Offers for Sale Prior to Conception May Create On-Sale Bar

Yesterday, the Federal Circuit reversed a district court’s claim construction ruling of the term “wafer” in August Tech. Corp. v. CamTek, Ltd.  The court ruled that the term “wafer” does not include a plurality of wafers, but is only a single object.  The 6-year-old case was remanded to the district court with the Federal Circuit vacating rulings on infringement, invalidity, damages, and permanent injunction based on the claim construction ruling.

On-Sale Bar

That should be the end of the Federal Circuit’s opinion, right?  The case must be re-tried based on the Federal Circuit’s claim construction.  Unfortunately, the court didn’t stop there.  Judge Moore decided to provide six pages of dicta on a new interpretation of the on-sale bar.

Under the Supreme Court’s 1998 ruling in Pfaff v. Wells Elecs., Inc., an invention is considered to be “offered for sale” when it (1) was the subject of a commercial offer for sale, and (2) is “ready for patenting.”  The second prong meant that the invention was reduced to practice or sufficiently described that one of ordinary skill in the art could build the invention based on the description.  If the invention was on sale or offered for sale more than a year prior to the filing of a patent application, the invention was barred from receiving a patent under § 102(b).

In August Tech., the district court had instructed the jury that, in order for an offer for sale to be considered as prior art, the invention must be “ready for patenting” at the time of the offer.  This followed established law, including AIPLA Model Jury Instructions.  The Federal Circuit reversed, holding that:

if an offer for sale is extended and remains open, a subsequent conception will cause it to become an offer for sale of the invention as of the conception date. In such a case, the seller is offering to sell the invention once he has conceived of it.  Before that time, he was merely offering to sell an idea for a product.

So, the court is now saying that if you offer to sell an invention as a mere idea, no offer for sale has taken place.  If, however, an invention is conceived of based on that idea, the earlier offer for sale of that idea transforms into an offer to sell the later-conceived invention; unless, of course, the offer to sell of the idea was repudiated in the meantime.

The unfortunate part of the opinion is that once the court reversed the claim construction ruling, its discussion of the on-sale bar is totally unnecesary dicta.

Implications

The dicta in the opinion is another lesson from the court to file patent applications sooner rather than later.  Assuming the rest of the court accepts the reasoning of August Tech., as of today, if an offer to sell an idea has been made, an inventor must file a patent application within one year of conception of the invention.  “Conception” refers to “formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is thereafter to be applied to practice.”  In other words, conception is the mental act of thinking of the idea of the invention and how it would be implemented.

As noted by Hal Wegner, however, the opinion has much more drastic implications once the grace period is repudiated by the new patent reform bill.  The new patent reform bill only includes a grace period for disclosure activities by the inventor, but not for public uses or sales.  Therefore, under the reasoning of August Tech., if the inventor offered to sell an idea for an invention and then later conceives of the invention, that is, forms in his mind the complete and operative invention, he must file a patent application for the invention that same day.  Filing the application the next day will result in a loss of the ability to obtain a patent.

This opinion is another stake to the heart of patent rights by the America Invents Act.

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One Response to “Offers for Sale Prior to Conception May Create On-Sale Bar”

  1. Online Global Week in Review 26 August 2011 from IP Think Tank Says:

    [...] for sale prior to conception may create on-sale bar: August Technology Corporation v. Camtek (Inventive Step) (Patently-O) (IPBiz) (IP [...]

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