But what about use of an invention which is not public? For example, a new manufacturing process may be patentable, and it may be possible to make use of such a process within a secure facility such that it is not disclosed to the public. As another example, it may sometimes be possible to manufacture a new patentable product, such as in the form of a prototype, which might even be demonstrated to prospective customers under conditions of confidentiality before any patent application is filed.
The question that then arises is whether, and in what circumstances, such use may invalidate a subsequently-filed patent application?
It is timely to look at this question now, because the Raising the Bar reforms in Australia, and the America Invents reforms in the US, will both result in changes to the treatment of non-public prior use in the early part of 2013.
Under the current US law, 35 USC 102(b) provides that if an invention is ‘in public use or on sale in this country [i.e. the US], more than one year prior to the date of the application for patent in the United States’ then the inventor will lose the right to obtain a patent. This is generally known as the ‘on-sale bar’, since it bars a person from obtaining a valid patent if they have been making commercial use of the invention any earlier than one year before the filing of a US patent application.
As we shall see, the Australian law relating to ‘secret use’ focuses similarly on commercial benefit (although this is to be found in the case law, rather than in the words of the Patents Act 1990), however there is currently no grace period available in relation to such use. But, as we shall also explain, there will be key changes next year to the working of the grace period in relation to prior commercial use in both Australia and the US.
‘SECRET USE’The prohibition on patenting inventions that have been ‘secretly used’ in Australia is to be found in paragraph 18(1)(d) of the Patents Act 1990, which provides that:
…an invention is a patentable invention for the purposes of a standard patent if the invention, so far as claimed in any claim:
(d) was not secretly used in the patent area before the priority date of that claim by, or on behalf of, or with the authority of, the patentee or nominated person or the patentee's or nominated person's predecessor in title to the invention.
The question of what constitutes ‘secret use’ was most recently considered in Bradken Resources Pty Ltd v Lynx Engineering Consultants Pty Ltd  FCA 944 (we recently discussed another aspect of this decision in Reading Prior Art When the Times, They Are A-Changin’). In that case, the court noted (at ):
It is well recognised that the historical basis for ‘secret use’ as a ground of revocation is to prevent a patentee from gaining a longer monopoly than the statutory period by enjoying a period of de facto monopoly through the secret use before the priority date, without meeting the corresponding obligation attaching to such a monopoly, namely, the public disclosure of the invention.
The leading authority on secret use, cited in Bradken in support of the above position, is the decision of the Full Court of the Federal Court of Australia in Azuko Pty Ltd v Old Digger Pty Ltd  FCA 1079. In that case, it was stated that the assessment of whether or not there has been secret use of an invention is not fundamentally about interpretation of the words ‘secret’ or ‘use’. Rather, what is called for is a ‘practical test’:
…has what occurred amounted to a de facto extension of the patent term? The answer to this will usually depend upon whether the patentee reaped commercial benefit from what was done before the priority date. (At )
So secret use is best regarded as an exploitation of the invention which results in some commercial benefit equivalent to an extension of the patent term which does not, at the same time, result in a public disclosure.
Often, a commercial use will not be secret in the requisite sense. For example, sale of a product is normally unconditional, permitting the purchaser to use and/or dispose of the goods as they will. Such a sale is a ‘use’ of the invention which is not ‘secret’ because, in principle if not in practice, the sale makes the invention available to the wider public (this was essentially the finding in the UK case of Re Wheatley's Patent Application (1984) 2 IPR 450).
According to the Full Court (per Gyles J, with Beaumont J concurring and Heerey J dissenting) in Azuko, there are also activities which are not ‘secret use’ because, regardless of secrecy, they do not qualify as a relevant ‘use’ of the invention. The example in Azuko was the manufacture of articles (drill hammers for use in mining) before a patent application had been filed. It was the inventor’s intention ultimately to sell the hammers, and he already had a likely willing purchaser lined up, though there had been no firm offer or acceptance. In this sense, all of the legal steps making up the sale occurred after a patent application had been filed.
So, while ‘making’ an invention is one of the exclusive rights conferred upon a patentee once a patent is granted (as is ‘using’ the invention), it seems that under Australian law it is not, without something more, sufficient to constitute ‘use’ within the meaning of ‘secret use’. However, it is worth bearing in mind that the courts have often emphasised the fact-specific nature of the enquiry into whether a commercial benefit is obtained, and there could certainly be cases – such as large-scale pre-filing manufacture and stockpiling of products – that might be regarded as relevant ‘use’ of an invention.
DEFENCES AGAINST ‘SECRET USE’Section 9 of the Patents Act additionally deems certain activities not to qualify as secret use, effectively acting as a defence to invalidity in the event that one or more of these acts would otherwise constitute secret use:
(a) any use of the invention by or on behalf of, or with the authority of, the patentee or nominated person, or his or her predecessor in title to the invention, for the purpose of reasonable trial or experiment only;
(b) any use of the invention by or on behalf of, or with the authority of, the patentee or nominated person, or his or her predecessor in title to the invention, being use occurring solely in the course of a confidential disclosure of the invention by or on behalf of, or with the authority of, the patentee, nominated person, or predecessor in title;
(c) any other use of the invention by or on behalf of, or with the authority of, the patentee or nominated person, or his or her predecessor in title to the invention, for any purpose other than the purpose of trade or commerce;
(d) any use of the invention by or on behalf of the Commonwealth, a State, or a Territory where the patentee or nominated person, or his or her predecessor in title to the invention, has disclosed the invention, so far as claimed, to the Commonwealth, State or Territory.
