[00:00:02] Speaker 05:
The first order of business this morning is not related to the case we're hearing.

[00:00:07] Speaker 05:
Rather, before we begin, we're going to deal with an administrative matter, and that is the swearing in of our new clerk of court and circuit executive.

[00:00:17] Speaker 05:
Mr. Peter Marksteiner, would you please rise?

[00:00:21] Speaker 05:
Many of you may have already met Peter, but he's been selected by our court to serve as our next circuit executive and clerk of the court.

[00:00:30] Speaker 05:
He's the immediate past director of civil law and litigation for the United States Air Force, the position from which he recently retired after 30 years of service, including service as an appellate judge on the Air Force Court of Criminal Appeals.

[00:00:43] Speaker 05:
He holds a bachelor's of science cum laude and a JD with honors both from Florida State University

[00:00:49] Speaker 05:
He also has a master's of aeronautical science and a master's of law with distinction from Georgetown University Law Center.

[00:00:59] Speaker 05:
On behalf of all my colleagues, I'd like to welcome him to our court.

[00:01:05] Speaker 05:
And our current clerk of the court, our dear friend, Admiral O'Toole, will administer the oath.

[00:01:13] Speaker 05:
We'd also like to invite your wife, Tina, to hold the Bible.

[00:01:17] Speaker 05:
We're happy to have her join our court family as well.

[00:01:21] Speaker 01:
Congratulations to both of you and welcome to our court family.

[00:01:49] Speaker 05:
Now call up the case of the day, 141469, Medicines Company versus Hespera, Inc.

[00:01:59] Speaker 05:
Give you all a chance to settle in.

[00:02:25] Speaker 05:
Mr. LaIorla?

[00:02:44] Speaker 09:
Yes, Your Honor.

[00:02:45] Speaker 05:
You have reserved 10 minutes for rebuttal?

[00:02:47] Speaker 05:
I have, Your Honor.

[00:02:48] Speaker 05:
OK, thank you.

[00:02:48] Speaker 05:
Please be seated.

[00:02:49] Speaker 05:
Thank you.

[00:02:49] Speaker 09:
And may it please the Court.

[00:02:51] Speaker 09:
I'm going to try to address the first question that the Court has put to us,

[00:02:55] Speaker 09:
Namely, was there a sale for purposes of the on-sale bar?

[00:03:01] Speaker 09:
In 2006 and 2007, I think this is uncontroverted.

[00:03:06] Speaker 09:
The medicines company and Benvenue were in a contract manufacturing relationship.

[00:03:14] Speaker 09:
Everyone agrees, I think, that in this relationship, sales took place.

[00:03:21] Speaker 09:
I only call them transactions took place.

[00:03:25] Speaker 09:
Invoices were sent.

[00:03:27] Speaker 09:
Invoices were paid.

[00:03:29] Speaker 09:
Batches of angiomacs were delivered to the medicines company.

[00:03:34] Speaker 09:
That happened 11 times before the bar date.

[00:03:39] Speaker 09:
I think it's also agreed that these batches of angiomacs that were delivered to the medicines company before the bar date were embodiments of the patents.

[00:03:51] Speaker 09:
I believe that's not contested.

[00:03:54] Speaker 09:
because the patents identify these batches of angiomax as embodiments.

[00:04:01] Speaker 09:
That can be seen in example five of the patents, and I think the corresponding table is table seven.

[00:04:06] Speaker 09:
In table seven, the three so-called validation batches and the other eight batches that were manufactured before the bar date are listed as embodiments of the patent.

[00:04:19] Speaker 16:
But why weren't they payments for manufacturing services?

[00:04:24] Speaker 09:
Well, as Your Honor may guess, I'm coming to that.

[00:04:27] Speaker 09:
I can jump in.

[00:04:29] Speaker 09:
So they weren't payment for manufacturing services in Haspera's way of looking at these transactions.

[00:04:36] Speaker 09:
Because mindful of this court's jurisprudence on what constitutes a sale, we don't look at the formalities.

[00:04:44] Speaker 09:
I think our adversaries do emphasize the formalities.

[00:04:46] Speaker 09:
We look past the formalities.

[00:04:48] Speaker 09:
the reality, the commercial reality of the transaction.

[00:04:51] Speaker 09:
And so what happened here is money was paid and the invention was delivered as a result of the money being paid.

[00:04:58] Speaker 09:
And so we might argue, as my adversary has done, that that constitutes a sale of manufacturing services.

[00:05:06] Speaker 16:
But your own argument says that the value of this material was in the millions.

[00:05:12] Speaker 16:
Yes.

[00:05:12] Speaker 16:
But the amount paid is like $300,000.

[00:05:16] Speaker 09:
So that's important.

[00:05:19] Speaker 09:
More so, I would say, the value goes more to the question whether there was an experimental use.

[00:05:26] Speaker 09:
We emphasize it mostly because it rebuts in inference of experimental use.

[00:05:31] Speaker 09:
One is not experimenting when one is creating things of hundreds of millions of dollars in value, because it wouldn't experiment and put at risk something that valuable.

[00:05:40] Speaker 09:
It's less important, although it's relevant to the question whether there was a sale.

[00:05:46] Speaker 09:
But I think we emphasize it more so for purposes of this question

[00:05:52] Speaker 09:
experimental use.

[00:05:53] Speaker 07:
I understand that that's why you emphasize it, but I guess I'm not sure I understand why it's less relevant.

[00:05:58] Speaker 07:
Why wouldn't it be relevant, the huge differential between the value of what was delivered and what was paid for?

[00:06:07] Speaker 09:
Well, one imagines, and I think this is consistent with the court's jurisprudence on this whole question of what is a sale, one imagines that you could have a very modest sale

[00:06:17] Speaker 09:
and still trigger the buyer.

[00:06:19] Speaker 09:
So modest in terms of the dollars that changed hands.

[00:06:23] Speaker 09:
And so I don't know that we have to focus on the value that changes hands for purposes of determining whether or not there's a commercial sale under the FAF rule.

[00:06:30] Speaker 05:
Well, you're right.

[00:06:31] Speaker 05:
You could have a very modest amount.

[00:06:32] Speaker 05:
But here, it's not a question of it being only a modest amount.

[00:06:35] Speaker 05:
It's a modest amount relative to the amount which the product is valued.

[00:06:40] Speaker 05:
So it's not just that this was a small amount of pay.

[00:06:43] Speaker 05:
Oh, I understand.

[00:06:43] Speaker 05:
We look at it in comparison to the amount of value.

[00:06:46] Speaker 09:
So that's right.

[00:06:47] Speaker 09:
That's exactly right.

[00:06:49] Speaker 09:
I don't know that I would call it modest.

