On Sale Bar

 

  • BASICS: Entitled to patent unless “the invention was … on sale in this country, more than one year prior to the date of the application for patent in the United States.” 35 U.S.C. § 102(b)(pre-AIA). Pfaff (U.S. 11/10/1998) (overturning Fed. Cir.’s “totality of the circumstances” test) two-pronged test: “invention” (1) is subject of commercial offer for sale and (2) is ready for patenting (“reduction to practice” or “the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention”). “A primary rationale of the on-sale bar is that publicly offering a product for sale that embodies the claimed invention places it in the public domain, regardless of when or whether actual delivery occurs.” Helsinn (Fed. Cir. 05/01/17), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”). Others need not know that the product offered embodies the claimed invention. Id.
  • Offer Withdrawn Before Conception Is Not An Offer For Sale: “An invention cannot be offered for sale until its conception date. Hence, if an offer for sale is made and retracted prior to conception, there has been no offer for sale of the invention. In contrast, if an offer for sale is extended and remains open, a subsequent conception will cause it to become an offer for sale of the invention as of the conception date.” August Tech. (Fed. Cir. 08/22/11).
  • No Exemption For Agreements With Patentee’s Supplier Or Distributor: “The on-sale bar does not exempt commercial agreements between a patentee and its supplier or distributor.” The Medicines Co. IV (Fed. Cir. 02/06/18) (vacating district court decision; terms of exclusive distribution agreement.)
  • FITF: Changes this defense for patents subject to it. Entitled to patent unless “(1) 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.” 35 U.S.C. § 102(a)(1)(AIA). “The AIA did not change the statutory meaning of ‘on sale’ in the circumstances involved here.” Helsinn (Fed. Cir. 05/01/17) (rev’g bench-trial judgment of no on sale bar of both pre-AIA and FITF claims; pre-critical date patent owner entered exclusive distributor and requirements supply agreement with distributor agreeing to supply two doses (one claimed) of the claimed drug product at a specified minimum price, but could terminate if FDA did not approve either dose, which agreement was made public except for price and precise doses), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”).

a) ready for patenting

  • Must Be Ready For Patenting Prior To Critical Date: The invention need not be ready for patenting at the time the alleged offer is made, just prior to the critical date. August Tech. (Fed. Cir. 08/22/11). See Honeywell (Fed. Cir. 06/02/04) (en banc) (substantial evidence supports jury verdict that invention not ready for patenting).
  • Reduction To Practice (For On Sale) Need Not Remove Possibility Of Failure: Testing “must show that the invention works for its intended purpose ‘beyond a probability of failure’ but not ‘beyond a possibility of failure.’” Helsinn (Fed. Cir. 05/01/17) (claimed invention was reduced to practice despite lack of completion of Phase III trials; approval by FDA is more exacting standard), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”).

