The following article appears in the journal JOM, 51 (2) (1999), p. 64. JOM is a publication of The Minerals, Metals & Materials Society

The Forfeiture of U.S. Patent Rights by Placing an Invention on Sale

As a result of a recent opinion by the U.S. Supreme Court clarifying what is required to have an invention "on sale" prior to the filing of a U.S. patent application, it is important that inventors and those owning rights in inventions monitor their conduct carefully to avoid an inadvertent forfeiture.

The Federal Patent Statute states, in part, that a person loses the right to seek a patent if the invention has been "on sale in this country" more than a year prior to the date of filing the patent application. Earlier articles in this series, which were published in the November 1987 and August 1994 issues of JOM, dealt with aspects of this subject.

In the case that was the subject of the recent Supreme Court decision, the inventor had designed a new computer chip socket and sent detailed engineering drawings to a manufacturer. He also showed a sketch of the concept to a major U.S. company, which placed an order for a substantial quantity of sockets.

The District Court held that as the patent application was filed within one year after the invention was reduced to practice (i.e., the operability of the invention had been demonstrated physically), there was no "on sale" bar to obtaining a patent.

The U.S. Court of Appeals reversed the finding and stated that it was not necessary for the invention to be reduced to practice in order for it to have been placed on sale. It ruled that the proper test was that the invention was "substantially complete at the time of sale."

The Supreme Court did not view the tests of either court with favor. The court said that the "substantially complete" test by the Court of Appeals was a rule that made timeliness of an application depend on the date when an invention was substantially complete and thereby seriously undermined the interest in certainty. It further noted that such a rule had no support in the statute.

In its November 1998 opinion, the Supreme Court ruled that a twoelement test was to be applied in determining when the oneyear period of grace for filing a patent application begins. First, the product has to be the subject of a commercial offer for sale. Secondly, the invention has to be "ready for patenting." The court ruled that acceptance of the purchase order was proof that before the critical date an offer of sale had been made and the sale was clearly commercial.

One manner in which the invention could be deemed ready for patenting was to show that it had been reduced to practice. Unlike the district court, however, the Supreme Court did not feel that the absence of a reduction to practice prevented the oneyear countdown from beginning. It concluded that the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention. It concluded that this was enough to rule that the invention was on sale more than a year before the U.S. filing date and that the patent was, therefore, invalid. The fact that the inventor had not reduced the invention to practice and had not made a prototype or attempted to make one was not determinative of the issue.

One possible exception to the onsale bar to obtaining a valid patent would be proof that the sale was for experimental purposes. This exception in the onsale category is, however, a somewhat narrow exception as the experimental purposes must be the purposes of the inventor or patentee and not the customer. For example, suppose that a manufacturer of mining equipment needed to have the cooperation of a mine to confirm the operability of the equipment. If the manufacturer either loaned the piece of equipment to a mine or charged them a greatly reduced price and the inventor or patentee monitored operation of the equipment, maintained records, interviewed users, and otherwise obtained feedback regarding the operability of the equipment, this could be a sale for experimental purposes that would, for the experimental period, prevent the start of the oneyear statutory bar period.

In view of this court decision, it is important that those interested in avoiding forfeiture of patent rights in the United States not be lulled into a position of comfort solely because there has been no reduction to practice of the invention. As the concept of when something is ready for patenting is heavily dependent on the circumstances of a particular case, it would be prudent to avoid any conduct that could be regarded as placing an invention on sale more than a year before filing a U.S. patent application. Often, reasonable minds can differ as to what drawings or descriptions would be sufficiently specific to "enable a person skilled in the art to practice the invention."

To the extent to which commercial necessity dictates disclosures of inventions to customers or potential customers, it would be desirable to seek guidance regarding what would and would not raise a meaningful risk of starting the oneyear onsale bar. It is also important to have a clear understanding with third parties regarding the purpose for which the invention is being disclosed; contemporaneous written confirmation of relationships with third parties can also be helpful.

An obvious safe approach would be to file a U.S. patent application before any disclosure to others. It is much better to have a filing date before any outside exposure than to have a good argument supporting the position that there has not been an "onsale" bar.

Arnold B. Silverman is chair of the Intellectual Property Department and a member of Eckert Seamans Cherin & Mellott, LLC in Pittsburgh, Pennsylvania.

For more information, contact A.B. Silverman at Eckert Seamans Cherin & Mellott, LLC, 600 Grant Street, 44th Floor, Pittsburgh, Pennsylvania 15219; (412) 566-2077; fax (412) 566-6099; e-mail ARNIE@TELERAMA.LM.COM.