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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 819 its intended environment.”142 Obviously, “[t]esting is required to demonstrate reduction to practice in some instances because without such testing there cannot be sufficient certainty that the invention will work for its intended purpose.”143 As a final qualification, the Federal Circuit recently noted that “there is no experimental use unless claimed features or overall workability are being tested for purposes of the filing of a patent application.”144 Even though experimental use generally cannot negate a public use where the invention was reduced to practice before the experimental use in question, a district court found no public use where experimentation occurred after reduction to practice.145 In this case, field testing was used to debug and evaluate the patented system.146 The inventors continued to modify the system based on experiment results and the version used in field trials was not the final version of the invention.147 The district court cited Invitrogen for the proposition that “[e]vidence that the researchers were still conducting experiments of the..

. prototype is relevant in determining the precise nature of the activity that occurred in public” even though the invention had already been reduced to practice.148 The district court further noted other evidence of “openly experimental” use. First, researchers were required to get approval from the university’s research oversight committee in order to use human drivers as test subjects during the field trials.149 Further, even though the details of the experimentation were not apparent to the test drivers, the drivers understood that “the nature of the endeavor in which they were participating was clearly experimental and [they] would not... justifiably [] believe the invention was available to the public.”150 Additionally, the court noted that “[t]he inventors never showed the drivers how the Back Seat

142. Gould, Inc. v. United States, 579 F.2d 571, 583 (Ct. Cl. 1978).

143. In re Omeprazole, 536 F.3d at 1373 (quoting Cooper v. Goldfarb, 154 F.3d 1321, 1327 (Fed. Cir. 1998)) (internal quotation marks omitted).

144. Clock Spring, L.P. v. Wrapmaster, Inc., 560 F.3d 1317, 1327 (Fed. Cir.


145. Mass. Inst. of Tech. v. Harman Int’l Indus., 584 F. Supp. 2d 297, 311 (D. Mass. 2008).

146. Id. at 302–03.

147. Id.

148. Id. at 311 (citing Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1380 (Fed. Cir. 2005)).

149. Id. at 312.

150. Id.


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

Driver system worked, and the drivers were exposed to the workings of the system only to the extent that it was necessary to test it.”151 Finally, the public, viewing the prototype vehicle from the street, was unable to see that the test drivers were using the Back Seat Driver system.152 Experimentation to resolve potential issues with commercialization of the invention is not covered under the experimental-use exception.153 This raises an interesting issue when the invention requires regulatory approval prior to commercial marketing because the invention must be used sufficiently to determine its safety and efficacy—the use creating public knowledge of the invention and fueling market demand for the product.154 In Omeprazole, the Federal Circuit considered whether a pharmaceutical was reduced to practice prior to Phase III clinical trials.155 In determining that the clinical trials constituted experimental use, the Federal Circuit noted that in vivo testing as part of the clinical trials was necessary to proving the formulation worked for its intended purpose even though the inventors suspected their formulation would be successful based on laboratory testing.156 Revisiting Honeywell, which also required regulatory approval of its avionics invention, even publicizing experimentation with an invention does not vitiate the claimed experimental use.157 The Federal Circuit affirmed that Honeywell’s demonstrations to the aviation industry were experimental even though they “did not always relate to claimed features” because all of the demonstrations involved the invention’s intended use as an in-flight

151. Id. at 313.

152. Id.

153. See 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) (rejecting the inventor’s testimony that the invention was not ready for patenting because it “would not scale for commercial use”).

154. See Honeywell Int’l, Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 998 (Fed. Cir. 2007) (“Although these [test] flights allowed contact with potential customers, there is no evidence that they were solely or primarily for marketing purposes.”).

155. In re Omeprazole Patent Litig., 536 F.3d 1361, 1372 (upholding the district court’s factual finding that “the claimed formulation was not reduced to practice before the clinical trials were completed....”).

