Legal Definitions - first-inventor defense

The first-inventor defense is a legal protection available in patent law, specifically for patents that cover business methods. It allows a business to continue using a particular business method commercially, even if another party later obtains a patent for that same method.

To successfully use this defense, a company must demonstrate that:

• They were already using the business method in a commercial setting.
• This commercial use began at least one year before the patent holder filed their application for the patent.

Essentially, if you were openly and commercially using a business method for a significant period before someone else patented it, this defense can protect your right to continue that use.

Examples:

• Scenario 1: Financial Technology

  Imagine a financial advisory firm, WealthWise Inc., developed and began commercially using a unique algorithm in 2015 to provide personalized investment strategies to its clients. This algorithm constitutes a business method. In 2018, a competitor, FutureFunds Corp., obtains a patent for a very similar investment strategy algorithm and sues WealthWise Inc. for patent infringement. WealthWise Inc. could invoke the first-inventor defense because it was commercially utilizing its algorithm for more than a year (from 2015 to 2018) before FutureFunds Corp. filed its patent application.

• Scenario 2: Retail Operations

  Consider a large grocery chain, FreshMarket, which implemented a new, proprietary system for optimizing perishable inventory management across all its stores starting in 2017. This system, a business method, significantly reduced waste and improved supply chain efficiency. In 2020, a technology startup, ShelfSmart Solutions, secures a patent for a nearly identical inventory optimization business method and alleges that FreshMarket is infringing. FreshMarket could assert the first-inventor defense because it had been commercially operating its system for over a year (from 2017 to 2020) before ShelfSmart Solutions filed its patent application.

• Scenario 3: Online Services

  Suppose an online travel agency, Wanderlust Journeys, launched a unique dynamic pricing model for vacation packages in 2016, where prices adjusted in real-time based on a complex set of demand and supply factors. This model is a core business method for their commercial operations. In 2019, a rival agency, GlobalGetaways, obtains a patent for a very similar dynamic pricing business method and claims Wanderlust Journeys is infringing. Wanderlust Journeys can rely on the first-inventor defense, as it was commercially employing its pricing model for more than a year (from 2016 to 2019) before GlobalGetaways filed its patent application.