When possible, you should file a patent application prior to any business dealings with suppliers. Here's why: In a split decision issued on August 14, 2013, the Federal Circuit affirmed the invalidation of a patent for Hamilton Beach’s portable slow cooker under the on-sale bar of pre-America Invents Act (AIA) 35 U.S.C. 102(b). Hamilton Beach Brands v. Sunbeam Prods., Inc., Appeal No. 2012-1581 (Fed. Cir. Aug. 14, 2013).
In March 2006, Hamilton Beach filed a patent application for the slow-cooker at issue in this case. However, more than one year earlier Hamilton Beach issued a purchase order for 2,000 slow cookers from a foreign supplier to be delivered to Hamilton Beach’s U.S. warehouse. The order was confirmed by the supplier with manufacturing scheduled to begin once Hamilton Beach provided its approval in the form of a “release.”
The on-sale bar of pre-AIA 35 U.S.C. 102(b) invalidates a patent when the invention at issue was sold or offered for sale more than one year before the filing date. An offer for sale requires that the other party needs to only accept in order to create a binding contract for sale. Here, the foreign supplier’s confirmation to sell slow-cookers to Hamilton Beach created a binding contract for sale, as under the governing corporate purchase agreement Hamilton Beach could accept the offer at any time after receiving the supplier’s confirmation by providing a “release”. Consequently, Hamilton Beach’s asserted patent claims were found invalid under the on-sale bar date.
The dissent stated that this transaction was “experimental” in nature so that it should not trigger the on-sale bar and invalidate the patent. The majority, however, determined that the proposed sale of 2,000 units rebutted the dissent’s belief that this transaction was merely experimental in nature.
Key points for businesses based on this case
Therefore, if possible, you should file a patent application prior to any business dealings with suppliers. If business dealings must go forward first, then you should file the patent application within a year of such dealings to obtain patent coverage under U.S. law. Alternatively, if any business dealings occur more than one year prior to the filing of a patent application, you should analyze whether such dealings were experimental as opposed to commercial in nature. If they are experimental, then the on-sale bar would not apply.