No Experimental Use Exception After Commercial Offer for Sale

In Atlanta Attachment Co. v. Leggett and Platt Inc. (February 21, 2008) the Federal Circuit held that Atlanta Attachment's sales to Sealy were not experimental merely because they were prototypes submitted to determine if the invention fit Sealy’s requirements.

According to the opinion for the court filed by Circuit Judge Mayer:

Our patent laws deny a patent to an inventor who applies for a patent more than one year after making an attempt to profit from his invention by putting it on sale. 35 U.S.C. § 102(b); see also Elizabeth v. Am. Nicholson Pavement Co., 97 U.S. 126, 137 (1877). An invention is so barred when it was both the subject of a commercial offer for sale before the critical date and ready for patenting at the time of the offer. Pfaff v. Wells Elecs, Inc., 525 U.S. 55, 67, 199 S.Ct. 304, 311-12 (1998).

To meet the first, commercial offer, prong, the offer must be sufficiently definite that another party could make a binding contract by simple acceptance, assuming consideration. Netscape, 295 F.3d at 1323. In determining such definiteness, we review the language of the proposal in accordance with the principles of general contract law. Id. The law has long recognized a distinction between experimental usage and commercial exploitation of an invention. While "[a]ny attempt to use [an invention] for profit . . . would deprive the inventor of his right to a patent," an inventor’s use "by way of experiment" does not bar patentability. Elizabeth, 97 U.S. at 137 (1877). Therefore, we must consider whether the suspect activities were experiments as opposed to an attempt to profit from the invention, that is, whether the primary purpose of the offers and sales was to conduct experimentation. Allen Eng’g Corp. v. Bartell Indus., 299 F.3d 1336, 1354 (Fed. Cir. 2002). Neither profit, revenue, nor even an actual sale is required for the use to be a commercial offer under section 102(b) – an attempt to sell is sufficient if it rises to an offer upon which a contract can be made merely by accepting it. Although the third prototype was never actually delivered to Sealy, it was indeed sold to Sealy because Atlanta Attachment sent Sealy an invoice for the machine (an offer), and Sealy paid for the machine (an acceptance).

Atlanta Attachment responds that its sales to Sealy were experimental, because they were prototypes submitted to determine if the invention fit Sealy’s requirements. However, experimentation conducted to determine whether the invention would suit a particular customer's purposes does not fall within the experimental use exception. Allen Eng’g, 299 F.3d at 1355 (citing In re Theis, 610 F.2d 786, 792 (CCPA 1979)). Therefore, we are interested only in the actions of Atlanta Attachment (and not Sealy’s experiments) in determining whether the machine was suitable to the purpose of the invention.

Additionally, Leggett & Platt is correct to emphasize that Atlanta Attachment did not retain control over the prototypes when they were in Sealy’s possession. While we have held that control may not be the lodestar test in all cases, we have also said that it is important, and sometimes dispositive. Electromotive Div. of Gen. Motors Corp. v. Transp. Sys., 417 F.3d 1203, 1213 (Fed. Cir. 2005) (citing In re Hamilton, 882 F.2d 1576 (Fed. Cir. 1989)). In Allen Engineering, we simply catalogued a set of factors that previous cases had found instructive, and in some cases dispositive, for determining commercial offers versus experimental uses. 299 F.3d at 1353. The issue of control is dispositive here, therefore we need not review each factor set out there.

Atlanta Attachment was not experimenting within the contemplation of the experimental use doctrine when it sold its invention to Sealy because Sealy
performed the testing and because Atlanta Attachment did not have control over
the alleged testing to establish experimentation. See Electromotive Div., 417
F.3d at 1213. The fact that Sealy experimented with the prototypes is immaterial
because the experimental use exception only concerns the actions of the inventors and their agents, and Sealy was not under the inventors’ control.