b) commercial offer for sale

  • Commercial Offer for Sale: “To be ‘on sale’ under § 102(b), a product must be the subject of a commercial sale or offer for sale, and that a commercial sale is one that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.” The Medicines Co. II (Fed. Cir. 07/11/16) (en banc) (no commercial sale where patent owner paid supplier $347,500 to manufacture batches (worth over $20 million) of claimed drug product embodiments, identified as commercial units, for use to convince FDA that commercial product met approved specifications, but was invoiced as manufacturing services and title to the pharmaceutical batches did not change hands, and batches placed in quarantine pending FDA approval to sell (which came after critical date)). It must be “commercially marketed.” Id. Although not dispositive, “the passage of title is a helpful indicator of whether a product is ‘on sale,’ as it suggests when the inventor gives up its interest and control over the product.” Id. The UCC “does not have ‘talismanic significance’”; e.g., charging a fee to use a patented machine may place it “on sale” despite no passage of title. The offer must be such that “the other party could make [it] into a binding contract by simple acceptance.” Group One (Fed. Cir. 06/15/01); Helsinn (Fed. Cir. 05/01/17) (rev’g bench-trial judgment of no on sale bar of both pre-AIA and FITF claims; contract “unambiguously contemplated the sale by [patent owner] of [distributor’s] requirements of the claimed invention,” despite condition precedent requiring FDA regulatory approval of dose, and despite only one of the doses being claimed), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”); Merck & Cie (Fed. Cir. 05/13/16) (rev’g finding of no on sale bar: detailed offer (“providing essential price, delivery, and payment terms”) sent to single party in direct response to its request to purchase specified amount of specified product “contained all the required elements to qualify as a commercial offer for sale,” despite sale never being consummated). The offer must be to sell an embodiment of the invention as distinct from offering to sell patent rights to the invention. Offer may be by a foreign entity directed to someone in U.S.; offer to buy is not an offer to sell; and question of law based on underlying facts. The Medicines Co. II (Fed. Cir. 07/11/16) (en banc); Hamilton Beach (Fed. Cir. 08/14/13) (aff’g Summ. J. of on-sale bar based on foreign supplier’s pre-critical-date offer for sale to the patent owner) (2-1); Southern Snow (Fed. Cir. 06/30/14) (non-precedential) (rev’g refusal to enter JMOL of on sale bar). Cf. Milo & Gabby (Fed. Cir. 05/23/17) (non-precedential) (no “sale” by Amazon for purposes of copyright infringement: “Though FAC System shipped its product to an Amazon warehouse for storage and Amazon boxed up and shipped the product when a sale was consummated on the website, Amazon never held title to the accused products.”)
  • Charging For Use Of System Constitutes Sec. 102(b) On Sale: aff’g district court ruling that because patent owner had “charged users of the 386 system for the calls they made using that system, he engaged in a ‘sale’ of the service within the meaning of section 102(b) even if he did not make a profit on the transactions.” In re Cygnus Telecomms. (Fed. Cir. 08/19/08).
  • Neither Contract Manufacturing For An Inventor Nor Resulting Stockpiling Of Inventory Is A Commercial Sale, If Title Not Passed: “A contract manufacturer’s sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under § 102(b)” because it “does not constitute a ‘commercial sale’ of the invention.” The Medicines Co. II (Fed. Cir. 07/11/16) (en banc) (product and product-by-process claims; not on sale where, among other things, only manufacturing services were sold to the inventor at a price about 1% of market value of the products, inventor maintained control of the invention, as shown by the retention of title to the embodiments, and transaction was confidential). Stockpiling of “invention” embodiments by purchaser of manufacturing services is not commercialization under Sec. 102(b) because “the on-sale bar is triggered by actual commercial marketing of the invention, not preparation for potential or eventual marketing.” Id.Equistar (Fed. Cir. 07/03/18) (non-precedential) (vacating Summ. J. of no on sale bar; remanding in part to determine whether patent owner used patented method to make products in order to enable it to make offers for sale of those products before the critical date). But see The Medicines Co. IV (Fed. Cir. 02/06/18) (vacating district court decision; terms of exclusive distribution agreement show it was “an agreement to sell and purchase the product,” including statement that patentee “‘now desire[d] to sell the Product” to the distributor and it “‘desire[d] to purchase and distribute the Product,’” the price of the product, a purchase schedule, and the passage of title to the distributor upon receipt of the product, notwithstanding patentee’s limited right to reject all purchase orders.)
  • Delivery Of Custom Software Not A Sale: Not on sale where inventor hires programmer to develop and deliver custom software for an hourly programming fee. Trading Tech (Fed. Cir. 02/25/10).