[00:06:52] Speaker 09:
I mean, it's hundreds of thousands of dollars.

[00:06:54] Speaker 09:
For all 11 batches, it was, if I recall correctly, exceeded $700,000, which is a lot of money.

[00:07:00] Speaker 09:
Even in the pharmaceutical world, that's a lot of money.

[00:07:03] Speaker 05:
But as Judge Lloyd pointed out, and I haven't heard the answer quite yet, which is it was a payment for services, correct?

[00:07:09] Speaker 09:
But why would that matter, Your Honor?

[00:07:10] Speaker 09:
No one has explained why services in this context should be treated differently than a product.

[00:07:15] Speaker 09:
I mean, it particularly was agreed that what was provided to Benvenue as a result, I'm sorry, what Benvenue provided to the medicines company as a result of these transactions was the invention.

[00:07:25] Speaker 09:
The invention is clearly the object of this transaction.

[00:07:29] Speaker 09:
I think this transaction qualifies as a sale under the court's approach, going all the way back to metalizing, which was the predecessor court, but which was

[00:07:38] Speaker 09:
cited with favor by the Supreme Court in fact.

[00:07:42] Speaker 09:
I think it's consistent with what this court has done over the years in evaluating whether or not sales account for purposes of the on-sale bar.

[00:07:51] Speaker 08:
And our approach... But that's the issue, isn't it?

[00:07:53] Speaker 08:
The purpose of Section 102 in the on-sale bar and whether the on-sale bar, assuming, if we can say that if money changes hands, that this is a transaction.

[00:08:06] Speaker 08:
So you could call it a sale.

[00:08:08] Speaker 08:
But the real question is what the purpose is of Section 102.

[00:08:13] Speaker 08:
The sale or an offer of sale is to internal transactions within the compass solely of the inventor.

[00:08:24] Speaker 08:
Are they what Section 102 is directed to?

[00:08:27] Speaker 08:
Or is it directed to another aspect of public use and public knowledge?

[00:08:36] Speaker 09:
I think I would answer it this way, and if I'm not reaching the point that Your Honor is asking me to get to, then I'll please point that out to me.

[00:08:43] Speaker 09:
I know you will.

[00:08:45] Speaker 09:
I would answer it this way.

[00:08:46] Speaker 09:
I think that when we think about what the purpose of the on-sale bar is, as opposed to the public use defense, which is a separate defense, although the government urges, I think, that they kind of be merged.

[00:08:58] Speaker 09:
At least that's what I understand the government's position to be.

[00:09:00] Speaker 09:
The unsale bar is a separate defense.

[00:09:02] Speaker 09:
And the unsale bar is particularly well suited to serve the policy of trying to limit inventors to the statutory term plus the grace period.

[00:09:12] Speaker 09:
In other words, induce or require inventors to enter the patent system early.

[00:09:17] Speaker 09:
The public sale defense really doesn't do that.

[00:09:19] Speaker 09:
The public sale defense is more directed to

[00:09:22] Speaker 09:
the policy of not taking back from the public something that's been in the public, not allowing people to patent things that have been in the public, which is a different policy that FAF also recognizes.

[00:09:35] Speaker 15:
But isn't that precisely the question?

[00:09:38] Speaker 15:
If the point of this is to not permit people to take back

[00:09:42] Speaker 15:
that which is in the public, we have to consider what the public is.

[00:09:46] Speaker 15:
And there may be a lot of definitions of the public, but how is, in any definition, the inventor the public?

[00:09:53] Speaker 09:
So I'm not suggesting the inventor is the public, but I was saying it was the opposite.

[00:09:57] Speaker 09:
When it comes to the on-sale bar,

[00:10:01] Speaker 09:
It is arguable, and I find the argument persuasive, that the more important policy is this policy of getting inventors to enter the patent system earlier.

[00:10:11] Speaker 15:
So that the term, the exclusive- Sure, but we can't divorce that from the other, I think, more important aspect, which is that 102 prevents people from getting a patent on things which have already been given over to the public.

[00:10:24] Speaker 15:
And if the sale is to the inventor, how is that giving anything over to the public?

[00:10:29] Speaker 15:
It's giving it precisely back to the inventor.

[00:10:32] Speaker 09:
Well, Your Honor, I would say I don't disagree with that.

[00:10:35] Speaker 09:
102 certainly does that.

[00:10:36] Speaker 09:
But I think that's the public use defense more so than the on-sale bar.

[00:10:39] Speaker 09:
And so what this court has done with the on-sale bar over the years is- Well, the government's position is not that the two emerge completely.

[00:10:46] Speaker 07:
I think the government's position is that you can have a sale and you can have a use.

[00:10:50] Speaker 07:
And they could be two different things.

[00:10:51] Speaker 07:
But they both have to involve the public.

[00:10:53] Speaker 09:
Yes, that is the government's position.

[00:10:55] Speaker 09:
But I think what that winds up doing is it winds up turning the on sale bar into a subset of public use defense.

[00:11:01] Speaker 09:
And so after 200 years of having them separate defenses and serving the patent system well, the government is now, if I understand their argument correctly, and it's possible I don't understand it fully, and I look forward to hearing the government state their argument.

[00:11:15] Speaker 09:
But after 200 years of these defenses being clearly distinct and serving different purposes,

[00:11:20] Speaker 09:
Equally important purposes, I would say, although I understand the sentiment about public use being very important.

[00:11:27] Speaker 09:
But I wouldn't say the public use is more important than this idea of restricting the exclusive access to the invention to the statutory term plus the grace period.

[00:11:36] Speaker 09:
That's what the unsale bar does.

[00:11:39] Speaker 09:
And the public use defense doesn't do that at all.

[00:11:41] Speaker 13:
Apart from the early filing policy, there are two policies which the Supreme Court and we have articulated.

[00:11:47] Speaker 13:
One is that the patentee shouldn't be able to profit from the invention before the bar date.

[00:11:55] Speaker 13:
And that's not involved here, correct?

[00:11:58] Speaker 09:
I do think the patentee benefited

[00:12:01] Speaker 09:
Profit is a different word.

[00:12:02] Speaker 09:
I'm going to say benefited from exploitation of the invention before the part of it.

[00:12:07] Speaker 13:
Okay, but the patent didn't receive any money or make any profit in that sense?

[00:12:13] Speaker 09:
Well, it didn't make any sales of the invention.

[00:12:16] Speaker 09:
It benefited in other commercially relevant and important ways.

[00:12:20] Speaker 16:
That's a very important admission.

[00:12:22] Speaker 16:
They didn't make a sale of the product.

[00:12:25] Speaker 16:
Isn't that the whole issue here?

