Outsourcing of manufacturing is becoming more and more common in today’s business environment. Because of this, companies routinely contact suppliers to determine if, and when, their products can be manufactured. Now it appears though, that this practice can lead to invalidation of your own patent.
In a split decision, the Court of Appeals for the Federal Circuit (CAFC) recently affirmed a ruling from the Eastern District of Virginia, invalidating the claims of Hamilton Beach’s U.S. Patent No. 7,947,928 under 35 U.S.C. 102(b). The decision was based on a purchase order issued by the patentee to a supplier.
A patent will be deemed invalid under the on-sale bar when the invention was sold or offered for sale more than one year prior to the filing date (i.e., before the critical date). Additionally, an attempt to sell is sufficient to trigger the on-sale bar so long as it is “sufficiently definite such that another party could make a binding contract by simple acceptance.” Generally, the on-sale bar offers a bright-line test. Avoid offering the article to the public prior to the critical date and the on-sale bar is not an issue.
Hamilton Beach’s patent (the ’928 patent) is directed to a slow cooker. The priority application for the patent was filed in March 2006. More than one year prior to the filing of the priority application, Hamilton Beach sent a purchase order for delivery of 2,000 slow cookers from a foreign supplier. The order was confirmed by the supplier prior to the critical date as well, but manufacturing would not begin until Hamilton Beach directed so. Manufacturing did not commence, and no products were offered for sale to the public until after the critical date. Here, the CAFC found that the supplier’s response to the purchase order was, in fact, an offer to sell the patented article to the patentee. In the words of the CAFC:
Hamilton Beach’s supplier responded prior to the critical date that it was ready to fulfill the order. In other words, the supplier made an offer to sell the slow cookers to Hamilton Beach. At that point, the commercial offer for sale was made and, under the governing corporate purchase agreement, Hamilton Beach could accept the offer when it so pleased.
The dissent, likely echoing the concerns of many manufacturers, argued that this decision could have far-reaching consequences for manufacturers, especially those who outsource prototyping.