by Dennis Crouch
The Federal Circuit has ruled that Crown Packaging’s high-speed necking machine patents are invalid under the pre-AIA on-sale bar, reversing a Virginia district court’s summary judgment decision. Crown Packaging Technology, Inc. v. Belvac Production Machinery, Inc., Nos. 2022-2299, 2022-2300 (Fed. Cir. Dec. 10, 2024). The court held that a detailed price quotation marked “subject to written acceptance” can still constitute an invalidating offer for sale and not merely an invitation to make an offer.
Ooh la la … high speed necking. For those wondering, “necking” in the beverage can industry refers to the manufacturing step of reducing a can’s diameter at the top to create the tapered shape we drink from. Crown’s patents at issue in the case (U.S. Patent Nos. 9,308,570; 9,968,982; and 10,751,784) protect their horizontal, multi-stage necking machines designed for such high-speed production.
Pre-AIA: The critical on-sale bar date was April 24, 2007 – one year before the patents’ earliest priority date. The key evidence focused on a November 14, 2006 letter that Crown sent (from its English HQ) to Complete Packaging Machinery at its Arvada, Colorado USA address. This detailed commercial document, titled “Quotation Number Q22764,” offered Crown’s CMB3400 necking machine with specific terms including:
- A complete description of a 13-stage “3400 Die Necker” that court does not dispute embodied the claims of the asserted patents;
- Specific pricing terms; and
- And detailed delivery options and timeline.
All this looks like offer to sell, but there was also an additional feature of the quote – that it required “written acceptance” from Crown in order to be effective.
Under pre-AIA 35 U.S.C. 102, an invention cannot be patented if it was “on sale” more than one year prior to the effective filing date. (This is also true for post-AIA, except that the 1-year grace period goes away if the offer is from an independent 3rd party and the 102(b)(1) exceptions don’t apply). The statutory phrase “on sale” is typically interpreted to include both actual sales and also commercial offers to sell embodiments of the invention. (Selling plans to the invention or rights to the invention do not trigger the on sale bar). What all this means is that we typically look to contract law — most commonly law associated with the sale of goods — to determine whether a particular action constitutes an offer or a sale.
The district court sided with Crown, finding the letter was merely “an invitation to make an offer, not an offer itself.” This distinction stems from a fundamental principle of contract law: a valid offer must be capable of being converted into a binding contract through simple acceptance by the other party. Here, the quotation explicitly stated it was “subject to Crown’s written acceptance of your order.” In other words, even if Complete had attempted to accept the quoted terms, no binding contract would form until Crown provided an additional written acceptance. The district court reasoned that this extra step – requiring Crown’s subsequent approval – prevented the quotation from qualifying as a true “offer” that could trigger the on-sale bar. Rather, the court viewed it more like an invitation to negotiate, similar to how a store advertisement typically constitutes an invitation for customers to make offers rather than a binding offer itself.
The Federal Circuit, in an opinion by Judge Dyk, reversed — finding that the quote was a “commercial offer for sale” under Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998). The court explained that while labeling a document as a “quotation” is “an important fact,” it is not controlling. Instead, citing Junker v. Med. Components, Inc., 25 F.4th 1027 (Fed. Cir. 2022), the court examined whether the terms were sufficiently definite that another party could create a binding contract through acceptance.
The court found several factors demonstrated the letter was a commercial offer: it was specifically directed to one customer rather than broadly disseminated; it contained detailed product specifications; it included specific price and payment terms; and it provided clear delivery conditions.
I think that the best evidence for this being a contract comes from testimony from Crown’s former senior vice president acknowledging that customer orders responding to such quotations would create binding contracts. In addition, the quote includes Crown’s commitment to begin manufacture “immediately upon receipt of order.”
But, I’m still stuck on Crown’s argument that its reservation of written acceptance prevented the letter from being an offer. The Federal Circuit indicates that prior precedent strongly supports the idea that a written reservation requirement does not preclude the quote from being a commercial offer. See, Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc., 855 F.3d 1356 (Fed. Cir. 2017).
In Helsinn, orders under a supply and purchase agreement were “subject to written acceptance
and confirmation by [patentee] before becoming binding.” Despite this reservation, we held the agreement was a commercial offer for sale for the purposes of § 102(b), as the agreement “obligated [the patentee] to meet or designate a third party manufacturer to meet . . . firm orders.” . . . Helsinn [instructs] that a communication when taken as a whole may still be a commercial offer for sale even with an express written acceptance term.
