Pfaff v. Wells Electronics, Inc., 119 S.Ct. 304, 48 U.S.P.Q. 2d (BNA) 1641 (1998)

ON SALE BAR - REDUCTION TO PRACTICE - 102(b) - COMMERCIAL MARKETING - EXPERIMENTAL USE - OFFER FOR SALE -  INVENTION - CONCEPTION

Before the critical date, i.e., the filing date, of a patent application, the on-sale bar applies when (1) the product is offered for commercial sale, and (2) the invention is either reduced to practice or, if not reduced to practice, described in sufficient degree to enable a person skilled in the art to practice the invention.

[SUMMARY] | [ISSUE & DISPOSITION] | [AUTHORITIES CITED] | [COMMENTARY]

SUMMARY

Petitioner Wayne K. Pfaff, holder of U.S. Patent No. 4,491,377 (the '377 patent) to a computer chip socket, brought suit against Wells Electronics, Inc. (Wells) alleging that a modified version of Wells' socket infringed the '377 patent.

At the behest of Texas Instruments (TI), Pfaff began to develop the socket that is the subject matter of the '377 patent in November of 1980. Prior to March 17th, 1981, Pfaff completed and sent to TI a set of "detailed engineering drawings . . . to be used in making the socket." Pfaff, 119 S. Ct. at 307. TI placed an oral order for $91,155 worth of sockets, and confirmed this order in writing on April 8, 1981.  See id. At the time of the offer for sale, a prototype of the socket had not been made. The order was not filled until July 1981 because it took the manufacturer time to develop the machinery necessary to produce the socket. See id. The socket invention was not actually reduced to practice until July 1981, which was after the offer for sale to TI.

Application for a patent to the computer chip socket was filed on April 19, 1982; this establishes April 19, 1981 (one year before) as the critical date for calculation of the 35 U.S.C. § 102(b) on-sale bar. The '377 patent issued on January 1, 1985, by which time the chip socket had achieved "substantial commercial success." Pfaff, 119 S. Ct. at 307-08.

Pfaff brought suit against Wells for infringement of the '377 patent and lost on the district court's finding of non infringement. See Pfaff, 119 S. Ct. at 308 (citing Pfaff v. Wells Electronics, Inc., 9 U.S.P.Q.2d (BNA) 1366 (N.D. Ind. 1988)). This suit was brought when Wells began manufacturing a modified chip socket device. At trial, the district court held certain claims of the '377 patent infringed and rejected Wells' § 102(b) "on sale bar" defense because Pfaff had filed the application within one year of his reduction of the computer chip socket invention to practice. Wells appealed this decision, and the Court of Appeals for the Federal Circuit reversed, holding the '377 patent invalid for violation of § 102(b). The court held that despite not being reduced to practice, the one year bar period started when the invention was first offered in a commercial sale because it was "substantially complete" at that time. 119 S. Ct. at 308 (quoting Pfaff v. Wells Electronics, Inc., 124 F.3d 1429 (C.A.F.C. 1997).

The Supreme Court granted certiorari in this instance because other courts have held that the "on sale bar" cannot begin to run until there has been actual reduction to practice of the invention, and because there is no reference to a requirement of "substantial completion" of an invention in 102(b). See Pfaff, 119 S. Ct. at 308.

ISSUE & DISPOSITION

Issue

Whether the 35 U.S.C. § 102(b) "on-sale bar" may be measured from the first commercial offer for sale of an inventive product, even where the invention has not yet been reduced to practice.

Disposition

Yes. The on-sale bar applies when, before the critical date, (1) the product is the subject of a commercial offer for sale, and (2) the invention is ready for patenting. The latter of the requirements may be shown by either proof of reduction to practice or that drawings or the like have been prepared that are sufficiently specific to enable a person skilled in the art to practice the invention.

AUTHORITIES CITED

Cases Cited by the Court

Other Sources Cited by the Court

COMMENTARY

State of the Law Before Pfaff

It is well established that a person shall not be entitled to a patent if the invention has been "on sale" at a date more than one year prior to the filing of the patent application. Many courts in different jurisdictions have held that the term "on sale" for purposes of § 102(b) requires that the invention be reduced to practice or, in other words, that an invention cannot be "on sale" for the purposes of § 102(b) unless it has been reduced to practice. See, e.g., Timely Products Corp. v. Arron, 523 F.2d 288, 299-302 (2d Cir. 1975); Dart Industries, Inc. v. E. I. Du Pont de Nemours & Co., 489 F.2d 1359, 1365 n.11 (7th Cir. 1973). The Federal Circuit has held that an invention need not be reduced to practice to begin the running of the on-sale bar clock but that the invention need only be "substantially complete at the time of sale." Pfaff v. Wells Elecs., Inc., 124 F.3d 1429, 1434 (Fed. Cir. 1997).

The Patent Act does not expressly state that reduction to practice is necessary before an invention can be "on sale" for § 102(b) purposes. Established case law holds that reduction to practice is not a prerequisite for patentability. See The Telephone Cases, 126 U.S. 1, 533 (1888). While it is well settled that an invention otherwise patentable can cease to be if the invention is, in fact, "on sale" for more than one year prior to filing of the patent application, see, e.g., Metallizing Eng'g Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516, 520 (2d Cir. 1946) ("it is a condition upon an inventor's right to a patent that he shall not exploit his discovery competitively after it is ready for patenting; he must content himself with either secrecy, or legal monopoly."), prior to this case it was also seemingly clear that an invention could not technically be "on sale" prior to being reduced to practice.  This latter proposition was upset by the Federal Circuit's decision in the present case in that it held that an invention may, in fact, be "on sale" for § 102 purposes if the invention is simply "substantially complete" at the time of sale regardless of whether it was actually reduced to practice by this time.
 

Effect of Pfaff on Current Law

The Supreme Court confirmed the position of the Federal Circuit that an invention need not be reduced to practice before the on-sale bar clock begins to run. Section 102(b) states that an invention must not be offered for sale more than one year prior to the filing of the application for patent. According to the Supreme Court, an "invention" for 102(b) purposes takes place before the idea is reduced to practice, for the term "invention" refers to an inventor's conception rather than to a physical embodiment of that idea. See Pfaff, 119 S. Ct at 308. While the two courts are in agreement in this regard, they diverge on the degree to which the inventive concept must be complete before the on-sale bar begins to run. The Supreme Court calls into question the standard applied by the Federal Circuit that the on-sale bar clock begins to run when the invention is "substantially complete" at the time of sale. In the Supreme Court's view, the invention needs to be complete, not merely substantially compete, at the time of sale.

Based on this definition of the word "invention" for 102(b) purposes, the Court promulgated a rule as to when the on-sale bar applies. A patentee is denied patent protection when two conditions are met prior to the critical date. First, the product must be the subject of a commercial offer for sale. Second, the invention must be ready for patenting. The second condition may be met either 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. See Pfaff, 119 S. Ct. at 311-12.

Unanswered Questions

1. To what extent does this decision hinder marketing efforts which allow companies to get an impression of the commercial viability of an invention before spending considerable time and money in pursing patent protection?

2. Could a patentee use the veil of experimental use to circumvent on-sale bar from applying in situations similar to the facts of the present case, i.e., will this decision open the door to increased litigation regarding whether a sale is commercial in nature as opposed to experimental?
 

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