From: srctran@world.std.com (Gregory Aharonian) Subject: Patent Office Reform Panel Final Report PART1 Message-ID: Organization: The World Public Access UNIX, Brookline, MA Date: Thu, 4 Feb 1993 14:30:39 GMT Lines: 1794 Last year, the Patent Office sponsored a committee to review current patent practices in the United States. Last fall they issued their final report, which contains many interesting suggestions, including first to file, software patents, excessive secrecy orders, international harmonization, challenging patents, reexamination, excessive legal costs and other issues. In particular, I know that a few Congressmen are introducing legislation this spring to switch the U.S. from first-to-invent to first-to-file. Also, it seems that the Patent Office library does not have any IEEE or ACM publications, as incredible as that might seem (nor have they deemed to buy a copy of my directory of much of the government's software, a great prior art source). What follows is the text to their final report, split into five files. A paper version of this text can be obtained from the Patent Office. I would like to thank Noah Friedman, Toni Emerson, Keith Berrier, Glenn Tenney, Rahul Dhesi and Jude Wilkinson for all contributing ten dollars to help me defray the cost of acquiring a $1.50 diskette from the Patent Office with these files. Gregory Aharonian Source Translation & Optimization ============================================================================== PART ONE HARMONIZATION-RELATED ISSUES I. FIRST-TO-FILE A. Introduction and Overview In the United States, when more than one patent application is filed claiming the same invention, the patent will be awarded to the applicant who establishes the earliest acts of invention in the United States and who has not thereafter suppressed, abandoned or concealed the invention ("first-to-invent" system) [1]. Applicants are permitted to establish a date of invention that is prior to the filing date in an interference proceeding conducted in the U.S. Patent and Trademark Office (USPTO). In contrast, in nearly every other country which provides patent protection, priority of invention is established by the earliest effective filing date of a patent application disclosing and claiming the invention ("first-to-file") [2]. A long-standing issue in discussions on patent law reform has been whether the United States should change its patent system to conform with the manner of awarding priority of invention in other countries [3]. This question is again a dominant issue in discussions regarding patent law reform due to the negotiations designed to achieve global harmonization of the intellectual property laws. Specifically, in the context of the multilateral patent law harmonization treaty negotiations conducted under the auspices of the World Intellectual Property Organization, other nations have made it clear that there will be no treaty unless a first-to-file method for determining priority of invention is included [4]. The principal issue thus presented is whether the United States should change from a first-to-invent procedure to a first-to-file procedure (1) as a necessary part of a global harmonization package which provides, on the whole, advantages to United States inventors, (2) without regard to a harmonization treaty or (3) not at all. If a change to a first-to-file system is the ultimate decision, questions ancillary to this decision must be addressed; specifically, whether or not the contemplated change to a first-to-file procedure should be accompanied by features such as a "provisional application" procedure, a grace period and a "prior user rights" defense to patent infringement. B. Summary of the Public Comments The issue of whether the United States should adopt a first-to-file system provoked a substantial response from the public, as measured through the response to the invitation of the Advisory Commission for public comment [5]. The principal objections raised to first-to-file by members of the public included: - small entities might be placed at a disadvantage in the "race to the Patent Office" because of limited resources to prepare and file patent applications; - a first-to-file system might tend to foster premature and sketchy disclosures in hastily-filed patent applications; - the possibility of theft of an invention from the true inventor could be increased in a first-to-file system; - the opportunity to explore commercialization possibilities prior to filing would be reduced because of the importance of early filing; and - the USPTO could be burdened with an increased volume of patent applications filed for defensive purposes. Those members of the public responding in favor of adopting a first-to-file system raised the following points: - most of U.S. industry is acting now on a first-to-file basis, even in the United States, to avoid forfeiture of patent rights abroad, and the first-to-invent system could be hurting the competitiveness of U.S. industry; - a U.S. first-to-file system would encourage early filing worldwide, so that patent rights are not forfeited, and would promote the early public disclosure of inventions; - an agreement by the United States to a harmonization treaty requiring a change to first-to-file could bring dramatic improvements in the patent systems of foreign countries for U.S. applicants seeking patents abroad; - a first-to-file system could greatly decrease the complexity, length and expense associated with current USPTO interference procedures; and - the first-to-file rule would provide a definite, readily determinable and legally-fixed date of invention, would eliminate uncertainties associated with interferences and would provide greater reliability for U.S. patents. Some respondents favored adopting a first-to-file system unilaterally, i.e., without regard to harmonization negotiations. Others, however, proposed adopting a first-to-file system only as a part of a global harmonization package which