On November 10, 1998, the United States Supreme Court issued a decision in Pfaff v. Wells Electronics, Inc., No. 97-1130, 1998 U.S. LEXIS 7268, concerning the interpretation of the "on sale" bar of 35 U.S.C. Section 102(b). Section 102(b) provides that an inventor is not entitled to a patent if "the invention was . . . on sale in this country more than one year prior to the date of the application for patent in the United States." In a unanimous opinion by Justice Stevens, the Court held that an invention need not be reduced to practice in order to qualify as "on sale" within the meaning of the statute. Due to the prevalence of this defense in patent cases, the Pfaff decision will have a significant impact on future litigation. It also has consequences for patent prosecution practices.
Background to the Supreme Court's Pfaff Decision.
The Supreme Court's Pfaff decision affirmed a panel decision of the United States Court of Appeals for the Federal Circuit, Pfaff v. Wells Electronics, Inc., 124 F.3d 1429 (Fed. Cir. 1997). In that decision, the Federal Circuit held certain claims of the patent at issue invalid under 35 U.S.C. § 102(b) because the invention of such claims was "substantially complete" when the inventor had offered the invention for sale over a year before the filing of a patent application. Id. at 1434-35.
The patent in Pfaff related to sockets for testing leadless chip carriers, and Mr. Pfaff had filed a patent application on April 19, 1982. Therefore, April 19, 1981, constituted the "critical date" for purposes of the on sale bar. If Mr. Pfaff had engaged in activities that rendered his invention "on sale" before that date, he would have lost his right to patent his invention.
Mr. Pfaff began working on his socket in November 1980 when Texas Instruments ("TI") asked him to develop a new device for mounting and removing semiconductor chip carriers. 1998 U.S. LEXIS 7268, at *6. Mr. Pfaff did not work for TI. By February or March 1981, he had prepared detailed engineering drawings that described the design, the dimensions, and the materials to be used in the socket, and by March 17, 1981, Mr. Pfaff showed a sketch of his concept to representatives of TI. Id. On April 8, 1981, the TI representatives provided Mr. Pfaff with written confirmation of an earlier placed oral purchase order for 30,100 sockets at a price of $91,155. Id. As of that date, Mr. Pfaff had not made or tested a prototype of his socket. Id. Indeed, the evidence showed that he first reduced his invention to practice in the summer of 1981. Id. at *7.
Although, Mr. Pfaff had offered his invention for sale before the critical date, because this reduction to practice occurred after the critical date, the district court refused to apply the on sale bar. 124 F.3d at 1433. On appeal, the Federal Circuit rejected the notion that an invention must be reduced to practice before the on sale bar applies. 124 F.3d at 1433-34. Instead, the court held 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 1434 (quotations and citations omitted). The Federal Circuit then found the claims in suit invalid because Mr. "Pfaff's invention was substantially complete at least by the time of the pre-critical date offer to sell . . . ." Id. at 1435.
Content of the Supreme Court's Pfaff Decision.
The Supreme Court affirmed the judgment of the Federal Circuit but rejected the Federal Circuit's reasoning. Focusing on both the literal text and the underlying policies of § 102(b), the Court agreed that no reduction to practice is required before the on sale bar applies, but rejected the Federal Circuit's "substantially complete" test. 1998 U.S. LEXIS 7268, at *10-*20. Instead, the Court held that the invention must merely be "ready for patenting" (and on sale for commercial purposes) prior to the critical date for the on sale bar to apply. Id. at *21-*22.
The Court first examined the text of the statute, and emphasized that the term "invention" "unquestionably refers to the inventor's conception rather than to a physical embodiment of that idea. The statute does not contain any express requirement that an invention must be reduced to practice before it can be patented." Id. at *10. The Court thus found it "well settled that an invention may be patented before it is reduced to practice." Id. at *11-*12. Supreme Court precedent from over 100 years ago establishes that "[t]he law does not require that a discoverer or inventor, in order to get a patent for a process, must have succeeded in bringing his art to the highest degree of perfection. It is enough if he describes his method with sufficient clearness and precision to enable those skilled in the matter to understand what the process is, and if he points out some practicable way of putting it into operation." Id. at *12-*13 (quoting The Telephone Cases, 126 U.S. 1, 535-36 (1888)).
