Hoping to bring greater certainty to the application of the on-sale bar test the Supreme Court, in 1998, in Pfaff v. Wells Electronics, Inc. (1) articulated a new, two part standard for that test. The Court held that a patent is invalid under the on-sale bar if the invention was (1) the subject of a commercial offer for sale and (2) ready for patenting, prior to the critical date. So far, however, the certainty sought by the Court has proved elusive, particularly with respect to the, now more important, "commercial offer" prong of that test. One point that seems clear in the wake of Pfaff, though, is that the scope of commercial activities sufficient to prove an offer for sale has narrowed.
Pre-Pfaff--Totality of the Circumstances
Prior to the Supreme Court's decision in Pfaff, the Federal Circuit looked to the "totality of the circumstances" in each case to determine whether a patent was invalid for being on sale. (2) Under the heavily fact-laden totality of the circumstances test, an actual sale was not required, and an offer did not have to be accepted to trigger the bar. (3) An offer to sell merely had to be "definite" (4) and "objectively manifested." (5) But as would be expected under this amorphous, fact- intensive standard, few predictable, concrete rules emerged as to what constituted an objective, definite offer in the absence of a sale.
Typical of these pre-Pfaff offer to sell cases was RCA Corporation v. Data General Corporation. (6) In RCA, the patentee argued that its bid proposal on a Federal Aviation Administration (FAA) project was not a "definite" offer. The Federal Circuit rejected that argument, stating that "merely offering to sell a product by way of an advertisement or invoice may be evidence of a definite offer for sale or a sale of a claimed invention even though no details are disclosed." (7) Regarding the definite nature of the offer in view of the ongoing and experimental nature of the work, the Federal Circuit stated:
The requirement of a definite offer excludes merely indefinite or nebulous discussion about a possible sale. While this requirement may be met by a patentee's commercial activity which does not rise to the level of a formal "offer" under contract law principles ... a definite offer in the contract sense clearly meets this requirement. (8)
The Federal Circuit's statement that activities short of a formal offer could establish an on-sale bar, would not survive Pfaff.
Pfaff Articulates a New Standard
In 1998, in Pfaff v. Wells, the Supreme Court established the current two-prong test governing application of the on-sale bar: "First the product must be the subject of a commercial offer for sale.... Second, the invention must be ready for patenting." (9) The Supreme Court intended this statement of the on-sale bar test to bring greater certainty to this area of law, noting that the Federal Circuit's "totality of the circumstances" test had been criticized as unnecessarily vague. (10)
As to the second prong, an invention is "ready for patenting" when it is reduced to practice or when an enabling disclosure is prepared, which in many cases is quite early in development. Consequently, the new rule has made it more difficult for a patentee to defend against an on-sale challenge based on the invention not being sufficiently developed to be "on sale." Predictably then, increased attention has focused on the commercial offer prong of the Supreme Court's test.
Post-Pfaff--Contract Law Principles Govern
In Group One, Ltd. v. Hallmark Cards, Inc., (11) …