by Dennis Crouch
The Federal Circuit held oral arguments on March 4, 2024 in the important patent case of Celanese Int’l. v ITC, 22-1827 (Fed. Cir. 2024).
The question: Under the AIA, does sale of a product by the patent applicant prohibit the patentee from later patenting the process used to make the product?
Background
Celanese developed an improved process for making the artificial sweetener acesulfame potassium (Ace-K). For several years, Celanese kept its Ace-K manufacturing process a trade secret while selling the Ace-K product it produced. In 2016, over a year after it began selling Ace-K, Celanese filed patent applications on its heretofore secret Ace-K process.
When competitor Anhui Jinhe began importing Ace-K into the U.S., Celanese sued Jinhe for patent infringement at the International Trade Commission (ITC). Jinhe argued Celanese’s asserted process patent claims were invalid under the AIA’s “on-sale bar” because Celanese had sold Ace-K made by the later-claimed process more than one year before filing for its patents.
The ITC ruled for Jinhe, holding that Celanese’s patent claims were invalid under the on-sale bar. It held that under pre-AIA Federal Circuit precedent, a patentee’s sale of a product made by a secret process placed the process “on sale” under the statute, thus invalidating later patent claims to the process. The ITC ruled that the AIA did not change this rule and that the process claims were invalid under the on-sale bar. Celanese appealed.
The case has major implications for the relationship between patent rights and trade secret rights. Historically, an inventor could choose to protect a new manufacturing process either by patenting it or by keeping it as a trade secret – but not both. The “on-sale bar” was the statutory hook that prevented an inventor from commercially exploiting a secret invention for several years and then also obtaining a patent monopoly. But, the problem is that the statute expressly asks whether the invention was “on sale.” Here, the claimed invention – the process of manufacturing – was not being sold or disclosed by the sale.
Although the statute does not distinguish between sales by the patentee and those by an unaffiliated third party, Federal Circuit case law does make a distinction. For the court, pre-filing sales by the patentee have create a much broader bar to patenting than do sales by the third party. Compare D.L. Auld Company v. Chroma Graphics Corp., 714 F.2d 1144 (Fed. Cir. 1983) (sale of product by patentee prevents patenting of manufacturing process) with W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540 (Fed. Cir. 1983) (sale of product by a third party who had kept its process secret does not prohibit an independent inventor to patent the process). This differential concept was first popularized by the Judge Learned Hand decision in Metallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir. 1946). Celanese notes that the Supreme Court has never endorsed Metallizing‘s holding.
But many manufacturers prefer to keep novel processes as trade secrets initially, before their value is clear, while still preserving the option to later seek patents. The pharmaceutical, chemical, and semiconductor industries, in particular, rely heavily on long-held trade secrets and could be impacted if the Federal Circuit alters the long-held interpretation. Celanese argues that its approach promotes disclosure of trade secrets, while the other side note that the approach promotes unfair extension of exclusive rights.
Celanese’s Arguments
Although there is Federal Circuit case law on point, Celanese argues that the AIA supersedes the Federal Circuit’s pre-AIA rule that sales of products made by a secret process place the process “on sale.” In particular, congress amended Section 102 to focus on whether the “claimed invention” is on sale, rather than simply the “invention.” Although in most pre-AIA situations, the Federal Circuit was already defining the invention as the claimed invention, this on-sale issue is one area departure. According to the patentee, Congress “doubled down” on the textual meaning in a way that calls on the Federal Circuit to reconsider its precedent. Arguing on behalf of Celanese, Deanne Maynard argued that “The process is not on sale. End of story.”
Celanese also contends its interpretation aligns with the AIA’s purpose of harmonizing U.S. patent law with the rest of the world, where sale of a product does typically not preclude later patenting of the process. See AIA Section 3(p) (sense of Congress that moving to first-to-file will “promote harmonization of the United States patent system with the patent systems commonly used in nearly all other countries throughout the world … and thereby promote greater international uniformity and certainty in the procedures used for securing the exclusive rights of inventors to their discoveries.”). Celanese further argues its reading matches other AIA provisions that presuppose secret activities are not invalidating, such as the prior use defense.
ITC and Jinhe’s Arguments
The ITC and Jinhe counter that the Supreme Court’s 2019 decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. held that in the AIA, Congress did not change the meaning of “on sale” from the pre-AIA statute. They argue Helsinn requires applying the settled pre-AIA rule treating a patentee’s sale of products made by a secret process as invalidating sales of the process.
