Intellectual Property & Technology E-lert -- Small Businesses Stand to Gain From Federal Circuit Ruling Limiting On-Sale Bar

TAMPA, FL -- July 18, 2016 -- A recent decision by the Federal Circuit this month will have a big impact on small businesses and start-ups attempting to manufacture invention prototypes and other embodiments. 

35 U.S.C. § 102(b) prevents the patenting of any invention that was on-sale, or offered for sale, more than one year prior to the date of the application for patent. This limitation is known as the on-sale bar. The Supreme Court held in Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), that a two pronged approach was necessary to meet § 102(b) and required a finding that the invention was (1) the subject of a commercial offer for sale and (2) ready for patenting. The Federal Circuit’s recent en banc decision now limits the on-sale bar’s reach even further by defining what constitutes a “commercial” offer for sale.

In this month's decision, The Medicines Co. v. Hospira, Inc., case number 2014-1469 (Fed. Cir. July 11, 2016), the Federal Circuit held that “the mere sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not constitute a ‘commercial sale’ on the invention” even though there may have been a commercial benefit to both parties. The full Federal Circuit heard the case after a panel decision reached the opposite conclusion for a patent on a product-by-process claim. 

MedCo’s patent involved a product-by-process claim for a pH-adjusted pharmaceutical batch of a drug product comprising bivalirudin where MedCo contracted out manufacturing capabilities since it did not have the manufacturing capabilities to produce an appropriate batch. The court noted that a transaction must be one in which “the product is ‘on sale’ in the sense that it is ‘commercially marketed.’” To use the Federal Circuit’s phrasing, “to be ‘on sale’ under § 102(b), a product must be the subject of a commercial sale or offer for sale, and that a commercial sale is one that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.” The court made the policy decision not to punish the applicant simply because it did not have the manufacturing capability to make an embodiment of the invention in-house and because the inventor retained title over the embodiments. The focus is on what makes a sale “commercial” as that term is generally understood as opposed to “merely obtaining some commercial benefit from a transaction.” Thus, the Federal Circuit remanded the case after finding that there was no on-sale bar and the patent was not invalid. 

This decision will likely affect smaller businesses and their attempts to take an invention to market. Most larger businesses have some sort of manufacturing ability that allows them to avoid this sort of issue with the on-sale bar. Now, according to the Federal Circuit’s decision, a business can take an invention to a manufacturer and attempt to have it create a batch or prototype in exchange for money or goods and not have it count as a “sale” so as to invoke the on-sale bar during prosecution or litigation. However, it is still recommended that all invention disclosures be kept to a minimum so as to avoid any issues regarding the on-sale bar of § 102(b). 

Cole Carlson is an associate in GrayRobinson’s Tampa law office and a member of the Intellectual Property & Technology practice group. He litigates patent, copyright, and trademark, unfair competition, trade secret, false advertising, and other related state law disputes. Cole is also a registered patent attorney, where he prosecutes patent and trademark matters in front of the USPTO.

Cole Y. Carlson
401 East Jackson Street
Suitre 2700
Tampa, Florida 33602
Phone: 813-273-5000
Fax: 813-273-5145