On April 29, 2022, the Court of Appeals for the Federal Circuit issued an opinion for Sunoco Partners Marketing & Terminals L.P. v. U.S. Venture, Inc., U.S. Oil Co., Inc. (2022 WL 1275697).This case touched on a number of issues, including experimental-use doctrine, on-sale bar, infringement and damages awards. In this article, we will focus on the experimental-use doctrine and the on-sale bar.
As background, Sunoco’s patents were directed to a system and method for blending butane with gasoline at a point close to an end of the distribution process – in particular, the point immediately before being distributed to tanker trucks. Accordingly, producers could blend the maximum allowable butane into each batch of gasoline based on location and time of year. Both the location and time of year were subject to certain regulatory requirements.
The District Court for the Northern District of Illinois held a bench trial and rejected Venture’s on-sale bar defense. The District Court awarded Sunoco $2 million in damages, which it trebled to $6 million. Venture appealed, challenging the District Court’s rejection of the on-sale bar defense.
In addressing Venture’s on-sale-bar defense, the Federal Circuit noted Venture needed to show, before the critical date, Sunoco’s patented invention was both (1) “the subject of a commercial offer for sale” and (2) “ready for patenting.” The Federal Circuit further noted that Sunoco could negate an on-sale bar by demonstrating the sale occurred “primarily for purposes of experimentation.”
As to being (1) “the subject of a commercial offer for sale,” the Federal Circuit noted that before the critical date, the inventors’ company offered to sell and install the patented system for another company. The District Court had decided that this transaction related to experimental purposes instead of commercial purposes, based on the fact that no money was exchanged, as well as other facts.
However, the underlying agreement described the transaction as a sale with consideration in the form of purchasing butane. In particular, the agreement had requirements for installation of a butane blending system by the inventors’ company as well as butane supply agreement stipulations for the other company.
Sunoco argued that the agreement related to an experimental purpose. In particular, Sunoco argued sections in the agreement requiring pre-installation testing and post-installation testing demonstrate the agreement was for experimental usage. However, the Federal Circuit concluded that Sunoco’s arguments “fell flat.” In particular, Sunoco did not dispute that the pre-installation testing was conducted at a third-party facility and could have been conducted before an offer to sell the system was made.
Accordingly, the Federal Circuit opinion provides some insight as to what may not be considered to be primarily for purposes of experimentation – for example, requirements as to location and timing of experimentation. Additionally, the Federal Circuit opinion provides some insight as to what actions may be considered an on-sale bar. For example, purchase supply commitments and termination fees may provide a basis for consideration indicative of a sale. As to being (2) “ready for patenting,” the District Court had not addressed this issue and accordingly the Federal Circuit remanded this to the District Court to assess these aspects.