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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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011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 805 formed).60 The Court determined that for the on-sale bar to arise, the invention must be “ready for patenting.”61 This may be shown “by proof of reduction to practice before the critical date; or by proof that prior to the critical date 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.”62 In arriving at this standard, the Supreme Court rejected an alternative suggested by the Solicitor General: “[I]f the sale or offer in question embodies the invention for which a patent is later sought, a sale or offer to sell that is primarily for commercial purposes and that occurs more than one year before the application renders the invention unpatentable.”63 It is also important to note at the outset that the invention must at least be conceived of prior to any offer for sale because “[w]ith no conception of an invention, there cannot be an offer for sale or a sale of that invention.”64 Reduction to practice of an invention occurs when an embodiment “meets every limitation and operates for its intended purpose.”65 “An invention works for its intended purpose when there is a demonstration of the workability or utility of the claimed invention.”66 While “an inventor is entitled to perfect

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

61. Id. at 66.

62. Id at 67–68 (noting that “the second condition of the on-sale bar is satisfied because the drawings Pfaff sent to the manufacturer before the critical date fully disclosed the invention”); see also Robotic Vision Sys., Inc. v. View Eng’g, Inc., 249 F.3d 1307, 1313 (Fed. Cir. 2001) (“[T]he test for determining whether [an] invention is complete also requires proof that the invention was enabled prior to the critical date.”).

63. Pfaff, 525 U.S. at 68 n.14 (quoting Seal-Flex, Inc. v. Athletic Track & Court Constr., 98 F.3d 1318, 1325 (Fed. Cir. 1996) (Bryson, J., concurring in part and concurring in the result) (internal quotation marks omitted) (explaining that this formulation does not account for “additional development after the offer for sale”)).

64. Sparton Corp. v. United States, 399 F.3d 1321, 1325 (Fed. Cir. 2005) (finding no conception prior to the offer for sale and thus no on-sale bar). Compare id. at 1324–25, with Robotic Vision Sys., Inc., 249 F.3d at 1313 (finding that conception, followed by offer for sale, followed by enabling internal disclosure triggers the on-sale bar).

65. Honeywell Int’l, Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 997 (Fed. Cir. 2007) (citing Eaton v. Evans, 204 F.3d 1094, 1097 (Fed. Cir.


66. Id. (citing Fujikawa v. Wattanasin, 93 F.3d 1559, 1563 (Fed. Cir.

1996)); see Robotic Vision Sys., Inc., 249 F.3d at 1313 (finding that an earlier commercial offer for sale, when combined with a subsequent, internal enabling disclosure may trigger the on-sale bar even though there was no proof that the conceived-of invention was ready for patenting at the time of the offer for sale);


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

claimed features as part of reducing the invention to practice,”67 once the invention is workable or useful “an invention can be considered reduced to practice ‘even though it may later be refined or improved.’”68 Like the public-use bar, the on-sale bar contains an experimental-use exception which is unavailable where a commercial offer for sale has been made.69 The Federal Circuit applies the experimental-use doctrine to the ready-for-patenting prong of the on-sale bar and notes that there is “overlap” of the proofs required for experimental use and ready for patenting.70 “[H]owever, the Supreme Court explicitly preserved proof of experimentation as a negation of statutory bars.”71 For instance, tests conducted to determine whether an invention worked for its intended purpose are not “demonstrations” of workability or utility when the tests are part of an effort to reduce the invention to practice and work remains “to ascertain the success of the operation.”72 This is especially the case where see also Cygnus Telecomms. Tech., L.L.C. v. Telesys Commc’ns, L.L.C. (In re Cygnus Telecomms. Tech., L.L.C., Patent Litig.), 536 F.3d 1343, 1355 (Fed.

Cir. 2008) (“The question whether [a] system would work on a commercial scale is distinct from whether the system embodied the claims in the [] patents at issue.”).

67. Atlanta Attachment Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1367 (Fed. Cir. 2008) (citing Electromotive Div. of Gen. Motors Corp. v. Transp. Sys.