[00:12:26] Speaker 09:
No, I don't think it is, Your Honor.

[00:12:28] Speaker 09:
I think there were sales that were made that were relevant to the on-sale bar under the court's jurisprudence.

[00:12:33] Speaker 09:
Let me finish my question.

[00:12:37] Speaker 13:
The other aspect, another policy that's played here, is public knowledge of the invention.

[00:12:46] Speaker 13:
And your problem is that this was a confidential transaction that the public was not aware of.

[00:12:53] Speaker 13:
How do you get around that?

[00:12:55] Speaker 09:
Well, the medicines company has argued that.

[00:12:56] Speaker 09:
And the way I get around it is I say it's a settlement question.

[00:13:00] Speaker 09:
This court has said in Atlanta Attachment, in the Coveney case, in the Hobbs case, that private sales count for purposes of the on sale bar.

[00:13:09] Speaker 09:
I think that's a settlement question.

[00:13:13] Speaker 03:
Do any of those cases involve private sales by somebody other than the patentee?

[00:13:19] Speaker 03:
uh... that uh... uh... with pennies a seller yes other than other than where that because if the company's seller than the first policy of no compensation profit coming into the patentee ahead of time would be sufficient there are other cases your honor that some of the question of whether the patentee

[00:13:37] Speaker 09:
has to be the seller.

[00:13:38] Speaker 09:
This Akron case, the Hamilton Beach case, have said that the seller need not be... What about the confidential sales cases?

[00:13:44] Speaker 13:
Are those all cases in which the patent team is profiting so that the first policy was implicated?

[00:13:50] Speaker 09:
Well, I'm chagrined to say, as I stand here right now, I don't think so, Your Honor, but I don't have all the facts of those cases firmly in mind.

[00:14:02] Speaker 09:
What I was about to say, and I think it's relevant to the question, is that in Zacherin and Hamilton Beach, the court found that sales count for the on-sale bar, even when the seller is not the patentee.

[00:14:14] Speaker 09:
And to go ahead and tick off the other boxes that medicine companies raises.

[00:14:19] Speaker 13:
There's no question that under the Supreme Court's decision at Shaw that sales by third parties count for the on-sale bar.

[00:14:25] Speaker 13:
But the question is whether confidential sales

[00:14:30] Speaker 13:
by third parties should count for the on-sale bar because the policy seems to be public, like the public awareness of the invention.

[00:14:38] Speaker 13:
And where the sale's confidential, there's no public awareness.

[00:14:42] Speaker 09:
So I think the more important concern in our fact pattern, which involves a confidential sale where the patentee is not the seller, the more important concern is that if you change the rule,

[00:14:56] Speaker 09:
then the inventors like the medicines company, or the medicines company obviously is the S&E, but the inventors involved with these patents, these are inventors who in the future, if you change the rule, are inventors in the future who will file much later than they currently do.

[00:15:12] Speaker 09:
And it's a very large class of inventors who use contract manufacturing.

[00:15:16] Speaker 07:
If you change the rule... But you're requiring us then to differentiate between the two classes of manufacturers, correct?

[00:15:22] Speaker 09:
Well, we differentiate all the time based on different behavior.

[00:15:25] Speaker 09:
If you're using a contract manufacturer, you're making choices and conducting your business in a different way than a large company that manufactures it.

[00:15:33] Speaker 07:
As I understand your argument, you're saying that we shouldn't just be worried about profit.

[00:15:37] Speaker 07:
We should be worried about any commercial advantage that could arise.

[00:15:41] Speaker 07:
And you point to commercial advantage from being able to do what you need to do to get the FDA approval or being able to stockpile.

[00:15:51] Speaker 07:
If that were the case, why wouldn't we say that non-contract

[00:15:55] Speaker 07:
manufacturing so that somebody who can do it in-house, that everything they do inures to their commercial advantage.

[00:16:02] Speaker 09:
It does.

[00:16:03] Speaker 09:
Building a plant inures to their commercial advantage.

[00:16:05] Speaker 09:
That's absolutely right.

[00:16:06] Speaker 09:
And to the extent they're exploiting the invention, they make the first half of the test.

[00:16:12] Speaker 09:
The second half of the test, there has to be a transaction.

[00:16:14] Speaker 09:
And so these companies that manufacture in-house are able to do it.

[00:16:18] Speaker 09:
They're able to delay the filing of their patents in a way that's not beneficial to the patent system, not beneficial to the public.

[00:16:25] Speaker 09:
But they're able to delay it because they can take advantage of their size.

[00:16:27] Speaker 09:
That doesn't mean we should change the rule for the companies for whom the rule is working well.

[00:16:32] Speaker 09:
Nobody points to any problem.

[00:16:34] Speaker 07:
Well, when you say the rule, you still haven't answered the question of whether there is a commercial sale.

[00:16:40] Speaker 09:
No, I thought I had them, and I apologize.

[00:16:42] Speaker 09:
Under the court's decisions, and if I hadn't said it, I should say, there are many years of jurisprudence from this court dealing with the question of what's an on sale.

[00:16:54] Speaker 07:
What sales come from an on sale?

[00:16:56] Speaker 07:
Right now, we're visiting this question on proceeding, and so maybe we should begin with the statute.

[00:17:02] Speaker 09:
We should begin with the statute.

[00:17:04] Speaker 09:
So there has to be, in fact, let me start with FAF, which is more helpful, I think, at least for present purposes.

[00:17:12] Speaker 09:
FAF says the patent has to be ready for patenting, and it has to be a commercial sale.

[00:17:18] Speaker 09:
But it doesn't tell us what a commercial sale is.

[00:17:20] Speaker 09:
At the end of the day, FAF is about whether the patent was ready for patenting when it hadn't been reduced to practice.

[00:17:28] Speaker 09:
It doesn't reach this question of what's on sale.

[00:17:33] Speaker 09:
points us in the right direction by affirmatively citing the metallizing case.

[00:17:40] Speaker 09:
And the metallizing case provides the framework we contend, the framework for deciding this question of what constitutes a sale for on-sell bar purposes.

[00:17:48] Speaker 09:
And what it tells us is there has to be commercial exploitation of the invention combined with a transaction that triggers the bargain.

[00:17:57] Speaker 09:
And remember, this is not a rule about invalidating patents.

[00:18:01] Speaker 09:
If we think of it as a rule for invalidating patents, we might think it's kind of harsh and unfair.

[00:18:06] Speaker 09:
It's not a rule about that.

[00:18:07] Speaker 09:
It's a rule about when you have to file your patents.

[00:18:09] Speaker 07:
Doesn't PAP say the reason for the commercial sale requirement is because that an inventor can control and anticipate the first commercial use of its invention?

