© 2003, Gallagher & Dawsey Co., LPA
Recently the Court of Appeals for the Federal Circuit (CAFC) clarified
the law as to what constitutes an offer for sale under 35 USC §102(b)
in the case of Lacks Indus., Inc. v. McKechnie Vehicle Components USA,
Inc. With regard to sales, §102(b) states, in essence, "[a] person
shall be entitled to a patent unless . . . the invention was . . . on
sale in this country, more than one year prior to date of the
application for patent in the United States . . . ." This leaves a lot
to interpretation as to what constitutes "on sale."
It is important to note that "on sale" does not mean that an "actual
sale" has taken place. In fact, an invention is said to be "on sale"
when either sold in an arms-length transaction to a third party, or
there is an offer for sale. Prior to the Lacks decision there was
confusion in the courts as to what constituted an offer for sale, and
what law governed such a determination.
In Lacks the CAFC, following the precedent of Group One, Limited v.
Hallmark Cards, held that only an offer that rises to the level of a
commercial offer for sale, in other words, one in which the other
party could make into a binding contract by simple acceptance, would
preclude an applicant from obtaining a patent under §102(b). The CAFC
further emphasized that Federal Circuit law, not state law, is to be
used in determining if certain events rose to the level of a
commercial offer for sale. As such, one should begin any offer for
sale analysis with a review of the Uniform Commercial Code (UCC).
The CAFC vacated and remanded the U.S. District Court for the Eastern
District of Michigan's finding that Lacks' commercial activities
invalidated many of the claims of the one of Lacks' patents. Lacks
sued two competitors for infringement of three patents held by Lacks
that cover various aspects of cladded wheels. A portion of the
litigation focused on Lacks' own pre-critical date sales promotion
activities and whether they gave rise to the on-sale bar, thereby
invalidating several claims. Much of the District Court holding on
this issue centers on an eleven-page "Wheel Meeting Agenda" document
that included a description of Lacks' product and its benefits, a plan
to "validate assemblies following a plan jointly developed with [the]
customer," and approximate cost savings as a result of using Lacks'
product. The Special Master appointed by the District Court found that
this was evidence of an offer for sale and invalidated several claims.
However, on appeal the CAFC found that the Special Master incorrectly
applied contract law principles that do not govern §102(b).
On appeal the CAFC utilized the UCC standard in determining if the
documents rose to the level of a commercial offer for sale and
determined that they did not. The defendants asserted that this "Wheel
Meeting Agenda" document is proof of an offer for sale because "this
is how business is done in the automotive industry," trying to argue
"course of dealings" and evidence of "practice in the industry" as
permitted for consideration by the UCC. The CAFC did not find enough
evidence on record to agree with the defendants claim and remanded the
issue to the District Court.
Therefore, if one must have meetings with third parties prior to
filing a patent application, a clear understanding of what constitutes
a commercial offer for sale, as defined by contract law, is essential.