provides advantages to U.S. inventors who seek patent protection abroad. Many proponents of the first-to-file system approach suggested that certain features accompany the change to preserve what are perceived to be beneficial elements of the existing first-to-invent system. These included a procedure to allow the filing of a preliminary or "provisional" application at low cost, which would facilitate early filing and encourage entry into the patent system by small entities. Many others recommended inclusion of an international grace period to protect an inventor from his or her pre-filing public disclosure of the invention. In addition, several responses addressed the issue of "prior user rights" in a first-to-file system. These issues, particularly the question of prior user rights, were considered extensively by the Commission members during their deliberations. C. Recommendation and Discussion Recommendation I-A Change the U.S. patent system to award patents to the first party to file a patent application, as opposed to the first party to invent, as a necessary part of a global harmonization package which provides, on the whole,advantages to U.S. inventors, subject to the following conditions: (i) adoption of a provisional patent application procedure to facilitate early filing at reduced cost, allowing the inventor to claim a right of priority for a later-filed complete application; (ii) provision of a grace period during which public disclosure of an invention by an inventor would not affect the patentability of that invention if claimed in an application filed by that inventor within 12 months of the disclosure; and (iii) establishment of a personal right for a third party who develops and/or uses an invention in good faith, before the filing date of an application on which a patent is granted to another, to continue that use under certain conditions ("prior user right"). 1. Discussion From a purely statistical viewpoint there would seem to be little difference in result between a first-to-invent patent system and a first-to-file patent system. More than 99.9% of the U.S. patent applications now being filed raise no dispute as to the identity of the first inventor. Even when such disputes arise, the inventor who filed first ("senior party") is procedurally favored in the highly complex interference proceeding that follows -- the senior party prevails in a significant majority of such interferences. The actual effect of a switch to first-to-file system of priority, thus, is likely to have little or no actual significance in terms of inventors losing priority of invention to other inventors, based upon these statistical findings. However, patents vary widely in terms of commercial importance. The public comments, as well as the experience of many Commission members, suggest that applications involved in interferences are almost always drawn to those inventions that are very important commercially. Because such inventions are often developed to answer needs in very competitive markets, the high stakes in such situations drive parties to engage in hard-fought priority contests. Disposition of this issue in favor of the simpler first-to-file approach was not made, therefore, on the basis of statistical evidence alone. Rather, the recommendations of the Commission on this point reflect a careful consideration of several issues, and have been made while being mindful of the concerns expressed by various users of the patent system. For example, many have questioned whether independent inventors, small businesses and university inventors would be able to adjust as well as others to a first-to-file environment. If not, a unique and creative U.S. research and development resource that is admired and envied throughout the world for its leadership in the advancement of science and technology could be disadvantaged by a change to a first-to-file system. The Commission recognizes the competing interests and the concerns expressed by these different sectors of the patent user community. The Commission's fundamental belief, regardless of which system is used in the United States to determine priority of invention, is that only bona fide, original inventors (or their representatives or assignees) should be able to file for and receive patents. Protection for bona fide inventors against theft is a feature of all first-to-file patent systems throughout the world and would remain a feature of any revised U.S. system. In the first-to-file system proposed by the Commission, inventors in the United States would be able to retain their ability to prove derivation or "theft" of an invention in situations where a patent application is improperly filed by or on behalf of a non-inventor. The Commission feels that their recommendation to convert the U.S. system to one that measures priority based upon the first-to-file, as a whole, represents a favorable change for U.S. applicants, both large and small, in terms of ease of filing, clarification of rights, and, importantly, international competitiveness. In formulating the package, the Advisory Commission has considered the concerns over access to the patent system by small entities, university researchers and independent inventors, as well as the needs of modern businesses engaged in international competition. The benefits that can stem from international patent law harmonization, made possible through U.S. acceptance of the first-to-file concept, only serve to accentuate the potential benefits of adoption of the proposed package. 