Understanding the Federal Circuit's Clarification of the On-Sale Bar: What Inventors Need to Know
In December 2024, the U.S. Court of Appeals for the Federal Circuit issued a key ruling in Crown Packaging Technology, Inc. v. Belvac Production Machinery, Inc. that clarifies how the on-sale bar applies under pre-America Invents Act (pre-AIA) patent laws. While this ruling does not change the law, it highlights critical nuances that every inventor and entrepreneur should understand, particularly regarding pre-sales, public disclosures, and the timing of patent applications.
In this post, we’ll explore the key points of the ruling, its implications for inventors in the U.S., and strategies to protect intellectual property (IP) in an increasingly interconnected and fast-moving market.
What is the On-Sale Bar?
The on-sale bar prevents an inventor from patenting their invention if it has been commercially offered for sale for more than one year before filing a patent application. The purpose of this rule is to ensure that inventors do not delay patent filings while commercially exploiting their invention, thereby extending their monopoly unfairly.
The Federal Circuit clarified several key points in the Crown Packaging case:
A commercial offer for sale doesn’t need to be formal. Even "quotation letters" with specific terms, pricing, and delivery details can trigger the on-sale bar.
The geographic scope of the pre-AIA on-sale bar depends on where the offer is directed (e.g., to a U.S.-based party), not where the product will ultimately be used or manufactured.
These clarifications serve as an important reminder to inventors: seemingly informal pre-commercial activities may jeopardize your patent rights.
How This Ruling Impacts U.S. Inventors
For inventors in the U.S., this decision underscores the risks of pre-sale activities—especially in the age of Kickstarter and other crowdfunding platforms. Here are the primary implications:
Risks of Pre-Sales and Crowdfunding
Crowdfunding campaigns often involve pre-orders or pledges, which courts may interpret as commercial offers for sale. If such campaigns occur more than a year before filing for a patent, the on-sale bar could render the invention unpatentable in the U.S.
Additionally, the public nature of crowdfunding platforms constitutes public disclosure, potentially barring patent protection in international markets where no grace period exists.
Importance of Timing in Filing Patents
Inventors must file a provisional patent application before launching pre-sales or crowdfunding campaigns to preserve their U.S. patent rights and avoid triggering the on-sale bar.
The provisional application provides a 12-month window to refine the invention and file a full (non-provisional) patent application.
International Risks
Most countries do not allow a grace period for public disclosures or sales. If an inventor publicly discloses or offers their invention for sale in the U.S. before filing a patent application, they may lose the ability to secure international patents entirely.
Strategic Steps for Managing IP and Pre-Sales
To navigate the risks of pre-sales, disclosures, and patent filings, inventors can adopt the following strategies:
1. File a Provisional Patent Application Early
Filing a provisional patent application protects the invention’s priority date while allowing 12 months to develop the product and assess market viability. This step is critical before any public or commercial activity, including crowdfunding campaigns.
2. Avoid Public Disclosures
Be mindful of what is shared on crowdfunding platforms, in marketing materials, or in public forums. Keep descriptions general and avoid revealing detailed, patentable features.
3. Use Confidentiality Agreements
When discussing the invention with collaborators, manufacturers, or potential investors, ensure they sign non-disclosure agreements (NDAs) to protect your IP.
4. Clearly Define Development Activities
If engaging a development partner, clarify in contracts that the relationship is for service work and not a commercial sale of the invention. This can help avoid triggering the on-sale bar.
5. Emphasize "Under Development" Status
When engaging in pre-sales or crowdfunding, emphasize that the product is still in development and delivery timelines are estimates. This distinction can help reduce the risk of courts interpreting the activity as a finalized commercial offer.
6. Plan for International Patent Protection
If international markets are part of the plan, file patent applications before any public offering or disclosure. This ensures compliance with stricter foreign rules.
Cautionary Notes: Situations That Could Trigger the On-Sale Bar
While RFQs alone typically do not trigger the on-sale bar, certain scenarios might present risks:
Selling a Complete Invention via RFQs:
If you solicit RFQs for the turnkey production of a complete product and provide detailed specifications for the final invention, it could be interpreted as evidence that the invention is ready for sale.
Even if the product isn’t physically manufactured yet, showing it is “ready for patenting” combined with RFQs for the final product could be risky.
Contractual Language:
Be cautious of including language in RFQs that implies intent to enter into a binding agreement to produce the invention or that could be interpreted as a commercial offer (e.g., "We are seeking to purchase X units of this product at $Y per unit").
Ensure the RFQ is framed as soliciting bids for manufacturing services or components, not an agreement to produce a commercial product.
Pre-Critical Date Agreements:
If an RFQ leads to a binding contract for the sale of the final invention more than one year before filing a patent application, this could trigger the on-sale bar.
Best Practices to Avoid On-Sale Bar Risks with RFQs
Maintain Confidentiality:
Always require NDAs before sharing RFQs or any details about the invention with suppliers, manufacturers, or collaborators.
Focus on Development, Not Sale:
Clearly indicate that the RFQ is for development purposes (e.g., prototyping, pre-production evaluation) and not for the sale or commercialization of a final product.
Avoid Final Product Specifications:
If possible, limit RFQs to parts, components, or subassemblies rather than specifying the complete invention, especially if the invention is still under development.
Document Intent:
Keep records that demonstrate the purpose of the RFQ process is for research, development, or exploration, not commercialization or sale.
File a Provisional Patent First:
If the invention is fully developed or close to being "ready for patenting," consider filing a provisional patent application before soliciting RFQs, especially for final assembly or turnkey solutions.
Key Takeaways
The Federal Circuit’s decision in the Crown Packaging case serves as a wake-up call for inventors navigating the complexities of patent law. It emphasizes that:
Even informal pre-sale activities can jeopardize patent rights under the on-sale bar.
Public disclosures on crowdfunding platforms can create hurdles for securing both U.S. and international patents.
To mitigate these risks, inventors should prioritize timely patent filings, maintain confidentiality, and carefully structure their pre-commercialization strategies. By doing so, they can maximize their IP protection while bringing innovative products to market.
Let us know if you need assistance with provisional patent filings, NDAs, or IP strategies tailored to your invention!
Have Questions About Your IP Strategy?
If you’re an emerging brand or an existing brand looking to navigate the complexities of intellectual property protection, Idea House & Co. can help. Whether you’re preparing for crowdfunding, filing patents, or managing confidentiality agreements, our team can guide you through every step of the process.
Contact us today to review your specific situation and explore how we can help you secure and protect your intellectual property. Let’s make sure your great ideas get the protection they deserve! ops@ideahouseandco.com or Steve@ideahouseandco.com
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