Cooked in their own juice

The Court of Appeals of the Federal Circuit (CAFC) decided last week that a manufacturer’s request from a sub-contractor to produce a product creates an “offer for sale” which creates a bar to novelty. The case is Hamilton Beach Brands v Sunbeam Products and the decision is available here.

The case revolves around slow cookers that employ clips to hold the lid closed so that food will not leak out during transport. The sole issue considered by the court was whether there was a bar to patentability under 35 U.S.C § 102 due to prior sale of the product.

The case was decided under the old § 102(b):

“A person shall be entitled to a patent unless…the invention was …in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States…”

It seems likely that facts of the case would have given the same outcome under the new § 102(a) (1):

“A person shall be entitled to a patent unless…the claimed invention was … in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention…”

The facts of the case are as follows:

Hamilton Beach’s earliest filing date was March 1, 2006. On February 8, 2005, Hamilton Beach issued a purchase order to its supplier for manufacture of its Stay or Go® slow cookers.  On February 25, 2005, the supplier 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.

The CAFC held that the February 25, 2005 confirmation from the supplier was an “offer for sale” made more than 1 year before the priority date. They also held that the offer was “in this country” because although the supplier was outside the US, the offer was made to Hamilton Beach in the US.

The Court noted that:

“The 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.  Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998).  An actual sale is not required for the activity to bean invalidating commercial offer for sale.”

This means that Hamilton Beach’s own actions caused another party to engage in activity which made it impossible to obtain a valid patent. In order to avoid this outcome, Hamilton Beach would have had to file a patent application within one year of issuing a purchase order to its supplier, or at least within one year of the date the supplier responded to that purchase order affirmatively.

While the case does not represent a departure from previous decisions, it is interesting for two reasons:

The first reason is that under the new § 102(a)(1) which came into effect in March 2013, there does not appear to be a 1 year grace period for sales activity. This means that under the new law a manufacturer should file a patent application before issuing a purchase order to its supplier, or at least before the supplier responds to that purchase order affirmatively.

The second reason is that the case may be relevant to other business scenarios. Many entrepreneurs employ external engineers or development consultants prior to actual manufacture of their product. Assuming that this employment of external people occurs before filing a patent application a defendant in future infringement litigation will have nothing to lose by saying that the product was “ready for patenting” at the time of the employment, and that the work product returned by the external engineers or development consultants constituted a “sale” or “offer for sale” in the sense of § 102.

What can one do to prepare for such an eventuality?

One thing is to call the order for work something other than a “purchase order”.  The word “experiment” can be helpful. Experimental use enjoys a special status under § 102:

“A use or sale is experimental for purposes of section 102(b) if it represents a bona fide effort to perfect the invention or to ascertain whether it will answer its intended purpose.…If any commercial exploitation does occur, it must be merely incidental to the primary purpose of the experimentation to perfect the invention.” LaBounty Mfg. v. United States Int’l Trade Comm’n, 958 F.2d 1066, 1071, 22 USPQ2d 1025, 1028 (Fed. Cir. 1992) (quoting Pennwalt Corp. v. Akzona Inc., 740 F.2d 1573, 1581, 222 USPQ 833, 838 (Fed. Cir. 1984)). “The experimental use exception…does not include market testing where the inventor is attempting to gauge consumer demand for his claimed invention. The purpose of such activities is commercial exploitation and not experimentation.” In re Smith, 714 F.2d 1127, 1134, 218 USPQ 976, 983 (Fed. Cir. 1983)." [MPEP § 2133.03(e)]

Specifying that work done by external engineers or development consultants is in the nature of “experimental testing” already at the time contractual arrangements are being made has the potential to save a lot of headaches later on.