Federal Circuit Holds That A Price “Quotation” Can Trigger An On-Sale Bar
On February 10, 2022, the Court of Appeals for the Federal Circuit (CAFC) issued an order reversing a decision by the United States District Court for the District of New Jersey, No. 2:13-cv-04606-MSG, Judge Mitchell S. Goldberg, granting plaintiff-appellee’s motion for summary judgment of no invalidity of an asserted design patent under the on-sale bar. Junker v. Medical Components, Inc., __ F.3d __ (Fed. Cir. Feb. 10, 2022). In its order, the CAFC held that a letter offering a quotation for product covered by the patent does constitute an offer for sale under pre-AIA 35 U.S.C. § 102(b).
In the mid-1980s, plaintiff developed a new design for a catheter introducer sheath. He filed a patent application for his design on February 7, 2000, which ultimately issued as the D’839 patent. Prior to filing for his patent, plaintiff entered into an agreement with a medical device manufacturer (“Manufacturer”) to make and sell plaintiff’s catheter introducer.
On January 8, 1999, prior to plaintiff’s patent application, Manufacturer sent a letter to a medical device supplier (“Supplier”) stating: “Thank you for the opportunity to provide this quotation …. When we first received [your] request for quotation we were under the mistaken impression that you wanted the exact configuration as the drawing that was provided which would have required extensive tooling expense. Subsequently, we have learned that this is not the case and are pleased to submit this quotation for a product of our design.” The letter also included a price chart for shipment in varying quantities of non-sterile product, free on board, Athens, Texas. The letter concluded by stating that the Manufacturer “look[ed] forward to discussing [Supplier’s] requirements in person.”
In 2013, plaintiff sued defendant-appellant for infringement of the D’839 design patent. After discovery, cross-motions for summary judgment were filed seeking a decision on whether Manufacturer’s January 1999 letter to Supplier constituted a commercial offer for sale of a product embodying the claimed design—rendering the patent invalid under pre-AIA 35 U.S.C. § 102(b). The district court—focusing on the letter’s use of the word “quotation” and its conclusion with an invitation to further discuss specific requirements—held, as a matter of law, that the letter was merely a preliminary negotiation that did not render the patent invalid.
On appeal, the CAFC conducted a de novo review, applying traditional contract law principles. The CAFC further explained that, under these principles, only an offer which the other party could make into a binding contract by simple acceptance (assuming consideration), constitutes an offer for sale under § 102(b). The CAFC also stated that whether the on-sale bar applies is a question of law and that no material facts were in dispute.
The CAFC proceeded to examine the language in the January 8, 1999 letter. The CAFC pointed out that the letter was responding to a “request for quotation” from Supplier and was addressed to Supplier alone, suggesting that it was not an unsolicited price quotation or invitation to negotiate, but rather a specific offer to Supplier to take further action.
The CAFC also noted that the letter contains a number of necessary terms typical for a commercial contract, including regarding pricing, delivery condition, shipping, and payment. Finally, and importantly according to the CAFC, the letter specifies multiple different purchase options for different size products and different purchase quantities.
While acknowledging the letter concludes with an invitation to further discuss Supplier’s specific requirements in person, the CAFC interpreted this text as “expressing a desire to do business in the future [that] does not negate the commercial character of the transaction then under discussion.”
The CAFC next dismissed plaintiff’s argument that an offer must specify the exact size and amount of product the buyer desires to trigger the on-sale bar under § 102(b). That there were multiple sizes and that the quantity was left open do not mean that there was no offer to be accepted. Rather, reasoned the CAFC, the letter comprises multiple different offers that Supplier could have accepted.
The CAFC gave more careful consideration to plaintiff’s alternate argument that the January 8, 1999, letter was merely a price quotation inviting further negotiations. The CAFC acknowledged that the letter’s repeated use of the word “quote” is an important fact supporting the district court’s conclusion as that word “is commonly understood as inviting an offer rather than as making one, even when directed to a particular customer.” However, the CAFC further noted that, while the precise label used for a given communication is relevant, it is not controlling. Rather, the terms of the communication must be considered in their entirety. In sum, based on the specificity and completeness of its commercial terms, the CAFC concluded that the letter constituted a commercial offer for sale that Supplier could have simply accepted to bind the parties in a contract. Accordingly, the CAFC reversed the district court’s summary judgment of no invalidity.