On Sale Bar - Klarquist Patent DefensesKlarquist Patent Defenses

BASICS: Entitled to patent unless “the invention was … on sale in this country, more than one year prior to the date of the application for patent in the United States.” 35 U.S.C. § 102(b)(pre-AIA). Pfaff (U.S. 11/10/1998) (overturning Fed. Cir.’s “totality of the circumstances” test) Two-pronged test: “invention” (1) is subject of commercial offer for sale and (2) is ready for patenting (“reduction to practice” or “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”). “A commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’” under the AIA as under the pre-AIA statute. Supreme Court precedents suggest that “a sale or offer of sale need not make an invention available to the public…. [Our] cases focus on whether the invention had been sold, not whether the details of the invention had been made available to the public or whether the sale itself had been publicly disclosed.” The Federal Circuit “has long held that ‘secret sales’ can invalidate a patent.” Helsinn II (U.S. 01/22/2019). See Mosaic Brands (Fed. Cir. 12/20/22) (rev’g Summ. J. of on-sale anticipation by product of accused infringer, supposedly sold before critical date, ivo genuine dispute over third-party inventor’s credibility: failed to clear “high bar” “to show that no reasonable factfinder, taking the evidence in the light most favorable to [patent owner], could do anything other than find clear and convincing evidence of anticipation”).
Offer Withdrawn Before Conception Is Not An Offer For Sale: “An invention cannot be offered for sale until its conception date. Hence, if an offer for sale is made and retracted prior to conception, there has been no offer for sale of the invention. In contrast, if an offer for sale is extended and remains open, a subsequent conception will cause it to become an offer for sale of the invention as of the conception date.” August Tech. (Fed. Cir. 08/22/11).
No Exemption For Agreements With Patentee’s Supplier Or Distributor: “We still do not recognize a blanket ‘supplier exception’ to what would otherwise constitute a commercial sale as we have characterized it today. While the fact that a transaction is between a supplier and inventor is an important indicator that the transaction is not a commercial sale, understood as such in the commercial marketplace, it is not alone determinative. Where the supplier has title to the patented product or process, the supplier receives blanket authority to market the product or disclose the process for manufacturing the product to others, or the transaction is a sale of product at full market value, even a transfer of product to the inventor may constitute a commercial sale under § 102(b). The focus must be on the commercial character of the transaction, not solely on the identity of the participants.” The Medicines Co. II (Fed. Cir. 07/11/16) (en banc). “The on-sale bar does not exempt commercial agreements between a patentee and its supplier or distributor.” The Medicines Co. IV (Fed. Cir. 02/06/18) (vacating district court decision; terms of exclusive distribution agreement.); In re Caveney (Fed. Cir. 05/08/85) (aff’g rejection of claims based on a third-party’s sale to its partly owned distributor); Special Devices (Fed. Cir. 10/26/01) (there is no “‘supplier exception’ to the on-sale bar.), cited with approval, Helsinn II (U.S. 01/22/2019) (cited as “invalidating patent claims based on ‘sales for the purpose of the commercial stockpiling of an invention’ that ‘took place in secret’”).