c) may be secret

  • Existence Of Sale Or Offer May Be Secret (FITF changes, probably): Applies to offer for sale by patent applicant or by a third party, even if confidential (secret) offer for sale. In re Caveney (Fed. Cir. 05/08/85) (aff’g PTO rejection of claims: rejecting contention that sales offer “kept secret from the trade” cannot be an on sale; “sales or offers by one person of a claimed invention will bar another party from obtaining a patent if the sale or offer to sell is made over a year before the latter’s filing date. An exception to this general rule [on sale before critical date bars claim] exists where a patented method is kept secret and remains secret after a sale of the unpatented product of the method. Such a sale prior to the critical date is a bar if engaged in by the patentee or patent applicant, but not if engaged in by another. [But] here the claimed invention was disclosed to the purchaser.”); Helsinn (Fed. Cir. 05/01/17) (citing In re Caveney and other cases with approval on this point; which cases were “concerned entirely with whether the existence of a sale or offer was public”), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”).
  • FITF: Existence Of Sale Or Offer [Probably] Must Be Public: “after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale.” Helsinn (Fed. Cir. 05/01/17) (existence of sale public), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”). See Pennock (U.S. 1829) (“If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make, and sell his invention publicly, and thus gather the whole profits of it, relying upon his superior skill and knowledge of the structure; and then, and then only, when the danger of competition should force him to secure the exclusive right, he should be allowed to take out a patent, and thus exclude the public from any farther use than what should be derived under it during his fourteen years; it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.”)
  • On Sale Activity Need Not Publicly Disclose Claimed Invention (FITF also): Rejecting “suggestion [that in AIA (FITF)] Congress required that the details of the claimed invention be publicly disclosed before the on-sale bar is triggered. Requiring such disclosure as a condition of the on-sale bar would work a foundational change in the theory of the statutory on-sale bar…. If Congress intended to work such a sweeping change to our on-sale bar jurisprudence and ‘wished to repeal . . . [these prior] cases legislatively, it would do so by clear language.’”) Helsinn (Fed. Cir. 05/01/17) (redacted contract made public, disclosed claimed invention except for the doses), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”).

d) method claims

  • Three Ways To Put “Method” On Sale: Either make a commercial offer to perform the patented method (even if the performance itself occurred after the critical date) or before the critical date in fact perform the patented method for a promise of future compensation. Plumtree (Fed. Cir. 12/18/06); cf. Minton (Fed. Cir. 07/29/03) (the patent applicant leasing “a fully operational computer program implementing and thus embodying the claimed method,” enabling lessee to practice the claimed invention, put method on sale). Or, before the critical date offer for sale a product made by the patented method, L. Auld (Fed. Cir. 08/15/83), unless that sale fails to make the method public, In re Caveney (Fed. Cir. 05/08/85); cf. The Medicines Co. II (Fed. Cir. 07/11/16) (en banc) (distinguishing Plumtree, D.L. Auld as concerning method claims not product-by-process or product claims, because “the literal subject matter of [method] claims is incapable of being sold.”).
  • Does Quanta Add Another Way To Put “Method” On Sale?: In ruling that the sale of certain components of a combination exhausts patent claims directed to a method of using that combination, S. Ct. stated: “It is true that a patented method may not be sold in the same way as an article or device, but methods nonetheless may be ‘embodied’ in a product, the sale of which exhausts patent rights.” Quanta (U.S. 06/09/2008) (Similarly: “Aro described combination patents as ‘cover[ing] only the totality of the elements in the claim [so] that no element, separately viewed, is within the grant.’ 365 U.S., at 344; see also Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 667–668 (1944) (noting that, in a combination patent, ‘the combination is the invention and it is distinct from any’ of its elements). Aro’s warning that no element can be viewed as central to or equivalent to the invention is specific to the context in which the combination itself is the only inventive aspect of the patent. In this case, the inventive part of the patent is not the fact that memory and buses are combined with a microprocessor or chipset; rather, it is included in the design of the Intel Products themselves and the way these products access the memory or bus.”). One might argue that an offer to sell a component whose sale would exhaust a method claim, is an “on sale” activity barring that method claim. Also consider analogizing to SiRF Tech. (Fed. Cir. 04/12/10) (providing the hardware/firmware functionality = performing the method under Sec. 271(a)).
  • TIPS: