Death by a Salesman: The Onsale Bar

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Death by a Salesman The On-sale Bar

• Patent Law Prof Merges
• 9.25.2008

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On-Sale Bar

• Sale or offer for sale
• Traditionally, required (1) reduction to
  practice, and (2) sale or offer for sale
• Now, no reduction to practice required- if you
  sell an uncompleted product, it may bar a patent
  if the application is filed more than 1 year
  later.
• See Pfaff v. Wells Electronics, Inc.

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Pfaff v. Wells
4/8/81
Pfaff Files Patent Application
Order Filled
The Critical Date for the Patent Application
Texas Instruments places P.O. for 30,100 new
chip carriers
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On Sale Bar Litigation Issues

• Sale can be completely confidential and still bar
  the patent
• A truly secret form of prior art
• Discovery is obviously crucial
• Spending time with the shoeboxes . . .

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• It is evident that Pfaff could have obtained a
  patent on his novel socket when he accepted the
  purchase order from Texas Instruments for 30,100
  units. At that time he provided the manufacturer
  with a description and drawings that had
  "sufficient clearness and precision to enable
  those skilled in the matter" to produce the
  device.
• -- 525 U.S. 55, 63

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Major Developments Post-Pfaff

• What is a sale or offer for sale?
• License vs. sale

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Group One, Ltd. v. Hallmark Cards, Inc.254 F.3d
1041C.A.Fed.,2001.

• We will look to the Uniform Commercial Code
  ("UCC") to define whether, as in this case, a
  communication or series of communications rises
  to the level of a commercial offer for sale.

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Hallmark Cards

• Because of the importance of having a uniform
  national rule regarding the on-sale bar, we hold
  that the question of whether an invention is the
  subject of a commercial offer for sale is a
  matter of Federal Circuit law, to be analyzed
  under the law of contracts as generally
  understood.

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Problems with Hallmark?

• Lacks Industries, Inc. v. McKechnie 322 F.3d
  1335, 1348 (Fed. Cir. 2003)

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Lacks Industries

• Lacks "(1) vigorously solicited wheel
  manufacturers to whom Lacks could sell overlays
  and on whose wheels Lacks could perform its
  overlay- bonding method, and (2) vigorously
  solicited original equipment manufacturers to
  specify and purchase wheels clad by the
  later-patented method."

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• The Special Master did not find this activity,
  nor any other of Lacks' activities, to be a
  commercial offer for sale as defined by contract
  law.
• Lacks Industries, Inc. v. McKechnie 322 F.3d
  1335, 1348 (Fed. Cir. 2003)

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But commercial activity prong of public use --
??

• Invitrogen Corp. v. Biocrest Mfg., L.P.424 F.3d
  1374C.A.Fed. 2005

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• A process for producing transformable E. coli
  cells of improved competence by a process
  comprising the following steps in order (a)
  growing E. coli in a growth-conductive medium at
  a temperature of 18C to 32C (b) rendering said
  E. coli cells competent and
• (c) freezing the cells.

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• The parties do not dispute that Invitrogen used
  the claimed process before the critical date, in
  its own laboratories, to produce competent cells.
  Invitrogen did not sell the claimed process or
  any products made with it. The record also shows
  that Invitrogen kept its use of the claimed
  process confidential. The process was known only
  within the company. Stratagene does not dispute
  that the claimed process was maintained as a
  secret within Invitrogen until some time after
  the critical date.
• -- 424 F3d at 1379

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• The proper test for the public use prong of the
  102(b) statutory bar is whether the purported
  use (1) was accessible to the public or (2) was
  commercially exploited.
• - 424 F.3d 1374, 1380

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• Commercial exploitation is a clear indication of
  public use, but it likely requires more than, for
  example, a secret offer for sale. Thus, the test
  for the public use prong includes the
  consideration of evidence relevant to
  experimentation, as well as, inter alia, the
  nature of the activity that occurred in public
  public access to the use confidentiality
  obligations imposed on members of the public who
  observed the use and commercial exploitation. -
  424 F.3d 1374, 1380

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• The district court reasoned that Invitrogen had
  used the claimed process in its own laboratories,
  more than one year before the '797 application
  was filed, to "further other projects" beyond
  development of the claimed process and to acquire
  a commercial advantage. Invitrogen admits that it
  used the claimed process in its own laboratories
  before the critical date to grow cells to be used
  in other projects within the company.
• ? Still, NOT a Public Use

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License vs. Sale

• In re Kollar, 286 F.3d 1326 (CA FC 2002)
• Elan Corp. PLC v. Andrx Pharmaceuticals Inc., 366
  F.3d 1336 (CA FC 2004)

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In re Kollar

• Although the Celanese Agreement specifically
  contemplates that resultant products
  manufactured using the claimed process could
  potentially be sold, nowhere in the Celanese
  Agreement is there an indication that a product
  of the claimed process was actually offered for
  sale. Rather, that agreement constitutes a
  license to Celanese under any future patents
  relating to Kollar's invention.