2. Elements of the Proposed U.S. First-to-File System The Advisory Commission proposal consists of a recommendation to change to a first-to-file system having three basic elements; namely, - a provisional application filing system to facilitate early and simplified patent filings, - an international grace period to avoid patent-defeating prior art authored or created by the patent applicant, and - a limited prior user right. Furthermore, the recommendation to shift to the first-to-file system is conditioned upon obtaining a favorable harmonization "package" which, on the whole, provides a net positive benefit to U.S. inventors around the world. Each of the elements has been thoroughly considered in the context of the necessity of the element, and the benefits and detriments of each element, from the perspective of various sectors of the patent user community. Because this proposal reflects a compromise of competing concerns, a discussion of each of the elements which explains the element, and which reflects those concerns is provided below. (a) Provisional Application The Advisory Commission believes that a provisional application procedure should be adopted as an essential part of a domestic first-to-file patent system. Such a procedure would permit patent applicants to obtain early filing dates with a minimum of formal application requirements, and, importantly, at a reduced cost. Several elements of the provisional application as contemplated by the Advisory Commission bear mention [6]. First, inventors should be able to file a provisional application with a minimum of formal requirements and at a low cost. Specifically, while the provisional application would have to satisfy the description and enablement requirements of 35 U.S.C. 112, inventors would not have to include claims to define the invention in order to receive a filing date for the application[7]. Furthermore, to facilitate early filing, requirements for formal oath or declaration and for inventorship nomination would be waived for the provisional application.8 Satisfaction of these formalities of the application would not be required until the inventor files a complete patent application. In operation, the patent applicant would have twelve months after filing the first provisional application to file a complete application meeting all regular application requirements. This could be accomplished by completing the missing elements of the provisional application, or by simply converting a previously filed provisional application meeting all the regular application requirements into a complete application by paying the regular filing fee. One or more provisional applications could be consolidated into one complete application. Once the complete application had been filed, any earlier provisional applications would be abandoned. Applicants using the provisional application scheme would be entitled to claim priority for subject matter claimed in the complete application back to the date of filing of the provisional application, provided the provisional application includes a sufficient "description" of the invention, and sufficiently "enables" the practice of the invention claimed in the later complete application[9]. The provisional application could serve also as a priority document for foreign applications filed within one year, as authorized by the Paris Convention[10]. The filing date of the complete application would serve as the basis of the domestic patent term, where the patent term is a fixed period measured from the filing date, as recommended later in this report. There are several reasons for recommending provisional applications as part of any change to a first-to-file procedure. First, the ability of parties to file early and easily is essential in a first-to-file system. The provisional application would provide a simple and relatively inexpensive method to establish an early priority date for the subject matter which it discloses. This feature is of enormous potential benefit to inventors of limited means, because it would give them a full year to determine whether to proceed with the expense of filing a formal, complete application to the invention. In addition, early priority dates in the United States could be used abroad both offensively (to obtain patents) and defensively (to block patents to others), since most foreign countries would give U.S. patents claiming priority to a provisional application a patent-defeating prior art effect as of the filing date of the provisional application. Provisional applications would also serve the useful purpose of placing U.S. patent applicants on equal footing with their foreign counterparts who claim priority under the Paris Convention. The Paris Convention provides that the Convention priority year cannot be included in the patent term[11]. Hence, where the patent term is measured from the filing date, the starting point must be a domestic filing date. Without a provisional application system, a domestic and a foreign applicant could file a patent application in their respective countries on the same date, yet the foreign applicant's corresponding patent term in this country could expire a full year after that of the domestic applicant, because the foreign applicant can defer filing in the U.S. during the one-year priority period. To address this inequality, Japan and the European countries provide systems to ensure that domestic applicants have a one-year "internal priority" period to parallel the Paris Convention priority year of foreign applicants. The provisional application system recommended would provide this "equalizing" effect to U.S. patent applicants, by affording them a similar one-year "internal priority" period that would not be counted in the term of a U.S. patent [12]. While a provisional application system is recommended as part of a first to file-system, some have argued that it is desirable to add such a system to the existing U.S. first-to-invent system. The provisional application would provide a simple method to establish an invention date, by serving as evidence of a constructive reduction to practice of an invention disclosed therein. In addition, even under our first-to-invent system, U.S. applicants wishing to obtain patent rights abroad must establish a priority date as early as possible to rely upon when filing in foreign countries. Thus, this element merits consideration outside of the current proposal of the Commission. (b) Grace Period Long and firmly established traditions in the United States scientific community encourage open and free communication through early publication and dissemination of the results of scientific research. Yet, prior public disclosure of the substance of an invention serves as the most fundamental bar to the ability of an inventor to obtain patent protection. The U.S. patent laws provide a compromise to these two opposing principles through a grace period -- an explicit right of an inventor to prevent the patent defeating effect of an earlier publication or public disclosure of the invention for a one-year period following the disclosure[13]. If an inventor publishes details of the invention, and then later decides to file a patent application, that publication will not be a bar to obtaining a patent in the United States, so long as the patent application is filed within one year of the publication. If a third party publishes the same invention within one year of the filing date, the publication will not be a bar to obtaining a patent in the U.S. so long as the inventor provides an adequate affidavit establishing that the date of invention was prior to the disclosure.14 The grace period is, therefore, of critical importance to the scientific community in facilitating early dissemination of research results, while preserving the patenting opportunity of the academic inventor for a reasonable period. The grace period also is essential to protect entities which have limited financial resources for speculative patent application filing and prosecution. Such entities must have some time after a publication or other public disclosure to validate the commercial viability of an innovation, often by finding a prospective licensee as a precondition to making any significant financial commitment toward obtaining patent protection for that innovation. The U.S. grace period helps to ensure equal access for such entities to the benefits of U.S. patent protection, and protects against inadvertent loss of U.S. patent rights during the initial period of testing or promotional activities. The protections offered by the U.S. grace period, however, are limited. Specifically, the U.S. grace period protects the inventor only against pre-filing publication or other public disclosure with respect to U.S. patent rights. The patent laws of most other countries do not provide inventors with a grace period. This means that pre-filing publication or public disclosure of the invention will defeat the inventor's attempt to obtain foreign patent protection for the disclosed invention. Thus, foreign patent offices will use the inventor's earlier publication as a basis for denial of the patent grant [15]. The absence of parallel protection for the inventor who has published or otherwise publicly disclosed the invention abroad has caused many United States inventors to unnecessarily or inadvertently forfeit their patent rights in much of the rest of the world. Because of this, U.S. negotiators in the WIPO patent law harmonization exercise have struggled to incorporate an international grace period into the draft harmonization treaty. The grace period under consideration in the current text of the draft treaty provides a limited grace period which extends only to acts by the inventor, or by another party who obtained the disclosed information from the inventor[16]. Hence, persons who publish their inventions prior to the time a patent application is filed would be protected. Most significantly, the treaty would mandate that all foreign patent systems recognize an international grace period so that such "self-created" prior art would not destroy patentability in any country. The prospect of obtaining the concession on an international grace period from other countries is a significant one. The Advisory Commission considers a grace period to be an essential element of any first-to-file system, and its current absence in other systems to be a significant detriment to U.S. inventors. However, other countries participating in the harmonization negotiations insist that the harmonization treaty mandate a first-to-file system for priority. Thus, the harmonization treaty could provide a significant direct benefit for all U.S. inventors. Therefore, if the United States adopts the first-to-file system, this Commission recommends that the United States retain a grace period during which public disclosure of an invention by the inventor would not affect the patentability of that invention if claimed in an application filed in an country offering reciprocal benefits within 12 months of the disclosure. If the first-to-invent system is retained, the current grace period under 35 U.S.C. 102(b) is preferred. The Advisory Commission is cognizant of two potential problems that may arise in a first-to-file system that extends a grace period only to the inventor's publications (a so-called "personal" grace period). These problems are not fatal, as appropriate measures can be implemented to prevent or control their effects. The first involves a situation where a party other than the inventor learns of an invention exposed through a grace period publication and then files a patent application on that invention before the original inventor. Such an action would be inconsistent with existing requirements that one affirm that he is in fact the inventor of the claimed subject matter, a requirement that should continue even in a first-to-file based priority system. Retention of the requirement for an affirmation of inventorship by the true inventor, and provision of a forum to decide derivation issues, whether it is the USPTO in an interference)like proceeding, or in the courts, should suffice to address this situation [17]. The second problem ("spoiling") occurs where someone other than the patent applicant learns of the subject matter of the invention and prior to the filing of the patent application