156. Id. at 1373–74.

157. Honeywell Int’l, 488 F.3d at 998 (finding that even though a “reporter published an article... about [the test] flight... he indicated the system was still under development”). See infra Part II.B.

011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 821 avionics system.158 Regarding sales incident to experimentation, “[t]he law has long recognized a distinction between experimental usage and commercial exploitation of an invention.”159 “Any attempt to use [an invention] for a profit, and not by way of experiment...

deprive[s] the inventor of his right to a patent” when that use occurs prior to the critical date.160 However, an inventor may charge another for their experimental use of his invention.161 In such instances the determining question is “whether the primary purpose of the offers and sales was to conduct experimentation.”162 In other words, sales during the experimental phase must be “merely incidental to the primary purpose of experimentation.”163 The Federal Circuit often looks to the amount of payment for the invention relative to the product’s later market price.164 In allowing sales and contact with potential customers during experimentation, the Federal Circuit has noted that “[c]ommercial purpose underlies virtually every contact between inventor and potential customer” and so customer contact for purposes of experimentation “does not convert an otherwise experimental purpose into a public use.”165 However,

158. Id. (noting that testing is permitted “to determine the workability of an invention even if the claims do not expressly set forth the intended use under examination”).

159. Atlanta Attachment Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1365 (Fed. Cir. 2008)

160. City of Elizabeth v. Am. Nicholson Pavement Co., 97 U.S. 126, 137 (1877); see also Allied Colloids Inc. v. Am. Cyanamid Co., 64 F.3d 1570, 1576 (Fed. Cir. 1995) (“[T]he absence of payment supports the inference that the tests were for the benefit of the patentee, and thus contravenes the inference of public use for or by the potential customer.”).

161. See, e.g., Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1353–54 (Fed. Cir. 2002).

162. Atlanta Attachment Co., 516 F.3d at 1365; see also TP Labs. Inc. v.

Prof’l Positioners, Inc., 724 F.2d 965, 972 (Fed. Cir. 1984) (noting that some other factors, such as “expression by an inventor of his subjective intent to experiment,” particularly after institution of litigation, are not very helpful).

163. Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1185 (Fed. Cir. 1993). The court attempted to clarify the issue: “There are not, however, two separable issues, i.e., ‘Was the invention on sale?’ and then, ‘Was the sale an experimental use?’ The correct statement of the sole issue is ‘Was the invention on sale within the meaning of section 102(b)?’” Id. at 1185 n.3.

164. See Mark Levy, An Analysis of the On Sale Bar and Its Impact on the Structure and Negotiation of Development Agreements, 30 U. DAYTON L. REV.

181, 198 (2004) (“A sale for full price may be viewed as a bar rather than as an experimental use.”).

165. Allied Colloids Inc., 64 F.3d at 1575; see also Paragon Podiatry Lab., Inc., 984 F.2d at 1188 (finding sales limited to low volume purchases “may be 011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM

–  –  –

“experimentation conducted to determine whether the invention would suit a particular customer’s purposes does not fall within the experimental use exception.”166


As Learned Hand noted, “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 legal monopoly.”167 This language reflects the public policy interest underlying the commercial exploitation prong of the public-use bar. As it stands though—and as this Article aims to demonstrate—the Federal Circuit’s jurisprudence does little more than allow one to compare their (or a client’s) practices of interest to those the Federal Circuit has found (usually in dicta) to constitute commercial exploitation. Recall in Woodlands Trust, the Federal Circuit upheld the patent, but commented that the use of an irrigation system by a commercial greenhouse for more than a year prior to the critical date could constitute commercial exploitation (assuming evidence of sufficient weight, not before the court).168 Similarly, in D.L. Auld, the Federal Circuit invalidated a method claim because the patentee had offered to sell—prior to the critical date—a device manufactured using the patented method.169 Another circumstance that emerges is failure to notify customers of the experimental nature of the product being provided.170 And, of course, “[a]n offer to mass produce producrelevant to determining whether the scope of the inventor’s testing was appropriate but only where other evidence indicates that the sales were restricted and controlled as appropriate for experimental use”).

