Kaye Scholer Federal Circuit Review
License Agreement for a Process Does Not Trigger On-Sale Bar
In In re Kollar, No. 01-1640 (Apr. 11, 2002), the Federal Circuit Court of Appeals held that a process that had been licensed to a manufacturer more than one year before a patent application for that process was filed was not a commercial offer for sale of the process and patentability was not barred by 35 U.S.C. 102(b).
Kollar applied for a patent for a process to make dialkyl peroxides, which can be used to make ethylene glycol. More than 15 years prior to applying for a patent application on the process, Kollar's assignee entered into an agreement with Celanese Corporation to share technology and coordinate research efforts "with the ultimate goal of designing and building a commercial plant capable of implementing the claimed process to manufacture ethylene glycol." The agreement had two phases - an R&D phase of five years and a commercial phase. During the R&D phase, in return for disclosing technical information, Kollar's assignee was to receive annual royalties. During the commercial phase, Celanese would receive a license under any future patent to build a processing plant and sell the resultant products, and Kollar's assignee would receive running royalties based on the products sold. Based upon this agreement, the Patent and Trademark Office (PTO) rejected Kollar's application, calling the agreement a "sale" of the invention under section 102(b), which bars the granting of a patent if the invention was "on sale in this country more than one year prior to" the patent application date. The Board of Patent Appeals and Interferences (the Board) affirmed the rejection.
On appeal, the Federal Circuit first stated the rule of Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998), which is that the on-sale bar of section 102(b) can be imposed when (1) the product is the subject of a commercial offer for sale and (2) the invention is ready for patenting. The Federal Circuit held that although Kollar's reduction to practice of the invention rendered it "ready for patenting," the agreement with Celanese did not rise to a "commercial offer for sale" and therefore the on-sale bar was not triggered.
Citing Mas-Hamilton Group v. LeGard, Inc., 156 F.3d 1206, 1217 (Fed. Cir. 1998), the Federal Circuit found that the agreement with Celanese was a license under future patents, and it did not trigger the on-sale bar. In addition, the court stated that because the claims are for a process, as opposed to a product, no "sale" can occur merely by a transfer of information regarding the process. The court held that "licensing [an] invention, under which development of the claimed process would have to occur before the process is successfully commercialized, is not" a sale that can trigger section 102(b). Although the court could not "articulate in advance what would constitute a sale of a process in terms of the on-sale bar," it did state that "[s]urely a sale by the patentee or a licensee of a product made by the claimed process would constitute such a sale." Similarly, the court stated that actual performance of the claimed process in return for consideration would also trigger a section 102(b) bar. In this case, the court indicated that offering to actually perform the claimed process to commercially produce ethylene glycol or any other compound would trigger the on-sale bar.
The court also discussed the policy implications of declaring that a license to a process is not a sale. First, a license agreement is generally not publicly disclosed because the only disclosure is to the licensee, and there are usually confidentiality obligations associated with the agreement. Second, because many inventors do not have the capability to commercialize these processes, licenses with parties in a better position to commercialize the invention further the objective of making the inventions publicly available. Third, "the real benefit from commercializing an invention occurs when the invention is utilized commercially or made available to the public," and a license grant is only a step in that direction.
The Federal Circuit vacated the Board's decision and remanded for a determination of whether other actions by Kollar, his assignee, or any licensee, such as an offer for a sale of a product using the claimed process or an offer to actually perform that process for commercial purposes more than one year before the filing date, triggered the on-sale bar.
Where Appropriate Safeguards Imposed, Appointment and Use of Technical Advisor Not Abuse of District Court's Discretion
In TechSearch L.L.C. v. Intel Corp., Nos. 00-1226, -1250 (April 11, 2002), the Federal Circuit Court of Appeals, agreeing with the district court's claim construction, held that the district court properly granted Intel's motion for summary judgment of noninfringement. The Federal Circuit also held that the district court did not abuse its discretion in appointing and using a technical advisor.
TechSearch owns U.S. Patent No. 5,574,927 ("the '927 patent") relating to micro-processors that "emulate," or behave like, popular microprocessors. TechSearch alleged that Intel's P6 line of microprocessors - processors that execute all of the instructions of their predecessors, without modification, as well as new instructions unique to the device - infringed the claims of the '927 patent. After construing several claim terms that were disputed by the parties, the district court granted summary judgment of noninfringement in favor of Intel on the ground that, inter alia, the P6 microprocessors are not configured to "emulate" as claimed by TechSearch's patent.
TechSearch acknowledged that Intel's P6 microprocessor's instruction set is comprised of instructions of all "previous versions" of Intel's microprocessors, and additional instructions newly added for the P6 microprocessors - i.e., "current version" instructions. The previous version instructions are common to both the previous version microprocessor and the P6 microprocessor. Further, the P6 microprocessor cannot function without the inclusion of the previous version instructions.
TechSearch further acknowledged that the P6 microprocessor executes earlier version instructions in the same manner as those from the current version in that the earlier version instructions are part of the P6 microprocessor's instruction set. On that basis, the Federal Circuit agreed with the district court's finding that the P6 microprocessor cannot infringe TechSearch's patent claims, as it does not "emulate" or modify the instructions first introduced with previous microprocessors when executing such previous version instructions:
The P6 microprocessor cannot be said to "emulate" solely because it executes instructions that also belong to the instruction set of previous microprocessors. Those previous version instructions are part and parcel of the P6 microprocessor's instruction set.
In affirming the district court's construction of several pertinent terms included in TechSearch's patent claims and comparing the claims to Intel's P6 microprocessor, the Federal Circuit concluded that "even assuming TechSearch has shown that some aspect of the P6 processor may be characterized as performing a form of emulation, no reasonable jury could find that the P6 emulates in the manner claimed."
Of broader significance, the Federal Circuit addressed the appropriateness of the district court's appointment and use of a technical advisor. After conducting a Markman hearing, but before granting summary judgment, the district court appointed its own technical advisor, a neutral third party, to provide technical assistance to the court. The district court reasoned that the case was "a highly technical" one which was "far beyond the boundaries of the normal questions of fact and law with which judges routinely grapple." The court limited the role of the technical advisor to explaining terminology and theory underlying the evidence offered by the parties, and mandated that the technical advisor not engage in any independent investigation of the underlying litigation, provide evidence to the court or contact any party or witness in the action.
TechSearch complained that the district court abrogated its authority by allowing the technical advisor to resolve disputed issues of fact. TechSearch...