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US patentee burnt by on-sale bar through outsourcing


23rd Aug 2013

In the recently issued judgment in Hamilton v Sunbeam, the Federal Circuit affirmed a ruling that Hamilton’s claims were invalid under the pre America Invents Act (AIA) on-sale bar at least because there was an offer for sale from a manufacturer to Hamilton more than a year before the filing date of the priority application. However, this point may have been decided differently if it was subject to the AIA law.

Background

Hamilton filed a first application, directed to a slow-cooker including sealing clips on the housing to hold a detachable lid in place. Subsequently, competitor Sunbeam started selling a slow-cooker with sealing clips on the lid rather than on the body of the slow-cooker. In an effort to stop Sunbeam, Hamilton filed a continuation application for a slow-cooker pot with the sealing clips on the lid and then filed an infringement suit against Sunbeam on the same day that the continuation patent was granted. Sunbeam countered the suit and the District Court found that the Sunbeam slow-cooker did not infringe the continuation patent and further that the continuation patent’s claim to priority was not valid because the continuation patent added matter in comparison to the first application, thus ruling out the validity of the continuation patent in view of the prior slow-cooker sales.

However, the District Court did not stop there and further ruled that, even if the continuation patent had been entitled to the filing date of the first application, there was evidence of an offer for sale from a foreign manufacturer to Hamilton more than a year before the filing date of the first application. Hamilton appealed and it is to this point that the Federal Circuit limited its review.

The Decision

The patent claims had an effective filing date prior to the AIA implementation and so the case was examined under the old law, which provides that a public use or sale of an invention more than a year before the filing date of the corresponding application would only be a bar to patentability if the public use or sale occurred in the United States. US case law has since further required that the offer is a commercial offer for sale (i.e. not experimental) and that the invention is ready for patenting. The Federal Circuit ruled that, despite the offer coming from a foreign manufacturer, the important point was that the offer was directed to a US customer with a US place of business and that, since Hamilton merely had to accept the agreement in order to create a binding contract, the offer constituted an offer for sale.

Hamilton tried to argue that the invention was not ready for patenting at the time of the offer for sale since the sealing arrangement was still being refined; however, this was dismissed by the court as simple fine tuning that would not prevent the invention from being patented. One question that was not raised by Hamilton was whether the offer constituted a commercial offer. The dissenting opinion of Judge Reyna highlighted his concern that the decision may cause problems for future innovators that lack in-house prototyping and fabricating capabilities. However, the majority of the Judges contended that this will not be the case since this defence was not decided upon and that, if it were, the quantity ordered (nearly 2,000) would not constitute an experimental use in this case.

Potential Impact Of The America Invents Act

Interestingly, although the AIA broadens the citable prior art in that there are no geographical limitations, the new wording of the on-sale bar could have actually benefited Hamilton if the claims had been subject to the provisions of the AIA. In the new law, the bar comes into force if the claimed invention was in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.

This “or otherwise available to the public” clause indicates that the new on-sale bar does not cover secret sales or offers for sale since the sale must make the invention available to the public. Accordingly, if Hamilton could show that the manufacturer was under an obligation of confidentiality then the offer for sale might not have triggered the AIA on-sale bar. However, it is doubtful that this small concession would have saved the continuation patent and so the outcome for Hamilton would likely have remained the same.

Conclusions

Companies looking to file a US patent application should be cautious to ensure that any outsourcing agreements are explicitly confidential in nature in order to try and avoid creating US prior art, regardless of where the sale or offer takes place. Additionally, the quantity of units offered in any such agreement should be kept to a minimum in order to keep as close to the protection of the experimental use defence.

It should be noted that most patent systems, including those of the UK and Europe, do not have exceptions akin to the on-sale bar and that every effort should be made to obtain a patent application filing date prior to making an invention available to the public.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.

Author
Jon West
Senior Associate
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