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«011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM The Commercial Exploitation Continuum Phillip W. Goter* I. INTRODUCTION In the realm of ...»

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The Commercial Exploitation Continuum

Phillip W. Goter*


In the realm of patent validity, patentable subject matter

and obviousness seem to be perennially en vogue. Academics,

courts, and practitioners alike dwell on these areas because

they lend themselves well to legal scholarship and debate. Patent law courses naturally gravitate towards discussion of seminal cases such as KSR Int’l Co. v. Teleflex Inc.1 and Bilski v.

Kappos.2 Less often do courses delve into detailed discussion of the greater issues involving § 102(b) and its on-sale and publicuse bars3—even though application of either of these statutory bars results in an absolute bar to patentability, invalidating a granted patent. However, the greater issues—including an articulate definition of commercial exploitation as a predominant factor in identifying whether an invention was in public use or on sale—are of extreme importance to innovators and those advising them, who seek to maximize their effective patent lifetime by aligning the market window, product launch, and patent filing. Considering parties litigate the issue of patent validity almost as frequently as infringement,4 one would expect more discussion of the absence of a cohesive approach to application of the public-use and on-sale bars with respect to © 2012 Phillip W. Goter * The author is an attorney at the law firm of Fish & Richardson, P.C.

where he focuses on patent litigation matters. J.D., The University of Iowa College of Law, 2011; M.B.A., The University of Iowa Tippie School of Management, 2008; M.S., The University of North Dakota, 2005; B.S., The University of North Dakota, 2001. The author would like to thank Andrew Dommer for his constructive critique.

1. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (concerning obviousness).

2. Bilski v. Kappos, 130 S. Ct. 3218 (2010) (concerning patentable subject matter).

3. Patents, 35 U.S.C. § 102 (2006).

4. Kimberly A. Moore, Judges, Juries, and Patent Cases—An Empirical Peek Inside the Black Box, 99 MICH. L. REV. 365, 390 (2000).

011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 796 MINN. J. L. SCI. & TECH. [Vol. 13:2 commercialization and commercial exploitation.

Contrary to the commercial interests of innovators, § 102(b) of the Patent Act “encourages an inventor to enter the patent system promptly” by defining separate statutory bars to patentability that prohibit sales and public uses of an invention more than a year prior to filing a patent application.5 To determine public use, the Federal Circuit currently asks whether the invention was accessible to the public or commercially exploited.6 As for determining whether an invention was on sale, the test is whether there was a commercial offer for sale after the invention was ready for patenting.7 As the Federal Circuit’s jurisprudence currently stands, the commercial-exploitation prong of the public-use bar lacks any coherent definition and is dangerously close to subsumption by the on-sale bar. Take, for example, the Federal Circuit’s Invitrogen Corp. v. Biocrest Manufacturing decision, in which it noted that “[c]ommercial exploitation is a clear indication of public use, but it likely requires more than... a secret offer for sale.”8 Consider further the Federal Circuit’s TP Laboratories, Inc. v. Professional Positioners, Inc. decision that linked “commercial exploitation” with commercial sale of the invention—as opposed to sale for experimental purposes.9 Finally, in Atlanta Attachment Co. v. Leggett & Platt, Inc., the Federal Circuit determined “[a]n offer to mass produce production models... is commercial exploitation.”10 This may just be careless wording resulting in conflation of commercial exploitation with being “on sale,” but the specter of commercial exploitation continues to loom as a distinct, principal criterion for satisfying the “public use” prong of the § 102 bar. As such, it deserves a definition.

With the passage of the America Invents Act (AIA), the

5. Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998). Section 102(b) conditions patentability upon the invention not being “patented or described in a printed publication in this or a foreign country or in public use or 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).

6. Am. Seating Co. v. USSC Grp., 514 F.3d 1262, 1267 (Fed. Cir. 2008) (citing Invitrogen Corp. v. Biocrest Mfg., 424 F.3d 1374, 1380 (Fed. Cir. 2005)).

7. Invitrogen Corp., 424 F.3d at 1379.

8. Id. at 1380.

9. TP Labs., Inc. v. Prof’l Positioners, Inc., 724 F.2d 965, 972–73 (Fed.

Cir. 1984).

10. Atlanta Attachment Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1366 (Fed. Cir. 2008).

011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 797 United States converted itself to a first-to-file priority-of-right system with significant changes to § 102.11 However, the relevant changes under the AIA apply only prospectively to patents issued on or after September 16, 2012.12 This leaves at least twenty more years during which patents could be litigated under the existing standard. Under §102 currently, an inventor is entitled to a patent unless “the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States.”13 In contrast, AIA allows an inventor a patent unless “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.”14 Note that the AIA does not relieve inventors of the onsale or public-use bars currently existing in §102(b), and so there is no reason to expect a radical departure from existing §102(b) precedent as courts begin to consider whether to apply the same bars—now residing in §102(a)—to patents facing validity challenges under the AIA. If anything, these cases may arise more frequently given the expansion of prior-user rights and the concern that they will encourage covert innovation and use.15 To date, perhaps courts have not seen the appropriate set of facts, at the appropriate stage of the proceedings, to decisively clarify the issue. Take for instance an agri-tech company that creates a drought-tolerant hybrid seed that exhibits resistance only to a new, environmentally safe pesticide. No doubt the company will want to patent this variation, but when will it apply for the patent? In order to commercially market the seed, application of the pesticide to the seed must receive

11. Leahy-Smith America Invents Act, sec. 3(b)(1), 125 Stat. 284 (2011) (amending 35 U.S.C. § 102).

12. Id. at sec. 35.

13. Patents, 35 U.S.C. § 102(b) (2006).

14. Leahy-Smith America Invents Act, sec. 3(b)(1).

15. See America Invents Act: Hearing Before the Subcomm. on Intellectual Prop., Competition, and the Internet of the H. Comm. on the Judiciary, 112th Cong. 50 (2011) (statement of Rep. Sensenbrenner, Member, H. Comm. on the Judiciary) (“[E]xpanding prior user rights will harm inventors who share their knowledge and discovery and reward those who choose to stay silent, keep innovation secret, and don’t contribute to the products of science... [by] effectively put[ting] trade secrecy in the patent law with a powerful incentive—a royalty-free statutory license.”).


