Pfaff v. Wells Electronics, Inc: the On-Sale Bar

By Lori Stiffler and Michael Locklar

On November 10, 1998, United States Supreme Court rendered a decision in Pfaff v. Wells Electronics, Inc., 119 S. Ct. 304, 1998 WL 777044 (November 10, 1998), interpreting the requirements of the "on sale" bar to patentability under 35 U.S.C. § 102(b). The Court's decision rejects standards previously applied by the Federal Circuit and other circuits and provides a new test for determining whether an invention has been placed "on sale" for purposes of triggering section 102(b).35 U.S.C. § 102(b) provides that "[a] person shall be entitled to a patent unless . . . (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b).

This section of the patent statutes describes the well-known statutory bar conditions that start the running of the one-year filing clock. Under this provision, if an invention is on sale or offered for sale prior to the critical date, i.e., one year prior to the filing of the patent application, the inventor is statutorily barred from receiving a patent. See Pfaff at *4-*5; King Instrument Corp. v. Otari Corp., 767 F.2d 853, 859-60 (Fed. Cir. 1985). Prior to 1983 (when the Federal Circuit began hearing all appeals arising under the patent statutes), the regional circuits that had addressed the issue had agreed that, in general, the invented device or method had to have been reduced to practice to be "on-sale." See UMC Electronics, Co. v. United States, 816 F.2d 647, 654-55 & n. 8 (Fed. Cir. 1987). In 1987, the Federal Circuit eliminated any absolute requirement that an invention be reduced to practice in favor of a more flexible test in which it examined "all of the circumstances surrounding the sale or offer to sell." Id. at 656.

Under this new test, the inventor did not necessarily need to have the invention "reduced to practice." Instead, the stage of development of the invention and the nature of the invention became factors to be considered and weighed against the policies underlying § 102(b). See id. These policies include: discouraging the removal from the public domain those inventions that the public reasonably has come to believe are freely available; favoring the widespread disclosure of inventions; allowing the inventor a reasonable amount of time following the sales activity to determine the potential economic value of a patent; and prohibiting the inventor from commercially exploiting the invention for a period of time greater than the statutorily described time. See id. at 652-53.

In 1997, the Federal Circuit interpreted UMC to mean that the invention should be "substantially completed" such that the inventor had reason to expect that the invention would work for its intended purpose upon completion. See Micro Chem., Inc. v. Great Plains Chem. Co., 103 F.3d 1538, 1545 (Fed. Cir.), cert. denied, 117 S. Ct. 2516 (1997).

In Pfaff v. Wells Electronics, Inc., 124 F.3d 1429 (Fed. Cir. 1997), aff'd, 119 S. Ct. 304, 1998 WL 777044 (November 10, 1998), the Federal Circuit again addressed the requisite standard for determining when the "on sale" bar is triggered. Citing Micro, the Court noted that "'[a]ll of the circumstances surrounding the sale or offer to sell, including the stage of development of the invention and the nature of the invention, must be considered and weighed against the policies underlying § 102(b),'" and that "the appropriate question is whether the invention was substantially complete at the time of sale such that there was 'reason to expect that it would work for its intended purpose upon completion.'" Id. at 1433-34.

Applying these principles, the Federal Circuit found the relevant patent claims invalid, noting that even though the invention had not yet been reduced to practice, the inventor was confident the invention would work and had solicited a purchase order to sell the device. See id. at 1434-35. The patent holder then appealed to the Supreme Court. See Pfaff v. Wells Electronics, Inc., 118 S.Ct. 1183 (1998) (granting certiorari).

On November 10, 1998, the Supreme Court rendered an opinion in Pfaff affirming the Federal Circuit's decision, but rejecting the standard used by the Federal Circuit in reaching that decision. The unanimous Supreme Court discarded the "substantially complete" test applied by the Federal Circuit in Micro and Pfaff. See Pfaff WL 777044 at *6 (stating that an invention must be "complete, rather than merely . . . 'substantially complete'", and that the "substantially complete" test has "no support in the text of the statute" and "seriously undermines the interest in certainty").

The Court also rejected the notion that a "reduction to practice" was necessary to trigger § 102(b). See id. at *4. Instead, the Court replaced the "substantially complete" test with a two-prong test. See id. at *7. Under the new test, prior to the critical date, the invention first must be "the subject of a commercial offer for sale." Id. Second, the invention must also be "ready for patenting." Id.

This second condition can be satisfied in at least two ways: 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 id. Applying this test, the Court found that the second condition was satisfied in Pfaff because the drawings sent by the patent holder to the manufacturer before the critical date fully disclosed the invention. See id.

Interestingly, although the patent holder had provided his drawings to a third person, the Supreme Court's opinion does not explicitly require that the drawings be disclosed to anyone. The Court's decision also leaves open the possibility that other circumstances may meet the "ready for patenting" prong of the test.

The Supreme Court's new test for the on-sale bar departs from existing Federal Circuit precedent, and limits what inventors may say and do regarding their inventions following conception. Under Pfaff, it appears that if an inventor has created sufficient documentation to enable another to practice the invention, any offer to sell the invention prior to the critical date may invalidate the patent.

For further information please contact Mitch Lukin.

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