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A confidentially protected offer or sale is little protection at all

Failure to inform the PTO could have significant consequences in the event the court decides that Congress did not intend to do away with secret prior art

Before the America Invents Act (AIA), sales and offers for sale were triggers, starting the one-year grace period toward an ultimate bar date for filing a patent application. It didn’t matter if the sales or offers were under confidentiality, non-public or public. Pre-AIA offers for sale and sales were commonly analyzed in the context of the public policies that underlay the public use and on sale bar. Specifically, “discouraging removal of inventions from the public domain that the public justifiably believes are freely available, prohibiting an extension of the period for exploiting an invention, and favoring prompt and widespread disclosure of inventions.”

Sales and offers for sale, by their very nature, are the exploitation of an invention by its inventor.

Accordingly, pre-AIA sales and offers, either public or secret, customarily started the one-year clock during which time the inventor had to decide whether or not to file a patent application. Commercial activities, even when secret, were considered prior art available against the inventor.

For example, the sale of a product produced by a secret process, an offer for sale under confidentially or another non-informing sale would all constitute prior art against the party taking economic advantage of the non-public invention. It is unclear whether Congress intended to overturn these long articulated policies.

Resultantly, since the adoption of the AIA, there have been continuing questions over how the courts will ultimately interpret the new AIA 35 U.S.C. 102(a)(1), regarding sales and offers. The Patent and Trademark Office (PTO) has taken the position that, because the new statute includes the phrase “or otherwise available to the public,” after “in public use, on sale," the statute only covers public sales. Many have questioned whether the PTO’s conclusion is correct, and whether Congress actually intended to remove “secret prior art” as a category.

Personally, I do not believe that Congress intended an inventor to be able to sell and use his invention freely so long as it is in secret. Likewise, for the court to conclude that commercial activity no longer triggers the timing in which one must file a patent application, would be a big step away from its precedent, and more importantly, the policies that underlie it.

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Some have argued that the phrase “or otherwise available to the public” is a catch all phrase, and was never intended to modify public use and on-sale. Such a position has appeal, as it would keep intact a long line of precedent that secret commercialization limits patentability options.

Furthermore, while the PTO draws the line between public and private as it relates to sales, the PTO has been less willing to draw the same line when it comes to public use. Specifically, when asked about the experimental use doctrine, which exempts certain public uses from prior art status, the PTO took the position in its Examination Guidelines that nothing within the legislative history of the AIA suggests that Congress intended to do away with experimental use.

If the PTO’s position is correct, under 37 C.F.R. 1.56, there is no obligation to tell the Patent Office about secret sales since they are no longer considered prior art. However, failure to inform the PTO could have significant consequences in the event the court decides that Congress did not intend to do away with secret prior art.

So, if a company instructs its sales staff to sell under a confidentiality agreement prior to application filing, it would be wise to file any desired application within a year of the sale, thereby taking advantage of the grace period in AIA 35 U.S.C. 102(b)(1) and not having to address the question of duty of disclosure to the USPTO under Rule 56.

Since this issue awaits judicial interpretation, the most prudent course of action is to assume everyone is correct. Thus, we can assume that the precedent surrounding public use and the on-sale bar will continue to be applicable, and we can concurrently use a confidentiality agreement so that if the USPTO is correct, we can take full advantage of private sales and offers. While the PTO opines that a confidentiality agreement provides strong protection, in reality, your confidentiality agreement may provide no protection at all.

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Lori A. Johnson

Lori A. Johnson is a patent lawyer and shareholder in the Intellectual Property Practice at Chamberlain Hrdlicka (Atlanta). She brings over 20 years of experience...

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