166. Atlanta Attachment Co., 516 F.3d at 1366; see also Paragon Podiatry Lab., Inc., 984 F.2d at 1188 (finding that because “Paragon represented to doctors and their patients that the [devices] were fully tested” the experimental use did not apply and the invention was considered on sale). In rejecting gauging customer satisfaction with an invention through sales, the Federal Circuit noted that “there [is] no reason to be concerned about customer relations if the [experimental] devices prove[ ] unsatisfactory” and determined that marketing testing of the invention is not included in the experimental use exception. Id.

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

168. Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998).

169. D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1151 (Fed.

Cir. 1983).

170. Electromotive Div. of Gen. Motors Corp. v. Transp. Sys. Div. of Gen.

011 GOTER_PROOF -SK.DOCX (DO NOT DELETE) 7/5/2012 1:24 PM 2012] THE COMMERCIAL EXPLOITATION CONTINUUM 823 tion models does not square with experimentation under any standard; it is commercial exploitation.”171 So where does that leave commercial exploitation when the case law revolves around a sale of the invention or a disclosure to the public? Or in the experimental use context, where the primary purpose of a sale must be for experimentation, but experimentation may include commercial promotion so long as the experimentation is not primarily for marketing purposes?

Commercial exploitation has to be more than a “magic trump card” discretionarily used to discipline inventors that cross an invisible line.172 Perhaps a more certain (better) approach would be for the Federal Circuit to define commercial exploitation, or at least catalogue its “approved” list of factors that inform the commercial exploitation determination. Given the public policy concerns embodied in the § 102(b) statutory bar, it is unlikely that commercial exploitation should require that the invention be on sale or even that a revenue stream can be directly traced to an inventor’s use of the invention.

However, in the same way that the on-sale bar currently has vitiated the commercial exploitation analysis under the public-use bar, we must be careful to not vitiate the on-sale bar through our definition. Thus, commercial exploitation concerns under the public-use bar should be most acute in the context of pre-sale marketing activities. Suppose a university laboratory, in an effort to find a corporate sponsor through technology transfer, invites several industry players to individually attend demonstrations of its ready-for-patenting invention. Even though the demonstrations are not experimental and all confidentiality and invention-control criteria have been met, the systematic demonstrations objectively prove a purpose of commercial exploitation and should implicate the public-use bar.

Considering that the inventors can simply apply for a patent to protect themselves, a definition of commercial exploitation that includes such targeted pre-sale marketing activities is not draElec. Co., 417 F.3d 1203, 1214–15 (Fed. Cir. 2005).

171. Atlanta Attachment Co., 516 F.3d at 1366 (Fed. Cir. 2008); see also Elec. Storage Battery Co. v. Shimadzu, 307 U.S. 5, 20 (1939) (“The ordinary use of a machine or the practise [sic] of a process in a factory in the usual course of producing articles for commercial purposes is a public use.”).

172. See Cass R. Sunstein, Foreword: Leaving Things Undecided, 110 HARV. L. REV. 4, 61 (1996) (discussing the Supreme Court’s failure to articulate their actual standard of scrutiny and instead using “rationality review, traditionally little more than a rubber stamp... to invalidate badly motivated laws”).


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

conian and furthers the public-policy interests embodied in the public-use bar. What more is required such that the test for commercially exploitative public use is distinct from the on-sale bar? Courts offer little in the way of a definition and are in danger of conflating the two separate bars. Perhaps they simply know commercial exploitation when they see it.173 Regardless, the Federal Circuit should endeavor to demarcate the bounds of commercial exploitation as soon as the opportunity presents itself and in so doing provide much needed guidance to innovators, practitioners, and the district courts.

173. See Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J., concurring) (struggling to define a workable standard for obscenity that does not degenerate into case-by-case review of the material and facts by appellate courts,

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