Applying this reasoning, the Court concluded that Mr. Pfaff could have obtained a patent by the time he received the April 8, 1981 purchase order from TI. Id. at *14. He had already provided a manufacturer with descriptions and drawings of "‘sufficient clearness and precision to enable those skilled in the matter' to produce the device." Id. Nothing in the text of § 102(b) provided a basis for finding that Mr. Pfaff's invention was not "on sale" until he had reduced it to practice. Id.
The Court next embarked upon an analysis of the policies underlying § 102(b) to determine how complete an invention must be for § 102(b) to bar the patent. The Court ultimately rejected both the district court's approach that required a reduction to practice, as well as the Federal Circuit's interpretation that required a "substantially complete" invention.
The Court explained that "the patent system represents a carefully crafted bargain that encourages both the creation and the public disclosure of new and useful advances in technology, in return for an exclusive monopoly for a limited period of time." Id. at *15. The system seeks to balance "the interest in motivating innovation and enlightenment," and "the interest in avoiding monopolies that unnecessarily stifle competition . . . ." Id. Section 102 serves as a "limiting provision" by "excluding ideas that are in the public domain from patent protection and confining the duration of the monopoly to the statutory term." Id. at *16 (citing Frantz Mfg.Co. v. Phenix Mfg. Co., 457 F.2d 314, 320 (7th Cir. 1972)). Specifically, it is a "reluctance to allow an inventor to remove existing knowledge from public use [that] undergirds the on-sale bar." Id.
Moreover, since 1839, Congress has allowed inventors a "grace period" -- currently one year -- from the time that they offer their inventions for sale, in which they must file a patent application. Supreme Court precedent recognizes that this fixed grace period reflects "an interest in providing inventors with a definite standard for determining when a patent application must be filed." Id. at *18. The Court agreed with Mr. Pfaff that the Federal Circuit's vague "substantially complete" rule "seriously undermines the interest in certainty [and] . . . finds no support in the text of the statute." Id. The Court reiterated that the word "invention" refers to a "concept that is complete, rather than merely one that is ‘substantially complete.'" Id. at *20.
This did not, however, persuade the Court to "engraft a reduction to practice element into the meaning of the term ‘invention' as used in § 102(b)." Id. at *19. Although a reduction to practice will suffice to show a complete invention, "it does not follow that proof of reduction to practice is necessary in every case." Id. at *20. The Court thus concluded that the on sale bar applies when two conditions are met prior to the critical date: (1) "the product must be the subject of a commercial offer for sale," and (2) "the invention must be ready for patenting." Id. at *21-*22. The Court explained that the second condition can be satisfied in at least two ways -- by proof of a reduction to practice, or by proof that the inventor had described the invention with specificity sufficient to enable one of skill in the art to practice the invention. Id. at *22.
Practical Implications of the Supreme Court's Pfaff Decision.
The Supreme Court's optimism that its Pfaff decision will lead to greater certainty with respect to the on sale bar defense may be misplaced. Rather than attempting to determine whether an invention was "substantially complete" at the time of a commercial offer for sale, courts and litigants will instead now focus on whether the invention was "ready for patenting." Neither is susceptible to a bright line determination.
In light of Pfaff, however, attorneys should encourage clients to file patent applications as soon as practical if the client has offered the invention for sale. Sales that would not have triggered the on sale bar in the past may now do so. As long as the invention was ready for patenting at the time of the offer -- whether or not the invention or the product containing it is substantially complete -- the clock on the on sale bar will begin to run.
Because of the generality of this article, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.