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Grp. One, Ltd. v. Hallmark Cards, Inc. - 254 F.3d 1041 (Fed. Cir. 2001)

Rule:

The question of whether an invention is the subject of a commercial offer for sale for purposes of the "on-sale bar" of 35 U.S.C.S. § 102(b) is a matter of Federal Circuit law, to be analyzed under the law of contracts as generally understood.

 

Facts:

Frederic Goldstein, the Managing Director and sole beneficial shareholder of Group One, was the name inventor of the '492 patent and the '752 patent. The '752 patent claimed a method for curling and shredding ribbon on a mass basis, while the  '492 patent  claimed a machine for performing the method. Prior to Goldstein's conception, ribbon had been sold in a form that was suitable for curling, but was not so curled until curled by the consumer. Goldstein perceived a market for pre-curled ribbon--for use, for example, as filler in a gift package or gathered in a bow--and conceived the inventions of the '492 patent and '752 patent to exploit that market. Before filing his PCT application, Goldstein attempted to generate interest in his device, commencing a series of communications with Hallmark. Thereafter, Hallmark and Goldstein arranged a meeting to discuss details of the curling and shredding machine for February 17, 1992. Prior to the meeting, the parties negotiated a Confidential Disclosure Agreement (CDA) regarding the technology to be discussed at the meeting. However, despite essential agreement on the terms of the CDA, Hallmark never signed it. Hallmark then cancelled the planned February 17 meeting, deciding it would instead evaluate its own internal capability of producing a curling and shredding machine. On June 6, 1992, Hallmark sent a letter to Goldstein indicating that it had developed its own machine for curling and shredding ribbon. Subsequently, Group One sued Hallmark for infringement of the aforementioned patents. Hallmark counterclaimed for a declaratory judgment that Group One's '492 patent was invalid and unenforceable. Ruling on summary judgment, the district court found that Group One's communications with Hallmark more than one year before the filing date of the application for the '492 patent constituted an offer for sale and therefore the patent was invalid. The district court also ruled that Group One’s trade secrets ceased to be such on the date on which its Patent Cooperation Treaty (PCT) patent application was published. Group One challenged the trial court’s decision.

Issue:

Did the district court err in holding that the patent was invalid because Group One’s communication with Hallmark constituted an offer for sale within the purview of the one-year ban?

Answer:

Yes

Conclusion:

The United States Court of Appeals for the Federal Circuit affirmed the district court's judgment regarding the trade secret issue, noting that under state law, the publication of the PCT application destroyed the trade secret status of the confidential disclosures. However, the appellate court reversed the district court's judgment that the patent was invalid under the on-sale bar of § 102(b). The Court held that only an offer rising to the level of a commercial offer for sale, as generally understood under contract law, could trigger the on-sale bar. According to the Court, the communications between the inventor and the corporation did not rise to the level of a commercial offer for sale.

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