publishes the information. This would have a patent defeating effect on the true inventor's patent application. To resolve this potential problem, the Commission believes it would be appropriate for the USPTO to "presume" that the second publication of the same invention was derived from the first, and then on this presumption, grant the patent application. The question of whether the later publication was in fact actually derived from the inventor's grace period publication would be resolved only in the event that a dispute over the validity of the patent subsequently arose, and this resolution would occur in a forum more appropriately suited to assess inter partes disputes, namely, the Federal courts. This may look at first like a "first-to-publish" system. But in the balancing of equities, the public would benefit from having earlier access to the information in the publication. In any event, the United States must remain free to establish whatever means may be appropriate under our legal system to curb potential abuse of inventor rights. (c) Prior User Rights The issue of prior user rights presented difficult questions that the Commission had to address pursuant to its deliberations on the first-to-file issue. Under the appropriate circumstances, a prior user right will enable an earlier user of a patented invention to raise a defense to a claim of patent infringement. To establish the prior user right, the prior user must show that he independently developed the invention and began use or substantial preparation for use of that invention prior to the filing by the patent owner. If the extent of pre)filing activity was sufficient, the prior user will be permitted to continue such use despite the presence of the patent, subject to specific limitations on the extent of that use. Prior user rights provisions are common in many first-to-file patent systems[18]. Such rights commonly provide a limited defense against an infringement claim where the prior user defendant can establish commercial use, or substantial preparation toward such use, of the patented invention in that country prior to the effective filing date of the patent[19]. Prior user rights are also authorized in Article 20 of the Basic Proposal of the WIPO Patent Harmonization Treaty draft [20]. Prior user rights, as such, do not exist in U.S. law. The fundamental concept, however, is partially filled by 35 U.S.C. 102(g), which provides that an applicant will be entitled to a patent in the United States unless "before the applicant's invention thereof the invention was made in this country by another who had not abandoned, suppressed, or concealed it" [21]. In operation, this enables a prior inventor who has not abandoned, suppressed or concealed the invention to invalidate the later filed patent of another, thereby escaping liability for infringement. In a first-to-file system, section 102(g) would be inapplicable, as priority in rights to a patent would be keyed upon filing of the patent application, rather than priority in inventorship. However, prior user rights, as contemplated by the Commission and as in place in foreign systems, differ in several respects from operation of 35 U.S.C. 102(g). One significant difference is that the prior user right, as it exists in foreign systems, is a personal defense. In addition, the prior user right does not have a patent defeating effect, as is the case under existing U.S. law. Prior user rights are intended to provide a degree of balance created by a first-to-file system by providing some protection to an earlier independent inventor [22]. The basic difficulty in providing a prior user right is crafting the right so that it does not undercut the value of the exclusive rights obtained through patent grant, or the desirable goal of early disclosure of inventions stimulated by a first-to-file system. Advocates and opponents of prior user rights have identified several reasons to either include or preclude such rights in a U.S. first-to-file based patent system. The Advisory Commission has considered the merits of these arguments at length. While not unanimous in all respects, the consensus of the members of the Advisory Commission is to support the establishment of a limited prior user right as part of a U.S. first-to-file patent system. It is important, however, to recognize the reasons that were offered in support of, or against prior user rights, as these reasons are grounded upon specific concerns of the different sectors of the U.S. patent user community that would be affected by the implementation of such a system in the United States. Advocates of prior user rights advance several arguments in support of a U.S. prior user right. They point out that prior user rights are designed to benefit those who have independently developed, in the country having the right, an invention in good faith before the effective filing date of a patent application on that invention. Hence, they note, almost every industrialized country protects its national industry by including a prior user right in its patent system. Without a prior user right in the United States, foreign U.S. patent holders could "close down" U.S. prior users, while U.S. owners of foreign patents would remain unable to exercise those patents against prior users abroad. Supporters also argue that without prior user rights, inventors may be encouraged to flood the USPTO with patent applications on numerous minor improvements during product development [23], and that prior user rights cases are extremely rare in countries having the right [24]. Many proponents of prior user rights also believe there is a need to protect secret uses from the risk of later independent invention and patenting by others. They argue that trade secret use of an innovation is sometimes the best, or only, way to realize the benefit of the investment that gave rise to it. In such cases, it is argued, trade secret protection must be given weight in order to protect