798 MINN. J. L. SCI. & TECH. [Vol. 13:2

regulatory approval. Obtaining this approval requires gathering field data. So, the company confidentially, and subject to its control, plants the seed, applies the pesticide, and gathers the data. These actions do not fall under the usual prong of public use, but if the activities are performed solely with a view to commercialization of the invention, is it commercial exploitation?16 As a second example, suppose a software company develops source-control and change-control tools, representing a major paradigm shift from existing tools, and uses them internally for five years during the development of its next-generation operating system. The company wants to patent the tools and market them because it has received accolades for the softwareengineering revolution sparked by the developmental success and resulting stability of its operating system. As we will see, use of the tools did not result in creation of the operating system in the same way that practicing a process to manufacture products does, and so it is unlikely that this example would fall under existing caselaw finding public use through public accessibility.17 But, is it commercial exploitation to utilize the software-engineering management tools to produce software that is commercially marketed?

This Article addresses the abject lack of a meaningful definition of “commercial exploitation”—apart from being on sale— as a prong of the test for public use. First, this Article introduces the Federal Circuit’s on-sale bar jurisprudence. Second, this Article discusses the public-use bar and its experimental-use exception while attempting to delineate between the two separate bars. In examining the interplay between the commercialexploitation prong of the public-use bar and the on-sale bar, relevant Supreme Court decisions and recent district court decisions are also discussed. Finally, this Article concludes by exThe answer is likely yes, due to language elsewhere in the Patent Act, but these facts have not yet come before a court. See 35 U.S.C. § 273(a)(1) (2006) (“[T]he subject matter for which commercial marketing or use is subject to a premarketing regulatory review period during which the safety or efficacy of the subject matter is established, including any period specified in section 156(g), shall be deemed ‘commercially used’ and in ‘commercial use’ during such regulatory review period....”) But, is “commercial use” the same as “commercial exploitation”?

17. Note that in this example, a computer-aided software engineering tool may arguably “produce” the software product, therefore the example points to the tools used to manage the development process.


–  –  –

amining circumstances found relevant to a determination of commercial exploitation.

II. THE ON-SALE BAR To fully appreciate the current ambiguity surrounding the public-use bar, one must first consider the Federal Circuit’s decisions regarding the on-sale bar. One district court acknowledged that “there are differences in the analysis of the two bars: the public-use bar focuses on the public’s reliance on an invention that is thought to be in the public domain, while the on-sale bar centers on any commercialization beyond the one year grace period.”18 Even so, the Federal Circuit has yet to articulate a substantive difference between “commercial exploitation” as applied to the “on-sale” and “public-use” bars. Indeed, “[m]any decisions consider Section 102(b) without carefully differentiating public use and on sale.... However, it is clear that public use and on sale are separate events and one may occur without the other.”19 Section 102(b) bars patentability for inventions that were “on sale in this country, more than one year prior to the date of the application for patent in the United States.”20 In addition to “a policy favoring prompt and widespread disclosure of inventions to the public,” the Federal Circuit has identified other policies underlying the on-sale bar, including “a policy against removing inventions from the public domain which the public justifiably comes to believe are freely available due to commercialization... [and] a policy of giving the inventor a reasonable amount of time following sales activity to determine whether a patent is worthwhile.”21 In Pfaff v. Wells Electronics, Inc., the Supreme Court defined the baseline test for determining whether the on-sale bar applies.22 “[T]he on-sale bar applies when two conditions are satisfied before the critical date. First, the product must be the subject of a commercial offer for sale.... [and s]econd, the invention must be ready for patenting.”23 This Article discusses

18. Honeywell Int’l, Inc. v. Universal Avionics Sys. Corp., 343 F. Supp. 2d 272, 290 (D. Del. 2004).

19. 2-6 DONALD S. CHISUM, CHISUM ON PATENTS § 6.02[6] (2010).

20. Patents, 35 U.S.C. § 102(b) (2006).

21. In re Caveney, 761 F.2d 671, 676 (Fed. Cir. 1985).

22. Pfaff v. Wells Elecs. Inc., 525 U.S. 55, 67 (1998).

23. Id.; see also Preemption Devices, Inc. v. Minn. Mining & Mfg. Co., 732 F.2d 903, 905–06 (Fed. Cir. 1984) (defining the “critical date” as the date one 011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM

–  –  –

each of these prongs below.


The first prong of the on-sale bar requires a commercial offer for sale or an actual sale. This trigger creates little hardship for patentees because, as the Court noted, “[a]n inventor can both understand and control the timing of the first commercial marketing of his invention.”24 Prior to Pfaff, the Federal Circuit applied a totality-of-the-circumstances test to determine whether a “substantially complete” invention was on sale prior to the critical date—the date one year prior to application for a patent.25 Although not the issue before it in Pfaff, the Supreme Court criticized the Federal Circuit’s totality-of-thecircumstances approach to “determin[ing] the trigger for the on-sale bar” in dicta.26 “While the Supreme Court has not explained what is necessary for a ‘commercial offer for sale,’ [the Federal Circuit] ha[s] held that two elements are necessary.”27 First, there must be a “commercial offer” and second, the “offer [must be] for the patented invention.”28

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