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• We have held that merely granting a license to an
  invention, without more, does not trigger the
  on-sale bar of 102(b). See Mas-Hamilton Group v.
  LaGard, Inc., 156 F.3d 1206, 1217, 48 USPQ2d
  1010, 1019(Fed. Cir. 1998).

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Elan v Andrx

• 366 F.3d 1336C.A.Fed. 2004.

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Elan v Andrx

• I would like to confirm to you our licensing and
  development plans for our once daily tablet aimed
  at a launch in the U.S.A. by the patent expiry
  date . . .
• I would confirm that we would take
  responsibility for supplying bulk tablets with
  our objective being to achieve a price structure
  allowing you an initial gross margin based on
  current naproxen prices of not less than 70
  after taking into account our processing charge .
  . .

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• The letter to Lederle lacked any mention of
  quantities, time of delivery, place of delivery,
  or product specifications beyond the general
  statement that the potential product would be a
  500 mg once-daily tablet containing naproxen.
  Moreover, the dollar amounts recited are
  clearly not price terms for the sale of tablets,
  but rather the amount that Elan was requesting to
  form and continue a partnership with Lederle.
  Indeed, the letter explicitly refers to the total
  as a licensing fee. 366 F.3d at 1341

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Elan v Andrx

• An offer to enter into a license under a patent
  for future sale of the invention covered by the
  patent when and if it has been developed, which
  is what the Lederle letter was, is not an offer
  to sell the patented invention that constitutes
  an on-sale bar. 366 F.3d 1336, at 1341

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• Enzo Biochem Inc. v. Gen-Probe Inc., 424 F.3d
  1276 (CA FC 2005)

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• Provision of agreement executed more than one
  year prior to filing date of patent in suit,
  which required patentee to supply its customer
  with active ingredients of polynucleotide
  probes for detecting Neisseria gonorrhoeae
  bacteria, constituted commercial offer to sell
  invention of patent, since provision relates to
  commercial supply, since provision in question
  cannot be considered mere research and
  development provision relating to undeveloped
  process, in that claimed polynucleotide probe
  invention is tangible item that can be sold or
  offered for sale, and since provision clearly
  constitutes binding commitment by parties to
  enter into commercial sale and purchase
  relationship.

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American Nicholson Paving

• Wood block pavements were laid in New York and
  Philadelphia about 1835, in England about 1838,
  and in Paris about 1880. The first blocks were
  round or hexagonal, and many different types of
  wooden pavements were patented between 1840 and
  1913.

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Nicholson timeline
Hosking Patent 1850
1854 Patent filed/Issues
1875 Reissued Patent Expires
8.1847 Nicholson files caveat
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Nicholson Facts
6 Years of Public Use
1854 Patent filed/Issues
1875 Reissued Patent Expires
8.1847 Nicholson files caveat
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• 1821 Mill Dam runs from Beacon Street to Charles
  Street and across to Sewellís Point, Brookline.
  The dam is the brainchild of Uriah Cotting and
  the Roxbury Mill Corporation. The structure is 50
  feet wide and one half mile long with a toll road
  running over it between a row of trees. It is
  called Western Avenue and later Beacon Street.

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Key Facts

• Lang Testimony, p. 587
• Nicholson inspected surface daily
• Asked questions about it
• Corroboration by witnesses

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Holding

• Public use okay when the delay in filing is
  occasioned by a bona fide effort to bring his
  invention to perfection or to ascertain whether
  it will answer the purpose intended

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Extra Points

• Reissues, nineteenth century
• Sovereign immunity/govt Ks

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Public use and on sale experimental use
exception applies to BOTH

• Public (commercial) uses vs. offers for sale

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Lough v. Brunswick

• Stern drive assembly seal for boats
• Lough installed 6 prototypes in boats of friends
  and acquaintenances
• Question public use statutory bar?

