A Private Sale is not a “Public Disclosure,” Federal Circuit Rules
In a case of first impression, the Federal Circuit ruled in Sanho Corp. v. Kaijet Techs., No. 2023-1336 (July 31, 2024) that a pre-filing private sale does not constitute a public disclosure for purposes of excluding a prior art reference having a post-sale effective filing date.
Prior art that patent claims need to distinguish generally includes all information that was public as of the filing date of the patent application. But prior art also includes sales or offers for sale, even if not made publicly, and pre-filing public use of an invention, even if done in a way does not disclose details of the invention to the public. Also, other patent applications filed prior to a patent application’s filing date are generally part of the prior art that the applicant needs to distinguish.
However, there are exceptions. For example, if the disclosure was made less than a year before the applicant’s filing date, and was made by an inventor or someone who obtained the subject matter (directly or indirectly) from the inventor, that disclosure is not prior art. And if the inventor publicly disclosed the invention before the effective filing date of a patent application filed by another, that other patent application is not prior art.
That latter exception was at issue in Sanho, which involved a patent on a computer device, US 11,572,429 (“the ‘429 patent”), owned by Sanho, and challenged on obviousness grounds in an inter partes review. Among the references cited against the ‘429 patent was a published application to Kuo, which was filed (but not published) before the filing date of the ‘429 patent. Sanho argued that the Kuo reference should be excluded as prior art based on the inventor’s pre-filing sales made to Sanho, before Kuo’s effective filing date (but less than one year before the filing date of the ‘429 patent), that the inventor’s pre-filing sales constituted a public disclosure that excluded Kuo as prior art.
However, the sales by the inventor to Sanho were fully private, not publicized in any way. The prior art includes “on sale” activities, 35 USC 102(a)(1), which has been interpreted to include private sales in Helsinn Healthcare v. Teva Pharm., 586 US 123 (2019). But the exception as issue in Sanho, that of 35 USC 102(b)(2)(B), requires the inventor to have “publicly disclosed” the invention prior to the effective filing date of the reference. While private sales constitute a “disclosure” by the inventor that excludes those sales from use as prior art themselves, they do not constitute a public disclosure that would exclude as a patent application filed by another. As stated by the Federal Circuit, the exception of 35 USC 102(b)(2)(B) “applies only to ‘disclosures’ that result in the subject matter of the invention being ‘publicly disclosed.’”
One takeaway from Sanho is the desirability of getting a patent application filed as early as possible. Had the inventor gotten a patent application (even a provisional application) on file before making the pre-filing sales to Sanho, the ‘429 patent might well have survived the challenge to it.
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