Prior User Rights: The Prior Commercial Use Defense under 35 U.S.C. § 273

A company may use a process or machine internally for years, keeping it as a trade secret rather than patenting it. If someone else later patents the same subject matter, the company could face an infringement claim for continuing what it was already doing. The prior commercial use defense in 35 U.S.C. § 273, often called “prior user rights,” addresses that situation.

The defense existed before the America Invents Act but was limited to methods of doing business. The AIA expanded it substantially, and the expanded version applies to patents issued on or after September 16, 2011.

What the defense provides

Section 273(a) gives a defense to infringement to a person who, acting in good faith, commercially used the subject matter in the United States. The use may be an internal commercial use or an actual arm’s length sale or other arm’s length commercial transfer of a useful end result of that use.

The defense covers subject matter consisting of:

• A process, or
• A machine, manufacture or composition of matter used in a manufacturing or other commercial process

The defense is aimed at manufacturing know-how and internal processes, which are the kinds of things businesses often keep secret.

The timing requirement

The commercial use must have occurred at least one year before the earlier of:

1. The effective filing date of the claimed invention, or
2. The date on which the claimed invention was disclosed to the public in a manner that qualified for the grace-period exception under 35 U.S.C. § 102(b)

This one-year cushion means the defense protects established uses, not ones started in response to the patentee’s activity. A user who began just before the patentee filed will not qualify.

Who can rely on the defense and its limits

The defense is deliberately narrow.

Feature	Rule under § 273
Nature of the right	A personal defense, not a general license under the patent
Transfer	Only with a good faith assignment or transfer of the entire enterprise or line of business to which the defense relates
Scope	Limited to the specific subject matter used; variations in quantity or volume and improvements that do not infringe additional specifically claimed subject matter are permitted
Derivation	Unavailable if the subject matter was derived from the patentee or those in privity with the patentee
Abandonment	A person who abandoned commercial use cannot rely on activities before the abandonment to establish the defense for later uses

Certain non-commercial settings are treated as commercial use, including use during a premarketing regulatory review period and use by a nonprofit research laboratory or similar entity for the benefit of the public, subject to limits on who may assert the defense in those cases.

Exhaustion for useful end results

When a qualifying user sells or otherwise disposes of a useful end result of the protected commercial use, the patentee’s rights are exhausted as to that product to the same extent as if the patentee had sold it. Downstream purchasers can therefore use or resell it.

The university exception

The defense generally is not available against a patent that, when the claimed invention was made, was owned by or subject to an obligation of assignment to an institution of higher education or a technology transfer organization affiliated with one. The statute contains a narrow exception to this rule related to federal funding.

Proving the defense

A person asserting § 273 must establish it by clear and convincing evidence (§ 273(b)). That is a demanding standard and, in practice, depends on records: dated process documentation, production logs, equipment records and similar evidence showing the subject matter was in commercial use before the critical date.

The statute also discourages weak assertions. If the defense is pleaded without a reasonable basis, the court must find the case exceptional for purposes of awarding attorney fees under 35 U.S.C. § 285.

Prior user rights versus invalidity

The defense does not invalidate the patent. Section 273(g) states that a patent is not deemed invalid under § 102 or § 103 solely because a defense is raised or established. The patent remains enforceable against everyone else.

This distinguishes prior user rights from invalidity challenges. A party that wants a patent canceled must show unpatentability, for example in post-grant review, ex parte reexamination, inter partes review or court. Whether an earlier use is itself prior art depends on the requirements of § 102, which differ from those of § 273. A secret internal process may support a prior user defense even when it does not qualify as prior art. For an overview of USPTO options, see the patent modification guides.

Parties should also consider how positions interact. A party that unsuccessfully challenges a patent at the PTAB may face estoppel on invalidity grounds, but § 273 is a non-infringement defense and is not an invalidity ground.

Key takeaways

• 35 U.S.C. § 273, as expanded by the AIA for patents issued on or after September 16, 2011, provides a defense for good faith prior commercial use in the United States.
• The use must predate the earlier of the effective filing date or the patentee’s qualifying public disclosure by at least one year.
• It covers processes and machines, manufactures or compositions used in a manufacturing or other commercial process.
• The defense is personal, transferable only with the entire enterprise or line of business, and is not a general license.
• It requires clear and convincing evidence, does not invalidate the patent, and generally does not apply to university-owned patents.