The On-Sale Bar -- Where Patent Law and Contract Law Meet
The on-sale bar prevents an inventor from getting a patent if the invention is "on sale ... before the effective filing date of the claimed invention," 35 USC 102(a)(1). (There is a one-year grace period for sales by the inventor or someone obtaining the subject matter directly or directly from the inventor, 35 USC 102(b)(1).) The on-sale bar is invoked not only by actual sales, but also by offers for sale. But what constitutes an offer for sale that invokes the bar?
That was the issue in a recent Federal Circuit case, Crown Pckg’g Tech. v. Belvac Prod’n Mach., No. 22-2299 (Fed. Cir. Dec. 10, 2024). Crown owned a series of patents on machines for producing a reduced diameter portion at the top of a can, a process known as “necking.” Before the critical date at the beginning of the one-year grace period Crown sent a letter to a third party, Complete Packaging, styled as a “Quotation,” inviting purchase of a necking machine embodying the invention. Complete apparently never followed up to the point of purchasing the necking machine from Crown. Was Crown’s letter itself an offer for sale, or merely an invitation for Complete to make an offer to purchase?[1] If the former, Crown’s patents would be invalid, since the other conditions required for invoking the on-sale bar were present.
In looking at whether a communication is an offer that invokes the on-sale bar, contract law is applied to the facts of the case. Quotations are interesting situation. Standing alone they are not considered offers under contract law, but they may be offers if it is accompanied by additional terms.
Here Crown’s letter was found to be an offer in view of several factors. It was directed to a specific potential purchaser, rather than widely disseminated to a variety of recipients. The letter also included a number of necessary terms typical for a commercial contract: it provided a detailed description of the necking machine, a price, payment terms (including a partial payment at the time of order), shipping and delivery terms, and a list of conditions of sale and additional terms. Further, it characterized itself as an “offer.”
The court further noted that Crown had responded to orders from other third parties receiving similar letters by sending back “Order Acknowledgements,” implying that the orders were effective upon receipt. A further term of the “Quotation,” which indicated that orders were subject to Crown’s written acceptance, did not negate the binding contract that would be created by response to the letter, especially in view of language in the letter that required information from the purchaser to enable Crown “to proceed with manufacture immediately upon receipt of an order.” With the “Quotation” from Crown to Complete considered to be an offer for sale before the critical date, Crown’s patents were invalidated.
The lesson is that pre-filing commercial activity, even if no sales are made, can jeopardize patent rights. It is best to seek patent protection early in the process, in particular before the invention is made public or devices including the invention are made commercially available.
[1] The case was decided under the pre-AIA 35 USC 102(b), but the result is equally applicable to the present (post-AIA) law.
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