Does the AIA Require Public Availability for "On Sale" Prior Art?, Contributed by Michael J. Flibbert and Pier D. DeRoo, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
The Leahy-Smith America Invents Act (“AIA”) effects major changes to what could be called the heart of the patent statute, 35 U.S.C. § 102. In addition to implementing a first-inventor-to-file system and removing territorial restrictions on prior art activities, the AIA threatens to upend yet another fundamental prior art doctrine: the on-sale bar. The amended statute provides:
A person shall be entitled to a patent unless—
(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention[.]1
The revised language raises an important question of statutory interpretation: Does the phrase “or otherwise available to the public” modify “on sale,” such that only “public” sales or offers for sale qualify as prior art? An affirmative answer could significantly narrow the scope of the on-sale bar.
The Current On-Sale Bar Under Section 102(b)
Under current Section 102(b), sales or offers for sale, kept secret from the public, nevertheless may trigger the on-sale bar.2 Although these secret activities likely do not disclose claimed inventions to the general public, the statutory language of Section 102(b) is nevertheless broad enough to cover these actions.
Additionally, even when a claimed invention itself is not the object of a sale or offer to sell, courts have applied a similar bar to patentability under a forfeiture rationale when a sale or offer for sale amounts to an indirect “secret commercialization” of a claimed invention. This gap-filling theory is illustrated by the disparate treatment applied to secret commercialization of unpatented methods depending on the identity of the commercializing party. When an inventor uses a secret, unpatented method to produce and sell goods that do not reveal the method, and does so for longer than the one-year grace period, these sales may bar the inventor from later patenting the method.3 When a third party uses a secret, unpatented method to produce and sell such goods, however, this activity will not create a bar preventing a different inventor from later patenting the same method.4 Thus, under current Section 102(b) and the related forfeiture doctrine, an inventor faces a simple choice: “he must content himself with either secrecy, or legal monopoly.”5
A Potential New Interpretation of “On Sale”
Statutory construction begins with the language of the statute.6 When a statute’s terms are unambiguous, judicial inquiry ends, except in rare and exceptional circumstances.7 Proponents of a new interpretation of the on-sale bar may argue that the AIA provides new, unambiguous statutory language. The statute now states “on sale, or otherwise available to the public.” The newly added phrase arguably refers back to the preceding terms in AIA Section 102(a)(1)—including the immediately preceding “on sale” term—effectively limiting the on-sale bar to publicly available sales or offers for sale. This view may be further supported by the first “or” in AIA Section 102(a)(1), which seems to create a group of three related categories of publicly available prior art (“or in public use, on sale, or otherwise available to the public”). Such an interpretation, if adopted, would likely curtail the current breadth of the on-sale bar, which includes barring patentability after secret sales or offers for sale.
If the Federal Circuit finds AIA Section 102(a)(1) ambiguous, it may still interpret “on sale” by reference to other associated words or phrases in the statute. Under an established canon of statutory interpretation, noscitur a sociis, the meaning of a word that appears ambiguous in isolation may become clear when analyzed in light of the terms that surround it.8 Thus, the Court may interpret “on sale” to possess qualities similar to its surrounding Section 102(a)(1) terms—patents, publications, public use, “or otherwise available to the public”—each of which requires some level of public availability.
