6.2 The "On Sale" bar

Patents / Biotechnology / US Biotechnology Practice

This is a bar only under § 102(b) and so applies only if the product to which the invention relates was on sale in the United States more than one year before the United states filing date.

It is important to note that for this bar to come into play, it is not necessary that there has been an actual sale of something falling within the claims, merely that something of this type was "on sale", that is to say offered for sale. Two key elements must be considered when analyzing any situation as to the applicability of this provision. Firstly one must consider the nature of the transaction which occurred before the relevant date and secondly one must consider what it was that constituted the subject matter of the transaction.

In applying this ground of invalidity, the courts for many years tended to look to the totality of the circumstances, which led to some inconsistencies, for example when sales discussions took place about articles whose development was not yet complete when the “sales” transaction took place. Following a 1998 decision of the Supreme Court in Pfaff v. Wells Electronics [110] which rejected the totality of the circumstances approach the law is now considerably clearer. The Supreme Court held that for the on-sale bar to apply two conditions had to be satisfied at least one year before the filing date of the patent application.

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.

The purposes of the "on sale" bar to patentability were reviewed in the Court of Appeals for the Federal Circuit in 1985. [111] The court noted four policies that had to be considered:

(1) discouraging the removal of inventions from the public domain by granting a patent to the inventor after the public had come to believe the invention was freely available as a result of the sale of products embodying it,
(2) favoring wide spread disclosure of inventions,
(3) giving the inventor a reasonable amount of time after sales started to decide whether the invention was worth patenting, and
(4) preventing the inventor from unduly extending the period of his monopoly by delaying the filing of a patent application until he feared that he might start to experience competition.

The Federal Circuit has held that in order to succeed with a challenge to the validity of a claim under the on sale bar, the challenger must:

demonstrate by clear and convincing evidence that there was a definite sale or offer to sell more that one year before the application for the subject patent, and that the subject matter of the sale or offer to sell fully anticipated the claimed invention ... [112]

The mere fact that an agreement was to supply experimental systems on a “cost plus” basis may not suffice to avoid the on-sale bar, if the invention was ready for patenting at the time of the transaction. [113]

For a sale to act as a bar to a subsequent patent, it is not necessary that the sale disclosed the nature of the invention to the purchaser. [114] It is sufficient that it has been developed to the point where a patent application could be filed and was in fact marketed. [115] However, in the case where there is no actual sale prior to the start of the grace period, but only an offer for sale, it seems that perhaps the offer must be accompanied by some information as to the nature of the invention in order to create the bar. [116]

The question of what constitutes an offer for sale for the purposes of the on sale bar was considered by Federal Circuit in Group One Limited v. Hallmark Cards Inc. [117] The court held that since a national standard was necessary for determining whether or not a product was “on sale”, it was not appropriate to look to state law for an answer to what constituted a commercial offer for sale as referred to by the Supreme Court in Pfaff. One should instead “ as a general proposition” look to the Uniform Commercial Code to define whether a communication or series of communications rises to the level of a commercial offer for sale. [118]

A sale that is made solely for experimental purposes is not a bar as long as the purchaser lacked authority to use the invention or to exploit its commercial value. [119] An intra-organization sale from a British company to its American affiliate has been held to trigger the on sale bar even though both companies were wholly owned subsidiaries of the same parent. [120] The court laid some emphasis in this case that control of the two companies was in fact different even though they both answered to the same shareholders. It has, however, been held that it is unlikely that there could be an experimental use exception to the on sale bar in the case of design patents.

In Continental Plastic Containers v. Owens Brockway Plastic Products, [121] the Federal Circuit pointed out the different policies behind the prior use bar and the on-sale bar in the following terms:

The primary policy underlying the "public use" case is that of detrimental public reliance, whereas the primary policy underlying an "on sale" case is that of prohibiting the commercial exploitation of the design beyond the statutorily prescribed time period.

It therefore did not apply the holding in Tone Brothers to an on-sale bar case.

In Brassler U.S.A. LLP v. Stryker Sales Corp [122] the issue before the court was whether the on sale bar applies in the case of a joint invention where the sale in question was from the employers of one group of joint inventors to the employers of a second group of joint inventors. The court held that since the sale in question was of a substantial number of products falling within the claims and that the parties had clearly treated it as commercial, the relationship between the parties with regard to inventorship was irrelevant to the question of whether an on-sale bar came into effect.

In order for the bar to come into effect, it is not necessary that the seller knew exactly what it was that was being sold. Thus in Abbott Laboratories v. Geneva Pharmaceuticals [123] it was held that the commercial sale of a particular anhydrous form of a compound and triggered the on-sale bar even though it had not been appreciated that the material being sold contained that anhydrous form, that fact being discovered only later when samples of the material that had been sold were analyzed. The Court distinguished earlier cases which had held that there was no anticipation where a reaction may have been carried out inadvertently while carrying out some other process on the ground that in such cases the earlier work had produced no useful or appreciated result. This was not the case here where the prior sales had been of useful product that had been appreciated.

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