Constitutes Prior Art For Sec. 103 Analysis Also (Sec. 102(b)/103 Bar): “Prior art under the § 102(b) on-sale bar is also prior art for the purposes of obviousness under § 103.” Dippin’ Dots (Fed. Cir. 02/09/07) (aff’g jury verdict of obviousness over an on sale product). ; Pfaff (U.S. 11/10/1998) (aff’g Fed. Cir. that four claims invalid under on sale bar and two claims obvious over that prior art: “The other two claims (11 and 19) described a feature that had not been included in Pfaff’s initial design, but the Court of Appeals concluded as a matter of law that the additional feature was not itself patentable because it was an obvious addition to the prior art. Given the court’s § 102(b) holding, the prior art included Pfaff’s first four claims.”); Sparton (Fed. Cir. 02/28/05) (rev’g anticipation based on on-sale product but remanding for determination of obviousness in view of the on-sale product); Dow Chem. (Fed. Cir. 09/05/03) (aff’g obviousness of method claims based on combination of publication prior art reference, disclosing most of the method, and prior art on-sale product disclosing one feature; the product “constituted a piece of prior art against the claims of the patents-in-suit both as an apparatus and the obvious uses of that apparatus”); Torpharm (Fed. Cir. 07/23/03) (“If a device was in public use or on sale before the critical date, then that device becomes a reference under section 103 against the claimed invention.”); Allen Eng’g (Fed. Cir. 08/01/02) (Pfaff two-part test is applied to the product alleged to be on-sale: the challenger “must show that the Red Rider embodied all of the limitations of that claim or would have rendered that claim obvious. In addition, [it] must also prove the facts underlying both prongs of the Pfaff test by clear and convincing evidence. Specifically, [it] must show that, before the critical date… the Red Rider was both (1) the subject of a commercial offer for sale not primarily for purposes of experimentation and (2) ready for patenting.”); LaBounty (Fed. Cir. 03/12/92) (aff’g finding of inequitable conduct based on failure to disclose “on sale” products; “Section 102(b) may create a bar to patentability either alone, if the device placed on sale is an anticipation of the later claimed invention or, in conjunction with 35 U.S.C. § 103 (1988), if the claimed invention would have been obvious from the on-sale device in conjunction with the prior art.”); In re Kaslow (Fed. Cir. 05/17/83) (aff’g ex parte rejection of claims for obviousness over a public use combined with a publication; “a public use or placing on sale under section 102(b) is ‘prior art’ which may support an obviousness rejection under section 103”); In re Corcoran (CCPA 02/02/81) (aff’g obviousness rejection based on component of claimed combination being on sale; “complete readability of the claim on the thing offered is not required because whatever is published (or on sale) more than one year prior to the filing of a patent application becomes part of the prior art over which the claim must be patentable.”); Public uses also are part of the prior art under Sec. 103. Netscape (Konrad) (Fed. Cir. 07/09/02) (aff’g Summ J. invalidity for public use; “Section 102(b) may bar patentability by anticipation if the device used in public includes every limitation of the later claimed invention, or by obviousness if the differences between the claimed invention and the device used would have been obvious to one of ordinary skill in the art.”).
FITF: Changes this defense for patents subject to it. Entitled to patent unless “(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U.S.C. § 102(a)(1)(AIA). “The AIA did not change the statutory meaning of ‘on sale’ in the circumstances involved here.” Helsinn (Fed. Cir. 05/01/17) (rev’g bench-trial judgment of no on sale bar of both pre-AIA and FITF claims; pre-critical date patent owner entered exclusive distributor and requirements supply agreement with distributor agreeing to supply two doses (one claimed) of the claimed drug product at a specified minimum price, but could terminate if FDA did not approve either dose, which agreement was made public except for price and precise doses), cert. granted (U.S. 06/25/2018) (Question Presented: “Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”).
- AIA Does Not Alter Pfaff On-Sale Bar: “The catchall phrase ‘or otherwise available to the public’” did not alter the on-sale bar as defined in Pfaff. Therefore, “an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under §102(a) [AIA].” “Our precedents suggest that a sale or offer of sale need not make an invention available to the public,” and the Federal Circuit has so held expressly. Given this “well-settled judicial interpretation,” “the addition of ‘or otherwise available to the public’ is simply not enough of a change for us to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’” Helsinn II (U.S. 01/22/2019), aff’g, Helsinn (Fed. Cir. 05/01/17) (rev’g bench-trial judgment of no on sale bar of both pre-AIA and FITF claims; pre-critical date patent owner entered exclusive distributor and requirements supply agreement with distributor agreeing to supply two doses (one claimed) of the claimed drug product at a specified minimum price, but could terminate if FDA did not approve either dose, which agreement was made public except for price and precise doses).

