«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 ...»
1. A Commercial Offer Noting “the importance of having a uniform national rule regarding the on-sale bar,” the Federal Circuit has held that determining whether a commercial offer for sale was made is a matter of Federal Circuit law, “to be analyzed under the law of contracts as generally understood.”29 Thus, the Federal Circuit looked to the Uniform Commercial Code (UCC) and the Restatement of Contracts to define a “commercial offer for sale.”30 year prior to the patent application having been filed).
24. Pfaff, 525 U.S. at 67.
25. Seal-Flex, Inc. v. Athletic Track & Court Constr., 98 F.3d 1318, 1323 n.2 (Fed. Cir. 1996).
26. Pfaff, 525 U.S. at 66 n.11 (noting that the test “has been criticized as unnecessarily vague”) (citing Seal-Flex, 98 F.3d at 1323 n.2).
27. Sparton Corp. v. United States, 399 F.3d 1321, 1323 (Fed. Cir. 2005).
28. Id. (citing Scaltech, Inc. v. Retec/Tetra, L.L.C., 269 F.3d 1321, 1328 (Fed. Cir. 2001)).
29. Grp. One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1047 (Fed. Cir.
2001) (noting that any alternative holding would mean that a patent could simultaneously be valid in some jurisdictions, but not others—which “is clearly incompatible with a uniform national patent system”).
30. Id. at 1047–48 (citing Enercon GmbH v. Int’l Trade Comm’n, 151 F.3d 1376, 1382 (Fed. Cir. 1998)) (noting that “[t]he UCC has been recognized as 011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 801 The Federal Circuit has noted that “[n]either profit, revenue, nor even an actual sale is required for the use to be a commercial offer under section 102(b).”31 In order to constitute an offer for sale under § 102(b), an offer must be one “which the other party could make into a binding contract by simple acceptance (assuming consideration).”32 In contrast, communications attempting to “generate interest” in an invention, by inviting discussion of licensing terms33 or merely “[q]uot[ing]... a sales price to a potential distributor of a product that is not available for sale and distribution,” do not alone constitute commercial offers for sale.34 “[T]here must be more than an informational exchange of price information..
..”35 Note that actually producing or delivering a commercial good is not required.36 Likewise, performance of the patented method prior to the critical date is not required so long as the commercial offer for sale occurred prior to the critical date.37 Once someone—the inventor, his supplier or any other third party—places an invention on sale, the on-sale bar is implicated.38 Thus, “even if a thief ‘stole’ the claimed invention and passed it on to an innocent buyer, the innocent buyer’s subsequent offer to sell still trigger[s] the plain language of the on-sale bar” because an inventor could easily protect himself by the general law governing the sale of goods” and that Supreme Court decisions support consulting the UCC and Restatement “in the commercial contract law context”).
31. Atlanta Attachment Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1365 (Fed. Cir. 2008).
32. Grp. One, Ltd., 254 F.3d at 1048.
33. Id. at 1049.
34. C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1357 (Fed. Cir. 1998).
36. Atlanta Attachment, 516 F.3d at 1365 (finding that even though a prototype embodying the invention was never delivered, it was sold where the manufacturer sent “an invoice for the machine (an offer), and [the client] paid for the machine (an acceptance)”); see also Evans Cooling Sys., Inc. v. Gen.
Motors Corp., 125 F.3d 1448, 1452 (Fed. Cir. 1997) (finding that where an independent car dealership violated internal procedures by offering the 1992 Corvette for sale prior to GM’s model announcement, “the mere fact that the offer for sale was illegal or ineffective does not remove it from the purview of the section 102(b) bar... [even if] the contract was cancelable or changeable under certain circumstances”).
37. Plumtree Software, Inc. v. Datamize, L.L.C., 473 F.3d 1152, 1162 (Fed. Cir. 2006).
38. Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353, 1355 (Fed. Cir. 2001) (noting that “the text of section 102(b) itself makes no room for a ‘supplier’ exception”).
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promptly “filing a patent application within the one-year deadline.”39 Underlying such a result is the “primary policy” of the on-sale bar namely, encouraging inventors “to enter the patent system promptly.”40 Thus, an inventor’s own prior, secret commercial use implicates the statutory bar,41 as do secret “sales for the purpose of the commercial stockpiling of an invention.”42 Generally, the on-sale bar precludes patenting a process that the patentee has actually used—overtly or covertly—to produce a commercialized product.43 “In contrast, if the product were sold by one other than the patentee, and the process of making remained unknown, then sale of the product would not pose a statutory bar to a claim on the process.”44 Notice we already encounter commingling of the separate on-sale and public-use bars—in Woodland Trust, the irrigation system was never alleged to be “on sale” but rather was challenged as in public use because it was allegedly used to preserve the flora offered for sale at several greenhouses.45 Of course, performing a process for consideration would likewise trigger the on-sale bar.46
40. Id. at 1357 (quoting Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998)); see also In re Caveney, 761 F.2d 671, 676 (Fed. Cir. 1985) (noting that the on-sale bar is intended to promote “prompt and widespread disclosure of inventions to the public”).
41. Woodland Trust, 148 F.3d at 1370.
42. Special Devices, Inc., 270 F.3d at 1357 (finding the patentee’s contract “to have the patent’s commercial embodiment mass-produced more than one year before it filed a patent application” implicated the on-sale bar).
43. In re Kollar, 286 F.3d 1326, 1333 (Fed. Cir. 2002) (“[T]he issue concerning the on-sale bar is not whether the process is physically represented or enabled by a written description, but whether the process has been commercialized.”); see D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1147– 48 (Fed. Cir. 1983) (finding that a pre-critical-date offer to sell a device, produced using the patented method, invalidated the patent).
