Feb
22

DON’T LOSE PATENT RIGHTS BY FAILING TO TIMELY FILE A PATENT APPLICATION!

This blog discusses an often-missed fact about the potential impact of pre-patent-application-filing activity on the validity of any resulting patent.  In a nutshell, there is a “statute of limitations” for filing patent applications under certain circumstances.  Patents have been invalidated on the basis of late-application filing.  

On Feb. 10, 2022 in the case of Junker v. Medical Components, Inc., the U.S. Court of Appeals for the Federal Circuit (CAFC) effectively eliminated a bench trial award of $1.2 million to the plaintiff in a patent infringement lawsuit by invalidating the plaintiff’s design patent (Pat. No. D450,839).  The invalidation was not based on theories involving obviousness or novelty.  Instead, the validation was based on a written price quotation for a product incorporating the later patented design.

The CAFC’s opinion does not refer to the lower court’s finding of facts concerning the plaintiff’s lawsuit against the company & the individuals who are merely referred to as the plaintiff’s business partners but who were also defendants in the lawsuit.  The lower court found that these business partners were not credible in their assertions that one of them was actually the inventor of the design in patent no. ’839.  To add insult to injury, it was one of these business partners which corresponded with Boston Scientific, unbeknownst to the plaintiff.  It may be that the lower court’s judge, after hearing and reviewing the evidence, avoided invalidating the design patent because of the unsavory actions of the plaintiff’s business partners on several fronts.

The CAFC’s decision is a cautionary tale to inventors to timely file their patent applications once the invention is ready for patenting to avoid: 1) either not being awarded a patent; or 2) having a granted patent later invalidated.  Under the law pertaining to patent applications filed before  May 16, 2013, a patent claim is invalid under 35 U.S.C. § 102(b) if “the invention was  . . .  on sale in this country, more than one year prior to the date of the application for patent in the United States.”   In Junker, the plaintiff filed his application for a design patent on Feb. 7, 2000. The Boston Scientific quotation was dated Jan. 8, 1999. Under the statute, the plaintiff had until Jan. 8, 2000 to file his patent application if the quotation constituted an offer for sale.

Congress amended § 102 when it acted the America Invents Act (“AIA”).   The amended AIA is applicable to patent applications filed since March 16, 2013.    The Junker patent was thus analyzed under the pre-AIA statute.  In determining if the on-sale bar applies, a court will rely on the underlying factual findings.   The lower court found that the communication sent to Boston Scientific Boston was not a quotation and not an actual offer for sale.

The CAFC focused only on the pre-AIA statute.  Because it concluded the 102b bar applied, the CAFC did not address any of the other appealed issues.  The Junker appellate court’s analysis focused on determining if the January 8, 1999 letter was an offer for sale of the claimed design or merely a quote, as the letter stated three times, signaling the parties were engaged in preliminary negotiations.  In conducting its analysis, the court applied traditional contract law principles involving an offer and acceptance.   Based on the CAFC’s precedent, only an offer which rises to the level of a commercial offer for sale, one which the other party could make into a binding contract by simple acceptance, constitutes an offer for sale under § 102(b).

One of the plaintiff’s business partners had responded through his company Xentek in response to Boston Scientific’s request for a quotation.   As such, the letter with its quotation was not an unsolicited price quotation or invitation to negotiate but a specific offer to Boston Scientific but not by the plaintiff who apparently knew nothing about the offer.  Additionally, the letter did not just include a quote but contained a number of terms typical of a commercial contract because if provided specific shipping conditions and that the shipment will be “FOB (free on board) Athens, Texas.” FOB is a standard contract term where goods shipping is involved to allocate the risks and responsibilities of the buyer and seller with respect to delivery, payment, and loss/damage of the goods.   The letter also included payment terms along with multiple different purchase options for Xentek’s goods where the listed prices were based the number of units ordered.  The court concluded that the detail of the relevant commercial sale terms in the letter establishes that the letter was not merely an invitation to negotiate.  The letter included multiple offers for sale, any one of which Boston Scientific could have simply accepted to bind the parties in a contract.  Additionally, later communications between the two companies used the exact same commercial terms suggesting that Xenex’s original terms were definite and not “suggestions.”

The Junker plaintiff argued that the letter was not an offer for sale but merely a price quotation inviting further negotiation, as the district court had found.   The court did state “[t] word quote is commonly understood as inviting an offer rather than as making one, even when directed to a particular customer.”  However, it opined that the terms of the letter must be considered in their entirety to determine whether an offer was intended, or if it was merely an invitation for an offer or further negotiations.  Here, the quotation went beyond merely providing a quote and included delivery, various ordering options, and payment terms.   Relying on a contracts law treatise which provides that if the quotation contains detailed terms, it may well be deemed an offer, the CAFC invalidated the patent due to the on-sale bar.

