by Dennis Crouch
The Federal Circuit’s new decision in Sanho v. Kaijet highlights the narrowness of the pre-filing grace period (safe harbor) provision under the America Invents Act (AIA) and serves as a reminder that there are a number of patents that would have been valid under the pre-AIA patent system may no longer be valid under the current law. Sanho Corp. v. Kaijet Technology International Limited, Inc., No. 2023-1336 (Fed. Cir. July 31, 2024).
The basic holding is that the 102(a)(2)/(b)(2) safe harbor triggered by an inventor’s pre-filing “public disclosure” of the invention requires that the invention be made “reasonably available to the public.” Neither public uses nor private sales satisfy this requirement. This is a long post, because the issues are both important and interesting. In the end, I suggest a panel rehearing in the case because I believe that the Federal Circuit unfairly found forfeiture of key arguments whose resolution would help clarify the law.
The patent at issue, US10,572,429 (Liao), covers a USB hub-like device that allows multiple peripheral connections through a single port on the computer. One advance is a routing module “which facilitates the simultaneous use of multiple ports and can also expand the number and types of devices that can be connected to the end-user device.”
The closest prior art (Kuo) was filed just a few months prior to Liao’s effective filing date. In fact, although Kuo was on file, it was not yet published as of Liao’s application filing date. Thus, as of Liao’s filing date, Kuo was not yet prior art. As required by 102(a)(2), Kuo’s subsequent publication altered its status, and the application suddenly became prior art, backdated to its effective filing date.
Liao had evidence of prior conception and reduction to practice — having delayed about 5 months from RTP to file the patent application in his home country of Taiwan. Pre-AIA rules included a generous grace period, and under that prior regime Liao would have been able to knock-out the prior reference with a showing of his prior invention. This contrasts with the current law amended by the American Invents Act of 2011 which substantially narrowed the safe harbor exceptions. Now, the safe harbor is only triggered in situations where the inventor has previously disclosed the invention.
35 U.S.C. § 102(b) provides three mechanisms for a safe harbor that can remove a disclosure from being considered prior art:
- The prior art was derived from the inventor’s disclosure (§ 102(b)(1)(A) and § 102(b)(2)(A)): If the prior art disclosure was made by the inventor or someone who obtained the subject matter directly or indirectly from the inventor, it is not considered prior art.
- The inventor had publicly disclosed the material prior to the prior art’s effective date (§ 102(b)(1)(B) and § 102(b)(2)(B)): If the inventor or someone who obtained the subject matter from the inventor had already publicly disclosed the subject matter of the purported prior art, then that reference will not be considered prior art. For Sanho, it is important to note that this provision requires “public disclosure” something more precise than the “disclosure” of the first mechanism in this list.
- The prior art and the invention are co-owned (§ 102(b)(2)(C)): If the prior art and the claimed invention were owned by the same person or subject to an obligation of assignment to the same person, the prior art is not considered. This provision only applies to secret prior art under 102(a)(2) in the form of prior filed applications that were not yet public as of the time of the claimed invention.
In Sanho v. Kaijet, the Federal Circuit focused on the second mechanism, specifically the interpretation of “publicly disclosed” in § 102(b)(2)(B). The first mechanism did not apply because there was no evidence that Kuo was derived from Liao. The third mechanism did not apply because Liao and Kuo were not co-owned. In its decision, the Federal Circuit rejected Sanho’s argument that “publicly disclosed” should be interpreted the same as “disclosure” used elsewhere in § 102. Instead, the court emphasized that § 102(b)(2)(B) is to protect inventors only inventors who share their inventions with the public before filing a patent application.
To help with understanding, I have created the following sequence of events in the case:
- November 17, 2016 (pre-filing disclosure): The inventor (ZhuoWen Liao) offered to sell HyperDrive devices to the owners of Sanho Corp. HyperDrive apparently embodies the claimed invention.
- December 6-8, 2016 (pre-filing disclosure): Sanho placed an order for 15,000 HyperDrive units including a payment of $153k, and the inventor’s company (GoPod Group) accepted the order. (Mostly funded through a public KickStarter campaign).
- December 13, 2016 (prior art Kuo filed): Competitor WIESON filed a Taiwanese patent application (Kuo) disclosing the invention. In February 2017, the U.S. child version of Kuo was filed, which published in 2018.
- April 27, 2017 (Effective Filing date of Lioa): Liao filed his patent application in China, In 2018, the U.S. child version was filed, which issued in 2020.
- Subsequent Events: At some later point, Liao (and his company) assigned the patent to Sanho. Who sued Kaijet for infringement. Kaijet responded with an IPR resulting in cancellation Sanho’s patent claims. Sanho now appeals.