U.S. investment. Absent any protection for the secret user, valuable technology may be lost because of the need to disclose it to insure its continued availability for use [25]. Supporters of prior user rights, based on activity that was intentionally protected as a trade secret, argue that inventors can secretly commercialize only a limited set of inventions, mainly certain process or apparatus inventions that are not disclosed by their products. They also maintain that the incentive to obtain patent protection on truly important technology, outweighs the incentive to maintain secrecy, because relying on a prior user right, for example, would not give an inventor any protection abroad. Those who oppose the right point out the inconsistency of the prior user right, at least insofar as it protects secret use, with the disclosure inducement theory that underlies our patent system. They argue that protection of secret prior use against a granted patent exalts secrecy over public disclosure. Some opponents of prior user rights believe it is not fair to reward an inventor who does not pursue patent protection, particularly those inventors who intentionally conceal an invention in commercial use. Others argue that prior user rights could increase the need for record-keeping, the potential for litigation, and other burdens that characterize current interference practice. Opponents of prior user rights are also concerned that the prior user rights threaten the exclusivity of a patent right and jeopardizes exclusive licensing and sale opportunities, particularly if more than one prior user exists. The arguments on both sides of the issue are valid and received serious and careful consideration. A right too easily achieved and too broad in scope might do grave damage to the United States patent system and severely impact the incentive to invest in research and development. On the other hand, elimination of the right altogether may make a first-to-file system in this country too harsh, and seriously injure U.S. manufacturing activity. The Commission believes that providing a limited prior user right to protect the legitimate interests of industry in the United States can be achieved without unduly detracting from the exclusivity and marketability of the patent grant. The prior user right should exist as a personal defense to an infringement claim, and should be based upon the following elements: (i) Time and Place The right should be based only upon activity in the United States prior to the earliest filing date to which the relevant claim or claims of the patent is or are entitled, including a foreign priority date under 35 U.S.C. 119. (ii) Independent Creation The activity must have been done in good faith and without derivation of the patentee, and it must have been based upon the independent development of the person claiming prior use, or of persons who had an obligation at the time of such development to assign or license patent rights to or otherwise share such rights with such person. The key to this concept of independent creation is that the prior user should not be able to take advantage of the patentee's pre-filing disclosures to create the right which will subsequently be used to avoid liability under the later-issued patent. (iii) Extent of Prior Activity The prior user right must be based upon either actual use in commerce of the patented invention, or upon substantial material preparations for such commercial use. In each case it is essential that the subject matter of the patent be the subject matter of the pre-filing use by the prior user. Preparations for commercial use that are substantial and material should give rise to the right, provided they represent activity toward actual commercialization as opposed to mere plans or preliminary efforts toward subsequent activity. At a minimum, the prior user must have completed an actual reduction to practice of the invention for which the right is claimed, prior to the patentee's earliest filing date, to claim the prior user right defense. The following factors, among others, should be employed to determine whether substantial preparation for use has been proven by a potential prior user: (a) the costs incurred by the prior user as of the filing date of the patent, as well as the proportion of those costs to the total costs for commercialization of the subject matter of the prior user right; (b) the amount of time required for the prior user to complete the preparation for commercial use after the filing date, and the proportion of that time in relation to the total time necessary to fully prepare for the prior use; (c) the complexity of preparation for practicing the claimed prior use; and (d) the diligence of the prior user in preparations for the prior use. The burden of establishing the requisite degree of sufficient prior use by documentary and other objective evidence should be on the party asserting the right. (iv) Scope of the Right The right created by prior use or preparation should be limited to continuation of the particular activity which gives rise to the right. In the case of processes, this would limit the use to a continuation of use of an identified process but would not limit the products produced or affected by the process. In the case of products, the right would extend to future editions of the product only if they are not materially different from the version of the product which gave rise to the right. For example, improvements to the prior use should be permitted to the extent they do not fall within the scope of other claims in the patent. The prior user should be able to reasonably expand the prior use to meet reasonable market demands within the United States, rather than being restricted to only the pre-filing volume of use. In addition, the prior user should not be restricted geographically within the borders of the United States, as entities commonly conduct development and commercialization activities at different sites