Federal Circuit finds patent invalid for being on sale

In Electromotive Div. of GMC v. Transp. Sys. Div. of GE, 417 F.3d 1203, 75 USPQ2d 1650 (Fed Cir. 2005), the Federal Circuit affirmed that a patent directed to a planetary bearing and compressor were invalid under 35 U.S.C. §102(b) based upon a pre-critical date commercial sale.  Plaintiff produces locomotives which incorporate the planetary bearing and compressor within a planetary drive train.  When the planetary bearing and compressor were first developed, Plaintiff initiated a two phase testing program.  In the first phase, the planetary bearing and compressor were tested in house.  When the first phase was completed on July 17, 1989, a second phase of testing was begun in August of 1989.  In the second phase, the planetary bearing and compressor were field tested by being installed in sold locomotives.  Plaintiff did not actively monitor the field tested planetary bearing and compressor after the sale, did not require recipients to sign confidentiality agreements or otherwise restrict access to the planetary bearing and compressor, and instead merely monitored whether repairs occurring in the locomotives were related to the planetary bearing and compressor.  The Federal Circuit held that, while the second phase was designated a test phase, the second phase did not qualify as experimental within the meaning of 35 U.S.C. §102(b).  Specifically, the Federal Circuit held that whether activity is experimental (as opposed to an on-sale activity) is based upon objective criteria separate from the inventor’s subjective intent.  The objective criteria are judged based upon thirteen (13) factors:

(1) the necessity for public testing; (2) the amount of control over the experiment retained by the inventor; (3) the nature of the invention; (4) the length of the test period; (5) whether payment was made; (6) whether there was a secrecy obligation; (7) whether records of the experiment were kept; (8) who conducted the experiment; (9) the degree of commercial exploitation during testing; (10) whether the invention reasonably requires evaluation under actual conditions of use; (11) whether testing was systematically performed; (12) whether the inventor continually monitored the invention during testing; and (13) the nature of the contacts made with potential customers.

Of particular importance in the context of distinguishing commercial on sale activity from experimental activity is both control over the experiment and customer awareness of the experimental nature of the transaction since “[i]f an inventor fails to communicate to a customer that the sale of the invention was made in pursuit of experimentation, then the customer, as well as the general public, can only view the sale as a normal commercial transaction.”  The Federal Circuit held that the lack of control over the field test combined with the lack of customer awareness of the experimental nature of the transaction meant that an on sale event occurred in at least August of 1989.  Since the Plaintiff did not file a patent application for the planetary bearing and compressor until November of 1990, the patent was invalid due under 35 U.S.C. §102(b) for being on sale more than one year prior to filing the patent application.

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