In addition, because the phrase “or otherwise available to the public” is set off from its preceding terms by a comma, the Court may conclude that it applies to the on-sale bar. In Finisar Corp. v. DirecTV Group, Inc., for example, the Federal Circuit noted that “[w]hen a modifier is set off from a series of antecedents by a comma, the modifier should be read to apply to each of those antecedents.”9 Other courts have interpreted similar catchall language in this manner. The Second Circuit has reasoned, for example, that a series of terms followed by a comma and the phrase “or any other . . .” means that those preceding terms are modified by the catchall phrase.10 The court in Universal City Studios, Inc. v. Reimerdes adopted the same reasoning for a statute with an “or otherwise” phrase similar in structure to AIA Section 102(a)(1).11 Senator Kyl noted these cases in his remarks on the Senate floor, expressing that “or otherwise available to the public” should in fact modify “on sale” in the revised statute.12
Indeed, the legislative history tends to support a more restrictive interpretation of the on-sale bar under the AIA. Among the recent attempts at patent reform, the 2005 House bill contained the phrase “or otherwise publicly known,” but the House omitted this language in its 2007 bill.13 The 2007 Senate version, however, incorporated the “or otherwise available to the public” phrase in its now-enacted form, which again appeared in both the House and Senate patent reform bills in 2009.14 The Senate Judiciary Committee Report explained: “[T]he phrase ‘available to the public’ is added to clarify the broad scope of relevant prior art, as well as to emphasize the fact that it must be publicly available.”15
The House and Senate patent reform bills in 2011 again contained the same “or otherwise available to the public” language, and the House Report gave an identical explanation of this phrase.16 But speaking immediately before the Senate passed its bill with a 95-5 vote, Senator Kyl elaborated at length on the purported “public availability” requirements for all prior art, including on-sale activities, under AIA Section 102(a)(1). He stated that the words “or otherwise available to the public” were added to make clear that the preceding clauses describe things that are of the same quality or nature as the final clause; that is, that although different categories of prior art are listed, all of them are limited to that which makes the invention “available to the public.”17
According to Senator Kyl, the bill creates “a general public availability standard.”18 He argued there is no reason to fear commercialization that consists of a secret sale or offer for sale but that does not disclose the invention to the public.19 He also criticized the forfeiture doctrine as imposing penalties not demanded by any legitimate public interest, reasoning that with a first-inventor-to-file system, the AIA already provided ample incentives to file promptly. Id. The new definition of prior art, he stated, will serve only one purpose: to prevent inventors from withdrawing that which was already in the public’s possession.20
Reiterating that the bill imposed a general public availability standard and eliminated secret prior art, Senator Kyl further urged that a contrary construction of Section 102(a)(1) that allowed private and non-disclosing uses and sales to constitute invalidating prior art “would be fairly disastrous for the U.S. patent system” by making the new post-grant review procedure unmanageable and by placing U.S. inventors “at grave risk of having their inventions stolen through fraud.”21 Immediately following Senator Kyl’s remarks, the Senate passed its version of the bill with a 95-5 vote.22 The following day, Senators Leahy and Hatch offered comments supporting Senator Kyl’s positions on “secret” on-sale activities.23 The House and Senate again subsequently passed this Section 102(a)(1) language without change, which President Obama signed into law on September 16, 2011.
The Federal Circuit has proven receptive at times to considering legislative histories. The Court has used legislative histories to confirm its interpretations based on plain readings of statutory language.24 It has also used legislative histories to decipher ambiguous statutes.25 And the Federal Circuit may use legislative history to overcome even an unambiguous, plain reading of a statute if it provides an “extraordinary showing of contrary intentions.”26 Given the specificity of the Senate floor remarks, the Court may find the legislative history persuasive. Indeed, if the Court credits the legislative history, it may apply a “general public availability standard” to both the on-sale and public use provisions of AIA Section 102(a)(1).27
A Plausible Alternative: Retain the Current Interpretation of “On Sale”
The Federal Circuit, however, may require more than Senate floor remarks to overrule decades of on-sale bar jurisprudence. Equally forceful “plain meaning” arguments can be made to support retaining the current understanding of the on-sale bar. Nothing in the language of AIA Section 102(a)(1) expressly limits the on-sale bar to publicly available sales or offers for sale. The amended statute says “on sale,” not “publicly on sale” or “on sale to the general public.” Nor does any grammatical rule absolutely require the phrase “or otherwise available to the public” to refer back to each of the preceding terms in AIA Section 102(a)(1), including “on sale.” Though the word “otherwise” suggests some antecedent in Section 102(a)(1), that antecedent could just as easily be the public use provision, for example. And the fact that a comma separates “on sale” from “or otherwise available to the public” may suggest they are distinct categories of prior art, whereas the absence of such a comma would perhaps facilitate reading them together.28
Furthermore, because Congress reenacted the familiar “on sale” language without change, the Federal Circuit may conclude that Congress intended to retain the existing judicial interpretations of the on-sale bar. In Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co., for example, the Court found the repeated reenactment of identical 35 U.S.C. § 112 language persuasive since courts had long interpreted that language to provide for a separate written description requirement.29
The Federal Circuit has also applied this reasoning to the reenactment of specific terms within an otherwise revised statute.30 In Nuijten, the Court concluded that by reenacting “manufacture” as a category of patentable subject matter, despite other changes to 35 U.S.C. § 101, Congress intended to adopt pre-1952 judicial definitions of the term “manufacture.”31 Under these early definitions, the Federal Circuit determined that Nuijten’s claimed “signals” did not constitute “manufactures.”32 Applying this reasoning to AIA § 102(a)(1), the reenactment of the familiar “on sale” language may lead the Federal Circuit to retain its current on-sale bar jurisprudence.
