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Protect Your Processes: Application of On-Sale Bar to Method Claims

Firm Thought Leadership

With the Supreme Court’s recent grant of certiorari in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the on-sale bar to patentability is back in the spotlight.  The on-sale bar traditionally applies if two conditions are met: (1) the product is the subject of a commercial offer for sale, and (2) the invention is ready for patenting.1  The sale or offer for sale of a product, device, or apparatus potentially giving rise to an on-sale bar is usually a straightforward event; a tangible item is transferred from the seller to the buyer.  But what about processes and methods, which are a series of acts or steps, that are not transferred in the same sense as a tangible item?  This article explores the application of the 35 U.S.C. § 102 on-sale bar to method claims.

Performing or offering to perform a claimed method for consideration may trigger the on-sale bar, even if the method itself is not sold or offered for sale.

The Federal Circuit has consistently held that an inventor’s or an assignee’s performance of, or offer to perform, a claimed method in exchange for consideration generally triggers the on-sale bar.  Depending on the type of method claim, the performance may take different forms (e.g., sale of a product versus sale of a service), but the underlying rationale for this general rule is the same: “to preclude attempts by the inventor or his assignee to profit from commercial use of an invention for more than a year before an application for patent is filed.”2  

The Federal Circuit has explicitly held that the commercial sale of a product made using a claimed method constitutes a sale of the method within the meaning of 35 U.S.C. § 102.3  In doing so, it likened such commercialization to the sale of a patented product itself: “Surely a sale by the patentee . . . of a product made by the claimed process would constitute such a sale because that party is commercializing the patented process in the same sense as would occur when the sale of a tangible patented item takes place.” Thus, selling a product made by a claimed method for consideration triggers the on-sale bar.

The same holds true for offering to sell a product made by a claimed method.  Recently in Equistar Chemicals, LP v. Westlake Chem. Corp., the Federal Circuit vacated and remanded the district court’s grant of summary judgment of no invalidity of method claims based on the on-sale bar where the patent owner undisputedly produced, but did not sell, resin using the claimed methods prior to the critical date.5 The Federal Circuit noted that the critical issue on remand was whether the patent owner made an invalidating offer to sell that resin before the critical date.6  The court also noted mere stockpiling of the resin made by the claimed process does not trigger the on-sale bar.7  

The Federal Circuit has also recognized that performing, or offering or perform, a claimed method as part of a service in exchange for consideration could trigger the on-sale bar in at least two situations.  First, the patent owner could make “a commercial offer to perform the patented method” before the critical date, “even if the performance itself occurred after the critical date.”8  Under this theory, the commercial offer must require the performance of all limitations of the claimed method.9  Second, the patent owner could actually perform the patented method prior to the critical date for the promise of future compensation.10

In Plumtree Software, Inc. v. Datamize, LLC, the patents at issue claimed processes for creating an interactive kiosk system, such as those used at ski resorts to provide information to customers about ski conditions, local hotels, and restaurants through a touch screen or key pad.11  The patent owner offered to create an interactive kiosk system for a trade show before the critical date and actually provided an interactive kiosk system after the critical date that utilized the claimed methods.12  However, the challenger failed to demonstrate either that: (1) the patent owner’s contract unambiguously required the use of the claimed method of create the interactive kiosk system under the first situation, or (2) the patent owner actually performed all of the patented steps before the critical date pursuant to its contract under the second situation.13  Thus, the Federal Circuit vacated and remanded the district court’s grant of summary judgment of invalidity of the method claims based on the on-sale bar because “the record contain[ed] insufficient facts to determine whether the patented process was sold or offered for sale before the critical date.”14  

Similarly, in Scaltech, Inc. v. Retec/Tetra LLC, the patent at issue claimed processes offered as a service, in this case, for treating waste water. 15  No tangible product was sold by the patentee.  Instead, the patentee made two offers prior to the critical date “to process the oily sludges and ‘return clean oil, water and a deoiled wet solid slurry suitable to be sent to the coker.’”16  Because the offers “provide[d] sufficiently definite offer language” and the subject matter of the offers satisfied each limitation of the claimed processes, the Federal Circuit found the on-sale bar was triggered.17  Critically, the Federal Circuit noted that “the fact that the process itself was not offered for sale but only offered to be used by the patentee . . . does not take it outside the on sale bar rule.”18  

A sale or an offer to sell a claimed method itself may trigger the on-sale bar.

The Federal Circuit has indicated that the sale of a claimed method itself likely constitutes an on-sale bar, but it declined to speculate as to what factual scenarios constitute the sale of a method sufficient to trigger the on-sale bar.19  It is certain from In re Kollar, however, that granting a license to practice a claimed method that is still under development coupled with providing know-how regarding that method does not constitute a sale of the claimed method under 35 U.SC. § 102.20  In Kollar, the applicant was seeking to patent a process for preparing a dialkyl peroxide via a particular reaction.21  Nearly fifteen years before the application was filed, however, the applicant entered into a research and development agreement “contemplate[ing] that ‘resultant products’ manufactured using the claimed process could potentially be sold.”22  While the Federal Circuit acknowledged that “‘[k]now-how’ describing what the process consists of and how the process should be carried out may be sold in the sense that the buyer acquires knowledge of the process and obtains the freedom to carry it out pursuant to the terms of the transaction,” it ultimately held that “such a transaction is not a ‘sale’ of the invention within the meaning of [pre-AIA] §102(b) because the process has not been carried out or performed as a result of the transaction.”23  

