On-Sale Bar: Everything You Need to Know
On-sale bar is a statutory bar of the United States Patent Act and can make a patent invalid if the claimed invention has been the subject of an offer for sale.7 min read
What Is On-Sale Bar?
On-sale bar is a statutory bar found in Section 102 of the United States Patent Act and can make a patent invalid if the claimed invention has been the subject of an offer for sale or commercial sale and the invention is ready to be patented. Other countries have different requirements around private and public sales of patentable ideas, so putting an idea or product up for sale could prevent you from obtaining a patent outside of the U.S. as well.
If you don't file for patent protection with the United States Patent and Trademark Office (USPTO) before putting the idea up for commercial sale, you will lose the opportunity to patent your idea at all. Furthermore, if someone else files a patent application before you do, that person could receive the patent. USPTO reviewers look at the filing date more than the date the product or invention was first used or by whom it was used.
Section 102, which contains information about on-sale bar, states that an inventor is entitled to a patent on a novel, unique, and non-obvious idea unless the claimed invention was:
- Described in a printed publication
- On sale
- Otherwise available to the public
Inventors may still be allowed to file a patent application within 12 months of releasing the idea in a public way, such as describing it in a publication, as long as it is not up for commercial sale. The change came in the form of the Leahy-Smith America Invents Act, which went into effect on March 16, 2013.
The New Jersey District Court saw a case involving Helsinn Healthcare, a company that made intravenous formulations of drugs for reducing nausea and vomiting caused by chemotherapy. Three of the four patents on the drug were filed for prior to the enactment of the modified on-sale bar laws, while the fourth did fall under the modified laws.
The accused infringer in this case claimed the on-sale bar applied because Helsinn Healthcare had a contract for a future commercial product, which qualified as a sale under the new on-sale bar law. The court ruled that in order to qualify under the on-sale bar, the sale or offer must be made available to the public. The focus of the transaction must be on its commercial character, not solely on the participants in the transaction and their identities or roles.
Why Is On-Sale Bar Important?
On-sale bar is important because it limits the option to file for patent protection when the idea or product is put up for commercial sale. In looking at a case between Pfaff and Wells Electronics, Inc., the District Court applied a two-step analysis in determining whether a sale qualified as on-sale bar and invalidated the option to file for patent protection. The two-step analysis was:
- Whether the claimed invention was the subject of a commercial sale, and
- Whether the claimed invention was ready for patenting.
In this example, the District Court panel established a model for future cases that could be considered under the on-sale bar. The Federal Circuit has also stated repeatedly that the on-sale bar does not include a supplier exception. The purpose of on-sale bar is to prevent an inventor from profiting on a commercial scale from an invention. Even if the invention title was not transferred, it could still be restricted under on-sale bar if evidence shows that the inventor profited or exploited the invention before the critical date.
The only area that has some flexibility is what qualifies as commercial exploitation. In a court case between Kinzebaw and Deere & Co., the court ruled that Deere benefitted from third-party testing of the durability and warrantability of the product. In another case, the Federal Circuit found that a pharmaceutical company that used a third party to perform services for FDA approval also benefitted on a commercial basis more than a year before the patent application was filed. In the second example, the reasoning behind the ruling pointed to significant commercial activities, including marking batches with commercial product codes and customer lot numbers.
As evidenced by these two examples, an actual commercial sale is not a necessary component of determining whether an invention qualifies under on-sale bar. Courts follow general contract laws in deciding whether an inventor has commercially exploited the idea. In another court case, Hamilton Beach sent a purchase order to a supplier before the critical date. That supplier acknowledged receipt of the purchase order with a plan to fulfill it upon release from Hamilton Beach. The court ruled that this action constituted a sale, even though no items were actually sold.
When the court is looking at the second requirement of on-sale bar, whether the idea is ready for patenting, they review if it has been reduced to practice. This review often involves looking at drawings, which must be specific and detailed enough that someone skilled in the art could use the invention. In the Hamilton Beach court case, the reviewers looked at the CAD drawings that showed the patented product, as well as communications between Hamilton Beach and the supplier. The simplicity of the product concluded that a person of ordinary skill would be able to build the invention, the reviewers said.