The sole question for the commission below and this court now is, did Congress change what it means for a process to be on sale when it enacted the AIA? The answer to that question clearly has to be no, given the unanimous holding in Helsinn that Congress did not alter the meaning of on sale when it enacted the AIA. . . . It is dispositive.
Benjamin Richards arguing on behalf of the ITC.
The ITC and Jinhe contend Celanese focuses too narrowly on the AIA’s “claimed invention” language and that there is no meaningful distinction from the prior statute’s use of “invention” and the new “claimed invention” even in the context of the on-sale bar. They argue the operative statutory term is “on sale,” which the Federal Circuit gave a well-established meaning before the AIA that Congress implicitly adopted by reenacting the same term in the AIA.
The ITC and Jinhe also that policy concerns about patentees inequitably extending their monopolies by serially invoking trade secret and patent rights still apply under the AIA, so the on-sale bar must still invalidate late-sought patents on secret processes previously used for commercial gain.
In Helsinn – like in Deere – the court noted a presumption that Congress intended to reenact well established patent law. The patentee argues that the reenactment cannon has much less weight in this situation — offering three key reasons:
- Reenactment cannon cannot reject plain language of the statute — and here the statute unambiguously requires the “claimed invention” itself, not products made using the claimed invention, to be “on sale.”
- The Supreme Court had never endorsed the pre-AIA interpretation that a patentee’s sale of products made by a secret process places the process “on sale.” There was thus no “well-settled” or “judicial consensus” on this issue for Congress to adopt.
- Further, there are very few Federal Circuit cases on point and so even there, the doctrine is hardly well-settled.
The ITC cites several treatises in response, including Donald S. Chisum, Chisum on Patents § 6.02[5][b] (2022) (“[I]t is now well established that commercial exploitation by the inventor of a machine or process constitutes a public use even though the machine or process is held secret.”). Celanese cited the same section Chisum’s treaties that recognized the “unclear” justification for treating patentee sales different from those of a third party. See also, Dmitry Karshtedt, Did Learned Hand Get It Wrong?: The Questionable Patent Forfeiture Rule Of Metallizing Engineering, 57 VILL. L. REV. 261(2012).
Although it was not discussed in the briefs or oral arguments, there is a key Supreme Court case on-point: Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 490-91 (1974). In that case, the court explained that trade secret law is not preempted by patent law. — finding that the two can co-exist. However, one justification for this co-existance is that inventors will need to choose one or the other — and most will choose patents.
Nor does society face much risk that scientific or technological progress will be impeded by the rare inventor with a patentable invention who chooses trade secret protection over patent protection. The ripeness-of-time concept of invention, developed from the study of the many independent multiple discoveries in history, predicts that if a particular individual had not made a particular discovery others would have, and in probably a relatively short period of time. If something is to be discovered at all very likely it will be discovered by more than one person.
Id. See Camilla Hrdy and Sharon Sandeen, The Trade Secrecy Standard for Patent Prior Art, 70 Am. U.L. Rev. 1269 (2021) (“Crucial to the [Kewanee] Court’s reasoning was the assumption that an inventor cannot get both forms of protection; instead, the inventor has to patent within one year or rely on trade secrecy.”).
= = =
Deanne Maynard of Morrison Foerster argued the case on behalf of the patentee Celanese. Benjamin Richards argued for the ITC and Nicole Saharsky of Mayer Brown argued for Anhui Jinhe. The case is held before Judges Reyna, Mayer, and Cunningham. In my view, Judge Reyna is likely to lead the court in siding with the ITC and keeping the longstanding rule that on its face appears to be a court-designed rule to better serve justice. The key aspect from Oral Arguments is as follows:
Judge Reyna: Doesn’t your argument lead us to a point to where we begin to move away from the foundation for exclusivity? And I’m talking about the dedication to the public of something in return for that exclusivity. And here, if the process remains secretive, but yet you get to continue selling products made by that process, you have advantage of the exclusivity, but you haven’t dedicated anything to the public.
Maynard: So actually, Your Honor, our reading does encourage people who are protecting their processes by trade secrets to patent them. And that’s what we did here. Our reading of the statute, this would be protected. If we wanted to keep it never dedicated to the public, we could have just kept it as a trade secret. But under our reading of the statute, it actually encourages parties to apply for a patent, disclose the patent, and have that for a limited time.