[00:18:20] Speaker 09:
As can a contract manufacturing patentee.

[00:18:24] Speaker 09:
The patentee who uses a contract manufacturer is entirely in control of when that process starts and when it ends.

[00:18:31] Speaker 07:
So what is the commercial use of the invention that arises from purchasing manufacturing services?

[00:18:39] Speaker 09:
Well, in this case, I mean, it depends on the facts of the case, but in this case, there's an immediate commercial exploitation in that those assets hit the books of the company immediately.

[00:18:49] Speaker 09:
Immediately, the company's more valuable.

[00:18:50] Speaker 09:
Plus, that inventory, I guess I should say, or those batches of angiomacs are available for business planning and executing business strategies, which did happen in this case.

[00:19:04] Speaker 09:
In March, after the batches, the first three batches were made in late 2006, and then eight more were made pre-bar date in March of 2007.

[00:19:13] Speaker 09:
In March of 2007, Medicine's company negotiated a very significant commercial contract with a company who was going to be their exclusive buyer of Angiomax in North America for the next three years.

[00:19:28] Speaker 09:
Now that's not a contract that a company could safely negotiate if it hadn't worked out and begun exploiting the benefits of the invention.

[00:19:38] Speaker 09:
So there was tremendous commercial exploitation, but there wasn't money.

[00:19:42] Speaker 09:
And to the extent that I thought Judge Dyke was asking me about money flow, there wasn't money flowing back.

[00:19:48] Speaker 09:
to the medicines company at that point in time.

[00:19:50] Speaker 09:
But the commercial exploitation is very, very significant.

[00:19:53] Speaker 09:
You combine the commercial exploitation with the 11 pre-bar date transactions.

[00:19:59] Speaker 09:
And in my mind, mindful of the court's jurisprudence in the past, at least under the laws that existed at the time, those dates triggered at the on-sale bar.

[00:20:09] Speaker 09:
And they should have filed their patents in 12 months, and they failed to do it.

[00:20:11] Speaker 09:
If they'd gone to a lawyer and said, what should I do?

[00:20:13] Speaker 09:
A lawyer would have told them, file your patents.

[00:20:15] Speaker 09:
It's very risky not to file your patents after manufacturing.

[00:20:18] Speaker 12:
So is it your argument that there's a company that has in-house manufacturing, that that in-house manufacturing is commercial exploitation?

[00:20:27] Speaker 09:
Well, yes, but there's no transaction.

[00:20:29] Speaker 09:
You have to have both to trigger the bargaining.

[00:20:32] Speaker 09:
What the large companies can manufacture in-house... And why is that?

[00:20:35] Speaker 12:
Because they can list the assets of the exploitation on their

[00:20:39] Speaker 12:
on their books?

[00:20:40] Speaker 09:
Well, that's one of the things they can do.

[00:20:41] Speaker 09:
But they can also use these assets for purposes of conducting their business, negotiating arrangements with other companies, and so forth.

[00:20:53] Speaker 09:
I'm not a businessman.

[00:20:54] Speaker 09:
I'm a lawyer, sadly.

[00:20:54] Speaker 09:
But there are many advantages and tremendous value to the company that is able to build up its inventory in a fashion.

[00:21:02] Speaker 12:
OK, it's a commercial exploitation, but is it a commercial sale?

[00:21:05] Speaker 09:
Yeah, well, yeah.

[00:21:08] Speaker 09:
So for example, special devices says that that's exactly what it is.

[00:21:12] Speaker 09:
Special devices says there's no exception for contract manufacturing sales.

[00:21:19] Speaker 09:
We don't have an exception.

[00:21:20] Speaker 09:
And then there's a couple of very good reasons why.

[00:21:22] Speaker 09:
First of all, these sales that result in stockpiling is a loaded word, but I'll call it stockpiling, and I don't mean to

[00:21:32] Speaker 09:
ascribing anything to Jordan to it.

[00:21:35] Speaker 09:
But these sales allow, let me state it in reverse, if you were to make an exception for these sales, what would result is that a large class of inventors who are now entering the patent system early, filing their patents early, would stop doing so, at least would have the freedom to stop doing so.

[00:21:56] Speaker 09:
I don't know how that benefits the public.

[00:21:58] Speaker 09:
I think everybody agrees that's not a good thing for the patent system.

[00:22:01] Speaker 09:
And it's inconsistent with the policy that we want to limit inventors as much as possible to the grace period and the statutory term.

[00:22:09] Speaker 09:
If you can use your patent for a long time and not have to file your patent, we are not honoring that policy.

[00:22:15] Speaker 09:
And so I urge you not to change the rule, because no one has identified a public benefit that will flow from changing the rule.

[00:22:23] Speaker 06:
Can I ask you about FAF for a minute?

[00:22:25] Speaker 06:
I agree with you that there isn't a lot of discussion about commercial offer for sale, but there is some language in there.

[00:22:31] Speaker 06:
It talks about when it's ready for patenting and being first marketed commercially, and also talks about exploiting discovery competitively.

[00:22:44] Speaker 06:
How do you respond to that when we're talking about marketed commercially?

[00:22:48] Speaker 06:
How is stockpiling marketed commercially?

[00:22:51] Speaker 09:
So I don't think that FATH reaches that issue.

[00:22:54] Speaker 09:
And I think it's really hard to take the facts of FATH and squeeze them onto all of the problems in our case that the court's concerned with.

[00:23:03] Speaker 09:
At the end of the day, FATH is about as ready for patent, even though it hasn't been reduced to practice.

[00:23:09] Speaker 09:
I think that is really helpful when it talks about the important policies.

[00:23:12] Speaker 09:
But it just doesn't reach this question of commercial manufacturing and whether that should constitute a sale that accounts for purposes of the on-sale buyer.

[00:23:21] Speaker 09:
I mean, that's just outside the can of what the court was thinking about in fact.

[00:23:24] Speaker 06:
I can see what you're saying.

[00:23:26] Speaker 06:
But I also just note that it does have that language where it's talking about it's not just a commercial sale.

[00:23:32] Speaker 06:
It has some language that suggests

[00:23:34] Speaker 06:
what it was thinking with commercial, what the court was thinking, including this marketing commercially and exploiting competitively.

[00:23:41] Speaker 09:
Right.

[00:23:42] Speaker 09:
Well, so let me say this.

[00:23:44] Speaker 09:
I'm not sure that this meets all of what you're pointing out.

[00:23:46] Speaker 09:
But I mean, FAF itself was a private sale.

[00:23:49] Speaker 09:
The public wasn't involved in that sale.

[00:23:51] Speaker 09:
Anybody who's sophisticated about that knows that this negotiation and this purchase of the, I guess, what were they?

