Umc Electronics v. United States: Should Reduction to Practice Be a Requirement of the on Sale Bar?

• Publication year: 1988

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 12, No. 1FALL 1988

NOTE

UMC Electronics v. United States: Should Reduction to Practice be a Requirement of the On Sale Bar?(fn*)

Michael R. Schacht

Under the "on sale" bar of section 102(b) of the Patent Act,(fn1) the Patent and Trademark Office (PTO) may not issue patents for inventions that have been placed "on sale in this country, more than one year prior to the date of the application for patent in the United States . . . ."(fn2) If the PTO does issue a patent for an invention that was on sale more than one year prior to the application date, courts may declare the patent invalid if it is subsequently challenged.(fn3)

For the invention to be found on sale within the meaning of section 102(b), the challenger must show that the invention was in an advanced stage of development at the time of the offer for sale; a bare offer to sell is insufficient to invoke the bar.(fn4) Until recently, courts have required that the invention be reduced to practice at the time the offer for sale was made.(fn5) Reduction to practice means not only that the invention has been physically embodied in some form, but also that the invention has been shown to work for its intended purpose.(fn6) Thus, an invention was not placed on sale within the meaning of section 102(b) until it had been embodied in physical form, shown to work for its intended purpose, and offered for sale.

However, in UMC Electronics v. United States,(fn7) the Court of Appeals for the Federal Circuit (CAFC) held that a reduction to practice was not a per se requirement of the on sale bar.(fn8) According to the UMC court, the technical requisite of a reduction to practice may frustrate the policies underlying the on sale bar.(fn9) Therefore, instead of requiring the challenger to show a reduction to practice, the UMC court held that future courts should consider, in light of the policies underlying the bar,(fn10) all of the circumstances surrounding the sale or offer to sell, including the stage of development and nature of the invention sold.(fn11) The UMC majority further held that an invention has been placed on sale within the meaning of section 102(b) when the inventor's commercial activities conflict with the policies underlying the bar.(fn12)

I. Introduction

This Note asserts that the UMC court's "all circumstances" test(fn13) cannot be consistently applied and does not satisfy the policies underlying the bar.(fn14) Therefore, a test is proposed that distinguishes between an offer to sell an invention and the actual sale of an invention.(fn15) The proposed test suggests that if the invention is sold before the critical date, it has been placed on sale within the meaning of section 102(b).(fn16) However, if the invention is merely offered for sale, it must have been reduced to practice at the time of the offer before the on sale bar may be applied.(fn17) Such a test would be more consistently applied and better satisfies the policies underlying the on sale bar than the UMC majority's all circumstances test.(fn18)

In developing the test, this Note will first explain the policies that underly the on sale bar and review the past application of the bar.(fn19) Second, the UMC case will be examined and its facts and holding explained.(fn20) Third, the panel majority's conclusion that a reduction to practice has not been, and should not be, a requirement of the on sale bar will be analyzed.(fn21) Fourth, the problems of applying the UMC all circumstances test will be illustrated.(fn22) Fifth, this Note will question whether the UMC decision satisfies the policies underlying the on sale bar.(fn23) Finally, a proposed test will be presented and applied to hypothetical situations to illustrate its application.(fn24)

II. Background

The purpose of this section is to give the reader an understanding of the on sale bar as it relates to patent law. With this relationship in mind, this section will next discuss the four policies that have been identified as underlying the on sale bar. Finally, this section will summarize the various doctrines used to apply the on sale bar in the past and describe the state of the law immediately prior to the UMC decision.

A. The On Sale Bar And Its Underlying Policies

The Constitution empowers Congress to "promote the Progress of Science and useful Arts, by securing for limited Times to . . . Inventors the exclusive Right to their . . . Discoveries."(fn25) To effectuate this constitutional provision, Congress enacted the Patent Act,(fn26) which gives patent owners the right to exclude(fn27) others from using the patented inventions for a period of seventeen years.(fn28) Before the Patent and Trademark Office (PTO) will issue a valid patent, however, the invention must meet the requirements set forth in the Patent Act.(fn29)

The section 102(b) on sale bar is a requirement of the Patent Act that is procedural in nature; it limits the period of time for filing a valid patent claim.(fn30) This time limit furthers four policy considerations, which are as follows: 1) To prevent detrimental public reliance on ideas that the public believes are freely available to all; 2) to prevent the inventor from commercially exploiting the patented invention beyond the seventeen-year statutory period; 3) to give the inventor a grace period in which to determine whether to file for a patent; and 4) to encourage prompt and widespread disclosure of inventions.(fn31) A brief discussion of each of these four policy considerations follows.

The first policy underlying the on sale bar is to prevent detrimental public reliance on ideas that the public believes are freely available to all.(fn32) When an unpatented product is sold to a member of the public, the public may assume that the idea is free to use. Relying on this assumption, members of the public may attempt to make, use, or sell the idea in the form of a competing product. If a patent issues for the invention after a member of the public has spent time and money on manufacturing a competing product, that time and money has been wasted. This is because the patent gives the patent holder the right to prevent the competitor from selling the competing product if it infringes the patent.(fn33) Under section 102(b), the inventor must file for patent protection within a year after selling the invention or lose the right to patent the invention. The statute limits the amount of time that the invention is exposed to the public without patent protection.(fn34) Thus, the on sale bar limits the waste that could occur should the public rely to its detriment on the free availability of unpatented products that have been sold or placed on sale.

The second justification for the on sale bar is that it prevents commercial exploitation of inventions beyond the seventeen-year period(fn35) set by Congress in the Patent Act.(fn36) Without the bar, inventors could commercially exploit their inventions for more than a year and then patent the invention and exclude their competitors from the market. For example, an inventor could market an invention for three years and then apply for a patent. When the patent issues,(fn37) the inventor is guaranteed a seventeen-year monopoly on the rights to the invention. The original three-year period, plus the statutorily guaranteed seventeen-year period, would effectively give the inventor exclusive use of the invention for twenty years. By preventing the PTO from issuing a valid patent after the invention had been sold or on sale for more than one year, the on sale bar prevents the inventor from thus extending patent protection beyond the seventeen-year period.(fn38)

In contrast to the previous policies, the third policy underlying the on sale bar favors the inventor.(fn39) Congress gave the inventor one year after the sale or offer for sale of the invention to decide whether the invention was worth the expense of obtaining a patent.(fn40) If, after a year, the inventor decides that the commercial prospects of the invention do not justify the expense of obtaining a patent, the inventor may choose not to patent the invention; the inventor thereby saves the time and money required by the patent application process. In addition, even if the inventor decides almost immediately after the sale that a patent would be worthwhile, it may take some time for the inventor and his or her patent counsel to complete a satisfactory patent application.(fn41) Thus, because the patent application procedure may be protracted and expensive, Congress gave the inventor a one-year grace period in which to determine whether to file for patent protection.(fn42)

The final policy underlying the on sale bar is the policy of promoting prompt disclosure of inventions.(fn43) In an effort to stimulate further innovation and permit the public to practice the invention after the patent has expired,(fn44) the Patent Act requires full disclosure of the invention before a valid patent will issue.(fn45) Section 102(b) furthers this policy by denying patent protection if the invention is not disclosed in a patent application within one year after sales to the public. The threat of a loss of potentially valuable patent rights encourages the inventor to disclose the invention to the PTO, and therefore the public, at an early date. Thus, the on sale bar promotes prompt disclosure of inventions to the PTO.

B. Application of the On Sale Bar

Under...