Inventors can run afoul of the Patent Act and forfeit patent protection by offering their invention for sale more than one year before filing a patent application. This patentability requirement—known as the "on-sale bar"—prevents the extension of the patent term while still providing sufficient time for inventors to seek patent protection. An on-sale bar arises if, more than one year before the inventor files a patent application: (1) the product is the subject of a "commercial offer for sale" and (2) the invention is "ready for patenting," that is, fully conceived in the inventor's mind. Often an inventor will offer a product for sale while still in development. At that time, the product does not embody the patented invention until the invention is fully complete in the inventor's mind.

Exactly when does the clock for the on-sale bar start ticking? Previously, it was unclear whether the invention needed to be ready for patenting before the commercial offer for sale, or merely before the one-year period. In a recent decision, August Technology Corp. v. Camtek, Ltd., No. 2010-1458 (Fed. Cir. Aug. 22, 2011)1, the Federal Circuit offered clarity on this question.

Background

August Technology Corp. sued Camtek Ltd. for infringing two claims of a U.S. patent. The jury found that Camtek literally infringed, that the patent was not invalid for obviousness or violating the on-sale bar, and that it was not unenforceable due to inequitable conduct. As a result, the jury awarded August Technology monetary damages, and the district court entered a broad injunction, which prohibited Camtek from making any sales offers communicated entirely in the United States for sales that could otherwise legally occur overseas.

The August Technology Decision

On appeal, the Federal Circuit considered, among other issues, the validity of the asserted patent in light of August Technology's own wafer-inspection machine, which Camtek alleged was prior art to the asserted patents. The jury had found that it was not prior art after being instructed that: "In order to be on 'sale' the [machine] must also have been ready for patenting at the time the alleged offer for sale is made." Although the court derived this instruction from the American Intellectual Property Law Association's model jury instructions, the Federal Circuit rejected the instruction as incorrectly stating the law. Instead, the court ruled an invention does not have to be ready for patenting at the time of the offer , to trigger an on-sale bar. Rather, an offer to sell a product before the patented invention is fully conceived has no legal effect. Once conception of the entire invention occurs, however, the previous offer becomes legally recognized, and an on-sale bar will arise if the inventor fails to file a patent application within a year of conception. Thus, the offer for sale of a developing product cannot trigger an on-sale bar to prevent patent protection of an invention not fully conceived until after conception. In light of this holding, a factual determination would have been required to determine if August Technology's machine was prior art. Because the Federal Circuit determined that the machine could not render August Technology's patent obvious even if it was prior art, the Federal Circuit held, as a matter of law, that the patent was not invalid.

The Federal Circuit also briefly addressed the district court's injunction, which it vacated after reversing a key claim-construction issue. It drew the trial court's attention to Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296 (Fed. Cir. 2010) (a case previously featured in this newsletter). In that case, the Federal Circuit made clear that what matters for infringing offers for sale is the location of the future sale, not the location of the offer. Thus, the Federal Circuit seemed to suggest that Camtek should not be enjoined from making offers communicated entirely in the United States for sales to occur overseas.

Strategy and Conclusion

  1. Offering to sell an idea for a product becomes offering the invention once full conception happens. No longer can innovators argue that an on-sale bar does not arise because the patented invention was not fully conceived before the offer was made. Instead, if there is an offer to sell a product, and that offer occurs before conception of the full invention, the one-year grace period to file a patent application runs from that date of conception.
  2. When instructing juries on the on-sale bar, courts should not use an instruction that requires the invention to be "ready for patenting at the time the alleged offer for sale is made." The Federal Circuit expressly disapproved of the AIPLA's instruction that formed the basis for this quoted language. Other similarly worded instructions or proposed instructions should also be avoided. 

Source: LES Insights