A cautionary tale: early contract with supplier can trigger loss of your patent rights

If you are considering a patent, file the application before engaging in any commercial activity — even contracts with your own suppliers.

Before launching a new product, companies are typically engaged in a flurry of activity. This may include securing suppliers, testing the product, preparing marketing materials, and a host of other activities.

If the company wants to patent the product, it needs to start the patent process early. A new court decision emphasizes this need by holding that even certain “preparatory” activities can trigger a loss of patent rights if the patent application is filed after that activity begins.

In Hamilton Beach Brands, Inc. v. Sunbeam, the U.S. Court of Appeals for theFigure 2 Federal Circuit considered Hamilton Beach’s claim that Sunbeam infringed a patent for a slow cooker. The patent claimed priority to an application filed in March 2006. Sunbeam argued that the patent was invalid because of a prior offer for sale that occurred in February 2005 — more than one year before the patent’s effective filing date. Significantly, the “offer for sale” was Hamilton Beach’s own contract with its foreign supplier.  In other words, the patent holder itself was the buyer in the sale transaction.

The Court held that the offer for sale invalidated the patent.  To quote the Court:

There is no “supplier exception” to the on-sale bar. . . . Thus, it is of no consequence that the “commercial offer for sale” at issue in this case was made by Hamilton Beach’s own supplier and was made to Hamilton Beach itself.

The ruling serves as a warning that would-be patent holders should file patent applications early – and in many cases before beginning any commercial activity. While a one-year grace period may still be in effect (even after the America Invents Act’s changes to 35 U.S.C. 102(b)), applicants should know that private sales — even those to the inventor itself — can trigger the start of this clock.

[UPDATE: Less than a month after the Hamilton Beach case, a court in Wisconsin reached the same conclusion on a similar set of facts.  For details, see Orbis Corp. v. Rehrig Pacific Co. (E.D.Wi. Sept. 10, 2013.)]

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