The Software IP Report

On-Sale Bar: Patent Invalid over Defendant’s Sale of the Product

By Bryan Hart

Categories: 35 U.S.C. §§ 102, 103, The Software IP Report

A district court ruled that the on-sale bar can be triggered by sales by third parties, even if the product is not delivered until after the critical date. In OneSubsea v. FMC, Civil Action No. H-18-2459 (Sept. 24, 2019), the Southern District of Texas granted a motion for summary judgment of invalidity of OneSubsea’s patent, ending the case in FMC’s favor.

OneSubsea owns U.S. Patent No. 9,945,202, which covers a technique for installing undersea wells that protects “potentially susceptible components from unwanted exposure to well fluids or other fluids in a monobore subsea installation.” OneSubsea is a subsidiary of Schlumberger and supplier for oil and gas companies, and FMC is a competitor in the same market. OneSubsea asserted the ’202 patent against FMC for FMC’s well installation equipment, the “High-Pressure High-Temperature Enhanced Vertical Deepwater Tree.” FMC sells two different versions with different pressure and temperature ratings. One Subsea accused the 15 kpsi, 400°F version but admitted that the 20 kpsi, 350°F version was identical for the purposes of infringement and invalidity. FMC had documentation about selling the 20 kpsi, 350°F version to Shell before the ’202 patent’s filing date.

This documentation formed the basis of FMC’s motion for summary judgment. FMC asserted that its sale to Shell triggered the on-sale bar. “A person shall be entitled to a patent unless the claimed invention was … on sale … before the effective filing date of the claimed invention.” 35 U.S.C. § 102(a)(1). The on-sale bar has two requirements: (1) a commercial sale or offer for sale and (2) that the invention is ready for patenting.

Before discussing those requirements, the court first shot down OneSubsea’s legal argument that the on-sale bar only applied to sales by the patent applicant, not by third parties. OneSubsea based its argument on footnotes in two Federal Circuit cases that the public-use bar—another provision of § 102—does apply to third parties, which in OneSubsea’s view implied that the on-sale bar did not. Unfortunately for OneSubsea, the Federal Circuit in several cases explicitly states that the on-sale bar applies to sales by third parties, including in the cases that OneSubsea cited.

With that hurdle out of the way, the court turned to the first requirement. What counts as “a commercial sale or offer for sale” is governed by basic contract law. A commercial sale means offer and acceptance, and an offer for sale means an offer in condition to be accepted. FMC introduced multiple purchase orders from Shell with definite delivery dates, as well as a “Variation Order Request Form.” OneSubsea quibbled over whether the acronyms in the purchase orders actually referred to product in question, but it did not provide another plausible theory about the subject matter of the purchase orders. The court did not think that OneSubsea’s argument raised a “genuine issue of material fact,” as required to avoid a summary judgment.

FMC also passed the second requirement, that the invention was ready for patenting. Under Federal Circuit caselaw, this requirement can be satisfied by proof of reduction to practice, such as drawings or descriptions that enable a practitioner to practice the invention. This does not mean that the invention must be completely ready for sale; fine-tuning can occur after the effective filing date. FMC presented three-dimensional models of the product to Shell before the effective filing date. Because OneSubsea admitted that the product sold to Shell was effectively the same as the product it accused of infringing the ’202 patent, the court did not need to analyze the elements of the ’202 patent’s claims. Unless OneSubsea could show that the design of the product had changed in some important way after the filing date, it had admitted that the product met all the elements of the patent claims. OneSubsea could not point to any material changes in the design that occurred between the presentation of the 3D models and the delivery of the final product. FMC thus prevailed on this point despite not actually delivering the products to Shell until after the effective filing date.

Lessons for Practice

Part of the usefulness of the on-sale bar as a way to invalidate a patent is that the sale (or offer) does not need to be public. The on-sale bar thus provides a complement to the public-use bar, which does not require a sale but does require that the public at large learn about the invention. With the on-sale bar, only the purchaser need learn about the invention for the sale to count as prior art.

The private nature of the on-sale bar highlights the limitations of even a thorough pre-suit investigation. The delivery of the product to Shell was, in all likelihood, the first public notice of the existence of FMC’s product. But this delivery did not occur until after the ’202 patent’s filing date. While this information could have notified OneSubsea of the risk of prior art, it couldn’t have definitively known until it saw the confidential documentation of the sale produced by FMC. While any potential litigant should gather all the information it can before filing suit, some irreducible risk will still exist.