But, I fear that the court overstated its case here. In Helsinn, the “written acceptance” clause appeared withing a Supply and Purchase Agreement between Helsinn and MGI, which was already a binding contract that obligated both parties. The “written acceptance” provision only applied to specific purchase orders made under that existing agreement. Importantly, even with the written acceptance requirement, Helsinn was still obligated under the contract to either accept those orders or designate a third party manufacturer to fulfill them. As the Federal Circuit explained, the agreement “obligated [the patentee] to meet or designate a third party manufacturer to meet . . . firm orders.” In contrast, Crown’s “written acceptance” clause appeared in its initial quotation letter, with no overarching agreement in place that would require Crown to accept orders.
In This Country: The case also had an important second issue that involved an international perspective. Pre-AIA on-sale bar was limited to situations where the invention was “on sale in this country” – i.e., the US. Crown is an English company and mailed the “offer” from England to the US. The letter also indicated that English law would apply to the contract. And finally, there was no indication from the letter that the invention would be used in the US.
Crown argued that an offer made from outside the United States only triggers the on-sale bar if the invention was intended for use within the United States. The Federal Circuit explicitly rejected this interpretation of the “in this country” requirement of pre-AIA § 102(b). The court explained that the geographic focus is on where the offer is directed, not where the offered product would ultimately be used. Citing In re Caveney, 761 F.2d 671 (Fed. Cir. 1985), the court noted that an offer “presumably made from England” but directed to an offeree “at its place of business in the United States” qualifies as an offer “in this country.” The court reinforced this principle by pointing to Hamilton Beach Brands, which held that “a commercial offer for sale made by a foreign entity that is directed to a United States customer at its place of business in the United States may serve as an invalid[at]ing activity.” Hamilton Beach Brands, Inc. v. Sunbeam Prods., Inc., 726 F.3d 1370 (Fed. Cir. 2013).
I do have some quibbles with how the Federal Circuit presented its decision as entirely based upon precedent. A closer examination of Caveney and Hamilton Beach reveals important nuances in how the Federal Circuit treats foreign-originated offers. In Caveney, while the offer was “presumably made from England,” we know the offer was directed to a U.S. company at its U.S. address, but the court never specifies where delivery would occur. The court focused entirely on where the offer was directed, not where manufacturing or delivery would take place. However, I believe it is safe to assume that in Caveney the delivery was sent to the U.S. Similarly, in Hamilton Beach, while we know the purchase order specified delivery to Hamilton Beach’s Tennessee facility. So the case didn’t present the question of whether an offer for purely foreign manufacturing and delivery would trigger the bar. This means that Crown Packaging presented a question that wasn’t squarely addressed by these two decisions – whether an offer from England to a U.S. company that contemplated foreign manufacturing and potential foreign delivery (since the letter specified delivery could be at “our premises”) would qualify as “on sale in this country.” While the Federal Circuit rejected Crown’s argument about intended use location, it didn’t explicitly address whether the location of manufacturing and delivery matters to the analysis.
The location of the “contemplated sale” adds another important wrinkle to the territorial analysis. In Halo Electronics v. Pulse Electronics, the Federal Circuit addressed the analogous issue of whether negotiations in the United States for foreign sales constituted an infringing “offer to sell” under § 271(a). The court held that for infringement purposes, “the location of the contemplated sale controls.” Even when contract negotiations occurred in the U.S., if the contemplated sale was to occur abroad (including manufacturing and delivery), there was no domestic “offer to sell.” If we applied the Halo reasoning to 102(b), it suggests that Crown’s quotation, even if deemed an offer, may not trigger the on-sale bar if both parties contemplated foreign manufacturing and delivery. However, the Federal Circuit did not engage with this nuance from Halo, instead focusing solely on whether directing an offer to a U.S. entity at its U.S. address was sufficient to constitute an offer “in this country” under § 102(b). The court’s silence on whether the location of the contemplated sale matters for on-sale bar purposes leaves open an interesting question about the relationship between § 271(a)’s territorial limits and those of § 102(b).
Of course, all this debate regarding the location of the sale for prior art purposes is moot since the AIA modified 102 to remove the geographic restriction. Thus for post-AIA patents and applications on sale prior art can arise anywhere.
The appeal was decided by Circuit Judges Dyk (author), Hughes, and Cunningham. Crown was represented by Daniel Goettle, Stephanie Hatzikyriakou, and Jeffrey Lesovitz of Baker & Hostetler LLP. Belvac was represented by David Finkelson, Brian Riopelle, and Brian Schmalzbach of McGuireWoods LLP. The case arose from the Western District of Virginia where it was presided over by Senior Judge Norman K. Moon.