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Death by a Salesman: The On-sale Bar

Death by a Salesman: The On-sale Bar. Patent Law March 3, 2008. For Sale. On-Sale Bar. Sale or offer for sale Traditionally, required (1) reduction to practice, and (2) sale or offer for sale

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Death by a Salesman: The On-sale Bar

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  1. Death by a Salesman: The On-sale Bar Patent Law March 3, 2008

  2. For Sale 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. • SeePfaff v. Wells Electronics, Inc.

  3. 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 . . .

  4. [I]t 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

  5. FieldTurf International Inc. v. Sprinturf Inc., 77 USPQ2d 1468 (CA FC 2006) FieldTurf International Inc. v. Sprinturf Inc., 77 USPQ2d 1468 (CA FC 2006) 77 USPQ2D 1468 FieldTurf International Inc. v. Sprinturf Inc. U.S. Court of Appeals Federal Circuit No. 04-1553 Decided January 5, 2006

  6. Infringement defendants' bid to supply artificial turf in response to school district's “request for proposal” was not infringing “offer to sell” under 35 U.S.C. §271(a), even though RFP specifications included features that characterized product covered by plaintiffs' patents

  7. [R]epresentatives of school district were aware that defendants' product differed from patented product, and defendants emphasized those differences in their communications to school district, since these facts show that defendants intended to offer and install product that is conceded not to literally infringe patents, and since, when plaintiffs complained to school district that defendants' bid was for patented product, district withdrew RFP entirely and rejected all bids, thus avoiding accrual of damages for infringement.

  8. Major Developments Post-Pfaff • What is a “sale or offer for sale”? • License vs. sale

  9. Group One, Ltd. v. Hallmark Cards, Inc.254 F.3d 1041C.A.Fed.,2001. [W]e 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.

  10. 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.”

  11. Problems with Hallmark? • Lacks Industries, Inc. v. McKechnie322 F.3d 1335, 1348 (Fed. Cir. 2003)

  12. 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."

  13. “[T]he 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. McKechnie322 F.3d 1335, 1348 (Fed. Cir. 2003)

  14. But: “commercial activity” prong of public use -- ?? • Invitrogen Corp. v. Biocrest Mfg., L.P.424 F.3d 1374C.A.Fed. 2005

  15. 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.

  16. 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

  17. 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

  18. 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

  19. 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.

  20. 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)

  21. 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. 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).

  22. 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 . . . “

  23. 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

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

  25. 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.

  26. 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.

  27. 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.

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

  29. 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”

  30. Extra Points • Reissues, nineteenth century • Sovereign immunity/gov’t Ks

  31. Line between public use and “on sale”; experimental use exception • Public (commercial) uses vs. offers for sale • Experimental use where items sold; experimental use and on-sale bar relationship

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

  33. 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

  34. 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.

  35. 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;

  36. 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.

  37. • 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

  38. Pfaff – p. 8 • Commercial offer for sale • Ready for patenting • Reduced to practice • Drawings etc. – enabling description on hand

  39. [O]nce 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.

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

  41. Leggett & Platt is correct to emphasize that Atlanta Attachment did not retain control over the prototypes when they were in Sealy’s 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)

  42. 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.

  43. 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.

  44. 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 -- ??

  45. 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.

  46. “[E]vidence 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

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