[00:23:58] Speaker 09:
They were chip connectors, chip sockets, I guess.

[00:24:03] Speaker 09:
That happens privately.

[00:24:04] Speaker 09:
That's not a public thing.

[00:24:05] Speaker 08:
I don't think that's accurate.

[00:24:07] Speaker 08:
Faff was an offer to sell to the public.

[00:24:10] Speaker 09:
But that was later, Your Honor.

[00:24:11] Speaker 09:
I think.

[00:24:13] Speaker 09:
I think.

[00:24:14] Speaker 09:
I could be wrong.

[00:24:15] Speaker 09:
But I believe that that happened later.

[00:24:18] Speaker 08:
That was what was deemed the sale, because the product hadn't yet been produced.

[00:24:22] Speaker 08:
But there was an offer to sell to the public.

[00:24:25] Speaker 08:
And it seems to me that Faff

[00:24:27] Speaker 08:
I bet that you're correct in saying that the situation in fact doesn't help us here particularly, other than perhaps to show the emphasis on the offer to the public to sell a product.

[00:24:41] Speaker 09:
Well, I defer to Your Honor on that case.

[00:24:45] Speaker 09:
I could be remembering it inaccurately, certainly.

[00:24:51] Speaker 09:
What I do think is important is that for the present discussion, FAF focuses on two policies.

[00:25:01] Speaker 09:
First of all, I guess it should be said, FAF is the only case the Supreme Court has ever had on the question of offer for sale.

[00:25:08] Speaker 09:
The other cases that the government cites that are highly relevant but still different are cases about the public use defense, which is different.

[00:25:15] Speaker 09:
We've already covered that.

[00:25:16] Speaker 09:
I won't rehash that.

[00:25:17] Speaker 09:
So we looked at that, because it is the case, and it tells us two really important things.

[00:25:20] Speaker 09:
It has to be ready for patenting, and it has to be a commercial sale.

[00:25:23] Speaker 09:
It doesn't tell us what a commercial sale is.

[00:25:25] Speaker 12:
Well, it does, doesn't it?

[00:25:27] Speaker 12:
Doesn't FAF define a commercial sale as any attempt to use a patented invention for profit?

[00:25:34] Speaker 09:
Gee, I didn't understand that to be a definition of sale.

[00:25:37] Speaker 09:
It seems overbroad.

[00:25:39] Speaker 12:
A commercial offer for sale.

[00:25:41] Speaker 12:
Is any attempt to use the pen invention for profit?

[00:25:46] Speaker 09:
Well, so, I mean, that would apply to the transactions I'm arguing should be treated as sales.

[00:25:52] Speaker 12:
How would that apply to a manufacturing contract, where I'm buying services to manufacture something, but not

[00:25:59] Speaker 12:
I'm not showing that for a profit.

[00:26:01] Speaker 12:
I'm not showing the items, the goods, for a profit.

[00:26:05] Speaker 09:
Well, I'm conducting my business, and I'm making plans, and I'm creating contracts, and I'm signing an agreement with a customer to whom I'm committed to sell this new

[00:26:17] Speaker 09:
set of batches using the new methodology.

[00:26:21] Speaker 09:
I'm doing all of that.

[00:26:23] Speaker 09:
And that is commercial exploitation.

[00:26:25] Speaker 09:
And that is tremendously beneficial to the company.

[00:26:30] Speaker 09:
And let me say one other thing, or maybe two other things about this.

[00:26:38] Speaker 09:
The argument that I hear coming from the medicines company, and partly from the government, is that there's something terribly unfair about that.

[00:26:46] Speaker 09:
And I don't think that's right.

[00:26:48] Speaker 09:
I don't think that's right in the sense that there was anything unfair to the medicines company.

[00:26:51] Speaker 09:
The medicines company should have known about the special devices cases.

[00:26:55] Speaker 09:
It was a well-known case.

[00:26:56] Speaker 09:
And they ignored special devices at their own risk when they didn't file their patent applications.

[00:27:02] Speaker 09:
And so there's no unfairness to the medicines company.

[00:27:06] Speaker 09:
I don't think there's unfairness to the public either.

[00:27:08] Speaker 09:
I think our laws are replete with examples where when companies behave differently, our laws treat them differently.

[00:27:15] Speaker 09:
What's important is once there's a transaction, you've got a year.

[00:27:19] Speaker 09:
And everybody has to abide by that rule.

[00:27:21] Speaker 09:
It's an even-steven rule that applies to everybody.

[00:27:24] Speaker 09:
The sole advantage that I can think of at least that the big company has is that the big company can sometimes organize its affairs in such a way that that sale that triggers the buyer date doesn't happen until later.

[00:27:36] Speaker 09:
Later than it does typically in a contract manufacturing situation.

[00:27:40] Speaker 09:
I don't find that terribly unfair.

[00:27:43] Speaker 09:
But let me say, I've been out of time for a long time.

[00:27:45] Speaker 05:
Yes.

[00:27:45] Speaker 05:
Well, no, you're not out of time, but you are cutting significantly into your rebuttal time.

[00:27:49] Speaker 05:
Yes, and I want my rebuttal time.

[00:27:50] Speaker 05:
Yes.

[00:27:51] Speaker 05:
I want to hear what the other people have to say.

[00:27:53] Speaker 05:
So why don't we, you want to hear from the other side.

[00:27:55] Speaker 05:
Thank you.

[00:27:56] Speaker 05:
Thank you.

[00:27:56] Speaker 09:
And we serve the balance of your time.

[00:27:58] Speaker 09:
Thank you.

[00:27:59] Speaker 09:
Thank you.

[00:28:07] Speaker 05:
So just to be clear, you're dividing your time with the government.

[00:28:10] Speaker 05:
20 minutes for you, 10 for the court.

[00:28:13] Speaker 04:
Yes, I understand.

[00:28:13] Speaker 04:
Thank you.

[00:28:13] Speaker 04:
May I please the court?

[00:28:15] Speaker 04:
The facts of the case are clear in the briefs.

[00:28:17] Speaker 13:
Let me see if I can understand the breadth of your argument.

[00:28:20] Speaker 13:
I understand that you're saying that a confidential sale to the patentee shouldn't be within the on-sale bar.

[00:28:28] Speaker 13:
And I understand that.

[00:28:30] Speaker 13:
But let's suppose that the patentee made a secret sale

[00:28:34] Speaker 13:
before the bar date.

[00:28:35] Speaker 13:
Do you agree that that would be covered by the on-sale bar?

[00:28:38] Speaker 04:
It might be.

[00:28:39] Speaker 04:
It might be, because I think you have to look at the FAF test.