Later, Anhui Jinhe’s counsel picked upon on these issues.
Nicole Saharsky: Celanese is doing exactly what the on-sale bar was intended to prevent, which is keeping something secret, the inventor making money off of it, commercializing it, waiting to seek a patent in order to extend the monopoly. I think the NAM amicus brief is unabashed that that’s the rule that they want. And Celanese does not dispute that that’s what they’re doing here.
This policy debate is at the heart of the dispute and it is juxtaposed to the plain statutory language.
Briefs:
What I am unclear about from this decision is “which process” is falls under this doctrine? I live in the pharmaceutical work so I will use an example that I am familiar with.
Process A to make Drug X. Composition of Drug X is patented. In the composition of matter patent is a method for making Drug X (lab bench scale).
Drug x moves to clinical stage. Process for making Drug X changes.
Drug X gets approved and is on sale.
Is the clinical process for making Drug X barred?
Is the clinical process deducible from the Drug X as publicly available?
NO – And there may be more than one way to make the drug.
(my view) – the more than one way can be a double edged sword.
From an enforcement angle, you might have some issues cutting against you.
From a patent bargain angle, this absolutely cuts in favor of you, as your additional method – being an alternative alone – is the type of thing that the promotion in the Quid Pro Quo is for.
Some want to think that for whatever reason, the change to be much more of the race to the Office, still drags along personal bars (that were poorly – as in incorrectly – previously in place).
Agree – form an enforcement angle it may be difficult. However, I have a good faith basis to file my complaint, and if during discovery, the other side provides documentation that they are not using my patented process, but another process, case dismissed.
With this case, however, I would expect the other side to seek dismissal prior to discovery, and I would never know for sure what process the other side is using.
Did you file a patent application on the secret new clinical manufacturing process [presumably unobviously distinguishable from any previously publicly disclosed process?] within less than one year after you started using that new process to make Drug X commercially? That, at least in my view, should avoid Metallizing Engineering, but read that decision.
You are assuming that Metallizing is still good law.
¯\_(ツ)_/¯
What if I never make the drug by that (new) process?
For example, I found a way to make the drug to get 100% purity, but I have to use exotic palladium catalysts – and its super expensive. Do I never implement the process. Am I barred from patenting it?
“What if I never make the drug by that (new) process?”
Do you even have an issue then? The product on the market would not then be at all reflective of the never used method.
The product is still the end result of the process. My points in all my hypotheticals is that there is more than one way to produce a product. trying to follow the logic in this case, I am struck with the inability to determine which process I am barred from patenting (assuming all processes to make the product have been kept a trade secret).
That is exactly part and parcel why the earlier case was decided in error.
There was conflation of different types of time protection under different sections of the Constitution.
Plus – no matter what transpired prior, at the moment of bringing a former trade secret out and joining the patent process, the Quid Pro Quo and all policy objectives of the Patent Bargain are still met.
Add in the explicit reasoning for Congress to pick up and change all of the prior art sections in the AIA, and this is an easy call.
RE: “This differential concept was first popularized by the Judge Learned Hand decision in Metallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir. 1946). Celanese notes that the Supreme Court has never endorsed Metallizing‘s holding.”
Relevant Supreme Court cases involving secret commercial use as a public use include: Pennock v Dialogue, 27 US (2 Pet.) 1 (1829); Shaw v Cooper, 32 US (7 Pet.) 292 (1833); and Kendall v Winsor, 62 US (21 How.) 322 (1858), all of which pre-date Metallizing by a significant amount. For example, in the Pennock case, Justice Story delivering the opinion of the Court stated:
“If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make, and sell his invention publicly, and thus gather the whole profits of it, relying upon his superior skill and knowledge of the structure; and then, and then only, when the danger of competition should force him to secure the exclusive right, he should be allowed to take out a patent, and thus exclude the public from any farther use than what should be derived under it during his fourteen years; it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.”
The Kendall case involved the inventor keeping the equipment and process secret, but selling the product.
Post-AIA statutes continue to have “public use” as a bar to patentability and there is no indication that secret commercial uses have now been excluded from such a bar.
