Start-ups Beware! Early Agreements with Suppliers to Manufacture Patented Products Can Kill Your Patent

Authored by Jeffrey A. Berkowitz

Start-up companies should learn from the mistake of a titan in the appliance industry, Hamilton Beach, and file patent applications covering prototypes as early as possible!

In response to Hamilton Beach's success in selling the "Stay or Go" slow cooker, Sunbeam developed a competing slow cooker called the "Cook & Carry." Hamilton Beach sued Sunbeam for patent infringement.

Hamilton Beach filed for the patent on March 1, 2006, so the critical date in this dispute was one year earlier, or March 1, 2005. Sunbeam argued that Hamilton Beach's foreign supplier offered to sell the Stay or Go cooker before the critical date. Specifically, Hamilton Beach issued a purchase order for nearly 2,000 Stay or Go cookers to its foreign supplier on February 8, 2005. Hamilton Beach listed a U.S. facility as the shipping address for the merchandise and another U.S. office as the billing address. The supplier confirmed receipt of the order on February 25, 2005, and responded that it would begin manufacturing the cookers once it received Hamilton Beach's release.

Because of these facts, a court recently concluded there was a commercial offer for sale of the Stay or Go cooker over one year before Hamilton Beach filed for the patent. Initially, the court found it was of no importance that the sale was made by Hamilton Beach's supplier. The court noted that after Hamilton Beach sent the order on February 8, 2005, and the supplier responded on February 25, 2005, that it had received and was ready to fulfill the order. This response from the supplier was significant because it was an "offer to sell" Stay or Go cookers that could form a contract upon Hamilton Beach's "release." This satisfied the legal requirement of a commercial offer for sale.

Another legal requirement is that the prototype be "ready for patenting" and the court ruled that the Stay or Go cooker was ready for patenting before the critical date. The court considered evidence of Hamilton Beach's meetings with retail customers before the critical date during which Hamilton Beach presented formal drawings showing the Stay or Go with all of the elements claimed in both of Hamilton Beach's patents. The court stated that even if some prototypes did not work as intended, fine-tuning an invention after the critical date does not mean the invention was not "ready for patenting."

This case demonstrates the importance of filing patent applications for an invention as early as possible. When timing is crucial, inventors should consider filing provisional applications, which may offer an inexpensive and useful tool to obtain the earliest possible filing date. This case also shows the need for start-ups to be cautious when dealing with suppliers, including overseas suppliers, as those dealings may trigger the on-sale bar.

Originally printed in The Marker/Start Israel on December 11, 2013. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.