Federal Circuit Clarifies On Sale Bar under 35 U.S.C. §102(b)

In Plumtree Software, Inc. v. Datamize, LLC, 81 USPQ2d 1251 (Fed. Cir. 2006), Datamize owned U.S. Patent No. 6,460,040 (the “’040 patent”), which contained method claims, and U.S. Patent No. 6,658,418 (the “’418 patent”), which contained both method and apparatus claims.  The ‘040 patent and the ‘418 patent are drawn to the software used to create interactive computer programs and the computer program itself.  Such programs were used to design kiosks used to display skiing information (slope conditions, resort particulars, etc.) to consumers at a ski trade show.  Both patents were continuations of U.S. Patent No. 6,014,137 (the “’137 patent”).  Datamize had informed Plumtree that Plumtree infringed the ‘137 patent, in addition to potentially infringing the yet to be issued continuations.  Datamize also engaged in infringement proceedings against other parties concerning the ‘040 patent. 

In response, Plumtree brought a declaratory judgment action under the Declaratory Judgment Act, 28 U.S.C. § 2201(a) alleging that the ‘040 and ‘418 patents were invalid under 35 U.S.C. §102(b) for having been sold more than one year prior to the earliest filing date.  Upon Plumtree’s declaratory judgment action, Datamize sought dismissal because of lack of subject matter jurisdiction, and Plumtree motioned for summary judgment with regard to patent validity.  The District Court had held that it had proper jurisdiction, and that the ‘040 and ‘418 patents were invalid for violating of the on-sale bar.

Under 35 U.S.C. 102(b), the on-sale bar applies when an invention is sold or offered for sale more than one year prior to the application filing date, the so-called “critical date.”  For an event to be considered an on sale bar, the invention must be sold or offered for commercial sale and must be ready for patenting.  The parties agreed that the latter element was met.  The issue was whether the offer to create a kiosk for a ski trade show in return for a waived entrance fee met the test for the offer/sale prior to the critical date when the completed kiosk was not provided until after the critical date. 

The Federal Circuit reviewed the dates relative to the on sale bar.  Specifically, the critical date was February 27, 1995 since the provisional application to which the ‘040 and ‘418 patents claim priority was filed February 27, 1996. The District Court found that there was an on sale event prior to February 27, 1995.  Specifically, The inventors had completed the kiosk authoring tool in December 2004.  On January 26, 1995, Datamize and the Ski Industry of America (SIA) entered into an agreement requiring Datamize  to provide its “SkiPath kiosk at a trade show inLas Vegas.  In return, SIA waived its entrance fee of $10,000 such that there was mutual consideration as required in a commercial offer for sale.  However, the District Court found that, while the agreement was ambiguous concerning whether the patented method had to be used in producing the kiosk, which itself was unpatented, the record supported that the method claims were invalid under the on-sale bar since the kiosk system (and the underlying agreement for it) had embodied the claims of the patent. 

But the Federal Circuit found this reasoning misguided and relied instead on its holding in Scaltech, Inc. v. Retec/Tetra, LLC, 269 F.3d 1321; 60 USPQ2d 1687 (Fed. Cir. 2001).  Noting that the invention was the process or method for creating the kiosk system, not the kiosk itself, the Federal Circuit found ambiguity as to whether the agreement required providing the kiosk system software or that the kiosk be made using the patented method.  As such, the Federal Circuit held that, although there was consideration sufficient for an on sale bar, the record did not establish that the invention that is the subject of the offer for sale satisfied each claim limitation of the patent.  Of special importance was Plumtree’s failing to provide extrinsic evidence that Datamize specifically performed the patented method under the contract.  At best, the evidence showed that, while one of the inventors had created the kiosk using the patented method claims, since the kiosk system was not completed until after the critical date, there was insufficient evidence that the inventor had used all of the method steps prior to the critical date.  Therefore, the Federal Circuit vacated the District Court’s holding of summary judgment for Plumtree and remanded the case for further proceedings.

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