throughout the United States. The prior user right will not authorize use outside the United States. (v) Personal Nature of the Right Prior user rights should be personal in nature, and should not be transferable, except with that part of the business which exploits the right. This is essential to preserve the personal nature of the prior user right, and to prevent the personal right from being extended to resemble a compulsory license-like authority to avoid liability for patent infringement that can be transferred or licensed to others. (vi) Legal or Equitable Nature of the Right Prior user rights should be an equitable defense to a charge of patent infringement, and at a minimum should permit continuation of use on the scale of the commercial use undertaken, or for which sufficient preparations were made, before the patentee's earliest filing date. Where the totality of circumstances make it appropriate, a court should have the authority to assess appropriate and reasonable royalties in favor of the patentee, or to expand the right to assure that justice is done. (vii) Other Elements Not Recommended for Inclusion in the Prior User Right The Commission, pursuant to its deliberations on the definition of the prior user right, contemplated several other options offered for inclusion in the prior user right proposal. These options would address real concerns expressed during the deliberative process of the Commission. However, the consensus opinion of the Commission is that it would not be appropriate to include these options in the prior user right proposal. For completeness of the record, these options are presented below. (a) Special Treatment of Non-Manufacturing Entities One proposal would provide special treatment for non-manufacturing entities in relation to the exercise of prior user rights. First, it was proposed that non-manufacturing entities be excluded from application of prior user rights, so that the prior user right defense would not be available against a patent held by such an entity. This, in essence, would differentiate operation of the prior user right based upon the identity of the patent holder. The proposal was intended to address concerns expressed by the university community, in particular, that prior user rights would be of little value to universities and small entities because these groups do not commercialize their inventions. Indeed, because such entities rely on licensing of patent rights to realize the value of the patent grant, such rights could disproportionately diminish the value of patent rights for non-manufacturing entities. An alternative to this proposal would create an administrative process to be implemented through the USPTO that would determine the validity of prior use claims and then use appropriate means to establish fair compensation to the patentee for loss of economic value of the patent. In this alternative, prior users would be required to "register" their claims of prior use with the administrative body and pay a fee for administrative costs; otherwise, they would forfeit the right to raise the prior use defense in subsequent litigation involving the patent. The Commission ultimately rejected these proposals after thorough consideration. The proposed exclusion of non-amanufacturing entities was viewed as overbroad in its scope and seen as possibly chilling industry/university collaboration. Even though prior user rights could not be transferred once created, Government agencies and universities could exercise prior user rights based upon developmental activities that were undertaken by others through contract. As to the proposed administrative process, the Commission viewed this as impractical and unfairly favorable to patent owners. For example, under the system, competitors would be required to alert patent owners of potential infringements and to thereby subject themselves to patent infringement suits. This would require a voluntary admission of liability for infringement, and if no prior user right is established, the entity would be unfairly prejudiced in a subsequent judicial proceeding. Finally, as USPTO determinations are subject to judicial review, this proposal would not remove the prior user rights defense issue from litigation. (b) Bar Availability of the Prior user Right Based Upon Intentionally Concealed Prior Use Another proposal offered was to preclude availability of the prior user right when the prior user intentionally concealed the prior use. The rationale for this proposal was that it would be unfair to reward an inventor who intentionally opts for secrecy rather than seeking protection through the patent system. Concerns were expressed that the prior user right would inappropriately elevate secret use to the stature of protected disclosed use as is the case with patent rights, and as such, a restriction such as this would be necessary to make prior user rights more compatible with the disclosure-inducement theory of the patent system. As proposed, this limitation would not exclude secret preparations absent intent to conceal the invention in commercial use, since most such preparations would be unannounced or private by virtue of their character (e.g., behind the factory gates). However, where an earlier inventor intentionally conceals, or intends to conceal, the invention in commercial use, prior user rights would not be available under their proposal. Of course, the prior activity on which prior user rights would be based would by definition be secret activity because prior public disclosure by the prior user, whether through publication or public use, would have a patent-defeating prior art effect on a subsequently filed patent application. This is because any earlier public disclosure of an invention by someone other than the inventor would bar the patent grant to the later patent applicant. The grace period, personal to the applicant, would not enable the patent applicant to escape the patent defeating effect of