Yes, as I recall there is also one CAFC case finding a secret but commercial use to be a 102 “public use.” [To me it seems to require excessive semantic legal legerdemain to say that a “secret use” is a “public use.”]
Mark,
Even giants sleep.
Crouch – how goes that project to reflect my detailed posts on this topic?
“[I]t is now well established that commercial exploitation by the inventor of a machine or process constitutes a public use even though the machine or process is held secret.”
Isn’t the issue whether the invention, or claimed invention, was on sale, not whether it was in public use?
I am not a patent attorney, so please excuse me if these questions are off-target.
From the post and the discussion, it was not clear to me whether Celenese also has a patent on Ace-K. The commentary states that Celenese “improved” the manufacturing process for Ace-K. Clearly, this impacts the analysis.
Also, if the infringed claim is solely to a process, and patents are jurisdictional, does Celenese have an analogous process patent in the country where the imported Ace-K is produced?
Seems like a simple case. They do not appear to import the process, just the product. The product of the process on sale already should enable others to sell product too. Since they appear to assert product by process re infringement, then the sale should invalidate. Waste of money and only bad case law can result. What am I missing?
>The product of the process on sale already should enable others to sell product too.
Well, that’s the core of their argument; the intent of Congress was to overrule “secret” use/sale decisions, like Metallizing…in large part to bring us into closer accord with consensous international law.
FWIW, the patent is on a process, not a product-by-process. They are presumably suing under 271(g)
Correct OC
In 2020 in BASF Corp. v. SNF Holding Co. the Fed. Cir. clearly distinguished between the 102 “on sale” bar, which the Sup. Ct. said in Helsinn Healthcare S.A. v. Teva Pharmaceuticals still applies to secret commercial sales, versus the “PUBLIC use” bar and Learned Hand’s Metallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co. doctrine plus the Fed. Cir. Gore v. Garlock decison.
The prior art status of a secret “on sale,” a secret sale of a product containing the invention, versus personal equitable estoppel for commercial use of a secret process, has been widely confused, even by the PTO, as discussed at length with specific citations and discussions of controlling case law in “The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act,” 2011 Patently-O Patent Law Review 29. The latter is the continued commercial use of a secret process to make and sell products that do NOT contain or disclose the invention. It is a purely personal forfeiture, not statutory prior art, under Metallizing Engineering doctrine Fed. Cir. case law. Some argued, and the PTO said in a footnote to AIA rule changes, that this AIA 102 statutory change in the definition of prior art also overruled the case law on the Metallizing Engineering doctrine, even though that doctrine is equitable, not statutory, and not prior art. But, contrary to some amicus assertions, this Sup. Ct. 2019 secret on sale decision in Helsinn Healthcare properly did not even mention the Metallizing Engineering doctrine.
Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29. (link to cdn.patentlyo.com)
Haven’t clicked through yet – but do you address the fact that the AIA set out expressly to “simplify” and remove aspects of personal forfeiture?
It would be wonderful if the good Professor could charge one of his students (or heck, feed the entire blog into an AI engine) and recall my prior points as to how the judiciary of the past (giants even, showing that even giants sleep) erred by conflating two very different times of protection that exist according to two very different portions of the Constitution.
I’ve always thought of this as an equitable doctrine (despite on-sale being in the statute): you sell the product made by the process, then you’ve used up your protectable rights vis-a-vis the product. If wanted to protect those rights, you needed to file before you started marketing the product made by the process. (This is why there’s a distinction between application sales by third parties and versus those of the applicant/patentee.)
Will be interesting to see where the CAFC comes out on this, but given its general bent these days, I’ll be surprised if it says a party can sit on a process that it’s using commercially and patent the process well after products made by the process have been on the market.
One aspect here (from Pre-AIA, IIRC), is whether or not the process can be ‘backed out of’ the product.
If even those with a high degree of desire are unable to do so, then the Patent Bargain remains enriched with a Quid Pro Quo of bringing the process out of secrecy – regardless of when such occurs.
It helps to view these things on first principles, while avoiding conflation of different laws.
If the product has already been on sale or in public use more than a year before the process application has been filed, it would seem that a product by process claim would be prohibited. If a product by process claim is prohibited, why wouldn’t a process claim itself be prohibited?
…because of the point that I have already presented: if one cannot deduce the process from the product, the patent bargain is gained with the sharing of the process.