[00:28:43] Speaker 04:
You have to see whether or not under the transfer.

[00:28:46] Speaker 04:
Would it be or not?

[00:28:47] Speaker 13:
It depends on the FAFs, Your Honor.

[00:28:48] Speaker 13:
Well, a cash sale by the patentee to someone before the bar date.

[00:28:55] Speaker 13:
It's secret.

[00:28:57] Speaker 04:
If it's a sale, commercial sale, falling within the FAF test, then I think it would be an on-sale bar if it's before the bar date.

[00:29:06] Speaker 04:
That's the whole question is if it is a commercial sale or offer of sale under the FAF test.

[00:29:12] Speaker 04:
Even if it's secret?

[00:29:13] Speaker 04:
Even if it's secret.

[00:29:15] Speaker 13:
So what about a situation where there's a third party sale?

[00:29:19] Speaker 13:
before the bar date as in the Supreme Court's decision in Shaw.

[00:29:23] Speaker 13:
Would a public sale by a third party be covered by the on-sale bar?

[00:29:29] Speaker 04:
If it meets a commercial sale, probably yes.

[00:29:34] Speaker 04:
Again, I think the court has to do that analysis, which doesn't apply here in the sense that there wasn't a commercial sale.

[00:29:43] Speaker 13:
Well, you're saying, first of all, there wasn't a sale.

[00:29:45] Speaker 13:
And second of all, it was a confidential sale

[00:29:48] Speaker 13:
that didn't commercially benefit the patentee.

[00:29:52] Speaker 04:
Correct, Your Honor, but it's not just confidential or not confidential.

[00:29:55] Speaker 04:
You also have to look at who has control of the transaction.

[00:29:58] Speaker 04:
Was title passed with the goods, for example?

[00:30:01] Speaker 04:
Title is not essential.

[00:30:03] Speaker 04:
It doesn't have to pass.

[00:30:04] Speaker 04:
However, it's highly probative evidence of who has control of this invention.

[00:30:09] Speaker 04:
Was the invention put in the hands of that third party?

[00:30:12] Speaker 04:
So that they could, in turn, do whatever they want with it, and now it's in the public.

[00:30:15] Speaker 16:
Mr. Hogg, I'd like to ask you what

[00:30:18] Speaker 16:
to deal with the purpose of the sale.

[00:30:21] Speaker 16:
Here we're dealing with a pharmaceutical product.

[00:30:24] Speaker 16:
The use is actually in the claim.

[00:30:28] Speaker 16:
But let's assume a hypothetical.

[00:30:31] Speaker 16:
Benvenue is a volunteer.

[00:30:34] Speaker 16:
It comes to medicines and says, I know you've got a product in development.

[00:30:39] Speaker 16:
I know you don't have a lot of development manufacturing capacity.

[00:30:43] Speaker 16:
We propose to manufacture this material for you and charge you $347,000.

[00:30:52] Speaker 16:
And they set it up as a sale.

[00:30:56] Speaker 16:
Title will pass on delivery and payment.

[00:31:00] Speaker 16:
That arguably is not a sale for the patented purpose.

[00:31:07] Speaker 16:
Does that matter?

[00:31:08] Speaker 16:
Would that still be a bar?

[00:31:11] Speaker 04:
I think you have to first look at the claims.

[00:31:12] Speaker 04:
What do the claims cover?

[00:31:13] Speaker 04:
And the claims here cover a product or product by process.

[00:31:16] Speaker 04:
They're directed to a product.

[00:31:17] Speaker 16:
Well, the process is irrelevant.

[00:31:19] Speaker 16:
Product by process is a product claim.

[00:31:21] Speaker 04:
Correct.

[00:31:22] Speaker 04:
So first look at the claims.

[00:31:24] Speaker 04:
What are we talking about?

[00:31:24] Speaker 04:
What is the invention?

[00:31:26] Speaker 04:
And then once you have established that, look at the goods.

[00:31:30] Speaker 04:
that we're talking about here.

[00:31:32] Speaker 04:
Excuse me.

[00:31:33] Speaker 16:
It's a chemical plus a carrier.

[00:31:35] Speaker 16:
It's a chemical plus a carrier.

[00:31:37] Speaker 16:
But it's not being sold for pharmaceutical purposes to medicines.

[00:31:42] Speaker 16:
Is that a bar?

[00:31:44] Speaker 04:
I don't think so.

[00:31:44] Speaker 04:
I don't think there is a commercial sale of the invention in that case.

[00:31:50] Speaker 16:
In other words, the utility in the patent is relevant.

[00:31:54] Speaker 04:
I think it is.

[00:31:55] Speaker 04:
Well, utility to the extent of how that relates to what's claimed, yes.

[00:32:00] Speaker 04:
I think that's what you have to look at.

[00:32:01] Speaker 16:
Well, usually utility isn't in a product claim.

[00:32:04] Speaker ?:
Correct.

[00:32:04] Speaker 04:
Well, I think you have to look at the goods that are covered by the claim.

[00:32:07] Speaker 04:
That is what either is in the public or that knowledge of that invention, as the Faff court said.

[00:32:13] Speaker 04:
It's really the patent laws therefore seek both to protect the public's right to retain knowledge already in the public domain and the inventor's right to control whether and when he may patent his invention.

[00:32:25] Speaker 04:
It's all about knowledge, whether it's public.

[00:32:27] Speaker 07:
Are you taking the position then that if the purchaser is the inventor,

[00:32:33] Speaker 07:
that there is no commercial sale because it's not for the purposes that the invention was made?

[00:32:39] Speaker 04:
I think it would depend again on the facts.

[00:32:41] Speaker 04:
If the purchaser was the inventor, this also goes to Judge Hughes' question, is it possible for the inventor to be the public?

[00:32:48] Speaker 04:
I think under certain facts it probably is.

[00:32:50] Speaker 04:
I think what you have to look at is

[00:32:52] Speaker 04:
Who has control of that transaction?

[00:32:55] Speaker 04:
Did the supplier have control of those products that they made and are selling to the inventor?

[00:33:01] Speaker 04:
That's a very probative fact.

[00:33:02] Speaker 04:
If they have title, if they have control, if it's commercial, if they sell it before the bar date, I think those facts are special devices.

[00:33:11] Speaker 07:
When you say does the supplier have control, meaning can the supplier sell it to someone else, is that what you're...

[00:33:16] Speaker 04:
Well, that would certainly be an operative factor.

[00:33:18] Speaker 07:
What if you had, instead of having this structured as a purchase of services, you had a purchase order where the inventor makes a purchase order to the supplier and says, please create this product to our specs.

[00:33:34] Speaker 07:
The product's created, and then the value of the product is paid for.

