In Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc., the Federal Circuit affirmed the district court’s finding that the asserted claims were invalid under the on sale bar of 35 USC § 102(b) due to a purchase order between Hamilton Beach and it’s supplier. Judge Reyna’s dissenting opinion questions whether the transaction at issue was a “commercial” offer for sale. His concerns might be at least partially addressed by the America Invents Act, if new § 102(a)(1) embodies a “public availability” component as the USPTO has found. 

The Patent At Issue 

The patent at issue was Hamilton Beach’s U.S. Patent 7,947,928, related to its Stay or Go® slow cooker. This slow cooker has “clips used to seal the detachable lid of the device on the housing of the cooker … to limit leaking during transport.” Representative claim 1 recites this feature as follows:

at least one clip mounted between the lid and the side wall of the housing, the at least one clip being an over-the-center clip having a hook and a catch, one of the hook and catch being mounted on one of the lid and side wall of the housing and the other of the hook and catch being mounted on the other of the lid and side wall of the housing, the at least one clip being selectively engageable with the lid and side wall of the housing to selectively retain the lid in sealing engagement with the container rim to inhibit leakage of the food stuffs from the interior of the container, wherein the housing and lid have a vertical height, the at least one clip being disposed entirely within the vertical height of the housing and lid to facilitate storage and transport of the slow cooker when the at least one clip is engaged with the lid and side wall of the housing.

The ’928 patent issued from an application with a priority date of March 1, 2006.

The Offer For Sale

The Federal Circuit summarized the critical facts as follows:

On February 8, 2005, Hamilton Beach issued a purchase order to its supplier for manufacture of its Stay or Go® slow cookers. Hamilton Beach listed on the purchase order its facility in Tennessee as the shipping address and its office in Virginia as the billing address. Hamilton Beach also listed the specific quantity—almost 2000 units, part number, unit price, and requested delivery date for the slow cookers. On February 25, 2005, the supplier, via email, confirmed that it had received the purchase order and noted that it would begin production of the slow cookers after receiving Hamilton Beach’s release.

February 8, 2005 was more than one year before the March 1, 2006 priority date. Thus, the court had to decide whether this exchange between Hamilton Beach and its supplier constituted a “sale” or an “offer for sale” under 35 USC § 102(b).

The Federal Circuit Decision

Judge O’Malley wrote the opinion for the Federal Circuit, which was joined by Judge Bryson. Judge Reyna wrote a dissenting opinion.

The court summarized the Pfaff v. Wells requirements for an on-sale bar as follows:

An on-sale bar applies when two conditions are satisfied before the critical date:
(1) the claimed invention must be the subject of a commercial offer for sale; and
(2) the invention must be ready for patenting.

An invention is “ready for patenting” when prior to the critical date:
(1) the invention is reduced to practice; or
(2) the invention is depicted in drawings or described in writings of sufficient nature to enable a person of ordinaryskill in the art to practice the invention.

Before delving in to the analysis, Judge O’Malley noted:

[T]here is no “supplier exception” to the on-sale bar…. Thus, it is of no consequence that the ‘commercial offer for sale’ at issue in this case was made by Hamilton Beach’s own supplier and was made to Hamilton Beach itself.

Hamilton Beach argued that there was no “sale” prior to the critical date, but the Federal Circuit disagreed. The court noted that “[a]n actual sale is not required.” Rather, “[a]n attempt to sell is sufficient so long as it is ‘sufficiently definite that another party could make a binding contract by simple acceptance.’” Applying these principles to the exchanges between Hamilton Beach and its supplier, the court stated:

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. And, Hamilton Beach concedes, … that, had it provided a “release” any time after it received that email, a binding contract would have been formed. … As such, [the supplier's response] was a commercial offer for sale that Hamilton Beach could have made into a binding contract by simple acceptance. This was enough to satisfy Pfaff’s first prong.

Hamilton Beach also challenged the district court’s findings on the second prong of the Pfaff test, but the Federal Circuit found “no error in the district court’s conclusion that the product was ready for patenting prior to the critical date.”

Judge Reyna’s Dissent

Judge Reyna disagreed that the transactions between Hamilton Beach and its supplier constitute a “commercial” offer for sale as required to fall under 35 USC § 102(b). In particular, Judge Reyna criticizes the majority for failing to undertake a “review of whether the offer was commercial in nature, …  without considering whether the purchase order was placed for purely experimental purposes.”

Considering how the court’s decision may be applied to future cases, Judge Reyna states:

My greatest concerns involve the implications this case will have for future innovators, most notably small enterprises and individual inventors who lack in-house prototyping and fabricating capabilities. … Under the majority’s holding in this case, a single offer to buy for purely experimental purposes may trigger the on-sale bar, and the experimental-use exception will offer them no salvation.

How Would This Case Be Decided Under The America Invents Act?

Under the America Invents Act (AIA), a potential on-sale bar activity would be evaluated under 35 USC § 102(a)(1) and 35 USC § 102(b)(1). Section § 102(a)(1) provides that a person shall be entitled to a 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.

In its Examination Guidelines for Implementing the First Inventor To File Provisions of the AIA, the USPTO indicated that existing jurisprudence surrounding contract law principles will continue to govern whether a sale or offer for sale has occurred.  Thus, the court’s analysis of whether the exchange between Hamilton Beach and its supplier amounted to an offer to sell or sale may remain relevant under the AIA. However, the USPTO interpreted the “on sale” requirement of the AIA as differing from that of § 102(b) in a way that could be relevant to a case like this one:

The phrase ‘‘on sale’’ in AIA 35 U.S.C. 102(a)(1) is treated as having the same meaning as ‘‘on sale’’ in pre-AIA 35 U.S.C. 102(b), except that the sale must make the invention available to the public.

It is doubtful that a supplier’s offer to sell product to the patent holder would be found to make the subject invention available to the public. Thus, a transaction between a patent holder and its supplier might not constitute invalidating prior art under § 102(a)(1) .

If for some reason such a transaction were found to come under § 102(a)(1), the next question would be whether it falls under the exception of § 102(b)(1), which disqualifies as prior art a “disclosure made one year or less before the effective filing date” if the disclosure

was made by the inventor … or by another who obtained the subject matter disclosed directly or indirectly from the inventor … or [if] the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor … or another who obtained the subject matter disclosed directly or indirectly from the inventor.

While this exception might apply to sales and offers for sale, it would not have helped Hamilton Beach because the offer for sale at issue occurred more than one year before the effective filing date.