Inventors have a limited amount of time to file a patent application, after which they will be forever barred from pursuing patent protection.

On April 14, the U.S. Court of Appeals for the Federal Circuit issued its decision in Definitive Holdings v. Powerteq, which affirmed the district court’s grant of summary judgment of patent invalidity. In so doing, the Federal Circuit sent a strong reminder to inventors (and would-be-inventors) that patent rights can be lost if the patent applicant does not file his/her patent application early enough relative to any “on sale” activity involving the claimed invention.

Under § 102 of the Patent Act, if an inventor does not file a U.S. patent application for the invention within one year from the earliest date on which a product embodying the invention has been sold or offered for sale, the inventor is barredfrom pursuing a U.S. patent. This is so regardless of whether the on-sale activity was that of the inventor or, as in Definitive Holdings, a third party.

The situation is even stricter if the inventor wishes to pursue foreign patent protection, because most foreign countries follow a doctrine called “absolute novelty,” under which a patent application must be filed before any on-sale activity occurs. In other words, to preserve the ability to seek foreign patent protection in most foreign countries, an inventor must file either a U.S. or foreign patent application before beginning on-sale activity concerning the invention. Unlike the U.S., there is no one-year grace period as to most foreign countries.

Cases like Definitive Holdings reinforce the importance of filing a patent application as early as possible to avoid loss of patent rights arising from invalidating on-sale activity.

Facts and Procedural History 

Definitive Holdings, LLC (“DH”) owned U.S. Patent No. 8,458,689 (“the ’689 Patent”), which claimed methods and apparatuses for upgrading software in engine controllers by connecting a device that can replace portions of stock engine control software with new data blocks while retaining an image of the original software.

The ’689 Patent issued from a patent application filed on March 31, 2001. Thus, the “critical date” for the ’689 Patent was March 30, 2000; in other words, any “on sale” activity of a product embodying the invention of the ’689 Patent on or before March 30, 2000 stood to invalidate the ’689 Patent under § 102 of the Patent Act.

DH sued Powerteq LLC in the U.S. District Court for the District of Utah, alleging that Powertech infringed the ’689 Patent. Powerteq raised certain defenses, including a defense that the ’689 Patent was invalid under § 102 of the Patent Act because a product embodying the claimed invention was on sale before March 30, 2000.

Since DH’s patent application was filed before March 16, 2013, the effective date of the American Invents Act (“AIA”), the parties agreed that Powerteq’s invalidity defense was governed by the pre-AIA version of § 102, namely, pre-AIA 35 U.S.C. § 102(b).

Although Definitive Holdings applied the pre-AIA version of § 102, its lessons remain notable even for cases that would involve the current (AIA) version of § 102, because in Helsinn Healthcare, S.A. v. Teva Pharm USA, Inc. (2019), the Supreme Court held that the AIA version carried forward the same definition of “on sale” that had existed in pre-AIA § 102(b).

Powerteq’s invalidity defense cited a device called the Power Programmer III (“PP3”), which deposition testimony revealed was sold by a third party, Hypertech, Inc. beginning in 1994-1996. DH contended that the PP3 did not qualify as “prior art” under pre-AIA § 102(b) because “the sale of the PP3 did not disclose how to perform the method of the ‘689 patent.” The district court rejected DH’s argument and granted a summary judgment of patent invalidity to Powerteq. DH appealed the ruling to the U.S Court of Appeals for the Federal Circuit.

The Federal Circuit’s “Definitive Holding” 

The Federal Circuit affirmed the district court’s ruling that the asserted claims of the ‘689 patent were invalid under pre-AIA § 102(b).

Quoting Helsinn (a post-AIA case), the Federal Circuit stated: “triggering the on-sale bar does not ‘require that the sale make the details of the invention available to the public.’” Then, quoting a 1986 (pre-AIA) decision, the Federal Circuit added: “‘[T]he question is not whether the sale, even a third party sale, ‘discloses’ the invention at the time of sale, but whether the sale relates to a device that embodies the invention.’”

The Federal Circuit held that the PP3 embodied the patented invention because an installation guide “explains how ‘an individual can reprogram a 1996 or newer vehicle sold in the United States’ by using the sold apparatus.” Therefore, applying the above “on sale” law, the Federal Circuit held that the district court did not err in granting the summary judgment of patent invalidity. The Federal Circuit suggested the result could have been different if the patented process were “undiscoverable from the product itself.”

Definitive Takeaways

A third-party device sold before the “critical date” of one’s patent application can invalidate any patent issuing from that application if the device embodies the patented invention. Therefore, prior to bringing any patent infringement litigation, a patentee should assess invalidity risks by not only conducting an invalidity search for prior patents and publications, but also interviewing knowledgeable persons within the patentee’s organization to discover whether they know of any relevant third-party products, even if unpatented, sold prior to the critical date. It is better to uncover such “prior art” before filing a complaint than after spending hundreds of thousands of dollars to reach the summary judgment stage in a patent infringement lawsuit. Of course, taking such steps does not eliminate the risk of invalidation, since an opponent could theoretically always cite references not known to either the patentee or its counsel, but such steps would still provide the best chances of avoiding “prior art” surprises in litigation.

Importantly, if a patent applicant is aware of a pre-critical date sale, or offering for sale, of a product that a reasonable patent examiner would deem important in deciding whether to allow the applicant’s claims, then the applicant has a duty to disclose such on-sale information to the USPTO patent examiner, regardless of whether a third party or the applicant himself/herself conducted such on-sale activity. Should a patent issue on the application without such information having been disclosed to the examiner, the patentee must confront a risk of the patent being held unenforceable for “inequitable conduct” in any litigation seeking to enforce the patent.

Finally, an inventor contemplating patent protection for his/her invention, and contemplating offering the invention for sale (or licensing someone else to do so) must act promptly to file a patent application claiming the invention. Such a filing must occur before any on-sale activity to fully preserve foreign patent rights, and within one year of the earliest date of such activity to preserve U.S. patent rights.

If there is not enough time to prepare a formal utility patent application before a scheduled sale or public disclosure of the invention, the inventor should consider first filing a provisional patent application, and then following that up with a utility patent application within a year from the filing of the provisional application. Inventors should, in any event, promptly consult with a licensed patent attorney or agent to determine the best strategies for maximizing patent protection.