a) ready for patenting

Must Be Ready For Patenting Prior To Critical Date: The invention need not be ready for patenting at the time the alleged offer is made, just prior to the critical date. August Tech. (Fed. Cir. 08/22/11). See Honeywell (Fed. Cir. 06/02/04) (en banc) (substantial evidence supports jury verdict that invention not ready for patenting).
Reduction To Practice (For On Sale) Need Not Remove Possibility Of Failure: Testing “must show that the invention works for its intended purpose ‘beyond a probability of failure’ but not ‘beyond a possibility of failure.’” Helsinn (Fed. Cir. 05/01/17) (claimed invention was reduced to practice despite lack of completion of Phase III trials; approval by FDA is more exacting standard), aff’d on other grounds, Helsinn II (U.S. 01/22/2019).
Where Invention On Sale, Conception Is Not Necessary For Reduction To Practice: “‘Where an invention is on sale, conception is not required to establish reduction to practice.’” Scaltech (Fed. Cir. 10/23/01) (aff’g Summ. J. of on sale bar; patent owner’s proposals to customer to refine waste placed claimed invention on sale even if inventors had not yet conceived of and appreciated all claim limitations).
Multiple Drawings And Descriptions May Be Combined To Show Ready For Patenting: See GS Cleantech (Fed. Cir. 03/02/20) (aff’g finding that claimed invention was ready for patenting based on combination of drawing, lab test results and oral descriptions before the critical date).

b) commercial offer for sale

Commercial Offer for Sale: “To be ‘on sale’ under § 102(b), a product must be the subject of a commercial sale or offer for sale, and that a commercial sale is one that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.” The Medicines Co. II (Fed. Cir. 07/11/16) (en banc) (no commercial sale where patent owner paid supplier $347,500 to manufacture batches (worth over $20 million) of claimed drug product embodiments, identified as commercial units, for use to convince FDA that commercial product met approved specifications, but was invoiced as manufacturing services and title to the pharmaceutical batches did not change hands, and batches placed in quarantine pending FDA approval to sell (which came after critical date)). It must be “commercially marketed.” Id. Although not dispositive, “the passage of title is a helpful indicator of whether a product is ‘on sale,’ as it suggests when the inventor gives up its interest and control over the product.” Id. The UCC “does not have ‘talismanic significance’”; e.g., charging a fee to use a patented machine may place it “on sale” despite no passage of title. The offer must be such that “the other party could make [it] into a binding contract by simple acceptance.” Group One (Fed. Cir. 06/15/01); Junker (Fed. Cir. 02/10/22) (rev’g Summ. J. of no on sale bar and finding commercial offer for sale as a matter of law; letter in response to request for quotation made multiple offers of sale to single potential purchaser and “specifies multiple sized products for sale, different bulk pricing options available for each product, payment terms (net 30- day basis), and delivery terms and conditions (bulk shipment, non-sterile, FOB)—contains all the required elements to qualify as a commercial offer for sale,” notwithstanding referring to “quotation” which conventionally refers to an invitation for an offer); Helsinn (Fed. Cir. 05/01/17) (rev’g bench-trial judgment of no on sale bar of both pre-AIA and FITF claims; contract “unambiguously contemplated the sale by [patent owner] of [distributor’s] requirements of the claimed invention,” despite condition precedent requiring FDA regulatory approval of dose, and despite only one of the doses being claimed), aff’d on other grounds, Helsinn II (U.S. 01/22/2019); Merck & Cie (Fed. Cir. 05/13/16) (rev’g finding of no on sale bar: detailed offer (“providing essential price, delivery, and payment terms”) sent to single party in direct response to its request to purchase specified amount of specified product “contained all the required elements to qualify as a commercial offer for sale,” despite sale never being consummated). The offer must be to sell an embodiment of the invention as distinct from offering to sell patent rights to the invention. Offer may be by a foreign entity directed to someone in U.S.; offer to buy is not an offer to sell; and question of law based on underlying facts. The Medicines Co. II (Fed. Cir. 07/11/16) (en banc); Southern Snow (Fed. Cir. 06/30/14) (non-precedential) (rev’g refusal to enter JMOL of on sale bar). Cf. Milo & Gabby (Fed. Cir. 05/23/17) (non-precedential) (no “sale” by Amazon for purposes of copyright infringement: “Though FAC System shipped its product to an Amazon warehouse for storage and Amazon boxed up and shipped the product when a sale was consummated on the website, Amazon never held title to the accused products.”).
