Offer to Sell Services, for Compensation, More Than One Year Before Patent Filed, Invalidates Patent

The Court of Appeals for the Federal Circuit held that when patent owner in February and March 2003, performed furnace tube inspection services similar to the later-issued method patent, on Norco’s furnace in exchange for $72,060, more than one year before the patent application filing date (June 1, 2004), this offer to sell invalidated the Quest patent. The on-sale bar does not apply to experimental use, but an invention is “on sale” within the meaning of the Patent Act, 35 U.S.C. § 102(b), when the invention is (1) “the subject of a commercial offer for sale” and (2) “ready for patenting.” This inquiry requires there have been a “commercial offer,” and “the invention that [wa]s the subject matter of the offer for sale must satisfy each claim limitation of the patent”. Quest Integrity USA, LLC v. Cokebusters USA, Inc., Case No. 2017-2423 (Fed. Cir. May 21, 2019) (Text of Full opinion available here).

Quest Integrity USA, LLC (“Quest”) appealed a judgment of the District Court in Delaware in favor of Cokebusters USA Inc. (“Cokebusters”). On summary judgment, the district court held that certain claims were invalid under 35 U.S.C. § 102(b) because the claimed invention was offered for sale more than one year prior to the filing of the patent application.

Quest owns the ’874 patent. The ’874 patent relates to a system and method for displaying inspection data collected from certain commercial furnaces (e.g., a furnace used in a refinery). The ’874 patent explains that “a furnace is generally comprised of several hundred to several thousand feet of serpentine tubing that is characterized by straight tube segments . . . interconnected by angled bends.” The bends allow the tube segments of the furnace to stack for maximum heat transfer and efficiency.

As an example, Claim 24 states: “A computer-readable medium having computer- executable instructions for performing a method of displaying inspection data collected from a furnace, wherein said furnace comprises a plurality of tube segments interconnected by a plurality of bends so as to allow stacking of at least a portion of said tube segments, said method comprising: [a] generating a plurality of data markers each of which identifies a location of a physical feature of said furnace; [b] partitioning said inspection data at said data markers so as to correlate said inspection data to an appropriate one of said tube segments of said furnace; [c] generating a display of at least a portion of said partitioned inspection data arranged to represent said physical geometry of a plurality of said tube segments and enable visual detection of a problem area comprising one or more of said tube segments; and [d] wherein said inspection data is collected by one or more devices selected from the following group: an ultrasonic transducer, a laser profilometer, and combinations thereof.

Cokebusters defended on the ground that the claims were invalid under 35 U.S.C. § 102(b) because there was a commercial sale of services that used the claimed methods, computer-readable media, and system more than one year before June 1, 2004, the date the application that led to the ’874 patent was filed in the United States. The basis for the on-sale bar defense was an offer by Quest itself to provide furnace tube inspection services to a client in the petrochemical industry. In February and March 2003, Quest performed furnace tube inspection services for Orion Norco Refinery in Norco, Louisiana in exchange for $72,060 (“the Norco Sale”). Cokebusters alleged that these commercial activities rendered the claims invalid because of the on-sale bar. Cokebusters argued that during those inspections, Quest used its commercial furnace tube inspection method, computer-readable medium, and system and generated two inspection reports (“the Norco Reports”), which Quest provided to the customer.

The Norco Reports contained two-dimensional, color-coded strip charts displaying the collected furnace inspection data (“the Norco Strip Charts”). Cokebusters alleged that the method, computer-readable medium, and system used to prepare the Norco Strip Charts satisfied the limitations of the asserted claims. Quest did not sell any hardware or software to the customer.

Claim terms is relevant to this appeal: “generating a display of at least a portion of said partitioned data arranged to represent said physical geometry of said tube segments and enable visual detection of a problem area comprising one or more of said tube segments.” This claim term was called “the Display Limitation.”

The district court construed the Display Limitation as including strip charts, such as those described in Example 1 of the ’874 patent, and concluded that the invention in Example 1 was not disclaimed during prosecution. At his deposition, inventor De Lorenzo testified that the “composite data marker” and “sensor data” features of certain claims were used in the Norco Sale.

In granting summary judgment, the district court concluded that inventor declarations from De Lorenzo and Phil Bondurant, another co-inventor of the ’874 patent, contradicted the earlier De Lorenzo testimony and stated that the Norco Sale did not, in fact, produce the Norco Reports using these features, were sham affidavits and declined to consider them.

Section 102(b) prevents a person from receiving a patent if, “more than one year prior to the date of the application for patent in the United States,” “the invention was . . . on sale” in the United States. This is known as the “onsale bar.” The on-sale bar seeks to prevent “[a]ny attempt to use [the claimed invention] for a profit, and not by way of experiment,” for more than one year before filing for a patent application. Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 65 (1998); see Medicines Co. v. Hospira, Inc., 827 F.3d 1363, 1372, 1377 (Fed. Cir. 2016) (en banc).

In Pfaff, the Supreme Court outlined a two-part test for determining whether an invention is “on sale” within the meaning of § 102(b). The patented invention must have been (1) “the subject of a commercial offer for sale” and (2) “ready for patenting.” Id. at 67. This inquiry requires there have been a “commercial offer,” and “the invention that [wa]s the subject matter of the offer for sale must satisfy each claim limitation of the patent, though it may do so inherently.” Scaltech, Inc. v. Retec/Tetra, LLC, 269 F.3d 1321, 1328–29 (Fed. Cir. 2001). Further, “a sale or offer of sale need not make an invention available to the public,” and “‘secret sales’ can invalidate a patent.” Helsinn Healthcare S.A. v. Teva Pharm. USA, Inc., 139 S. Ct. 628, 633 (2019).

Sale of a product (here, sale of the Norco Reports) produced by performing a claimed process implicates the on-sale bar. Medicines, 827 F.3d at 1376; D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1147–48 (Fed. Cir. 1983); cf. Quanta Comput., Inc. v. LG Elecs., Inc., 553 U.S. 617, 629 (2008) (“[T]his Court has repeatedly held that method patents were exhausted by the sale of an item that embodied the method.”).

 

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