Would the same decision have been reached under the A1A had Junker’s design patent been filed after May 16, 2013? The AIA’s amendments to Section 102 for patent applications filed after March 16, 2013 have muddied the waters.  First, the AIA has relocated the statutory bar provisions to a new 35 U.S.C. § 102(a)(1).  Second, it has carried forward the concept of a “grace period” in a new 35 U.S.C. § 102(b).

102(a)(1)  NOVELTY; PRIOR ART

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….

102(b) EXCEPTIONS

(1) DISCLOSURES MADE ONE YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION.

(A) the disclosure was made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if: (A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

The AIA’s oddly worded 102(a)(1) provision was ostensibly intended to exclude from the statutory bar any prior commercial activity by the inventor that does not place the details of the invention into the public domain.  That’s why the phrase “or otherwise available to the public” was added at least according to the AIA’s legislative history:  to exclude confidential sales or offers to sell an invention from triggering the on-sale bar. Under the pre-A1A statute, case law held that private offers for sale (as in Junker) or private uses or secret processes practiced in the US that result in a product or service that is then made public may be deemed patent-defeating prior art.  To add further confusion, Congress did not expressly define the word “disclosures” in the new Section 102(b) or the relationship of these “disclosures” to Section 102(a)(1)’s patent-barring events.   Congress should have left well enough alone and just modified the original 102(b) statute to explicitly state that confidential sales or offers for sell shall not trigger the on-sale bar.

In fact for now, the Supreme Court and the Federal Circuit have both concluded that Congress had not made that intent sufficiently clear to afford it a legally recognized policy.  In Heisinn Healthcare, S.A. v. Teva Pharmaceuticals USA, Inc., 686 U.S. (2019),  Supreme Court affirmed the CAFC’s conclusion that under Section 102(a)(1), a publicly disclosed commercial sale of an invention by an inventor, even if it does not place the details of the invention into the public domain (i.e., remains confidential), if made more than one year before the effective filing date of a patent.  As such, the disclosure can qualify as invalidating prior art under AIA Section 102(a)(1). Thus, the Heisinn decision arguably resurrects the pre-AIA separation of the statutory bars into two categories: public disclosures (patented, publication, in public use) and commercialization (on sale).

Confusing, isn’t it?  Based on Helsinn, those who are considering filing a patent application in this AIA world should for now assume that any confidential sales activity prior to applying for a patent might not be accorded a safe harbor.   Thus it makes goods sense to file at least a provisional patent application before commencing any such transactions or clearly within a year of commencing any sales activity whether confidential or not.  Prompt disclosure of the invention in at least a provisional patent disclosure is further encouraged considering that patents are now granted to the first inventor to file, another outcome of the AIA.  Moreover, all inventors should proceed cautiously when revealing their invention to anyone by having proper confidentiality agreements in place with language curtailing the providing of any information to any third party without the inventor’s written permission.

As a reminder: 1) the pre-AIA statute remains applicable to all patents granted on applications filed before March 16, 2013; and 2) a patent infringement lawsuit can occur during the lifetime of the granted patent (about 20 years after the filing date or 14 years from the grant date for design patents granted pre-AIA and 15 years post-AIA) and some years thereafter as a result of the patent statute’s 6-year statute of limitations for bringing a lawsuit. The impact of the pre-AIA statute will be around for a while.  As for the AIA statute, perhaps the courts will have a chance to add some clarity around the Helsinn decision in the not-too-distant future.

Take Home Points for Those Contemplating a Patent Application in the AIA World

  • Timely file patent applications to avoid any problems related to attempting to commercialize the invention before actual filing which could be violative of the AIA’s 102(a) and 102(b) provisions for patents resulting from applications filed since March 16, 2013 as the Helsinn decision demonstrates.
  • Ensure that all communications with potential commercialization partners are maintained in confidence and exchanged under the terms of an executed NDA.
  • Don’t broadcast “deals” of a business venture publicly before an application is filed.

 

   THANK YOU FOR YOUR INTEREST IN THIS BLOG.  WE HOPE IT WAS INSTRUCTIVE.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

           Have a question about intellectual property?  Contact us for a complimentary strategy session to determine your best course of action to protect and commercialize the fruits of your hard work, creativity, and innovativeness.


© 2022 by Troy & Schwartz, LLC

 

 

 

Posted in Intellectual Property Law, Patent Law - Current Issues on February 22,2022 04:02 PM
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