To obtain exclusive legal rights in an invention through a patent the inventor must disclose the invention to the government before certain events happen. In the United States one such event is the invention being “on sale”.
The general rule is that if an invention is “on sale” before a patent application is filed, then patent protection for the invention will not be available. This is commonly referred to as an "on sale" bar to patent protection. To know whether an "on sale" bar applies one has to know when an invention was first “on sale”, and by who.
THE “ON SALE” DATE OF AN INVENTION
The U.S. Supreme Court has determined that an invention in the U.S. is “on sale” for purposes of determining patent protection eligibility when:
- The invention is ready for patenting; AND
- The invention is the subject of a commercial offer for sale.
When Is An Invention “Ready for Patenting”?
Under U.S. patent law an invention is considered ready for patenting when the invention is actually reduced to practice or the inventor has prepared drawings or other descriptions of the invention that are sufficiently specific to enable a person skilled in the art to practice the invention.
Actual Reduction To Practice
An invention is actually reduced to practice when it has been constructed (or if a process, then performed) and has successfully worked for its intended purpose. Note that what has been actually constructed or performed need not be a final commercial embodiment or implementation of the invention. Even a rough laboratory prototype that works will suffice and be considered “ready for patenting”.
Drawings or Descriptions
But as mentioned above, to be “ready for patenting” does not require actual reduction to practice of the invention. If drawings or other descriptions of the invention are prepared that are sufficiently specific to enable a person skilled in the art to practice the invention, then it will be considered to be “ready for patenting”. This is why filing a patent application which contains such drawings or other description is considered a “constructive” reduction to practice. However, the drawings or descriptions do not need to be in a patent application. Drawings or descriptions internal to a business, or those given to a third-party manufacturing facility, will satisfy the “ready for patenting” requirement if they are sufficiently specific to enable a person skilled in the art to practice the invention.
When Is an Invention The Subject Of A “Commercial Offer For Sale”?
The legal framework for determining whether there is a commercial offer for sale of an invention is analyzed under the law of contracts as generally understood, and focuses on those activities that would be understood to be commercial sales and offers for sale in the commercial community.
Generally, a commercial sale is a contract between parties where one party agrees to give property in exchange for payment. An "offer for sale" is a communication offering to sell property which the receiving party can simply accept to create a binding contract. Accordingly, whether or not a transaction involving an invention is a “commercial offer for sale” of the invention is specific to the facts of each case. The determination must take into account the particular circumstances and terms of the transaction.
However, there is one important point that every business developing new products or processes should be aware of: A “commercial offer for sale” of an invention does not have to be an offer to sell it to an end-user customer of the business. Specifically, an agreement with a supplier or distributor can be a “commercial offer for sale” of the invention for purposes of establishing an “on sale” date. Because of this, the terms of any transaction with a supplier or distributor concerning any new product or process need to be very carefully considered if a patent application for the new product has not already been filed.
A common misconception is that an obligation of confidentiality undertaken by a supplier or distributor will prevent transactions being considered “commercial sales”. However, the requirement that a distributor or supplier keep information concerning a new product or process confidential will not by itself prevent the transaction from being considered a commercial offer for sale: A “secret sale” between a business and its suppliers or distributors is still a sale under U.S. patent law.
There are steps that can be taken in drafting agreements with suppliers, distributors or other third-parties during product development and testing to minimize the risk of transactions with such parties being construed by a court as a commercial offer for sale of the invention. However, such a risk can never be completely eliminated. Accordingly, the most prudent practice for protecting patent rights in new inventions is to file a patent application before any efforts involving suppliers, distributors, or third-parties and an invention are undertaken.
EXCEPTIONS TO THE “ON SALE” BAR
As stated, the general rule is that an invention is not eligible for patent protection unless a patent application has been filed before the invention is “on sale”. In the United States there is a limited exception to this rule: If the invention was “on sale” by the inventor, or “on sale” by another who had obtained the invention from the inventor, then U.S. patent protection can still be applied for up to one year after the "on sale" date.
However, being able to take advantage of this limited exception may require an applicant for U.S. patent protection to submit evidence that an alleged sale of the invention before the application filing date was by the inventor or someone who obtained the invention from the inventor. Accordingly, to the extent a business chooses to delay filing a patent application after the “on sale” date of an invention, it is important that the business maintain adequate documentation of any sales of the invention by it, and of all parties who the business disclosed the invention to.
It is also important to know that the same exception does not necessarily apply outside of the United States: An invention being “on sale” before a patent application is filed can prevent foreign patent protection.
WHAT YOU NEED TO KNOW
A business that wants to have exclusive rights in an invention should preferably file a patent application as soon as an invention is “ready for patenting” and before the “on sale” date of the invention. Transactions with any third parties involving an invention should be carefully documented and appropriately structured to minimize the risk of a court concluding that the “on sale” date of the invention was before a patent application was filed.
If the filing of a patent application is delayed until after the “on sale” date, then the delay should be minimized, and documentation maintained which can evidence that the first sale of the invention was by the inventor, or by one who obtained it from the inventor. Under no circumstances can a U.S. patent be obtained on an invention that has been on sale for more than a year.