The Federal Circuit issued an interesting decision today in Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc. (No. 2012-1581). The opinion, written by Judge O’Malley and joined by Judge Bryson, invalidated a patent based on the patentee’s contractual agreement with its own supplier to purchase a product that utilized the patented invention more than one year before the date of the patent application. The dissent, written by Judge Reyna, argued that this decision is inconsistent with the requirement that an offer for sale must by a commercial offer and that it will eviscerate the experimental-use exception.
The patentee, Hamilton Beach, developed an improved slow cooker with clips to hold the lid of the cooker to the body of the cooker. Hamilton Beach’s original design had the clips mounted to the body. Sunbeam designed a competing version of the product with clips mounted to the lid. In response, Hamilton Beach filed a continuation patent application that specifically incorporated Sunbeam’s new design. This application eventually matured into the patent involved in the lawsuit.
In defense, Sunbeam argued that it did not infringe and that the patent was invalid as anticipated because Hamilton Beach introduced new matter into its continuation application and therefore could not take advantage of the earlier filing date. Sunbeam also argued that the patent was invalid due to an offer for sale more than one year before the earliest priority date.
More than one year before the original patent application was filed, Hamilton Beach issued a purchase order to one of its foreign suppliers, asking it to manufacture nearly 2,000 slow cookers based on Hamilton Beach’s specifications and designs. The supplier agreed to fulfill the order once it obtained a release from Hamilton Beach. The supplier’s confirmation occurred more than one year before Hamilton Beach filed its patent application. Hamilton Beach issued the release to its supplier within the one-year period before it filed its application, though.
The District Court ultimately agreed with Sunbeam on all three grounds, finding that Sunbeam did not infringe and that the patent was invalid.
The Federal Circuit’s Decision
A patent can be invalidated under 35 U.S.C. § 102(b)’s on sale bar provision “when two conditions are satisfied before the critical date: (1) the claimed invention must be the subject of a commercial offer for sale; and (2) the invention must be ready for patenting.” There is an exception to the on sale bar where the use is experimental in nature, which negates the commercial requirement of § 102(b).
The Federal Circuit only addressed Sunbeam’s on-sale bar argument, finding that the offer from Hamilton Beach’s supplier to manufacturer the slow cooker once it received the release was an offer for sale under § 102(b). Because this offer occurred more than one year before Hamilton Beach filed its patent application and Hamilton Beach clearly had specifications and drawings of its invention, the patent was invalid as anticipated.
It reaching its decision, the Court noted that there need not be a binding contract for purposes of § 102(b)—only an offer is required. Moreover, the Court found that there is no “supplier exception” to the on-sale bar.
The key dispute between the majority and dissent was whether Hamilton Beach’s purchase order should have been analyzed under the experimental use exception.
The majority stated that it was expressly not considering the experimental use exception because (1) Hamilton Beach never raised this argument and (2) the order of almost 2,000 slow cookers strongly suggested that the use was not experimental. The majority went out of its way to specifically state that this opinion has no bearing on that exception:
“Experimental use” is simply not at issue. There is, thus, no threat that this decision will have any impact on that defense; it certainly will not “eviscerate” that defense as the dissent fears.
The dissent disagreed, finding that Hamilton Beach had raised this issue and that there was sufficient evidence to suggest that the 2,000 units were being ordered in order to work out a defect in the design. The dissent further expressed concern that this ruling would “eviscerate” the experimental use exception and create havoc for companies that have third parties manufacture their goods.
It is somewhat difficult to predict how this case will be used in the future, but there are certainly some points to take away from it. First, companies need to be aware that contractual negotiations and offers with their own suppliers potentially can be used against them to invalidate their patents. This highlights the need to file provisional applications and keep track of the relevant dates so as not run into this issue. Second, where a use is experimental in nature, it is helpful to document its experimental nature for use later in litigation. Third, the majority fairly clearly states that this decision does not destroy or even implicate the experimental use exception, so that exception should still be available if properly raised at the trial court. Finally, this case highlights the importance of preserving this argument explicitly and clearly.