An additional set of facts have to do with the confidentiality of the disclosure. Liao’s disclosure was made to Sanho, including employees of Sanho. It did not include any confidentiality agreement or expectation. And, in fact, a Sanho employee in December 2016 posted a YouTube video showing a Liao prototype, including internal workings, although not with sufficient detail to disclose the full invention. There is no evidence that technical disclosures went beyond Sanho.
Putting this together, we have a situation where the invention was offered and sold to a third party, and existence of the invention was also publicly disclosed, all prior the prior art date. However, the details of the invention were not generally available to the public, either in the form of an actual product or disclosures showing how to make and use the invention. The Federal Circuit was asked to decide whether these actions constituted “subject matter [being] publicly disclosed” stemming from the inventor under Section 102(b)(2)(b). If the sale was considered a public disclosure, it would have exempted a prior art reference (Kuo) from being considered prior art. At oral arguments, Sanho’s counsel David Ludwig explained his argument that “this was a public sale in the sense that there were no confidentiality expectations associated with sale.” However, the Federal Circuit held that the phrase “publicly disclosed” in § 102(b)(2)(B) requires the invention to be made reasonably available to the public, not just privately sold.
Reasonably Available to the Public: The court focused on several key precedents in reaching its decision. In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., 586 U.S. 123 (2019), the Supreme Court held that a commercial sale to a third party may place the invention “on sale” under § 102(a)(1), even if the sale does not disclose the details of the invention to the public. However, the Federal Circuit distinguished this case, noting that the “on sale” bar in § 102(a)(1) serves a different purpose than the “publicly disclosed” requirement in § 102(b)(2)(B). The court also cited Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998), which held that the “on sale” bar applies when the invention is the subject of a commercial offer for sale and is ready for patenting. However, as with Helsinn, Pfaff dealt with the “on sale” bar and did not address the meaning of “publicly disclosed” under the AIA.
The court also rejected Sanho’s argument that “publicly disclosed” should be interpreted the same as “public use.” The court emphasized the distinction between these terms and their different purposes in the statute. As the court explained:
Sanho’s misplaced reliance on the Supreme Court’s decision in Egbert v. Lippmann makes clear the problems with its theory. That case concerned whether the use of an invention (a modified corset spring) by one person was “a
public use within the meaning of the statute.” 104 U.S. 333 (1881). . . . The case thus concerned the scope of invalidating prior art. It did not hold that an invalidating public use must necessarily “publicly disclose” an invention.
In other words, a public use is different than public disclosure. “Because there is a difference between a commercial public use and a disclosure that puts the public in possession of the invention, we will not lightly assume that the new statutory phrase ‘publicly disclosed’ incorporates existing law on the issue of ‘public use.'”
Ultimately, the Federal Circuit found that Sanho’s private sale of the HyperDrive product did not “publicly disclose” the relevant subject matter under § 102(b)(2)(B) because the sale did not make the subject-matter of the prior art “reasonably available to the public.”
= = =
There are a few points that the court skipped over. I mentioned the YouTube video above and there is also the joint development project between Liao/GoPod and Sanho. Sanho’s opening brief explains that the parties worked together to bring the HyperDrive to market with Sanho employee working on the exterior and cooperating with Liao who developed the internal workings. The brief further explains:
On a phone call, Liao instructed Chin [a Sanho engineer] to open the HyperDrive and explained to Chin the layout of the circuit board and how it functioned. Chin then made a video of his examination of the HyperDrive, including an examination of its circuit board, and posted the video as well as images of the circuit board and other descriptive content on the internet as part of a Sanho Kickstarter campaign on December 5, 2016.
The after some challenges by the appellee to the content of the disclosure, the patentee then provided more extensive argument and evidence in its reply brief.
What it appears to me is that the disclosure found in the photos and video was not a schematic that would constitute an enabling disclosure. However, it was a public disclosure of something, including the existence of the invention, including its operational features, including an image of the chipset and use of the invention. In my mind, this information takes the facts outside of the ‘hidden’ public use of Egbert and the private sale discussion of Teva. However, rather than working through this issue the court made the odd conclusion that the argument was not raised in the appellant brief and thus was forfeited. In a footnote, the court explained that Sanho had not (until the reply brief) challenged the board’s conclusions that the photos/videos were insufficient to disclose the subject matter. My interpretation of the opening brief, however, was not a challenge to the board’s factual findings, but rather a legal challenge to what amount must be disclosed in order to satisfy the public disclosure threshold.
By refusing to contend with this the public KickStarter evidence, the Federal Circuit skirted consideration of the trickiest issues here — does the inventor’s disclosure need to be a full enabling disclosure? Would this be different if the public had direct access to the prototype, such as a trade show or via more public sales? In my view, this was sufficiently raised in the opening brief and we would benefit from the panel reissuing a decision handles this issue.
How would this have turned out under Pre-AIA law?
There’s way too many “gotchas” for inventors. Adhering to industry best practices for a patent application is rarely good enough to pass Federal Circuit muster.