It is also certain from Medicines Co. v. Hospira, Inc. that outsourcing the performance of a claimed method to a third party for the patentee’s benefit does not constitute a sale of the claimed method under 35 U.S.C. § 102.24  The patents at issue in Medicines claimed pharmaceutical batches of a drug product and processes for preparing the pharmaceutical batches.25  The patent owner contracted with a manufacturer to make three batches of the drug product according the claimed processes more than one year prior to the filing of its applications for the patent.26  The Federal Circuit clarified that such an arrangement is the “mere sale of manufacturing services by a contract manufacturer to an inventor”—not the sale of patented method or product—and thus “does not constitute a ‘commercial sale’ of the invention.”27

Although the Federal Circuit has not elaborated on what constitutes a commercial sale of a method under 35 U.S.C. § 102, it is not difficult to envision a situation similar to those of Kollar and Medicines in which an agreement requires a third party to carry out the steps of a claimed method, possibly constituting the sale of the method.  For instance, imagine a company develops a new method of manufacturing a product as Kollar did, but instead of licensing the option to practice its method, it hires a third party to manufacture the product using its new method as in Medicines.  Now suppose, that the company also permits the third party to sell the product made using the new method to others in exchange for a royalty.  Should the company enter into the agreement with the third-party manufacturer prior to filing a patent application on its new method, it may risk patent protection on its new method being barred by the on-sale bar.

Sale of a device or composition used to perform a claimed method may be sufficient to trigger the on-sale bar.

The Federal Circuit has held on at least two occasions that the sale of a device or composition used to perform a claimed method constitutes a commercial sale of the claimed method under 35 U.SC. § 102.  In Minton v. National Association of Securities Dealers, Inc., the Federal Circuit found the leasing of a fully operational computer program implementing, and thus embodying, a claimed method for trading securities between individuals to trigger the on-sale bar.28  In Enzo Biochem, Inc. v. Gen-Probe, Inc., the Federal Circuit held that the pre-critical sale of a polynucleotide probe created an on-sale bar to claimed methods of using that probe to detect certain bacteria.29  In Enzo, a polynucleotide probe was sold pursuant to an agreement along with accompanying instructions as to how to use the probe.30  The Federal Circuit found that, given there were also composition claims that read on certain probes that hybridize with the bacteria, carrying out such a hybridization in accordance with the claimed methods was inseparable from the compositions themselves.31  

In both cases, the Federal Circuit focused on the tangible device or composition being sold to distinguish the “right to commercialize” that was provided in Kollar. 32  Thus, these cases leave open questions of how intertwined the tangible device or composition itself must be with performance of the claimed method to constitute a commercial sale of the claimed method under 35 U.S.C. § 102.  For example, must the tangible device or composition be integral to the performance of the method claim as in Enzo to trigger on the on-sale bar, or is ancillary use with instructions as in Enzo sufficient?  Also, must the specific tangible device or composition be the only such device or composition capable of performing the claimed method? 

Best Practices

To entirely avoid any possibility of triggering the on-sale bar for method claims, it is best to file a patent application directed to any possible method claims before offering any product or service for sale.  While pre-critical manufacturing of a product likely would not likely trigger the on-sale bar for the manufacturing method used, any offer to sell the product before the critical date likely would.  It is also important to consider how the sale of products and any accompanying information might bar methods that use the product.  Additionally, whenever considering the use of proprietary methods by or for the benefit of third parties, refraining from enumerating or requiring the performance of any particular method steps in a contract may reduce the risk of triggering a bar, and one should consider how outsourcing might create possible on-sale bars to the method.  Finally, if there is potential risk that an on-sale bar exists for an internal process, trade secret protection may be a better option for protecting that process rather than filing a patent application disclosing the process with the risk that any patent issuing therefrom may be invalidated.

 

1 Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998). 

2 D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1147 (Fed. Cir. 1983).

3 Id.; W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540, 1550 (Fed. Cir. 1983); In re Kollar, 286 F.3d 1326, 1333 (Fed. Cir. 2002).

4 Kollar, 286 F.3d at 1333.

5 Equistar Chems., LP v. Westlake Chem. Corp., No. 2017-1548, 2018 WL 3239710, at *3 (Fed. Cir. July 3, 2018)

6 Id. at *3-4.

7 Id. at *3 (citing Medicines Co. v. Hospira, Inc., 827 F.3d 1363, 1377 (Fed. Cir. 2016) (en banc)).

8 Plumtree Software, Inc. v. Datamize, LLC, 473 F.3d 1152, 1162-63 (Fed. Cir. 2006) (citing Scaltech, Inc. v. Retec/Tetra LLC, 269 F.3d 1321, 1328-29 (Fed. Cir. 2001)). 

9 Id.  However, it could do so inherently.  See Scaltech, 269 F.3d at 1329.

10 Id. at 1163 (citing Kollar, 286 F.3d 1326). 

11 Id. at 1155.

12 Id. at 1157. 

13 Id. at 1163. 

14 Id. at 1164. 

15 Scaltech, 269 F.3d at 1325.

16 Id. at 1329. 

17 Id. at 1329-30. 

18 Id. at 1328.

19 See Kollar, 286 F.3d at 1333.

20 Id. 

21 Id.  at 1328.

22 Id. at 1330 (emphasis in original). 

23 Id. at 1332. 

24 See Medicines Co. v. Hospira, Inc., 827 F.3d 1363 (Fed. Cir. 2016) (en banc).

25 Id. at 1366-67. 

26 Id. at 1367. 

27 Id. at 1373.   

28 Minton v. Nat’l Ass’n of Sec. Dealers, Inc., 336 F.3d 1373, 1378 (Fed. Cir. 2003)

29 Enzo Biochem, Inc. v. Gen-Probe, Inc., 424 F.3d 1276, 1285 (Fed. Cir. 2005),

30 Id. 

31 Id.  

32 See Minton, 336 F.3d at 1377-78; Enzo, 424 F.3d at 1282.

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