The America Invents Act: This Isn’t Your Father’s On-Sale Bar

With the implementation of the America Invents Act (AIA), the United States went from a first to invent to a first inventor to file system of determining priority of patent rights. However, that was not all that changed with the implementation of the AIA. The AIA includes some significant changes to the on-sale bar which are important to keep in mind when planning your patent filings.

The AIA changed the on-sale bar in three key ways: First, sales of or offers to sell an invention by third parties are no longer subject to a one year grace period before they become invalidating.

Second, sales of or offers to sell an invention made anywhere in the world may be invalidating.

Third, secret sales or offers may no longer be invalidating.

Third Party Sales or Offers are No Longer Subject to a One Year Grace Period

Under the AIA, offers to sell or sales of an invention made by third parties (i.e., not by the inventor or assignees thereof) are no longer subject to a one year grace period. Thus, if a third party makes an invalidating offer or sale even a day before you file a patent application, you may be barred from doing so (or your patent may be subject to invalidation if one should issue).  See 35 U.S.C. § 102(a)(1) and (b)(1).

Invalidating Offers or Sales are No Longer Limited to Those Made in the United States

Under the AIA, offers for sale or sales of an invention made anywhere in the world may bar you from patenting the invention in the U.S.  This was not the case under 1952 Act that preceded the AIA.  The on-sale bar was previously codified in 35 U.S.C. § 102(b) and read as follows:

A person shall be entitled to a patent unless . . . (b) 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.

35 U.S.C. § 102(b) (pre-AIA) (emphasis added).  Previously, you did not have to worry about foreign sales or offers in planning the filing of U.S. patent applications.  That is no longer the case because the AIA does not include the “in this country” qualifying language of the 1952 Act.  The relevant AIA provisions read as follows:

A person shall be entitled to a patent unless—

(1)   the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.

35 U.S.C. § 102(a)(1) (AIA).  Therefore, when planning patent filings, it is now important to make sure that they are coordinated with any foreign commercialization activities so that no invalidating sales or offers are made.  It will be interesting to see how the choice of law issues are handled.  When the on-sale bar was limited to the United States, the Federal Circuit held that “the question of whether an invention is the subject of a commercial offer for sale is a matter of Federal Circuit law, to be analyzed under the law of contracts as generally understood . . . “  Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1047 (Fed. Cir. 2001).  To promote uniform application of the on-sale bar, the Group One court specifically rejected applying the contract law of individual states in determining whether a sale or offer had occurred.  Id. It will be interesting to see if that same principle is applied when dealing with sales or offers in foreign countries that have their own laws governing sales and contracts.

Secret Sales or Offers May No Longer Be Invalidating

Under the 1952 Act, the courts interpreted “on sale” to include secret sales, primarily because the statute used “public” to modify “use” but not to modify “sale.”  However, the AIA has the qualifying clause “or otherwise available to the public” which modifies “on sale.”  The courts have not yet interpreted this provision and ruled whether secret sales may be invalidating.  However, the U.S. Patent and Trademark Office has taken the position that secret sales are not invalidating. The Patent Office’s interpretation of the AIA on-sale bar is as follows:

The pre-AIA 35 U.S.C. 102(b) “on sale” provision has been interpreted as including commercial activity even if the activity is secret. See MPEP § 2133.03(b), subsection III.A. AIA 35 U.S.C. 102(a)(1) uses the same “on sale” term as pre-AIA 35 U.S.C. 102(b). The “or otherwise available to the public” residual clause of AIA 35 U.S.C. 102(a)(1), however, indicates that AIA 35 U.S.C. 102(a)(1) does not cover secret sales or offers for sale. For example, an activity (such as a sale, offer for sale, or other commercial activity) is secret (non-public) if it is among individuals having an obligation of confidentiality to the inventor.

Manual of Patent Examining Procedure (MPEP § 2152.02(d)) (emphasis added).  Some contend that the use of the phrase “on sale” indicated an intent to maintain the same case law governing the on sale bar, in which case secret sales would remain invalidating.  However, the Patent Office concluded that the statutory language was sufficiently clear on its face to indicate an intent to make only “public” sales invalidating.

Thus, at least based on the PTO’s interpretation, it may behoove companies to sell products that will be the subject of patent applications under a non-disclosure agreement until a patent application covering the products is on file.

One related issue concerns the impact of the on-sale bar on method claims.  Generally, one cannot sell “a method,” but can sell a product made by using the method.  Under pre-AIA case law, an inventor’s secret use of a method to make a product that he or she sold prior to the critical date (i.e., one year before the patent application was filed ) barred a patent on the method, while a third party’s sale of products made by the method did not.  D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1147 (Fed. Cir. 1983); W.L. Gore & Assocs. v. Garlock, Inc., 721 F.2d 1540, 1549-50 (Fed. Cir. 1983).  However, based on its interpretation of the AIA, it appears the PTO may not treat an inventor’s or assignee’s sale of a product made by a patented (and secret) process as rendering the method sufficiently “available to the public” to trigger the on-sale bar.

The PTO’s interpretation of the AIA does not have the force of law.  However, until the courts begin interpreting the foregoing provisions of the statute, the PTO will treat secret sales as not coming within the scope of the on-sale bar.