[00:33:38] Speaker 07:
by the inventor.

[00:33:40] Speaker 07:
Is that a sale?

[00:33:41] Speaker 04:
No, I don't think so.

[00:33:42] Speaker 13:
On those facts, assuming.

[00:33:45] Speaker 13:
Suppose it's public rather than confidential.

[00:33:48] Speaker 04:
If it was public, I think that would raise questions then about public use.

[00:33:53] Speaker 04:
It would raise questions of disclosure to the public.

[00:33:56] Speaker 04:
It would be a very important fact, a different fact, from certainly what we have here in this case.

[00:34:02] Speaker 11:
Your answer has to somewhat swing on whether

[00:34:07] Speaker 11:
and ownership interest has been transferred to that manufacturer, doesn't it?

[00:34:11] Speaker 04:
I think that is a probative fact.

[00:34:13] Speaker 04:
It's certainly a relative fact, Your Honor.

[00:34:15] Speaker 04:
Definitely a relative fact.

[00:34:16] Speaker 04:
And I think we always have to come back to the Faff v. Wells test.

[00:34:20] Speaker 04:
Was it a commercial sale or non-sale, offer or sale, or not?

[00:34:24] Speaker 04:
And that court also said something more about it.

[00:34:27] Speaker 03:
I think I don't think the judge stole on being competitive.

[00:34:30] Speaker 03:
Mr. O'Connor, can I ask you a question, please?

[00:34:32] Speaker 03:
Was the contract between Medicines and Benvenue here one that prohibited Benvenue from making the same thing and selling it to anybody else?

[00:34:45] Speaker 04:
I don't know if there is, standing here now, I don't know if there's a specific contract provision to that effect.

[00:34:51] Speaker 04:
That certainly was the understanding.

[00:34:55] Speaker 03:
Benvenue gets material and presumably some knowledge from medicines.

[00:35:00] Speaker 03:
Was there some limitation on its ability to say, boy, we know something, other people might be interested?

[00:35:07] Speaker 03:
Sell it to somebody else?

[00:35:08] Speaker 04:
There was a limitation in the fact that it was a confidential relationship between the medicines company and Benvenue.

[00:35:15] Speaker 04:
I don't want to say anything about what's not maybe in the record.

[00:35:18] Speaker 04:
I don't know if that specific provision is in their contract.

[00:35:22] Speaker 04:
I'd have to look at that.

[00:35:23] Speaker 04:
But clearly, it's a confidential relationship.

[00:35:26] Speaker 07:
Is the contract in the record?

[00:35:28] Speaker 07:
Excuse me?

[00:35:28] Speaker 07:
Is the contract in the record below?

[00:35:30] Speaker 04:
Yes.

[00:35:32] Speaker 04:
And there's an invoice, too, that says contract for manufacturing services.

[00:35:38] Speaker 04:
There are also fact findings in this case by the lower court.

[00:35:41] Speaker 04:
The lower court found that Benvenu was paid for services.

[00:35:46] Speaker 04:
I think the standard of review on that fact finding is clear error.

[00:35:50] Speaker 04:
Obviously, on sale is de novo on a matter of law.

[00:35:53] Speaker 04:
But there are fact findings here, very clear fact findings.

[00:35:57] Speaker 15:
When was Benvenu violated that confidential relationship and sold

[00:36:02] Speaker 15:
manufacturing services, not the product, but the same services to a third party.

[00:36:07] Speaker 15:
Would that implicate the on-sale bar?

[00:36:10] Speaker 15:
They're still doing manufacturing services.

[00:36:12] Speaker 15:
They're not selling the product.

[00:36:14] Speaker 15:
But they're selling it to not back to the inventor.

[00:36:18] Speaker 04:
Based on the facts in this case, I don't think so.

[00:36:19] Speaker 04:
Because again, the claims are directed to a product.

[00:36:23] Speaker 04:
So if they're only selling manufacturing services, they probably have a breach of contract or some other cause of action to worry about.

[00:36:31] Speaker 04:
But I don't think that's an on-sale bar would not constitute an on-sale bar.

[00:36:35] Speaker 13:
Well, that would be quite a problem, wouldn't it?

[00:36:36] Speaker 13:
Because then you could completely evade the on-sale bar by structuring your public sales as manufacturing services.

[00:36:46] Speaker 04:
No, I think the test doesn't change, Your Honor.

[00:36:50] Speaker 04:
You have to see whether or not it's a partial sale.

[00:36:52] Speaker 13:
So you can sell it to 200 people and characterize it as manufacturing services, contrary, and say, well, the on-sale bar doesn't apply.

[00:37:00] Speaker 04:
I would expect, Your Honor.

[00:37:01] Speaker 13:
Any more you need for that?

[00:37:03] Speaker 04:
No.

[00:37:04] Speaker 04:
I think a court would go through, would look at those facts and determine whether or not it's a sham transaction, whether it's an attempt to evade the on sale bar.

[00:37:11] Speaker 04:
Those would all be facts you'd have to look at.

[00:37:13] Speaker 04:
But the hypothetical, it's a hypothetical, I think.

[00:37:17] Speaker 02:
Just to understand your position, what is the minimum number of facts that would have to change on this case that would lead to triggering the on sale bar, in your view?

[00:37:29] Speaker 04:
Minimum number would be, first,

[00:37:31] Speaker 04:
the inventor, Patenteed, the medicines company, would have to offer for sale or actually sell the drug product as claimed.

[00:37:42] Speaker 04:
That would be number one.

[00:37:43] Speaker 04:
That hasn't happened here.

[00:37:44] Speaker 04:
That didn't happen until after.

[00:37:46] Speaker 02:
We're just talking about the transaction between Benvenue and medicines.

[00:37:51] Speaker 04:
I think that Benvenue would, the minimum facts to find are that the relationship was confidential,

[00:37:58] Speaker 04:
And the invention never left the control of the medicines company.

[00:38:04] Speaker 04:
I think those are the two main factors I would point to, and I think those are also what we argue to be an appropriate clarification of the special devices case.

[00:38:13] Speaker 02:
So if somehow one of those was taken away from you, then it wouldn't be a trigger of the on-sale bar?

[00:38:23] Speaker 04:
No, not necessarily.

[00:38:26] Speaker 04:
I don't think it's a matter of law.

[00:38:27] Speaker 02:
Right, so back to the question.

[00:38:28] Speaker 02:
What is the minimum number of facts that would need to be altered in your view, under your understanding, what would be the best understanding of the law that would thereby render this transaction of

[00:38:42] Speaker 02:
trigger to the on sale.

