Sheath Sell Off Sinks Big Dollar Damage Award

Holding

In Junker v. Medical Components, 21-1649 (Fed. Cir. Feb. 10, 2022), the Court of Appeals for the Federal Circuit (“Federal Circuit”) reversed a district court decision granting summary judgment of no invalidity under the on-sale bar.

Background

Junker sued Medical Components and Martech Medical Products (collectively, “MedComp”) for infringement of design patent D450,839 (“the ’839 patent”), which is directed to “introducer sheaths” used in the medical insertion of catheters. The application leading to the ’839 patent was filed on Feb. 7, 2000. Since the effective filing date was prior to March 16, 2013, pre-AIA law applied, and the critical date for the on-sale bar of 35 U.S.C. §102(b) was Feb. 7, 1999. Id. at *3-4.

In 1998, Junker entered into a business relationship with Eddings. In January 1999, Eddings' company, Xentek, produced a prototype of an introducer sheath product that included all of the features of Junker’s design. Id. at *5.

On January 8, 1999, Xentek sent Boston Scientific Corporation a letter detailing bulk pricing information for variously sized introducer sheath products. Id.

The district court granted Junker’s motion for summary judgment of no invalidity, finding that the January 8 letter was not a commercial offer for sale and, therefore, not a basis for invalidity under the on-sale bar of 35 U.S.C. §102(b). According to the district court, the letter was “a preliminary negotiation, not a definite offer.” Id. at *7. Although the letter “included numerous, specific, commercial terms (such as payment terms, shipment terms, and delivery conditions),” the court focused on use of the word “quotation” and the invitation to further discuss specific requirements. Id.

Rejecting other invalidity arguments, the district court found MedComp willfully infringed the ’839 patent and awarded damages of $1.2M. Id. at *8.

Federal Circuit Decision

The Federal Circuit reversed, finding that the pre-critical date letter was a commercial offer for sale. There was no dispute that the product described in the letter embodied the claimed design and that the claimed design was ready for patenting as of January 1999 when the prototype was produced by Xentek including all the features of Junker’s design.

The only issue was a question of law — whether the letter constituted a commercial offer for sale. Id. at *10. The Federal Circuit found three factors supporting the conclusion that the letter was a commercial offer for sale inviting Boston Scientific “to act rather than merely negotiate”:

1. Xentek was directly responding to a “request for quotation” from Boston Scientific, and the letter was addressed to Boston Scientific alone. It was not an unsolicited price quotation or invitation to negotiate, but rather a specific offer to Boston Scientific to take further action.” at *11.
2. The letter contained a number of necessary terms typical for a commercial contract: prices, delivery conditions, shipment conditions, and payment terms. at *11-12.
3. Xentek's letter specified multiple different purchase options for its products. at *12.

The Federal Circuit rejected Junker’s argument, that the letter was not an offer because it did not specify the exact amount of product the buyer desires, as “too stringent,” concluding:

The completeness of the relevant commercial sale terms in the letter itself signals that this letter was not merely an invitation to further negotiate, but rather multiple offers for sale, any one or more of which Boston Scientific could have simply accepted to bind the parties in a contract.

Id. at *12-13.

The Federal Circuit also rejected Junker’s argument that the letter was a “quote” not an “offer,” noting that labels do not control over substance:

While the precise label used for a given communication is relevant, it is not controlling. Rather, the terms of the communication must be considered in their entirety to determine whether an offer was intended, or if it was merely an invitation for an offer or further negotiations. A quotation typically leaves many terms necessary to a contract—such as place of delivery, payment terms, and the like—unexpressed.

Id. at *15-16. Thus, the Federal Circuit agreed with MedComp that the January 8, 1999, letter was a commercial offer for sale of the claimed design, rendering the sole claim of the ’839 patent invalid.

Take-Aways

First and foremost, remember that unless there is a design-specific rule (by statute or in the case law), utility patent principles apply to design patents.

Statutory “on sale” activity under pre-AIA 35 U.S.C. §102(b) arises when a definite sale or offer for sale of the claimed invention occurs in the United States more than one year before the filing date of the application. See Ferag AG v. Quipp Inc., 45 F.3d 1562, 1566 (Fed. Cir. 1995). An embodiment of the claimed invention that was sold or offered for sale before the critical date will, therefore, be anticipating. However, the offer for sale must be an offer in the contract law sense. See, Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041 (Fed. Cir. 2001); see also Merck & Cie v. Watson Labs. Inc., 822 F.3d 1347 (Fed. Cir. 2016), cert. denied, 137 S.Ct. 631 (U.S., 2017); Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359 (Fed. Cir. 2007).

The Supreme Court set out the following test in Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998) for determining whether pre-AIA 102(b) applies:

1. The product must be the subject of a commercial offer for sale; and
2. The invention must be ready for patenting: either there is proof of reduction to practice before the critical date or proof that prior to the critical date the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention.

In Junker, the Federal Circuit found that the standards of both Pfaff and Group One were satisfied. The case stands as a reminder to practitioners to always be careful about the language you use in correspondence. Merely using the term “quote” and language inviting future discussion may not be enough to convince a court that a document is merely a quotation (rather than an offer for sale), especially if the document contains specific and complete commercial purchase terms.  Ask probing questions to find out what the applicant has done, and if the one-year period (which was preserved, in part, under the AIA) has not passed, file the patent application in time to beat that one-year bar.

And, whether drafting a patent application or considering purchase of a patent application/patent in a due diligence setting, be on guard for any communications with other parties about the claimed invention. In this case, it was a letter from the business partner/manufacturer, but the warning similarly applies for communications from regulatory, marketing, and financing colleagues.