April 8, 2020

Licensing of Process, and Sale of the Business using Process, did not put Invention on Sale

In BASF Corp. v. SNF Holding Co.[2019-1243] (April 8, 2020), the Federal Circuit reversed summary judgment of invalidity of claims U.S. Patent 5,633,329, finding that the asserted prior art did not create an on-sale bar, a public use bar, or prior knowledge or use.

The Federal Circuit held that the asserted prior art, Sanwet® Process, does not create an on-sale bar to the ’329 patent under § 102(b), and further that the district court misinterpreted § 102(a) and the public-use bar of § 102(b), and that, under the proper legal standard, genuine issues of material fact preclude the entry of summary judgment on those issues.

§102(a) Prior Knowledge or Use

BASF first argued that the district court misinterpreted the phrase “known or used” in § 102(a) and erroneously disregarded the confidentiality of Celanese’s knowledge and use. In BASF’s view, knowledge or use that is not publicly accessible does not qualify as prior art under § 102(a). The Federal Circuit agreed, noting that it has uniformly interpreted the “known or used” prong of § 102(a) to mean “knowledge or use which is accessible to the public.”

The Federal Circuit concluded that the record reveals genuine issues of material fact as to whether the asserted Sanwet® Process was “known or used” within the meaning of § 102(a), and therefore reversed the district court’s summary judgment of invalidity and remanded for a determination of SNF’s § 102(a) defense at trial.

§ 102(b) Public Use

BASF also argued that the district court’s summary judgment on public use was in error, contending that the district court misinterpreted the public-use bar of § 102(b) to apply to a third party’s secret commercial use. The Federal Circuit again agreed with BASF, noting that in Shimadzu, the Supreme Court explained that the public-use bar applies to uses of the invention “not purposely hidden” and held that the use of a process in the ordinary course of business — where the process was “well known to the employees” and no “efforts were made to conceal” it from anyone else — is a public use. The Federal Circuit noted that it has applied Shimadzu in its public-use cases.

The Federal Circuit concluded that the district court erred in finding, on summary judgment, that the claimed process was publicly accessible. Neither party disputes that members of the public were given access to the Portsmouth plant on numerous occasions, where they could view the shape of the conical taper, and that no evidence suggests that any of these guests was a skilled artisan. The parties dispute whether the remaining elements of the Sanwet® Process were known, and to the extent they were not, whether they were concealed from the public on these tours, in newspaper articles, and in the commemoration video.

The Federal Circuit rejected as “simply wrong” SNF’s second contention that a third party’s commercial exploitation of a secret process creates a per se public-use bar to another inventor.

§102(b) On Sale

BASF argued that the agreement between Sanyo and Celanese to license the Sanwet® Process was not a sale under In re Kollar. The Federal Circuit agreed that the district court’s judgment must be reversed. Neither the Sanyo-Celanese license agreement nor the 1987 Hoechst acquisition of Celanese is a sale of the invention within the meaning of § 102(b). The Federal Circuit said the invention itself must be sold or offered for sale, and the mere existence of a “commercial benefit … is not enough to trigger the on-sale bar on its own.

To determine whether such a commercial sale or offer for sale has occurred, look to how those terms are defined in the Uni-form Commercial Code. The Federal Circuit recognized that a process, however, is a different kind of invention; it consists of acts, rather than a tangible item, as is contemplated by the U.C.C.’s definition of sale. Yet, in certain circumstances, a process may be sold in a manner which triggers the on-sale bar. For example, performing the process itself for consideration is sufficient. So is a patentee’s sale of a product made by his later-patented process.

Because the district court misinterpreted § 102(a) prior knowledge and use, as well as the public-use bar of § 102(b), the Federal Circuit reversed its summary judgment and remand for trial on those defenses.