Required Testing as Part of an Offer for Sale Does Not Preclude a Finding of a Commercial Sale for On-Sale Bar Defense

SUNOCO PARTNERS MARKETING v. U.S. VENTURE, INC.

Before Prost, Reyna, and Stoll.  Appeal from the United States District Court for the Northern District of Illinois.

Summary: References to testing in an offer for sale do not necessarily trigger application of the experimental use exception to the on-sale bar defense.      

Sunoco sued Venture for infringement of several patents related to the operation of butane-blending systems.  Venture alleged that a subset of the asserted claims were invalid because the invention covered by those claims was on sale a year and two days before filing the relevant patent application.  The inventors’ company offered to sell a butane-blending system on the condition that the third-party purchaser also commit to purchase butane from the company.  The District Court rejected Venture’s on-sale bar defense, concluding that the transaction occurred primarily for purposes of experimentation, rather than as a commercial offer for sale.  The District Court relied on a section of the contract between the inventors’ company and the third-party purchaser entitled “Equipment Testing.”  The District Court also relied on the fact that the third party was not agreeing to buy the equipment, but instead agreed to purchase barrels of butane, as evidence that the system was not part of a commercial sale.  Because the District Court determined that the sale at issue was primarily for purposes of experimentation, the District Court did not consider the second prong of the on-sale bar—whether the invention was ready for patenting.

The Federal Circuit reversed the District Court’s determination that Venture’s on-sale bar defense was negated by the experimental-use doctrine, and remanded for evaluation of the second prong of the on-sale bar.  The Federal Circuit held that the contract described the transaction as a sale, with no reference to experimental purpose.  The Federal Circuit also held that installation of the system in exchange for agreeing to purchase barrels of butane qualified as a commercial sale.  The Federal Circuit considered the section of the agreement entitled “Equipment Testing,” and held that the described testing was not for experimentation, as one test did not occur at the installation site, while the other test was an acceptance test that was also used in a later commercial contract by Sunoco.  However, because the District Court did not consider the second prong of the on-sale bar test, the Federal Circuit remanded for consideration regarding whether the invention sold anticipated or rendered obvious the claims at issue and whether it was ready for patenting.

Editor: Paul Stewart

Written by: Ashley C. Morales & Kendall Loebbaka