'On Sale' Gets Clarification by Fed Cir. Applying Basic Common Law

By Jonathan R. Tung, Esq. on July 26, 2016 | Last updated on March 21, 2019

Welcome clarification sprang from the Federal Circuit on the issue of what constitutes a good on sale under the 35 U.S.C. sec. 102(b) et seq. Specifically, the court addressed when the "on sale" bar would or would not get triggered on those patents that were filed before the passage of the America Invents Act (AIA).

The legal issue before the courts in this case were not fundamentally about intellectual property, but basic contract law.

The Bar

Intellectual property practitioners will recall that the pre-AIA sec. 102(b) and AIA sec. 102(a)(1) ban the granting of a patent when the subject invention was "on sale" prior to the application of the patent. In a case involving a pharmaceutical company and a manufacturer of a generic form of the pharmaceutical's drug, the legal issue weighs whether or not the manufacture of the drug triggers the "on sale" bar; or alternatively, whether the "stockpiling" of it does.

"On Sale"

In The Medicines Co. v. Hospira, Inc., the Federal Circuit Court addressed these basic questions. Hospira affirmed that the agreement between two parties for the manufacture of a good does not fall under UCC and commercial law, but is presumably governed by common law contract theory.

Stockpiling Issue

Another welcomed clarification by the court addressed the issue of "stockpiling" and whether the manufacture of mass-quantities of a substance (or good) could constitute a sale for purposes of the Act. In this case, although both parties stood to benefit from the transaction, a commercial sale under the act would first require a commercial benefit derived from commercial marketing of the good itself.

The court also pointed out that no "supplier exception" to the rule existed or had been recognized by the court. For good measure, ample caselaw was cited, which included the recent Hamilton Beach Brands, Inc. v. Sunbeam Products.

In this case, basic common law ruled the day.

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