Death by a Salesman: The On-Sale Bar

1. Death by a Salesman: The On-Sale Bar Patent Law – Prof Merges 10.5.2010

2. Agenda • On sale bar • Experimental Use exception to statutory bars

5. 7/81 4/19/82 4/19/81 Pfaff v. Wells 4/8/81 Pfaff Files Patent Application Order Filled The “Critical Date” for the Patent Application Texas Instruments places P.O. for 30,100 new chip carriers

6. 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 . . .

7. [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

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. 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)

15. 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.

16. 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).

17. Elan v Andrx • 366 F.3d 1336C.A.Fed. 2004.

18. 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 . . . “

19. The letter to Lederle lacked any mention of quantities, time of delivery, place of delivery, or product specifications beyond the general statement that the potential product would be a 500 mg once-daily tablet containing naproxen. Moreover, the dollar amounts recited … are clearly not price terms for the sale of tablets, but rather the amount that Elan was requesting to form and continue a partnership with Lederle. Indeed, the letter explicitly refers to the total as a “licensing fee.” – 366 F.3d at 1341

20. 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

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

22. 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.

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

24. 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.

25. 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

26. 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

27. 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

28. 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.  Still, NOT a Public Use

29. Agenda • On sale bar • Experimental Use exception to statutory bars

30. 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.

31. Wood Block technology

32. Wood block technology II

33. Nicholson timeline Hosking Patent: 1850 1854: Patent filed/Issues 1875: Reissued Patent Expires 8.1847: Nicholson files caveat

34. Nicholson Facts 6 Years of Public Use 1854: Patent filed/Issues 1875: Reissued Patent Expires 8.1847: Nicholson files caveat

35. 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.

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

37. 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”

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

39. Public use and “on sale”: experimental use exception applies to BOTH • Public (commercial) uses vs. offers for sale

40. Lough v. Brunswick • Stern drive assembly seal for boats • Lough installed 6 prototypes in boats of friends and acquaintenances • Question: public use statutory bar?

46. Judge Lourie opinion • Experimental use factors (pp. 562-563) • No. of prototypes, duration of testing, records, progress reports, secrecy agreements, payment to patentee, extent of control • Control “is critically important”

47. So, Lough loses here • Why? • He lacked control over the early prototypes of his outdrive seal assembly • Friends free to show to others, sell boats, etc.

48. Dissent • Judge Plager • Not a sophisticated party; he experimented within the bounds of common sense • Only the infringer benefits . . .

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

50. 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