Foreign Entity’s Sale May Constitute On Sale In U.S.: “A commercial offer for sale made by a foreign entity that is directed to a United States customer at its place of business in the United States may serve as an invaliding activity.” Hamilton Beach (Fed. Cir. 08/14/13) (aff’g J. of on-sale bar based on foreign supplier’s pre-critical-date offer for sale to the patent owner) (2-1). See In re Caveney (Fed. Cir. 05/08/85) (on sale bar where offer made from England but directed to place of business in U.S.); Caterpillar (Fed. Cir. 12/18/20) (non-precedential) (aff’g that sale of machine in Italy to a U.S. customer for use in U.S. constituted “commercial activity directed to the United States”).
Sale For Use Outside U.S. May Constitute On Sale In U.S.: “If the ‘offer for sale’ was ‘made in this country,’ then the invention would be ‘on sale’ in this country even if the invention was sold for use outside of the United States.” Caterpillar (Fed. Cir. 12/18/20) (non-precedential).
Licensing The Technology Does Not Constitute A Sale: “Merely granting a license to an invention, without more, does not trigger the on-sale bar.” In re Kollar (Fed. Cir. 04/11/02) (rev’g rejection of application claims under on sale bar where patentee provided license and technical assistance but no product was offered for sale); BASF (Fed. Cir. 04/08/20) (rev’g Summ. J. on-sale bar, relying on Kollar).
Commercially Using System Or Charging Others For Use Of System Constitutes Sec. 102(b) On Sale: aff’g district court ruling that because patent owner had “charged users of the 386 system for the calls they made using that system, he engaged in a ‘sale’ of the service within the meaning of section 102(b) even if he did not make a profit on the transactions.” In re Cygnus Telecomm’ns. (Fed. Cir. 08/19/08); Quest Integrity (Fed. Cir. 05/21/19) (aff’g on sale invalidity of some claims; patent owner used claimed system, method and CRM when servicing a customer’s furnaces, but reversing as to other claims because alleged functionality had been commented out of the source code and thus not used pre critical date).
Neither Contract Manufacturing For An Inventor Nor Resulting Stockpiling Of Inventory Is A Commercial Sale, If Title Not Passed: “A contract manufacturer’s sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under § 102(b)” because it “does not constitute a ‘commercial sale’ of the invention.” The Medicines Co. II (Fed. Cir. 07/11/16) (en banc) (product and product-by-process claims; not on sale where, among other things, only manufacturing services were sold to the inventor at a price about 1% of market value of the products, inventor maintained control of the invention, as shown by the retention of title to the embodiments, and transaction was confidential). Stockpiling of “invention” embodiments by purchaser of manufacturing services is not commercialization under Sec. 102(b) because “the on-sale bar is triggered by actual commercial marketing of the invention, not preparation for potential or eventual marketing.” Id.; Equistar (Fed. Cir. 07/03/18) (non-precedential) (vacating Summ. J. of no on sale bar; remanding in part to determine whether patent owner used patented method to make products in order to enable it to make offers for sale of those products before the critical date). But see The Medicines Co. IV (Fed. Cir. 02/06/18) (vacating district court decision; terms of exclusive distribution agreement show it was “an agreement to sell and purchase the product,” including statement that patentee “‘now desire[d] to sell the Product” to the distributor and it “‘desire[d] to purchase and distribute the Product,’” the price of the product, a purchase schedule, and the passage of title to the distributor upon receipt of the product, notwithstanding patentee’s limited right to reject all purchase orders.)