44. TorPharm, Inc. v. Ranbaxy Pharms., Inc., 336 F.3d 1322, 1327 (Fed.
Cir. 2003) (comparing D.L. Auld, 714 F.2d at 1147–48); see also W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540, 1550 (Fed. Cir. 1983) (“As between a prior inventor who benefits from a process by selling its product but suppresses, conceals, or otherwise keeps the process from the public, and a later inventor who promptly files a patent application from which the public will gain a disclosure of the process, the law favors the latter.”); Palmer v.
Dudzik, 481 F.2d 1377, 1385–86 (C.C.P.A. 1973) (finding that the inventor had concealed his invention since he kept his method secret and the products did not teach the public anything about the secret method).
45. Woodland Trust, 148 F.3d at 1369–70.
46. Compare Scaltech, Inc. v. Retec/Tetra, L.L.C., 269 F.3d 1321, 1328 011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 803 In a case arising under the on-sale bar, the Federal Circuit considered whether an offer to practice a patented method to produce an output—the output to be provided to a third party in return for a commercial benefit—invalidated the method claim.47 The court determined that the on-sale bar applies to the secret use of software to generate an output that is subject to an offer for sale, even if the output is not patented.48 Finally, the Federal Circuit requires that “a sale or offer to sell under... § 102(b) must be between two separate entities.”49 Whether two entities are in fact separate “depends on whether the seller so controls the purchaser that the invention remains out of the public’s hands.”50 The Federal Circuit has found a lack of common control, and thus separate entities, where a single government entity simply provided funding to a number of research institutions.51 Other factors to consider in determining whether two entities are separate include “the proportion of outstanding shares [of the company] held by the various parties; [the allegedly common entity’s] ability to control critical materials and products; and the terms of the Operator’s [sic] and Shareholder’s agreements.”52 Factors that are insufficient to demonstrate the existence of a common entity, include an unrelated requirement of mutual consent to management-employment decisions, a requirement that a distributor “use its best efforts to sell and service” products and not sell competing products, and a confidentiality obligation protecting one entity’s research and development information.53 (Fed. Cir. 2001) (invalidating a claim to a method for treating oil-refinery waste) with In re Kollar, 286 F.3d at 1333 (refusing to apply the on-sale bar to licensing of an invention “under which development of the claimed process would have to occur before the process is successfully commercialized”).
47. Plumtree Software, Inc. v. Datamize, L.L.C., 473 F.3d 1152, 1162 (Fed. Cir. 2006).
49. In re Caveney, 761 F.2d 671, 676 (Fed. Cir. 1985).
50. Ferag AG v. Quipp, Inc., 45 F.3d 1562, 1567 (Fed. Cir. 1995).
51. Netscape Commc’ns Corp. v. Konrad, 295 F.3d 1315, 1324 (Fed. Cir.
2002) (finding that the Department of Energy “never exercised such control over [the research labs at Berkeley, Stanford, and the Super Collider], as to render all part of the same entity,” and thus a sale of an invention between two of the entities implicated the on-sale bar).
52. Ferag AG, 45 F.3d at 1567 (“Because [Entity A] could not control [Entity B’s] marketing of the invention, the two companies were separate entities for section 102(b) purposes and the transaction between them gives rise to a statutory bar.”).
53. Id. (finding that “complete management authority over the operations... constrained only by a mutual consent clause mandating agreement... for 011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM
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2. Offer for the Patented Invention According to the Federal Circuit, “[w]hen the asserted basis of invalidity is a public use or on-sale bar, the court should determine ‘whether the subject of the barring activity met each of the limitations of the claim, and thus was an embodiment of the claimed invention.’”54 The Federal Circuit has held that this step “involves a comparison of the asserted claims with the device or process that was sold.”55 When “each and every limitation [of the claimed invention is] found either expressly or inherently” in the product that was sold, the claim is anticipated.56 In the case of a license to practice a process that contemplates sale of the products manufactured using the claimed process, the Federal Circuit held that such an agreement did not offer for sale the product of the claimed process.57 When the license pertains to patent rights, the on-sale bar will not be implicated.58 But, where the process has been carried out or performed as a result of the transaction, the on-sale bar may be implicated.59
B. READY FOR PATENTINGIn Pfaff, the Supreme Court considered the issue of whether the on-sale bar is implicated when an invention is “on sale” but “has not yet been reduced to practice” (e.g., the item has not actually been made or the process has not actually been percertain corporate decisions” is insufficient to demonstrate common control and a single entity).
54. Dana Corp. v. Am. Axle & Mfg., 279 F.3d 1372, 1375 (Fed. Cir. 2002) (quoting Scaltech Inc. v. Retec/Tetra, L.L.C., 178 F.3d 1378, 1383 (Fed. Cir.
55. Minton v. Nat’l Ass’n of Sec. Dealers, 336 F.3d 1373, 1376 (Fed. Cir.
56. Celeritas Techs. Ltd. v. Rockwell Int’l Corp., 150 F.3d 1354, 1361 (Fed.
57. In re Kollar, 286 F.3d 1326, 1330–31 (Fed. Cir. 2002); see MasHamilton Grp. v. LaGard, Inc., 156 F.3d 1206, 1217 (Fed. Cir. 1998) (finding that conveyance of production rights or exclusive marketing rights did not constitute a sale); Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1267 (Fed. Cir. 1986) (holding that “an assignment or sale of the rights in the invention and potential patent rights is not a sale”).
58. In re Kollar, 286 F.3d at 1330 n.3 (“[A] ‘license’ that merely grants rights under a patent cannot per se trigger the application of the on-sale bar.”).
59. See id. at 1332.