Sunoco Partners Marketing & Terminals L.P. v. U.S. Venture, Inc., Appeal Nos. 2020-1640, -1641 (Fed. Cir. Apr. 29, 2022)

Our case of the week has a little bit for everyone, including lost profits, reasonable royalties, enhanced damages, claim construction, and more.  However, the primary issue was application of the experimental use exception to the on-sale bar.  The experimental use exception, which traces to City of Elizabeth v. Am. Nicholson Pavement Co., 97 U.S. 126, 137 (1877), negates an on-sale or public use bar to patentability, allowing an inventor extra time to file the patent after exposing the invention to the public.  The district court found the exception applied.  On appeal, the Federal Circuit, applying de novo review, reversed, remanding to the district court for further consideration.

The patents in suit concern mixing butane with gasoline—a practice frequently done to lower the cost of gasoline and make it more volatile.  Two days before the February 9, 2000 critical date for patent purposes, MCE Blending offered to sell an automated butane-blending system to Equilon.  The offer was “in consideration for” a commitment to purchase at least 500,000 barrels of butane from MCE over the next roughly five years.  The district court found that this was not an invalidating offer to sell because it was primarily for experimental, rather than commercial, purposes.

The Federal Circuit analyzed the agreement “under the law of contracts,” focusing on the activities that would be understood to be commercial sales “in the commercial community.”  Thus, the Court analyzed the language in the agreement, describing it as a “sale, without any reference to any experimental purpose.”  The agreement also referenced “consideration,” including the purchase of butane.  Analyzing the express language of the agreement, the Court concluded that the sale “bears all the hallmarks of a commercial contract for sale,” including transfer of title.  While the district court held that the agreement did not require the payment of any money up front, the Federal Circuit noted that the transfer of equipment for an obligation to purchase butane was “a sale.”

The Federal Circuit also held that a section in the agreement titled “Equipment Testing” was not dispositive, because it was insufficient to shift the purpose of the transaction from being “primarily commercial” to “primarily experimental.”  The Court further rejected evidence of the inventors’ testimony concerning their intent in the sale, agreeing with the district court that “the inventors’ subjective intent is of minimal importance” and that the proper analysis focuses on “the objective evidence of the contract.”

The Federal Circuit also considered the fact that there was a need for testing, but held that this was more appropriately considered under the second prong of the on-sale bar analysis—i.e., whether the invention was “ready for patenting” at the time of sale.  In summary, the Court held that “the testing described in the Equilon agreement occurred to effectuate the sale, rather than the sale occurring to occasion the testing.”  Accordingly, the Court reversed the district court’s finding as to experimental use and remanded for the district court to assess whether the second prong of the on-sale analysis was satisfied.

Beyond that issue, the Federal Circuit also vacated infringement findings as to patent claims that had since been found invalid by the PTAB.  The Court also affirmed the district court’s claim constructions as to terms in two of the patents at issue.  The Court further made a number of conclusions about the damages awards, vacating the district court’s enhancement award, affirming the district court’s denial of lost profits, and affirming the district court’s reasonable royalty award.

The opinion can be found here.

By Nika Aldrich

ALSO THIS WEEK

Auris Health, Inc. v. Intuitive Surgical Operations, Inc., Appeal No. 2021-1732 (Fed. Cir. Apr. 29, 2022)

In an appeal from decisions the Patent Trial and Appeal Board made during an inter partes review, the Federal Circuit vacated and remanded, finding the PTAB performed an improper “motivation to combine” analysis.  The patent concerned robotic surgical systems that allow clinicians to quickly swap out surgical instruments.  Auris relied on the combination of two pieces of prior art.  The only issue was whether a skilled artisan would have been motivated to combine the art to yield the patented invention.  The Board concluded that there was no motivation to combine “when there is skepticism at the time of the invention for using robotic systems during surgery in the first place.”  The Federal Circuit disagreed, holding that generic industry skepticism was not probative of the relevant inquiry.  While skepticism may be relevant to objective indicia of non-obviousness, it has to be specific to the invention, not a general skepticism about the field.

Judge Reyna dissented, opining that the Board “relied on more than just general skepticism to find no motivation to combine” and that the Board had “dedicated several pages to explaining multiple reasons why Auris’s proffered motivation to combine was inadequate.”

The opinion can be found here.

By Nika Aldrich

Check out our searchable library of all Fresh from the Bench updates.