Who knows what, and when? Third-party product sale triggers patent’s on-sale bar
U.S. patent law includes many provisions that ensure patents are granted only to truly new inventions that the public couldn’t have been privy to before the filing of the patent application. One of these is the “on-sale bar,” which generally invalidates patents for products that had already been available for sale. The bar applies even, it turns out, if the products don’t disclose the patented invention’s functional details.
Start their engines
Definitive Holdings held a patent on methods and apparatuses for upgrading the software in a vehicle’s engine controller. The patent, filed before the passage of the America Invents Act (AIA) in 2011, had a priority date of March 30, 2001. The priority date is typically the filing date of the patent application.
Definitive sued Powerteq, alleging infringement of its patent. The trial court dismissed the case before trial. It found that Definitive’s patent was invalid based on the on-sale bar. Definitive appealed.
Look under the hood
The on-sale bar generally prohibits the patenting of an invention that was on sale in the United States before the “critical date.” An invention is “on sale” when it’s both the subject of a commercial offer for sale and ready for patenting.
Under pre-AIA law, the critical date was one year before the patent application filing date. So, for the patent at issue here, the critical date was March 30, 2000. (Under current law, the critical date is the application filing date, but a one-year grace period is allowed for a public use or commercial offer for sale by the inventor.)
The trial court concluded that the on-sale bar applied because a third-party company had commercially sold a device (the PP3) that embodied all the limitations of the claims in Definitive’s patent as early as the mid-1990s. On appeal, Definitive didn’t dispute that the PP3 embodied its patented invention. Instead, it contended that the PP3 wasn’t “prior art” so it couldn’t invalidate Definitive’s patent. Definitive argued that prior art must disclose to the public how to perform the patented method — and the sale of the PP3 didn’t disclose how to perform the method of the patent.
On appeal, the U.S. Court of Appeals for the Federal Circuit rejected this argument. It explained that the on-sale bar can be triggered without the sale revealing the invention’s details to the public. The relevant inquiry isn’t whether the sale, by a third party or the patentee itself, discloses the invention at the time of sale. Rather, it’s whether the sale relates to a product that embodies the invention. If so, the patented invention is “on sale.”
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The court made a point of distinguishing this case from earlier decisions where the on-sale bar wasn’t triggered. In those cases, a patented process had been placed on sale by a third-party sale of a product made by that process that wasn’t discoverable from the product. In other words, it wasn’t the process per se that was for sale.
The question in such “third-party secret sale cases” is whether the sale involved 1) a product embodying the claimed features, or 2) a product that was manufactured using a claimed process or apparatus that was secret or otherwise not discoverable from the product. Only in the first circumstances would the on-sale bar apply.
The Federal Circuit pointed out, though, that the third party in this case didn’t have a secret manufacturing process that permitted it to make a product in a new way that wasn’t discoverable from the product itself. It was directly selling to the public the ability to perform the method claimed by Definitive’s patent and to use the claimed apparatus.
The case stalls
Because the public was directly using the patented features before the critical date, permitting Definitive to remove them from the public domain would withdraw technology that was already available to the public. Thus, the appellate court affirmed the trial court’s invalidity ruling.
Sidebar: Proving the prior art sales
The plaintiff in Definitive Holdings alternatively argued that the case shouldn’t have been dismissed because there was insufficient evidence of sales of the prior art device (known as the PP3). Consequently, the trial court shouldn’t have invalidated the patent based on the on-sale bar. (See main article.) The U.S. Court of Appeals for the Federal Circuit disagreed.
In deposition testimony, the CEO and founder of Definitive, the business that sold the PP3, testified that units of the device were sold in the United States beginning in 1994. Sales records also showed that the devices were sold in the 1990s for certain car models. And an installation guide found in the packaging for a PP3 that serial and date codes indicated was manufactured in 1996 included instructions for the same car models.
The court found that the CEO’s testimony, combined with the sales records and installation guide, established that PP3 sales were made at least by 1996, which was well before the patent’s critical date of March 30, 2000. Thus, Definitive’s argument failed here as well.
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