Delivery Of Custom Software Not A Sale: Not on sale where inventor hires programmer to develop and deliver custom software for an hourly programming fee. Trading Tech (Fed. Cir. 02/25/10) (“No product was ever sold to [the named inventor]”).
Sale May Be Sale On Approval: GS Cleantech (Fed. Cir. 03/02/20) (aff’g that offer allowing customer to return product if not satisfied, even if conforming to specification in offer, was a “sale on approval” under U.C.C. § 2-326(1)(a), triggering on sale basis for inequitable conduct).

c) may be secret

Existence Of Sale Or Offer May Be Secret: “A commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’” under the AIA as under the pre-AIA statute. Supreme Court precedents suggest that “a sale or offer of sale need not make an invention available to the public…. [Our] cases focus on whether the invention had been sold, not whether the details of the invention had been made available to the public or whether the sale itself had been publicly disclosed.” The Federal Circuit “has long held that ‘secret sales’ can invalidate a patent.” Helsinn II (U.S. 01/22/2019), aff’g, Helsinn (Fed. Cir. 05/01/17) (rev’g bench-trial judgment of no on sale bar of both pre-AIA and FITF claims; pre-critical date patent owner entered exclusive distributor and requirements supply agreement with distributor agreeing to supply two doses (one claimed) of the claimed drug product at a specified minimum price, but could terminate if FDA did not approve either dose, which agreement was made public except for price and precise doses). Applies to offer for sale by patent applicant or by a third party, even if confidential (secret) offer for sale. In re Caveney (Fed. Cir. 05/08/85) (aff’g PTO rejection of claims: rejecting contention that sales offer “kept secret from the trade” cannot be an on sale; “sales or offers by one person of a claimed invention will bar another party from obtaining a patent if the sale or offer to sell is made over a year before the latter’s filing date. An exception to this general rule [on sale before critical date bars claim] exists where a patented method is kept secret and remains secret after a sale of the unpatented product of the method. Such a sale prior to the critical date is a bar if engaged in by the patentee or patent applicant, but not if engaged in by another. [But] here the claimed invention was disclosed to the purchaser.”)
FITF: Existence Of Sale Or Offer Need Not Be Public: “A commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’” under the AIA as under the pre-AIA statute. Supreme Court precedents suggest that “a sale or offer of sale need not make an invention available to the public…. [Our] cases focus on whether the invention had been sold, not whether the details of the invention had been made available to the public or whether the sale itself had been publicly disclosed.” The Federal Circuit “has long held that ‘secret sales’ can invalidate a patent.” Helsinn II (U.S. 01/22/2019)); Celanese (Fed. Cir. 08/12/24) (aff’g ITC that pre-critical date sales of product made outside U.S. in secret by patented process invalidates the claims under AIA section 102(a)(1)); See Pennock (U.S. 1829) (“If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make, and sell his invention publicly, and thus gather the whole profits of it, relying upon his superior skill and knowledge of the structure; and then, and then only, when the danger of competition should force him to secure the exclusive right, he should be allowed to take out a patent, and thus exclude the public from any farther use than what should be derived under it during his fourteen years; it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.”)
On Sale Activity Need Not Publicly Disclose Claimed Invention (FITF also): “A commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’” under the AIA as under the pre-AIA statute. Supreme Court precedents suggest that “a sale or offer of sale need not make an invention available to the public…. [Our] cases focus on whether the invention had been sold, not whether the details of the invention had been made available to the public or whether the sale itself had been publicly disclosed.” The Federal Circuit “has long held that ‘secret sales’ can invalidate a patent.” Helsinn II (U.S. 01/22/2019).