Div. of Gen. Electric Co., 417 F.3d 1203, 1211 (Fed. Cir. 2005)).

68. Id. (quoting New Railhead Mfg. L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290, 1297 (Fed. Cir. 2002)) (finding that a third prototype worked for its intended purpose and was thus reduced to practice and ready for patenting even though the inventor conducted further testing, refunded the cost of the third prototype, and responded to suggestions resulting in production of a fourth prototype, closer to a commercial-ready product).

69. Id. at 1366 (finding that “once there has been a commercial offer, there can be no experimental use exception.”); see also Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 64 (1998) (“Nevertheless, an inventor who seeks to perfect his discovery may conduct extensive testing without losing his right to obtain a patent for his invention—even if such testing occurs in the public eye. The law has long recognized the distinction between inventions put to experimental use and products sold commercially.”).

70. EZ Dock, Inc. v. Schafer Sys., Inc., 276 F.3d 1347, 1352 (Fed. Cir.

2002) (“Like evidence of experimentation sufficient to negate a bar, reduction to practice involves proof that an invention will work for its intended purpose.”).

71. Id. at 1352.

72. Honeywell Int’l, Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 997 (Fed. Cir. 2007) (determining that a videotaped demonstration of an uncertified terrain warning system deployed in an experimental aircraft was experimental use even though the proof-of-concept demonstrations supported 011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 807 “documents show that the system was still in development at the time of the tests” even though the inventor “did not alter any specific part of [the] claimed system” following the experimentation.73 Contrarily, showing that prior to the critical date the patentee “in fact performed the patented method for a promise of future compensation” constitutes obvious proof that an invention is ready for patenting.74 Further, under the experimental use exception to the onsale bar, the patentee may engage in joint-research agreements or industry-development collaborations with the aim of reducing the invention to practice.75 These activities likely receive the benefit of the doubt because where multiple innovators cooperate in research and development they are more likely to bring the patented product to market.76 For instance, where an avionics-electronics developer attempted to partner with business- and regional-jet manufacturers to provide avionics electronics for their jets, the Federal Circuit found that a single proposal of commercial terms—contingent on successful flight testing—for supplying the avionics system did not vitiate a claim of experimental use.77 The Federal Circuit acknowledged the district court’s finding that “both projects involved experimental aircraft [and] uncertified equipment”78 and noted that the avionics company “entered into these negotiations to facilicommercial proposals).

73. Id.

74. Plumtree Software, Inc. v. Datamize, L.L.C., 473 F.3d 1152, 1162 (Fed. Cir. 2006) (noting that proof “that the contract itself required performance of the patented method” is not necessary).

75. C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1356 (Fed. Cir. 1998) (“Generally cost defrayal arrangements between collaborators are not deemed to be invalidating sales, nor are payments for use substantially for test purposes.”) The Federal Circuit noted that the public policy concerns underlying the statutory bar were muted in these instances because clinical tests and experimental sales “d[o] not place the invention in the public domain or lead the public to believe that the device was freely available.” Mahurkar v. Impra, Inc.

(In re Mahurkar Double Lumen Hemodialysis Catheter Patent Litig.), 71 F.3d 1573, 1577 (Fed. Cir. 1995).

76. See generally Phillip W. Goter, Note, Princo, Patent Pools, and the Risk of Foreclosure: A Framework for Assessing Misuse, 96 IOWA L. REV. 699, 711–17 (2011) (discussing how standard-setting organizations, patent pools, and research joint ventures further public policy, competition, and consumer interests).

77. Honeywell, 488 F.3d at 996–97.

78. Id. at 996 (quoting Honeywell Int’l, Inc. v. Universal Avionic Sys.

Corp., 343 F. Supp. 2d 272, 295 (D. Del. 2004)) (internal quotation marks omitted).


