Federal Circuit Clarifies Scope of Pre America Invents Act On Sale Bar in Crown Packaging Decision

Highlights

The Federal Circuit revisited the conditions under which prior commercial offers for sale can invalidate a patent

Application of the on-sale bar requires a fact-intensive inquiry into an alleged commercial offer for sale within a proposed transaction

The geographic limitation of the pre-AIA on-sale bar focuses on where the offer is directed, not where the product is intended to be used

On Dec. 10, 2024, the U.S. Court of Appeals for the Federal Circuit issued a precedential decision in Crown Packaging Technology, Inc. v. Belvac Production Machinery, Inc. reversing a district court's ruling by finding that a pre-critical date agreement triggered pre-America Invents Act (AIA) U.S.C. Section 102(b)'s on-sale bar. Specifically, the court held that a "quotation" letter with all the hallmarks of a commercial offer to sell could trigger the on-sale bar and clarified that the pre-AIA Section 102(b)'s "in this country" limitation pertains to the location of the offer, not the product's eventual destination.

The on-sale bar, codified in both pre-AIA and current patent statutes, prevents an invention from being patented if it was for sale before the patent filing and ensures that inventors do not exploit an invention's commercial potential without starting the patent clock. To that end, a sale or offer for sale of the patented invention more than one year prior to the critical date (i.e., the earliest date to which priority can be claimed) will invalidate the patent. With respect to an offer for sale, the offer must relate to an invention that is ready for patenting. Generally, what constitutes an invalidating offer is determined using commercial contract law principles.

Patents in Dispute

The dispute was premised on patents directed to the manufacture of metal beverage cans. Crown, the owner of the asserted patents, and CarnaudMetalbox Engineering, an English corporation related to Crown, sued Belvac for infringement.

Crown makes and sells necking machines that practiced the asserted patents. Before the critical date of the asserted patents, Crown sent a directed letter to a third party that provided a "quotation" regarding Crown's necking machine. The letter included a description of the product, specific delivery options, and definite payment terms. The letter also stated that quotations are "subject to [Crown's] written acceptance of your order."

The district court concluded that the letter was merely "an invitation to make an offer" and not a commercial offer for sale. As a result, the district court declined to find that the on-sale bar applied.

On-Sale Bar at the Federal Circuit

On appeal, the parties disputed whether the letter invoked pre-AIA Section 102(b)'s on-sale bar. The Federal Circuit disagreed with the district court, finding that the letter constituted a commercial offer for sale and thus rendered the patents invalid.

Applying general commercial contract principles, the Federal Circuit found that the agreement included terms consistent with a commercial offer for sale, such as a defined price, a detailed description of the product, delivery terms, and conditions for sale. The court further noted that the letter was specifically directed to the third party and not just a general advertisement soliciting offers. Although the letter used the term "quotation," the Federal Circuit noted that it had "all the hallmarks of an offer for sale."

In addition, the Federal Circuit confirmed that the presence of a written acceptance provision does not alone prevent a letter from being a commercial offer for sale. While such express provisions can provide helpful evidence, the ultimate analysis focuses on the "communication when taken as a whole."

In this case, the letter obligated the recipient to commence performance by paying 50 percent of the purchase price immediately with receipt of the order. The letter also suggested that Crown would immediately begin performance upon order request, further undermining the practical application of Crown's written acceptance provision. The Federal Circuit said the substance of the letter demonstrated an intent to be bound; thus, it was a commercial offer for sale.

While not discussed by the district court, the Federal Circuit also clarified the geographic limitation under pre-AIA Section 102(b)'s "in this country" requirement. Crown argued that an offer made from outside the U.S. would only qualify if the resulting product was intended for use in the U.S. The Federal Circuit rejected that argument, holding that the geographic limitation applies to where the offer is directed, not the eventual use of the product.

In this case, the offer was addressed to the third party's Colorado address. In fact, Crown's own internal customer database listed the offer recipient followed by "USA." Accordingly, this commercial offer for sale was covered by pre-AIA Section 102(b)'s geographic scope. Note that this geographic issue is moot for patents effectively filed on or after March 16, 2013, because under the AIA, all sales and offers for sale - regardless of whether domestic or abroad - trigger the on-sale bar.

Takeaways

This decision provides a good reminder for both litigants and patent holders to scrutinize pre-patent-filing commercial activities. Pre-filing communications and agreements may contain terms that inadvertently trigger the on-sale bar. Even documents bearing the label "quotation" may constitute a commercial offer for sale upon further examination. It is not sufficient to look only at those business records showing when products that practice the invention were first invoiced, shipped, or recorded for accounting purposes.

For more information, please contact the Barnes & Thornburg attorney with whom you work or Heather Repicky at 617-316-5317 or [email protected] or Alexander Friel at 617-316-5323 or [email protected].

© 2024 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is proprietary and the property of Barnes & Thornburg LLP. It may not be reproduced, in any form, without the express written consent of Barnes & Thornburg LLP.

This Barnes & Thornburg LLP publication should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.

Public link

Please use the above public link if you want to share this noodl on another website.