Reasons to Consider Not Using On-Sale Bar
The on-sale bar section of the Patent Act is restrictive, so the only way to avoid it is to file for a patent before putting your intellectual property, or idea, up for commercial sale. If you release your idea in a public setting, you must file for a patent within 12 months of doing so, or you lose out on the option to get a patent.
Some inventors believe that they can sell their product to a supplier and this will not constitute a commercial sale. However, in a recent court case, the judge ruled that a transaction between a supplier and an inventor could still be considered a commercial sale. The only exception is a private sale, which might not be considered a public disclosure.
Prior to the enactment of the Leahy-Smith America Invents Act, a private sale could have invoked the on-sale bar. When this act passed, it included language that required a public, or commercial, sale to qualify under on-sale bar.
Reasons to Consider Using On-Sale Bar
It is important that inventors understand the rule of on-sale bar before deciding on a timeline to file a patent application. One example of a case that went through the Federal Circuit in 2016 was between The Medicines Company (MedCo) and Hospira, Inc. MedCo received two patents for its new process for making an anticoagulant drug. Before filing for the patents, the company contacted a laboratory to manufacture several batches of the drug using the new process. This called into question whether the manufacturing services by the laboratory counted as on-sale bar or a commercial sale.
In its ruling, the Federal Circuit explained that in order for the process to count as a commercial sale, it must be marketed in a commercial sense. MedCo paid about 1 percent of the market value to the laboratory and the batches of the drug never changed hands, therefore it was not considered to be a commercial sale.
The other company involved in this case, Hospira, filed an appeal, and a panel of the Federal Circuit reversed the original decision. The reasoning was that the inventor had "commercially exploited" the invention before filing for patent protection. MedCo then requested a re-hearing, in which the Federal Circuit reversed the prior panel. The reason for this reversal was that using a contracted manufacturer to manufacture the product does not constitute a commercial sale. Additionally, creating a stockpile of the product does not qualify under Section 102 either. The transaction must be one that involves commercial marketing, or putting the product up for sale in a public sense.
In this case, the Federal Circuit also emphasized the need to look at the Uniform Commercial Code (UCC) for additional clarification and rulings on what constitutes a commercial sale. The goal of on-sale bar is to prevent an inventor from filing for a patent more than a year after the product or idea has gone on sale commercially.
In the case of MedCo, the ruling went in its favor and the patents were still valid. But a mistake in the timeline or filing date of any kind of patent application could result in the loss of the option to file in the future. Inventors must keep close track of the dates and make sure to file applications before putting the product up for sale.
What Could Happen When You Use On-Sale Bar?
If you put your product or idea up for commercial sale before filing a patent application, the USPTO reviewer could decide that your decision to engage in a commercial sale negates the ability to file for patent protection. Additionally, if someone else infringes on your idea, they could claim that you violated the on-sale bar and your patent is not valid.
What Could Happen When You Don't Use On-Sale Bar?
If you ignore the rules of on-sale bar, you could miss out on the opportunity to file for patent protection at all. Every inventor must make sure that any contracts with third-party distributors and/or manufacturers clearly spell out that:
- The contract is for services rendered, not products for sale.
- The inventor retains protection in all products that represent the invention.
All compensation agreements must reflect only the fee for services, not the value of the product.
Frequently Asked Questions
- If I file for a patent within 12 months of releasing my idea in a public sense, does this protect me from the on-bar sale clause?
Possibly. Under the Leahy-Smith American Invents Act, a patent application must be filed prior to releasing the invention in a commercial sale. However, it is best to wait to release any details to the public until you are ready to file for patent protection to prevent someone else from filing first.
- How can I prove on-sale bar?
In the Pfaff v. Wells Electronic, Inc. case, which is widely considered to be a landmark case in the changes to the on-sale bar restriction, the court established two necessary conditions for the on-sale bar to apply. If the idea is ready for invention and the product is the subject of a commercial offer for sale, on-sale bar could be proven. In this case, Pfaff provided purchase orders and other proof that Wells Electronic, Inc. had violated the terms of on-sale bar.
Steps to File
When you're ready to file for patent protection, you must fill out the required application and submit it to the USPTO, along with necessary drawings and the filing fee.
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