It seems likely that in many cases the circumstances covered by paragraphs (a) and (c) would not be considered secret use in the first place, under the principles set out in Azuko. However, the court in Bradken recently had this to say (at ) about the requirement of paragraph (a) that the use be ‘for the purpose of reasonable trial or experiment only’:
‘Only’ cannot be given an absolute meaning and must permit of some commercial content otherwise there would almost never be an exception available under the Patents Act making the defence pointless.
SECRET USE AND THE GRACE PERIODSince 2001, the Australian patent law has provided applicants with a 12-month ‘grace period’, which requires all public disclosures of an invention by, with the consent of, or derived from, the inventor(s) or applicant(s), to be disregarded as prior art, so long as they occurred within one year prior to the filing of an Australian complete (i.e. nonprovisional) patent application. We first wrote about this grace period, and its limitations, back in the early days of this blog – see A Note on the Limitations of the Australian ‘Grace Period’.
However, the Australian grace period does not apply to secret use. An applicant who has not yet filed a patent application is therefore better off, under the current law, by making an open, unconditional sale of a patentable product than if they engage in confidential commercial discussions leading to a sale of the product. The first is covered by the grace period, while the second might be regarded as secret use.
However, along with other reforms of the Raising the Bat Act 2012 coming into effect on 15 April 2013, a new paragraph (e) will be added to section 9 of the patents act, such that the following will no longer be regarded as ‘secret use’:
(e) any use of the invention by or on behalf of, or with the authority of, the patentee or nominated person, or his or her predecessor in title to the invention, for any purpose, if a complete application is made for the invention within the prescribed period.
The relevant period will be prescribed by Regulation 1.6 of the Patents Regulations 1991 (see Timeframes Slashed in Second Stage of Proposed Regulations for links to redlined copies of the proposed regulations):
For paragraph 9 (e) of the Act, the period is 12 months after the first use of the invention.
Thus, for all complete applications filed on or after 15 April 2013 the 12-month grace period will extend to secret use as well as public use and disclosure.
It will remain the case that only secret use in Australia is relevant, regardless of when it occurs. A commercial use without corresponding public disclosure which occurs elsewhere in the world is of no relevance to the validity of Australian patent rights.
CHANGES TO THE US ‘ON-SALE’ BARThe coming Australian reforms clarify the situation regarding potentially private offers for sale, and improve the position of inventors and applicants by ensuring that such activities are protected by a general 12-month grace period.
Unfortunately, the impact of the America Invents Act reforms to 35 USC 102 may have the opposite effect, of introducing ambiguity, and potentially leaving applicants worse off than under the current law.
Under the new paragraph 102(a), an inventor/applicant will not be entitled to a patent if ‘the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.’
Firstly, there is no geographic limitation in this provision – commercial use of the invention anywhere in the world can act as a bar to patenting. There is also some question as to whether the word ‘otherwise’ attaches to ‘on sale’, changing the current law such that only public commercial activities trigger the bar (see this article for commentary on this issue).
Additionally, the grace period implemented by paragraph 102(b) refers to ‘disclosure made 1 year or less before the effective filing date of a claimed invention’, which raises the separate question of whether a confidential sale has the benefit of the 12 month grace period, since this might not be encompassed by the term ‘disclosure’. Does this refer to a public disclosure, or any disclosure to another party?
In the worst case scenario, US applicants may find themselves in the same position as current Australian applicants – with a private commercial arrangement triggering the on sale bar under paragraph 102(a), and with no grace period defence without public disclosure under paragraph 102(b). It must be said, however, that this does not appear to have been the intent of the US Congress, so we can hope that the courts will adopt an approach which interprets the statute consistently with historical principles.
On the more positive side, particularly for non-US applicants, the ‘effective filing date’ which defines the end-point of the grace period will be the priority date – which may be a foreign application from which priority is claimed under the Paris Convention – rather than the date of filing of a US application.
CONCLUSIONIn Australia and the US it remains one of the fundamental principles of the patent system that a monopoly of limited duration is granted in exchange for disclosure of an invention. Extending the effective period of monopoly by making commercial gains from the invention without corresponding disclosure is a violation of this principle, and is punishable by invalidity of a subsequent patent claim.
With new reforms, Australia is moving to a position in which inventors and applicants will have the benefit of a one-year grace period within which they must file for a patent after any commercial use of an invention. The US, on the other hand, is moving from a position in which the first inventor unquestionably has 12 months within which to file an application following any public disclosure or commercial use of an invention, to one in which the precise situation for non-public commercial use may be in doubt.
There are countries, such as New Zealand, India, and others whose law is derived ultimately from the older British law, in which ‘secret use’ provisions similar to those in Australia also exist. Ironically, the UK itself abolished the secret use ground of invalidity when it conformed its law to the European Patent Convention in the 1977 Act. Indeed, in Europe any use of an invention prior to filing of a patent application has absolutely no impact on subsequent patentability, and in principle an invention might be secretly used for some years before the commencement of a further 20-year patent monopoly.
Overall, the impact of obtaining a prior private commercial benefit, before filing a patent application, can vary significantly from country-to-country.
The best advice, therefore, is not to sell, negotiate sales, or otherwise seek commercial benefit, of any invention until after a patent application has been filed!