For a product by process claim, patentability depends upon the product, NOT the process. The product must be different. So, since the same process was used, the products will be not be different. Hence, the product by process claim will not be patentable.
For infringement, the process is relevant.
Yes, the Metallizing Engineering doctrine prevents a company from making and selling an exclusive or superior product made by a secret process protected by trade secrecy law for an unlimited number of years or until the secret is out of the bag, and then getting another 17 or so years of commercial exclusivity with a patent on the same process.
Just to be clear on the scope of this doctrine: does it not apply if I’m using a secret process to manufacture a product that is non-exclusive and identical to a product previously for sale in the prior art? I.e., can one still patent THAT process and enforce the patent on the process after practicing it secretly for years?
No valid patent under the judicial forfeiture doctrine of Metallizing Engineering, which the Fed. Cir. has adopted. Yes if that doctrine would be eliminated [unless prevented under some other doctrine or statute].
Paul — are you offering legal advice?
No, obviously, as everyone here is well aware and has been noted many times, no one on this blog is offering any legal advice in the proper meaning of that term. [Otherwise, some of it would bankrupt some insurance companies – sarcasm off]. Rarely are any questions or comments here directed to any particular client, requested by any client, or paid for by any client. If you don’t like what you read in any of these comments, please stick to educational substantive legal rebuttal arguments, even if others do not.
Agree totally with Paul here.
Hambone – please recognize the forum that you are in.
Malcolm:
The short answer is yes (see my post about being able to reverse to obtain the process with the public result of the process).
This is neither difficult, nor new folks.
Again – the purpose of the AIA in regards to removing complexities (and personal bars) does in fact have a bearing.
I would also point out that the AIA also included the new “Secret Use” “get-out-of-infringement” Prior User “Right.”
Yes, the AIA 35 U.S.C. 273 “Defense to infringement based on earlier commercial use” broadened the scope of the prior such statute. But this is not a judicially created patenting forfeiture bar against the prior commercial user of a secret process like Metallizing Eng’g. It is a limited defense against someone else’s patent, which is available to a commercial user doing so secretly more than a year before the filing date of that patent. I am not aware from any CAFC decisions that this statute has ever been used successfully, as other patent infringement defenses are usually available with less disadvantageous requirements.
Re the indicated intent of the AIA being to reduce “secret prior art,” the above statute does not. But the gradual elimination of surprise alleged prior invention interferences and 102(g) defenses has been successful in that regard. There have been no successful successor “derivation” case surprises. However, if elimination of secret commercial “on sales” as prior art was intended, that clearly failed with the subject Sup. Ct. Helsinn Healthcare S.A. v. Teva Pharmaceuticals decision. Nor was earlier filed but secret unpublished patent application prior art eliminated except in joint projects.
Paul, as the AIA made clear with its simplifying aim and race to the Office, personal bars of the nature of judicially created forfeitures were removed.
Well, that assertion leads to an interesting question. Where in the AIA is there such a reduction in statutory “bars”? I do not see any in the usual meaning of “bars” as being the named inventors own conduct or disclosures being useable as prior art against even the inventors themselves under 102 and 103 after the inventors one year grace period has ended. Which grace period is now in the AIA 102 “Exceptions” provisions. The Metallizing Engineering doctrine is a purely personal and non-statutory forfeiture. The AIA does not address that, laches, or any other equity doctrines.
statutory bars are in the statute – the purpose of the AIA in view of restructuring the prior art sections was blasted all over Congress.
One needs not “address” that which is dropped wholesale, in line with the well publicized purpose.
If the trade secret is out of the bag, they’re presumably blocked based on the invention being publicly known. But maybe someone could try to serially file apps with non-publication requests, and then serially abandoning them, as an 18-month get-out-of-jail card??
OC – not needed under the AIA.
But If the inventors of the trade secret process that went public are the named inventors on a less-than-one-year-later filed patent application, why would they not have the benefit of the AIA’s one year grace period in the U.S.? Thus, not needing your applications re-filings trick for the U.S. [even if not a laches problem]? But as to foreign patent rights, priority can only be claimed under the Paris Convention for the First application disclosing the invention.
You are confusing that grace period (general – and for many other things) with the plain words of Congress and the fact that the Patent Bargain is still met.
Foreign patent rights are an absolute non-sequitur (you know full well that the AIA was not going to be in any way shape or form a full alignment.
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