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Judge Lourie opinion

• Experimental use factors (pp. 562-563)
• No. of prototypes, duration of testing, records,
  progress reports, secrecy agreements, payment to
  patentee, extent of control
• Control is critically important

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So, Lough loses here

• Why?

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Dissent

• Judge Plager
• Not a sophisticated party he experimented within
  the bounds of common sense
• Only the infringer benefits . . .

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• UNITED STATES COURT OF APPEALS FOR THE FEDERAL
  CIRCUIT
• 2007-1188
• ATLANTA ATTACHMENT COMPANY,
• v.
• LEGGETT PLATT, INCORPORATED,
• Feb. 21, 2008

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One Sale Bar Experimental Use

• Patentee Atlanta Attachment (AA) had deal to
  develop machine and sell prototypes of it to
  customer Sealy
• AA quoted sales prices for first two epprototypes
  in December, 1999 and January, 2000 3rd
  prototype, September, 2000

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• The patent is directed at a machine that
  automatically attaches a gusset to a panel of a
  pillowtop mattress, rotating the panels at the
  corners, and pleating the corners of the gusset.

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• 32. A system for attaching a gusset to a panel,
  comprising
• a. a gusset forming station for automatically
  forming the gusset from a strip of gusset
  material
• b. a sewing table having an upper surface
  supporting the panel as the gusset is attached
  thereto
• c. a sewing machine adjacent the upper surface of
  the sewing table, positioned along sewing path
  for the panel, for attaching the gusset to the
  panel

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• d. a pleat generator for forming at least one
  pleat in the gusset at a desired location about
  the panel, said pleat generator operated in timed
  relation with said sewing machine, sewing the
  gusset to the panel and
• e. a system controller controlling a sewing
  operation for attaching the gusset to the panel,
  wherein said system control can control the
  sewing of the gusset to the panel at varying
  rates to enable high speed sewing of the gusset
  to the panel and sewing at a different rate for
  generation of the pleats in the gusset as needed.
  

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One operator produces 60 queen size pillow-top
panels (per hour) with flanging and ruffled
gusset corners 600 production gain over manual
operation Automatically flanges panel, edge
guides, senses corner, ruffles gusset, stops,
repositions folder assembly for finishing
operation. Plain, fused, vertical stitch and
quilted gusset
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Pfaff p. 8

• Commercial offer for sale
• Ready for patenting
• Reduced to practice
• Drawings etc. enabling description on hand

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• Once there has been a commercial offer, there
  can be no experimental use exception. We also
  conclude that the third prototype was a reduction
  of claim 32 to practice, and therefore the
  invention was ready for patenting.

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• Key question whether the primary purpose of the
  offers and sales was to conduct experimentation.
  Allen Engg Corp. v. Bartell Indus., 299 F.3d
  1336, 1354 (Fed. Cir. 2002)

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• Leggett Platt is correct to emphasize that
  Atlanta Attachment did not retain control over
  the prototypes when they were in Sealys
  possession. While we have held that control may
  not be the lodestar test in all cases, we have
  also said that it is important, and sometimes
  dispositive. Electromotive Div. of Gen. Motors
  Corp. v. Transp. Sys., 417 F.3d 1203, 1213 (Fed.
  Cir. 2005)

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• Atlanta Attachment was not experimenting within
  the contemplation of the experimental use
  doctrine when it sold its invention to Sealy
  because Sealy performed the testing and because
  Atlanta Attachment did not have control over the
  alleged testing to establish experimentation.

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Atlanta Attachment p. 9

• Consistent with the rule that later refinements
  do not preclude reduction to practice, it is
  improper to conclude that an invention is not
  reduced to practice merely because further
  testing is being conducted.

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• Changes in 3rd prototype do not show experimental
  use -- ??
• Refund of purchase price does not show machine
  was not yet fit for its purpose, and hence not
  reduced to practice -- ??

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Concurrence Prost Dyk

• Assuming a complete invention, ready for
  patenting, inventors should be able to continue
  to privately develop any claimed aspect of that
  invention without risking invalidation, if they
  conduct development activities in a way that is
  neither public nor simply commercial, even if
  there is some commercial benefit to the inventor
  in connection with the experimental use.

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• Evidence that the ... sale of the patented
  device was primarily experimental may negate an
  assertion of invalidity.
• Monon Corp. v. Stoughton Trailers, Inc., 239 F.3d
  1253 (Fed. Cir. 2001), at 1258