The first Pfaff prong is also met, and experimental use negated, because Atlanta Attachment had presented a commercial offer for sale of the invention en masse. Atlanta Attachment gave a quotation to Sealy dated September 27, 2000, for 50 production units, with "anticipate[d] installation of Production units to begin no later than March 2001." This offer occurred before the critical date of March 5, 2001. Furthermore, as Atlanta Attachment confirmed, the quotation became a contract with the signature of a purchasing entity. Therefore, this quotation constitutes an offer for sale that cannot avoid the on-sale bar via the experimental use exception. An offer to mass produce production models does not square with experimentation under any standard; it is commercial exploitation.

We now turn to the second Pfaff prong, ready for patenting. Contrary to Atlanta Attachment’s argument, once there has been a commercial offer, there can be no experimental use exception. We also conclude that the third prototype was a reduction of claim 32 to practice, and therefore the invention was ready for patenting.

. . . Atlanta Attachment received comments from Sealy about the third prototype, and in response improvements to the prototype were included in a fourth prototype. The amount Sealy had paid for the third prototype was refunded upon delivery of the fourth prototype. The district court erred in concluding that these facts showed the third prototype was not suitable for its intended purpose.

. . . Consistent with the rule that later refinements do not preclude reduction to practice, it is improper to conclude that an invention is not reduced to practice merely because further testing is being conducted. Moreover, because vibration-free operation was not a claimed feature, it would only be relevant if the vibration actually prevented workability or utility of the invention.

Because the third prototype was on sale, we agree with Leggett & Platt that it was material to the examination. See Digital Control Inc. v. Charles Mach. Works, 437 F.3d 1309, 1318 (Fed. Cir. 2006) (noting that a reasonable examiner would have
2007-1188 considered the true nature of the invention’s reduction to practice to be important in deciding to allow the claim). However, materiality does not presume intent. Manville Sales Corp. v. Paramount Sys. Inc., 917 F.3d 544, 552 (Fed. Cir. 1990). The district court did not consider intent after deciding the third prototype was an experimental use, leaving this issue of fact unresolved. We therefore must remand the case for the district court to reconsider the allegation of inequitable conduct.

Added in the cocurring opinion of Circuit Judges Prost and Dyk,

I agree with the majority opinion and fully join it. I write separately, however, to point out the confusion in our caselaw regarding the applicability of the experimental use doctrine to the two prong test for the on-sale bar. . . .

When the inventor conducts a commercial transaction in order to facilitate development, but the development activity meets the requirements of the experimental use doctrine, the inventor avoids the on-sale bar. This exception
to the on-sale bar does not evaporate upon reduction to practice. In essence,
just as inventors could develop any aspect of the invention privately, they may
employ the concepts of agency and confidentiality to also accomplish the same
result.

In the present case, as the majority opinion demonstrates, Atlanta Attachment cannot use the experimental use doctrine to avoid the first prong of the on-sale bar because it did not demonstrate experimental, rather than simply commercial, purposes for the sale. Similarly, the quote for fifty "production unit" machines separately demonstrates an offer to sell with simply commercial intent. Both the sale and offer to sell conclusively demonstrate satisfaction of the first Pfaff prong. The experimental use doctrine is inapplicable.

While the experimental use doctrine, as such, is not pertinent to the second Pfaff prong, an inventor’s experimentation may have relevance to that prong. As to the second prong, a patentee may still avoid the on-sale or public use bars by proving that the "invention" required additional experimentation, and was not in fact complete. Such a showing parallels the pre-Pfaff experimental use doctrine, but instead of involving an exception to the on-sale or public use bars, takes effect as merely avoiding the ready for patenting prong in the first place. Experimentation of this type must concern claimed aspects of the invention, because those aspects control whether the invention is ready for patenting or not.

In the present case, Atlanta Attachment’s argument that the third prototype did not work for its intended purpose attempts to avoid the second Pfaff prong. As the majority opinion demonstrates, however, because all of Atlanta Attachment’s arguments concern unclaimed features, they cannot avoid the conclusion that the third prototype was a reduction to practice and therefore met the second Pfaff prong.