Licensing of a Method Does Not Place the Method on Sale

In vacating a decision by the U.S. Patent and Trademark Office Board of Appeals & Interferences, the U.S. Court of Appeals for the Federal Circuit held that granting a royalty bearing license to use a method and conveying technical know-how related to implementing the method does not place the method on sale because the method is not carried out as a result of the transaction. In re Kollar, Case No. 01-1640 (Fed. Cir., April 11, 2002).

Redox Technologies, Inc., the assignee of Kollar, filed a patent application directed to a process for preparing a dialkyl peroxide. Approximately 15 years prior to its filing date, Redox reduced the invention to practice and entered into an agreement with Celanese Corporation for the purpose of "conducting research and development (R&D) in the Field Ö with a goal to achieving, by the end of 5 R&D years, Celanese approval for a commercial plant in the Field." In the agreement, Redox, in exchange for a series of annual royalty payments, licensed to Celanese a method covered by the claims of the Kollar application and disclosed to Celenese technical information concerning the claimed process.

The Board held that the agreement constituted a firm offer to sell embodiments of the claimed process, thus triggering an on-sale bar. The Board reasoned that Redox had granted to Celanese a "right to commercialize" Kollar's invention and disclosed to Celanese the necessary technical information to utilize that invention in exchange for royalty payments, which constituted the firm offer to sell. On rehearing, the Board further stated that "a claimed process can be physically represented by a written description in a document which not only identifies the process but also enables the practice of that chemical process by one of ordinary skill in the art," and that transferring this written description for consideration is a commercial exploitation of the claimed process.

The Federal Circuit reversed, noting that, although the claimed method was ready for patenting (under the second prong of the Pfaff test), it was not the subject of a commercial offer for sale (the first prong of the Pfaff test). The Federal Circuit noted that a claim to a process, unlike a claim to a device or apparatus, consists of doing...