SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Patent Prior User Rights Act of 
1994''.

SEC. 2. DEFENSE TO PATENT INFRINGEMENT BASED ON PRIOR USE.

    (a) In General.--Chapter 28 of title 35, United States Code, is 
amended by adding at the end thereof the following new section:
``Sec. 273. Rights based on prior use; defense to infringement
    ``(a) Definitions.--For purposes of this section--
            ``(1) the term `commercially used' means used in the 
        production of commercial products, whether or not the 
        processes, equipment, tooling, or other materials so used are 
        normally accessible, available, or otherwise known to the 
        public;
            ``(2) the term `effective and serious preparation' means 
        that a person has--
                    ``(A) actually reduced to practice the subject 
                matter for which rights based on prior use are claimed; 
                and
                    ``(B) made a substantial portion of the total 
                investment necessary, for the subject matter to be 
                commercially used; and
            ``(3) the `effective filing date' of an application for 
        patent is the earlier of the actual filing date of the 
        application or the filing date of any earlier United States, 
        foreign, or international application to which the subject 
        matter at issue is entitled under sections 119, 120, or 365 of 
        this title.
    ``(b) In General.--
            ``(1) Defense.--A person shall not be liable as an 
        infringer of a patent under section 271 of this title with 
        respect to any subject matter claimed in the patent that such 
        person had commercially used in the United States, or made 
        effective and serious preparation therefor in the United 
        States, before the effective filing date of the application for 
        the patent.
            ``(2) Good faith purchasers.--A person who purchases in 
        good faith a product that results directly from a use or 
        preparation therefor described in paragraph (1) shall not be 
        liable as an infringer for continuing the use of the product 
        purchased, or for selling to another person the product 
        purchased.
    ``(c) Limitation of Defense.--Rights based on prior use under this 
section are not a general license under all claims of the patent, but, 
subject to subsection (d), extend only to the claimed subject matter 
that the person asserting the defense based on prior use had 
commercially used or made effective and serious preparation therefor 
before the effective filing date of the application for the patent.
    ``(d) Certain Variations and Improvements Not an Infringement.--The 
rights under this section based on prior use shall include the right to 
vary quantities or volumes, or to make improvements, that do not 
infringe claims other than those claims that, but for subsection (b), 
would have been infringed as of the effective date of the application 
for patent.
    ``(e) Qualifications.--
            ``(1) Rights are personal.--The rights under this section 
        based on prior use are personal and may not be licensed or 
        assigned or transferred to any other person except in 
        connection with the good faith assignment or transfer of the 
        entire business or enterprise or the entire line of business or 
        enterprise to which the rights relate.
            ``(2) Exclusions.--(A) A person may not claim rights under 
        this section based on prior use if the activity under which 
        such person claims the rights was based on information obtained 
        or derived from the patentee or those in privity with the 
        patentee.
            ``(B) If the activity under which a person claims rights 
        under this section based on prior use is abandoned on or after 
        the effective filing date of the application for the patent, 
        such person may claim such rights only for that period of 
        activity which occurred before abandonment.
    ``(f) Burden of Proof.--In any action in which a person claims a 
defense to infringement under this section, the burden of proof for 
establishing the defense shall be on the person claiming rights based 
on prior use.''.
    (b) Technical and Conforming Amendment.--The table of sections for 
chapter 28 of title 35, United States Code, is amended by adding at the 
end thereof the following:

``273. Rights based on prior use; defense to infringement.''.

SEC. 3. EFFECTIVE DATE.

    (a) In General.--Subject to subsections (b) and (c), this Act and 
the amendments made by this Act shall take effect on the date of the 
enactment of this Act.
    (b) Existing Patent Claims.--This Act and the amendments made by 
this Act shall apply to any action for infringement that is brought, on 
or after the date of the enactment of this Act, by a patentee in a case 
in which the effective filing date (as defined in section 273(a)(2) of 
title 35, United States Code) of the application for patent is before 
such date of enactment, only if--
            (1) no other action for the same act or acts of 
        infringement was brought before such date of enactment, and
            (2) there has been no notice of infringement under section 
        287 of title 35, United States Code, as of October 1, 1994, 
        with respect to the same act or acts of infringement.
    (c) Equitable Compensation.--In any action for infringement to 
which subsection (b) applies and in which the defense of prior user 
rights under section 273 of title 35, United States Code (as added by 
this Act), is asserted and determined to be valid by the court, the 
court may grant equitable compensation to the patentee, notwithstanding 
subsection (b) of such section 273. Such equitable compensation may be 
based on all actions of the person asserting the defense that were 
carried out after notice of infringement under section 287 of title 35, 
United States Code, which would constitute infringement of the patent 
but for section 273 of such title (as added by this Act).

            Passed the Senate October 8 (legislative day, September 
      12), 1994.

            Attest:

                                                MARTHA S. POPE,

                                                             Secretary.
Patent Prior User Rights Act of 1994 - Provides that a person may not be liable as a patent infringer with respect to any subject matter claimed in the patent that such person had commercially used in the United States or made effective and serious preparation therefor in the United States before the effective filing date of the patent application.  Declares that a person who purchases in good faith a product that results directly from such a use or preparation shall not be liable as an infringer for continuing the use of the product purchased or for selling such product to another person.  Provides that rights based on prior use are not a general license under all claims of the patent but extend only to the claimed subject matter that the person asserting the prior use defense had commercially used or made effective and serious preparation therefor before the effective filing date of the patent application. 
Includes within rights based on prior use the right to vary quantities or volumes or to make improvements that do not infringe claims other than those claims that would have been infringed as of the effective filing of the patent application. 
Provides that rights based on prior use are personal and may not be licensed, assigned, or transferred to another except in connection with the assignment or transfer of the entire business or enterprise to which the rights relate. 
Bars claims of rights based on prior use if the activity under which the person claims the rights was:  (1) based on information derived from the patentee; or (2) abandoned on or after the effective filing date.  (Permits such claims only for the period of activity that occurred before abandonment.) 
Provides that the burden of proof for establishing the defense shall be on the person claiming rights based on prior use. 
Establishes conditions under which this Act applies to actions for infringement in cases where the effective filing date of the patent application is before this Act's enactment date.  Authorizes the court to grant equitable compensation to the patentee in such cases, subject to certain conditions.
Patent Prior User Rights Act of 1994