Under the America Invents Act of 2012 nothing would happen unless someone - the original inventor or any third party - filed for an Inter Partes Review. The cost of filing to try to get an IPR going is $15,500. If the published information about the original inventor's work passed some hurdle, an IPR can be instituted by the USPTO. It is a trial-light proceeding that is estimated to cost at least $100,000. Any claims that are found invalid are invalid for everyone (pending any appeals).
The AIA did introduce a new "feature" that could help you hypothetical first inventor to stay in business if he/she was actually producing and selling the thing. It is called "prior user rights" and lets you keep making what ever you were making at the location you are making them at. It is not automatic. Rather it is a defense in an infringement suit.
Even before the AIA there was no such thing as "have the patent canceled". The issue of the first inventor's prior art would come up at a patent infringement lawsuit.