Lacks Industries Inc. v. McKechnie Vehicle Components

Newsletters and Bulletins / Court of Appeal Decisions 2003 / Lacks Industries

Lacks Industries Inc. v. McKechnie Vehicle Components[1]

This case came to the Federal Circuit on appeal from summary judgments of Eastern District of Michigan in which the judge had effectively adopted a number of decisions of a special master before whom the case had been tried.

Although of most interest because of its treatment of the on sale bar, the case is also a useful reminder of a number of other aspects of the Federal Circuit’s approach to issues of infringement and validity. Thus the decision falls into three parts: (1) claim construction, (2) infringement analysis, and (3) validity analysis. The court notes that where invalidity is pleaded only as an affirmative defense to an infringement action, if no infringement is found then an inquiry into validity is not required.[2] The court also reminds us that in the claim construction one should start with the intrinsic evidence, then move to extrinsic evidence including dictionaries. As is common, however, the court found no need to go beyond the intrinsic evidence in this case, in effect deciding or at least conforming the issue of claim construction based on the stated purpose of the invention, which was to provide a cheap way of providing a chrome appearance of a car wheel by cladding a layer of metal or plastic over the entire surface of the wheel.

The infringement issue was quickly disposed of once the claim construction was done and the court moved to the question of validity, a primary element in which was whether an on sale bar had occurred. In this court held that the special master had misdirected himself as to the law, although noting that his decision had been prior to the Federal Circuit’s decision in Group One Ltd. v. Hallmark Cards[3] in which the Federal Circuit had emphasized the need to look to Article 2 of the UCC.[4] to determine whether particular acts or conduct fell within the first requirement of the Supreme Court’s test in Pfaff v. Wells Electronics.[5] The reader may recall that following the 1998 decision of the Supreme Court in Pfaff v. Wells Electronics the test to be applied to determine whether there is an “on sale” bar under 35 USC 102(b) is:

First the product must be the subject of a commercial offer for sale. ...

Second the invention must be ready for patenting. That condition may be satisfied in at least two ways: by proof of reduction to practice before the critical date; or by proof that prior to the critical date 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.

What was required for something to be an “offer” so as to comply with the first limb of the Supreme Court’s test was reconsidered by the Federal Circuit in the present case. The special master had held that vigorous solicitation of business was sufficient for the on-sale bar to apply. The Federal Circuit held that this was the wrong standard and reaffirming its decision in Group One held that it was necessary that an action must have been taken that could lead to an acceptance to form a contract. The court noted that under Article 1-205 of the UCC industry practice or a course of conduct could give rise to an acceptable “offer” but found that the evidence was insufficient to reach this conclusion in the present case and the matter was remanded for further consideration by the district court.[6] The court went on to note that in cases where there was an oral offer to sell, corroboration would be needed.[7] So far as establishing the identity of what had been the subject of any offer, such corroboration was needed on a “rule of reason” standard,[8] using the test set out in Price v. Symesk[9].

[1] 66 USPQ2d 1083 (Fed. Cir. 2003).
[2] Citing Cardinal Chemical Co. v. Morton Int’l Inc 508 US 83 (1993).
[3] 59 USPQ2d 1121.
[4] Article 2 of the Uniform Commercial Code (UCC) adopted by the National Conference of Commissioners on Uniform State Laws provides a model for sales law throughout the United States. Most states have adopted it substantially as written but there are some variations in detail between different states. The UCC contains no definition of the term “offer”. At common law, however, an essential requirement of an offer is that the party making it is willing to become legally bound by it if the offer is accepted. As such, an offer may be distinguished from an invitation to deal. Under the UCC, a contract for sale of goods may be formed inter alia when there is an offer and an acceptance of that offer. (Article 2-204) It should be noted that under Article 2-305, where the parties so agree a contract can be formed even though there is no agreed price. It therefore seems to follow that in such circumstances it is not necessary for a price to be quoted for an “offer” to trigger the on sale bar.

Article 2 is currently in the process of being revised, mainly so as to take account of the development of e-commerce and the adoption of the federal Electronic Signatures in Global and National Commerce Act (“E-sign) and the Commissioners own model state law, the Uniform Electronic Transactions Act (UETA). However, other changes are likely to be made including a provision that it is possible to form a contract even though the acceptance may include terms different from or additional to those of the offer. (Proposed new Article 2-206(3)). It is not clear what effect, if any this may have on the question of what constitutes an offer for sale so as to trigger the on-sale bar.
[5] 48 USPQ2d 1641 (S. Ct 1998).
[6] Judge Newman dissented on the question of whether industry practice should be taken into consideration on the question of whether an offer had been made. In her view this was a retrograde step in the pursuit of a rational uniform national law.
[7] Citing Finnigan Corp v. ITC 51 USPQ2d 1001.
[8] Citing Woodland Trust v. Flowertree Nursery 47 USPQ2d 1363.
[9] 26 USPQ2d 1031. This was a prior use case. The present court felt that the factors it set out applied analogously in the present case. The factors were: (1) the relationship between the corroborating witness and the alleged prior user; (2) the time period between the event and trial; (3) the interest of the corroborating witness in the matter in suit; (4) contradiction or impeachment of the witness testimony; (5) the extent and details of the corroborating testimony; (6) the witness familiarity with the subject matter of the invention and the prior use; (7) the probability that a prior use could occur considering the state of the art at the time; and (8) the impact of the invention on the industry and the commercial value of its practice.

The On Sale Bar in the U.S. and elsewhere

A copy of the court's decision is available here.

United States patent law is unique in providing for an On Sale Bar. The patent laws of most other countries provide instead that an invention is barred by a prior public divulgation of the invention, rather than by whether it has been offered for sale. An offer in the United States to sell a product including the invention, irrespective of whether the sale itself will be within the United States, will trigger the bar and if it occurred more than one year prior to the filing date of the patent application(s) in question (due to the one year grace period in the United States), then the patent(s) would have been found to be invalid.

It is interesting to note that an offer for sale, in and of itself, would not give rise to a patent bar in most other countries, since an offer to sell does not necessarily divulge any inventions in the product.

It should also be noted in passing that the novelty bars in the United States are usually subject to a one year grace period and that most foreign patent laws either do not have a grace period or have much more limited grace periods.

These laws reflect different approaches in the U.S. and elsewhere regarding the need that is perceived to force a patent applicant to file a patent application as quickly as possible after making the invention in question. These laws, with their different approaches to this issue, mean that an inventor needs to realize that even if they comply with the law of their home country on the issue of publicizing or using new technology, they can still end up barring patent protection for their invention in another country.

[Home] [About Ladas & Parry LLP] [Contact Us] [Search]
[Trademarks] [Domain Names & E-Commerce] [Patents & Copyrights]
[Litigation] [IP Rights Maintenance] [IP as Property] [News & Bulletins]