d) method claims

Two Ways To Put “Method” On Sale: Offer To Perform Or Perform The Method For Compensation: Either (1) make a commercial offer to perform the patented method (even if the performance itself occurred after the critical date) or (2) before the critical date in fact perform the patented method for a promise of future compensation. Plumtree (Fed. Cir. 12/18/06); cf. Quest Integrity (Fed. Cir. 05/21/19) (aff’g on sale invalidity of some claims; patent owner used claimed method when servicing a customer’s furnaces; “Performance of a claimed method for compensation, or a commercial offer to perform the method, can also trigger the on-sale bar, even where no product is sold or offered for sale.”); Scaltech (Fed. Cir. 10/23/01) (aff’g Summ. J. of on sale bar; “If the process that was offered for sale inherently possessed each of the claim limitations, then the process was on sale, whether or not the seller recognized that his process possessed the claimed characteristics.”)
Third Way To Put “Method” On Sale: Offer Product Made By The Method (Making Method Public): Before the critical date the patentee offers for sale a product made by the patented method, D.L. Auld (Fed. Cir. 08/15/83), unless that sale fails to make the method public, In re Caveney (Fed. Cir. 05/08/85); cf. The Medicines Co. II (Fed. Cir. 07/11/16) (en banc) (distinguishing Plumtree, D.L. Auld as concerning method claims not product-by-process or product claims, because “the literal subject matter of [method] claims is incapable of being sold.”). See Celanese (Fed. Cir. 08/12/24) (FITF) (aff’g ITC that pre-critical date sales of product made outside U.S. in secret by patented process invalidates the claims under AIA section 102(a)(1)).
Fourth Way To Put “Method” On Sale: Offer Product Substantially Embodying Essential Features Of Method: “A product and methods of using that product ‘may approach each other so nearly that it will be difficult to distinguish the process from the function of the apparatus.’ In that circumstance, where a product ‘embodie[s] essential features of [the] patented invention,’ a sale of the product is tantamount to a sale of the process performed by that product and thus creates an on-sale bar to the process claims as well.” BASF (Fed. Cir. 04/08/20) (rev’g Summ. J. on sale bar; where third party licensed another to practice the process and provided “exhaustive technical information” and personal assistance about performing it, because “the essential features of the claimed process here were not embodied in a product sold or offered for sale before the critical date.” Also, later sale of business did not put method on sale because “the equipment was capable of numerous uses apart from its use in [the process] and therefore does not substantially embody the essential features.” Relying in part on Quanta.); Minton (Fed. Cir. 07/29/03) (the patent applicant leasing “a fully operational computer program implementing and thus embodying the claimed method,” enabling lessee to practice the claimed invention, put method on sale); In ruling that the sale of certain components of a combination exhausts patent claims directed to a method of using that combination, S. Ct. stated: “It is true that a patented method may not be sold in the same way as an article or device, but methods nonetheless may be ‘embodied’ in a product, the sale of which exhausts patent rights.” Quanta (U.S. 06/09/2008) (Similarly: “Aro described combination patents as ‘cover[ing] only the totality of the elements in the claim [so] that no element, separately viewed, is within the grant.’ 365 U.S., at 344; see also Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 667–668 (1944) (noting that, in a combination patent, ‘the combination is the invention and it is distinct from any’ of its elements). Aro’s warning that no element can be viewed as central to or equivalent to the invention is specific to the context in which the combination itself is the only inventive aspect of the patent. In this case, the inventive part of the patent is not the fact that memory and buses are combined with a microprocessor or chipset; rather, it is included in the design of the Intel Products themselves and the way these products access the memory or bus.”). One might argue that an offer to sell a component whose sale would exhaust a method claim, is an “on sale” activity barring that method claim. Also consider analogizing to SiRF Tech. (Fed. Cir. 04/12/10) (providing the hardware/firmware functionality = performing the method under Sec. 271(a)).
TIPS: