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License of the Right to Commercialize an Invention Does Not Trigger On-Sale Bar

April 11, 2002

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Last Month at the Federal Circuit - May 2002

Judges: Lourie (author), Friedman, and Clevenger

In In re Kollar, No. 01-1640 (Fed. Cir. Apr. 11, 2002), the Federal Circuit vacated and remanded the Board’s decision holding the claims in John Kollar’s U.S. Patent Application No. 08/657,564 (“the ‘564 application”) to be unpatentable under the on-sale bar of 35 U.S.C. § 102(b) because the Board had erred in determining that a mere grant of a license to an invention triggered the on-sale bar and in failing to recognize the distinction between a claim to a product and a claim to a process within the purview of § 102(b).

John Kollar’s ‘564 application describes a process for a low-cost method of preparing various dialkyl peroxides by reacting one or more alcohols and/or an olefin with a monoalkyl hydroperoxide, which in turn can be used to make, inter alia, ethylene glycol—a versatile chemical in manufacturing various other commercial products. The Examiner had rejected claims 1 through 17 of the ‘564 application based upon a purported sale of the invention by Kollar’s assignee, Redox Technologies, Inc. (“Redox”), a company owned and operated by Kollar, to Celanese Corporation (“Celanese”). Kollar appealed that rejection to the Board, and the Board affirmed, determining that a July 1, 1980, Agreement (“the Celanese Agreement” or “the Agreement”) between Redox and Celanese constituted a firm offer to sell embodiments of the claimed process and transferred a right to commercialize Kollar’s invention and the necessary technical information to do so in exchange for a series of royalty payments.

On appeal, Kollar primarily argued that the Celanese Agreement was merely a license and therefore did not involve the sale of a commercial embodiment of the invention within the meaning of the onsale bar of § 102(b). Kollar further contended that the invention was not ready for patenting because it had not been determined whether a commercial plant meeting the quality specifications necessary to carry out the claimed process could be built. In response, the PTO argued that the Celanese Agreement constituted a sale of the process disclosed in claim 1 because Kollar received royalty payments and licensing agreements in certain Celanese technology as consideration for disclosing his process and granting Celanese the “right to commercialize” the invention. The PTO also contended that the claimed process was ready for patenting because Kollar admitted that it was reduced to practice at the time the Celanese Agreement was signed.

The Federal Circuit reasoned that although the Celanese Agreement specifically contemplated that resultant products manufactured using the claimed process could potentially be sold, nowhere did the Agreement indicate that a product of the claimed process was actually offered for sale. Rather, the Agreement constituted a license to Celanese under any future patents relating to Kollar’s invention. Accordingly, the Court held that the “right to commercialize” the invention granted to Celanese pursuant to the Agreement was insufficient to bar the claims of the ‘564 application under § 102(b).

The Court also ruled that the Board had erred in failing to recognize the distinction between a claim to a product and a claim to a process. The transfer of know-how describing the process was not a sale of the invention within the meaning of § 102(b) because the process had not been carried out or performed as a result of the transaction. The Court concluded that the issue concerning the on-sale bar was not whether the process was physically represented or enabled by a written description, but whether the process had been commercialized. The mere transmission of a written description of the process did not meet that test.

The Court also reasoned that exempting licenses under a patent from the on-sale bar was not inconsistent with traditional policies underlying that doctrine. The Court rationalized that many inventors do not have the resources to produce commercial embodiments of their inventions and, therefore, the ability to license or assign without fear of triggering the on-sale bar facilitates providing the public with the benefit of their inventions under circumstances in which they might not otherwise have the ability or the incentive to do so.