Prior User Rights

Posted: 4 Nov 2009

See all articles by Carl Shapiro

Carl Shapiro

affiliation not provided to SSRN

Date Written: 2006


U.S. patent law decrees that the first firm to inventa technology is awarded the patent for that technology.However, if onefirm had created a technology but had chosen to keep their invention a secret,said firm would have no claim to the invention if another firm later createdthe same technology and subsequently filed for a patent. Although current U.S. law limits the rights of prior users, the U.S.Congress is considering legislation, similar to European laws, which willexpand prior user rights.The potential economic impact of awarding prioruser rights is examined. Several theorems are proposed, based on thedisbursement levels associated with independent R&D projects, thediversification of research approaches, and the distribution of R&D budgetsacross industries. The support for each theorem is presented, and corollaries arediscussed.It is concluded that the expansion of prior user rights wouldbe advantageous for numerous reasons, including the enhancement of competition,the rewarding of innovation, and the motivating factor of being a sole inventorversus a joint inventor. However, the limitations of prior user rights are illuminated, including thetendency of inventors to conceal their inventions rather than apply forpatents.The evidence regarding the impact of both trade secrets andpatent protection is scarce; further studies are recommended to betterunderstand the benefits and drawbacks of both phenomena. (AKP)

Keywords: Prior user rights, Property rights, Trade secrets, R&D, Patent law, Inventors, Patents, Market competition, Innovation process

Suggested Citation

Shapiro, Carl, Prior User Rights (2006). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN:

Carl Shapiro (Contact Author)

affiliation not provided to SSRN

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