The Federal Circuit may also hold that it may not add statutory language that Congress did not include. In Ariad, the en banc majority reasoned that “[i]f Congress had intended enablement to be the sole description requirement of § 112, first paragraph, the statute would have been written differently.”33 Outside of the patent law context, the Federal Circuit has applied similar reasoning. In holding that no discovery rule tolled the statute of limitations under the Vaccine Act, for example, the Court noted that “Congress knows how to legislate an explicit discovery rule.”34 Here, Congress could have used “publicly on sale,” “on sale to the general public,” or similar language if it wanted to narrow the on-sale bar, but it failed to do so. Consequently, the Federal Circuit may be disinclined to read such a requirement into the reenacted “on sale” language.
Moreover, in contrast to Senator Kyl’s remarks suggesting that the “or otherwise available to the public” phrase in AIA § 102(a)(1) should unambiguously modify the preceding terms, some courts have in fact declined to read catchall “or otherwise” phrases as modifying preceding terms. In interpreting the review standard under the Administrative Procedure Act—”arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law”—the Supreme Court has read the catchall phrase as an independent category not modifying the preceding terms.35 The Eleventh Circuit has similarly declined to narrow the meaning of preceding terms with an “or otherwise” phrase under another federal statute, 18 U.S.C. § 2251A.36 Thus, Senator Kyl’s floor statements may overstate his case.
If the Federal Circuit remains unconvinced that AIA § 102(a)(1) altered the established meaning of “on sale,” it likely will conclude that the phrase “or otherwise available to the public” simply defines an independent fifth category of prior art with no effect on the on-sale bar.37 To reach this conclusion, however, the Court will have to discount the legislative history, which, as discussed above, appears to show a congressional intent to eliminate secret sales and offers for sale as prior art.
Implications for Practitioners
As we have seen, both sides of the impending “on sale” debate will have reasonable arguments. One is left wondering: If Congress did intend to eliminate secret sales and offers for sale as prior art, why did it leave it to the courts to infer this significant change in the law from legislative history and the “catchall” language of AIA Section 102(a)(1)? Elsewhere in the AIA Congress provided explicit definitions, for example defining “claimed invention” for the first time.38 Yet Congress did not define “on sale” or modify that well-established language. Perhaps those who advocated narrowing the on-sale bar should propose a new statutory definition of “on sale” to better effectuate their objective.
Absent some legislative fix, the on-sale bar faces significant unpredictability once AIA Section 102(a)(1) goes into effect on March 16, 2013. Years of litigation—ultimately before the Supreme Court—may be required to decipher Congress’s true intention. If the federal courts do eventually rule that secret sales or offers for sale no longer qualify as prior art, the role of trade secrecy may greatly expand under the AIA. Confidentiality and non-disclosure agreements, among other precautions, may be required with sales or offers for sale to avoid triggering the on-sale bar. Through trade secrecy, inventors may potentially commercialize their inventions indefinitely under a veil of confidentiality, only filing for a patent after competition emerges. Of course, reliance on trade secrets would carry other risks because, under the new first-inventor-to-file system, inventors will no longer be able to establish they were first to invent if they lose the race to the U.S. Patent Office.
In addition, if a narrower on-sale bar emerges, the Federal Circuit may have to judicially formulate updated standards for public availability in extending this requirement to on-sale activity, because many of the public availability requirements for other categories of prior art (e.g., proper indexing of university theses, etc.) do not appear readily applicable to sales or offers for sale. For instance, if an invention is sold with accompanying non-disclosure agreements to maintain secrecy, and such sales become widely prevalent in the marketplace, the Court may have to decide whether an invention becomes publicly available after sales reach a certain critical mass. Similarly, the Court may have to determine whether public availability for on-sale activity requires that the invention be sold or offered for sale to “interested” parties or competitors, as opposed to just any member of the public, before the on-sale bar arises. Given these uncertainties concerning the on-sale bar under the AIA, practitioners would be well advised to tread cautiously and stay tuned for further developments.
Michael J. Flibbert is a partner at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. Mr. Flibbert has extensive experience in all aspects of patent law, focusing on appeals and district court litigation. He can be reached at 202.408.4493 or firstname.lastname@example.org.
Pier D. DeRoo is an attorney at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. (Pier D. DeRoo is admitted in Maryland only; practicing under the supervision of the partners of Finnegan’s Washington, DC office.)
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