prior art or public disclosure of another. A majority of the Commission rejected this limitation, maintaining that such a limitation could create, in effect, a "compulsory patenting" system, forcing the disclosure of trade secrets [26]. Trade secrets are often the only practical form of protection for certain inventions. For example, it is often impractical to file for patents to minor process improvements, and difficult to enforce such patents abroad. Furthermore, in substance, the distinction between intentionally concealed secret use versus unannounced secret use amounts is non-existent. In both cases, the effect is that the information is not generally known to the public, cannot be used by others, and will not serve to preclude the grant of patent rights by another. Also, no other country having prior user rights imposes such a limitation. Finally, this limitation would require proving intent with regard to development activities. This will not only prove to be difficult, but will impose significant burdens through additional litigation costs and delays [27]. (c) Legal Rather than Equitable Prior User Right A third proposal was to craft the prior user right as a legal defense, rather than as an equitable defense. Doing so would make the prior user right an absolute defense to infringement, once the elements of the right were proven by a sufficient showing of the prior user. As a legal defense, the court would retain limited discretion to set the conditions of exercising the right. Some of the reasons offered in support of a legal prior user right focus on the desirability of simplifying the process of defining the prior user right. For example, giving the court the authority to assign royalties may create unpredictability and unnecessarily complicate the prior user right. In addition, rigidly enforced prerequisites to establishing the prior user right, including the requirements of independent innovation and actual reduction to practice, will ensure that the right is rarely invoked, and if invoked, sustained only where truly merited. Other reasons cited were the potential for creation of anomalous situations between U.S. and foreign markets. For example, facing the possibility of paying royalties only in the domestic market, domestic manufacturers may build plants overseas where valid prior users do not face the threat of being forced to pay compensation to patentees who file for and obtain their rights after the manufacturer has begun substantial use of the innovation. Also, no compensation is currently available abroad for U.S. owners of foreign patents by foreign prior users. In the U.S., however, prior users could be forced to pay compensation to owners of U.S. patents, yet nearly 50% of such owners are foreign. The majority of the Commission, however, believes that the prior user right should be equitable in nature, giving the courts power to assess royalties as well as to expand the prior user right, to ensure that justice is done. The majority of members believes that, as with intervening rights in reissue situations, courts should have broad equitable powers with respect to prior user rights, to make decisions that are situation specific, balancing the right of the patent holder with fairness to the prior user. (viii) Dissent Position One Commission member has voiced a strong dissension on Recommendation I-A (iii). He believes that the recommendation would undermine the value of patent rights to the non)manufacturing sector, exalts secrecy over public disclosure, increases the economic burden of enforcing one's patent rights, and reduces the incentive for licensing and investment. 3. Considerations in Formulating the Proposed Package (a) World Practice The current first-to-invent system may actually be harming the competitiveness of U.S. interests by not sufficiently encouraging U.S. inventors to file promptly. Except for the United States, Jordan and the Philippines, all other countries having patent systems use the first-to-file rule in awarding priority between competing patent applications . Even when an inventor who did not file first is able to prevail in an interference contest and obtain U.S. patent rights, that inventor will most likely lose such patent rights worldwide to those filing first, either here or abroad. For many users of the U.S. patent system, filing practices would be unchanged by adoption of a first-to-file procedure. U.S. inventors with global commercial interests must behave now as though the U.S. system was first-to-file to preserve their rights abroad. Parties who do not adopt this approach commonly forfeit their rights abroad through pre-filing disclosures. Furthermore, foreign entities, which account for slightly less than half of all U.S. patents, are, in fact, already in a first-to-file mode due to practices in their home countries. It is also useful to consider that Canada successfully replaced its first-to-invent system with a first-to-file system in legislation that took effect in 1989, and legislation to introduce a first-to-file system is currently pending in the Philippines. Canadian government officials have noted that they did not experience any of the negative consequences that some predicted would follow the adoption of a first-to-file system. (b) Premature Filings A first-to-file system will encourage early filing of patent applications in the United States, because delays in patent application drafting and filing risks preemptive filing by others in almost every other country in the world. Rather than being detrimental, early filing of patent applications would benefit the public. Together with early publication of patent applications, a first-to-file system would accelerate the innovation process by promoting early disclosure of inventive activity, timely dissemination of patent information, and avoidance of unnecessary research. One concern that has been expressed is that better written, more thorough patent specifications are a significant