Federal Circuit Disallows Experimental Use Exception In Evaluation Sale of Prototypes

In Atlanta Attachment Company v. Leggett & Platt, Inc., 516 F3d 1361, 85 U.S.P.Q.2d 1995 (Fed. Cir. 2008), Atlanta Attachment manufactures commercial sewing machines.  Atlanta Attachment and Sealy, Inc. entered into an agreement under which (1) Atlanta Attachment would develop an automatic gusset ruffler machine for Sealy, (2) if successful, Sealy would patent the machine, (3) if successful, Atlanta Attachment would only sell to Sealy, and (4) Atlanta Attachment would keep the development of the machine confidential.  At trial, both Atlanta Attachment and Sealy stated that both were expected to keep the development of the machine confidential.  Atlanta Attachment provided four prototypes to Sealy in succession, each of the prototypes embodying improvements suggested by Sealy.

Relevant to the issues herein, Atlanta Attachment provided a quotation for the third prototype to Sealy in September of 2000 and sales orders including quotations for sales of the third prototype on November 30, 2000, and February 5, 2001.  Sealy paid the February 5, 2001 invoice.  Sealy inspected the third prototype at Atlanta Attachment’s facilities, but Atlanta Attachment did not control the experimentation on and inspection of the prototype.  Sealy ultimately rejected the fourth prototype, thereby allowing Atlanta Attachment to seek sales elsewhere.

On August 15, 2002, Atlanta Attachment filed U.S. Patent Application No. 10/219,837, which issued as U.S. Patent No. 6,834,603 on December 28, 2004.  The ‘603 Patent claims priority to Provisional Application No. 60/362,025 filed on March 5, 2002.  Therefore, the critical date for analysis of statutory bars under 35 U.S.C. §102(b) is March 5, 2001.

Atlanta Attachment sued Leggett & Platt, alleging Leggett & Platt’s GPT-1000 series sewing machines infringed claim 32 of the ’603 patent.  Leggett & Platt asserted that the ‘603 patent was invalid due to an on‑sale bar due to the pre-March 2002 activities of Atlanta Attachment in attempting to sell prototypes to Sealy.  The Northern District of Georgia found summarily that Leggett & Platt infringed claim 32 of the ‘603 Patent, that the ‘603 patent was not invalid because of the on-sale bar, obviousness, lack of best mode and written description, and not unenforceable due to inequitable conduct.

On appeal, the Federal Circuit reversed the District Court on the issue of the on-sale bar.  Specifically, the Federal Circuit held that claim 32 of the ‘603 Patent was on-sale within the meaning of 35 U.S.C. §102(b) before the critical date thereof.   Under 35 U.S.C. §102(b), “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.”

An invention is statutorily barred from patenting if it was both (1) the subject of a commercial offer for sale before the critical date and (2) ready for patenting at the time of the offer.  Slip at 5, citing Pfaff v. Wells Elecs, Inc., 525 U.S. 55, 67, 199 S.Ct. 304, 311-12 (1998).  Such inventions are barred from patenting so as to prevent an inventor from commercially exploiting the invention beyond the statutory term for patent.  Id., citing Netscape Commc’ns. Corp. v. Konrad. 295 F.3d 1315, 1323 (Fed. Cir. 2002).  The third prototype is analyzed for purposes of the on-sale bar as the third prototype embodies the asserted claim 32. Further, the Federal Circuit held that the experimental use exception to the statutory bars of 35 U.S.C. §102(b) does not apply after a commercial offer for sale of an embodiment of an asserted claim.  “[O]nce there has been a commercial offer, there can be no experimental use exception.”  Slip at 8.

(1) Commercial Offer for Sale

In order to be a commercial offer for sale, such offer must be sufficiently definite that another party could make a binding contract by simple acceptance, assuming consideration, according to principles of general contract law.  Id. at 6.  The Federal Circuit stated that a distinction between experimental use and commercial exploitation of an invention has been long recognized.  As such, the Court must consider “whether the primary purpose of the offers and sales was to conduct experimentation.”  Id., citing Allen Eng’g Corp. v. Bartell Indus., 299 F.3d 1336, 1354 (Fed. Cir. 2002).  After considering the factors, the Federal Circuit found that claim 32 of Atlanta Attachment’s U.S. Patent No. 6,834,603 is not enforceable because an embodiment of claim 32 was on sale before the critical date (i.e., on sale more than one year before the earliest date to which the application that became the ‘603 patent claims benefit or priority), and was not eligible for the experimental use exception.

The Court found that the invention was subject to a commercial offer for sale.  Atlanta Attachment presented an invoice for the third prototype on February 5, 2001 (an offer), which Sealy paid (an acceptance).  Thus, there was evidence of contract for a commercial sale of the third prototype.