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

tate its programs to test its new system with human pilots in a genuine cockpit setting... to determine that the invention worked for its intended purpose.”79 In contrast, “[a]n offer to mass produce production models does not square with experimentation under any standard; it is commercial exploitation.”80 III. THE PUBLIC-USE BAR The public-use bar of § 102(b) denies patents to inventions that were “in public use... in this country, more than one year prior to the date of the application for patent in the United States.”81 As the Supreme Court has noted, “[Section] 102 of the Patent Act serves as a limiting provision, both excluding ideas that are in the public domain from patent protection and confining the duration of the monopoly to the statutory term.”82 Because “[c]ommercial exploitation of an invention as a trade secret violates the policies of encouraging an inventor’s prompt disclosure and preventing the inventor’s exploitation of an invention beyond the statutory patent term,” the on-sale and public-use bars may function as a “tool that forces an inventor to choose between patent protection and trade secret protection.”83 For instance, in Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., where the patentee used its secret process to recondition worn parts for its customers, the Second Circuit noted “that it is a condition upon an inventor’s right to a patent that he shall not exploit his discovery competitively after it is ready for patenting; he must content himself with either secrecy, or [a patent].”84 Among the other public policy interests in play, the public-use bar attempts to provide “inventors with a definite standard for determining when a patent application

79. Id. at 996. The Federal Circuit considered in its analysis that “Honeywell did not refer to the new system as ready for sale.” Id. at 997.

80. Atlanta Attachment Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1366 (Fed. Cir. 2008) (finding that a quotation for manufacture of 50 production units that according to the terms “became a contract with the signature of a purchasing entity... constitute[d] an offer for sale that cannot avoid the onsale bar via the experimental use exception”).

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

82. Pfaff v. Wells Elecs., 525 U.S. 55, 64 (1998).

83. Andrew S. Baluch, Note, Relating the Two Experimental Uses in Patent Law: Inventor’s Negation and Infringer’s Defense, 87 B.U. L. REV. 213, 225 (2007).

84. Metallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516, 520 (2d Cir. 1946).

011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 809 must be filed.”85 In Egbert v. Lippman, the Supreme Court set out the “classical standard” for assessing public use of an apparatus.86 The inventor provided two corset springs for unrestricted, albeit concealed, use by a woman, who used them for more than two years before the inventor applied for a patent.87 While the inventor received no commercial advantage, the use was still public where the inventor gave or sold the invention “to another, to be used by the donee or vendee, without limitation or restriction, or injunction of secrecy.”88 The Federal Circuit extended the Pfaff two-prong analysis to public use in Invitrogen, requiring that the invention be ready for patenting and in “public use.”89 The invention is in public use when it is: “(1) accessible to the public; or (2) commercially exploited.”90


Generally, “[a]n invention is in public use if it is shown to or used by an individual other than the inventor under no limitation, restriction, or obligation of confidentiality.”91 Prior to the Supreme Court’s decision in Pfaff, the Federal Circuit applied a totality-of-the-circumstances test to evaluate alleged

85. Weatherchem Corp. v. J.L. Clark, Inc., 163 F.3d 1326, 1333 (Fed. Cir.

1998) (quoting Pfaff, 525 U.S. at 65) (internal quotation marks omitted). Note that the on-sale bar functions similarly by allowing inventors to “explore [commercialization] of their invention before weighing the benefits of patent protection against the costs of obtaining the patent.” Frank Albert, Note, Reformulating the On Sale Bar, 28 HASTINGS COMM. & ENT L.J. 81, 101 (2005– 2006).

86. Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1382 (Fed. Cir.


87. Egbert v. Lippman, 104 U.S. 333, 337 (1881).

88. Id. at 336.

89. Invitrogen, 424 F.3d at 1379. The court considered that the Supreme Court “noted that both the ‘on sale’ and ‘public use’ bars were based on the same policy considerations[:]... ‘reluctance to allow an inventor to remove existing knowledge from public use’” and held that “[a] bar under § 102(b) arises where, before the critical date, the invention is in public use and ready for patenting.” Id. (quoting Pfaff, 525 U.S. at 64).

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