While Atlanta Attachment contended that this sale was really for experimental use and was therefore not a 35 U.S.C. §102(b) bar, the Federal Circuit disagreed since the sales were specifically not experimental use.  In so finding, the Court stated that experimentation to determine whether an invention meets a particular customer’s purposes does not fit within the experimental use exception.  Id., citing Allen Eng’g and In re Thesis, 610 F.2d 782, 792, 63 USPQ2d 1769 (CCPA 1979).  Further, the Court emphasized that the experimental use exception only applies to the actions of Atlanta Attachment and their agents.   In deciding whether experimental use exception is applicable, the Court noted that a number of factors can be used for assessing whether the circumstances surrounding a transaction indicate whether such transaction was commercial or experimental.  The court specifically noted that Allen Eng’g, 63 USPQ2d at 1779 catalogs these factors, but that a major factor is an amount of control over the experiment retained by the inventor.   

In applying these factors, the Federal Circuit found that Atlanta Attachment’s lack of control over the experimentation performed by Sealy in February 2001 was dispositive to show that Atlanta Attachment was not experimenting within the experimental use exception.  Specifically, the experimentation with respect to the third prototype was conducted by Sealy, and was not under the control of Atlanta Attachment during the testing as would be required for Atlanta Attachment to show experimental use.  As such, there was insufficient evidence of control to allow Atlanta Attachment to avoid the on-sale bar due to the sale of the third prototype.

Lastly, the Court found that Atlanta Attachment’s quotation to Sealy dated September 27, 2000 for sale of 50 units, which Atlanta Attachment testified would become a contract with upon Sealy’s signature, constituted a commercial offer for sale that cannot be avoided by the experimental use exception.

As such, Atlanta Attachment’s actions constitute a commercial offer for sale before the critical date of March 5, 2001, and therefore satisfied the first prong of the Pfaff v. Wells test.

(2) Ready for Patenting

The Federal Circuit next concentrated on whether the commercial offer was contemporaneous with the invention being ready for patenting.  The Federal Circuit found that the invention of claim 32 was ready for patenting at the time of the commercial offer because the third prototype was an embodiment of claim 32.  That the invention was ready for patenting may be demonstrated by (i) proof of reduction to practice before the critical date, or (ii) proof that “the inventor had produced drawings or descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention” before the critical date.  Slip at 8, quoting Pfaff, 525 U.S. at 67-68.  “An invention is reduced to practice when it works for its intended purpose” such that “there is a demonstration of its workability or utility.”  Id., internal citations omitted.  The Court found that the invention as recited in claim 32 was reduced to practice in February 2001 in Atlanta Attachment’s presentation of the third prototype to Sealy as the third prototype demonstrated the workability and utility of claim 32, and therefore, the invention of claim 32 was ready for patenting before the critical date.

Atlanta Attachment argued that the invention was not ready for patenting because Atlanta Attachment further refined the invention in response to Sealy’s comments.  “Consistent with the rule that later refinements do not preclude reduction to practice, it is improper to conclude that an invention is not reduced to practice merely because further testing is being conducted.”  Id. at 9.

In support of its showing that the testing evidenced a lack of workability, Atlanta Attachment further argued that the invention was not ready for patenting because the third prototype vibrated at high speeds, which was corrected in the fourth prototype.  However, because vibration-free operation was not claimed in claim 32, such refinement of the experimentation is only relevant if the vibration prevented workability or utility of the invention, and no evidence was presented to show that the vibration prevented workability or utility of the invention.

Lastly, Atlanta Attachment argued that in the third prototype, the pleat generator was coupled to the sewing head, thereby limiting the third prototype to one ruffle and one stitch at a time.  However, the Court noted that claim 32 does not require an uncoupled pleat generator or multiple stitches per pleat.  “While improvements were possible and ultimately manufactured in the fourth prototype, these deficiencies in the third prototype did not prevent reduction to practice of the invention actually claimed.”  Id. at 10.  Therefore, the prototype, while not perfect, was sufficiently workable to read on the invention as claimed in claim 32.

Conclusion

As the Court determined that the invention of claim 32 was the subject of a commercial offer for sale and ready for patenting before the critical date, March 5, 2001, the Court held claim 32 invalid due to the on-sale bar of 35 U.S.C. 102(b).  The Court remanded the case to the District Court for reconsideration of the allegations of inequitable conduct because the third prototype was material to the examination, but materiality does not presume intent.

 Significance for Entrepreneurs

Atlanta Attachment provides another example of the difficulty of executing agreements to allow customers to experiment with prototypes without triggering an on sale bar.  As demonstrated, where the prototype is workable and is being provided for purposes of consideration, courts are likely to find such a transaction a sale for purposes of 35 U.S.C. §102(b).  As such, it is important for inventors to ensure that they have already filed some form of patent application in order to ensure that such a transaction does not present a subsequent on-sale bar.

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