[00:38:44] Speaker 04:
There would have to be a factual determination that the inventor put their invention into, that the inventor offered that invention for sale and or sold it in a commercial sense under the FAF test.

[00:38:57] Speaker 13:
Well, it doesn't have to be by the inventor.

[00:38:59] Speaker 13:
The Supreme Court has called it to be a sale by a third party and it's completely unauthorized by the inventor, right?

[00:39:05] Speaker 04:
Well, I think the inventor at some point allowed that to happen, whether they did it inadvertently or inadvertently.

[00:39:12] Speaker 04:
I'm not sure that would happen.

[00:39:13] Speaker 13:
Allowed it to happen by not filing the patent application.

[00:39:16] Speaker 04:
It could be, and I think they would probably lose their patent right at that point.

[00:39:21] Speaker 04:
That's certainly not what happened here in this case.

[00:39:23] Speaker 04:
Benvenue was nothing more than a pair of hands to make drug product, period.

[00:39:30] Speaker 04:
That's all they were asked to do.

[00:39:32] Speaker 04:
They did it under a confidential relationship.

[00:39:34] Speaker 04:
The medicines company is not a vertically integrated company.

[00:39:38] Speaker 04:
They don't have manufacturing facilities.

[00:39:40] Speaker 04:
They simply can't make this drug product.

[00:39:42] Speaker 04:
They have to have someone make it for them.

[00:39:44] Speaker 04:
And if the law is, as soon as you go to a service provider, whether it's a contract manufacturer or a supplier or manufacturer or maybe someone to paint your car if your invention is a car, if the only test is commercial benefit,

[00:40:00] Speaker 04:
Well, I think that's not the law.

[00:40:03] Speaker 04:
It would not pass muster with FAF.

[00:40:09] Speaker 04:
And it's bad policy.

[00:40:11] Speaker 03:
Do you think that we need to overrule language, rationales, results in some of our cases to rule for you here?

[00:40:23] Speaker 03:
And if so, which cases?

[00:40:27] Speaker 04:
I think that there are a few cases that raise conflict, certainly.

[00:40:34] Speaker 04:
I think that, for example, in the Atlantic attachment case, there is a bit of a conflict as to when you can have experimental use versus ready reduction to practice.

[00:40:48] Speaker 04:
I think people reading these cases are not clear on that.

[00:40:50] Speaker 04:
But put aside the experimental use.

[00:40:53] Speaker 04:
Special devices, I think, should be clarified.

[00:40:56] Speaker 04:
Because the facts of special devices are very specific.

[00:41:00] Speaker 04:
There we had an agreement that the sale was commercial and not experimental.

[00:41:04] Speaker 12:
Why wouldn't we overrule special devices?

[00:41:07] Speaker 12:
Let's clarify.

[00:41:08] Speaker 04:
I don't think you have to overrule it, in my view.

[00:41:10] Speaker 04:
I think it should be clarified.

[00:41:12] Speaker 04:
Because what's happened since special devices is that it has been cited a number of times by this court as well as district courts throughout the country.

[00:41:21] Speaker 04:
And I think it's being looked at by some as kind of a shortcut to find an on-sale bar if you see a supplier.

[00:41:29] Speaker 04:
And whether it's a supplier or a contract manufacturer or someone else, it doesn't matter.

[00:41:35] Speaker 07:
So is your position just that the breadth of some of the statements in special devices weren't necessary because the facts didn't require such a broad holding and we should just clarify?

[00:41:48] Speaker 04:
I'm not going to quarrel with the statements in that decision itself, because I think the litigants specifically asked the court to find a special exception, and the court declined to do so.

[00:41:59] Speaker 07:
Right, because there was a concession that there was a commercial sale, correct?

[00:42:04] Speaker 04:
Correct.

[00:42:04] Speaker 04:
And it was an experiment, either.

[00:42:07] Speaker 13:
Was it confidential?

[00:42:08] Speaker 04:
You know what?

[00:42:09] Speaker 04:
I'm not sure.

[00:42:09] Speaker 04:
I think it might have been.

[00:42:11] Speaker 04:
I'm not sure about that.

[00:42:12] Speaker 04:
I don't want to misstate that.

[00:42:14] Speaker 04:
But it wasn't an issue.

[00:42:14] Speaker 04:
It was a commercial sale.

[00:42:17] Speaker 04:
commercial sale.

[00:42:18] Speaker 04:
You know, there's no question it was a commercial sale.

[00:42:21] Speaker 04:
And so the only issue then is, what would your exception be?

[00:42:24] Speaker 04:
Experimental use.

[00:42:25] Speaker 04:
Well, they conceded that it wasn't an experimental use.

[00:42:28] Speaker 03:
So what do you have left for you?

[00:42:29] Speaker 03:
Get out of jail free card.

[00:42:31] Speaker 03:
You have make a special exception.

[00:42:33] Speaker 03:
Mr. Hough, what about, I guess we relied on it to some extent in Hamilton Beach, I think is one of the cases.

[00:42:39] Speaker 03:
And then the two principal cases, Disgust and Special Devices, Brassler and Zacherin, is that right?

[00:42:45] Speaker 03:
Results depend on a position different from a position on the law that you're asking us to do.

[00:42:54] Speaker 04:
I think that to the extent any of those decisions your honor just mentioned, short-circuited analysis of the fact.

[00:43:03] Speaker 03:
I know that to the extent that they do, you don't want to disapprove them.

[00:43:07] Speaker 03:
I'm asking you, do they?

[00:43:13] Speaker 04:
I think they did inappropriately rely on the special devices case.

[00:43:20] Speaker 12:
So looking at special devices, the court said, we now expressly reject the reasoning and hold that no supplier exception exists.

[00:43:34] Speaker 12:
How do we clarify that?

[00:43:38] Speaker 04:
As we proposed in our briefing, I think a clarification should be that if the transaction is confidential and if the inventor retains control of the invention, whether it's with the supplier or a contract manufacturer, I think that it will not constitute an unsaleable.

[00:43:59] Speaker 12:
So you're arguing that a supplier exception should exist.

[00:44:05] Speaker 04:
No, I don't think a supplier should get special treatment from anyone else.

[00:44:11] Speaker 04:
I think you should look at the transaction and look at the party or the transaction between the inventor and the party you're looking at.

[00:44:18] Speaker 04:
And is that party engaging in an activity which constitutes a commercial sale or a commercial offer of sale in violation of the FAF test?

[00:44:29] Speaker 04:
If they are, it's a bar.

[00:44:31] Speaker 07:
So it may be just a matter of semantics, but you're saying it doesn't have to be an exception.

[00:44:34] Speaker 07:
What you have to say is, is there a commercial sale?

[00:44:37] Speaker 07:
And if there's not, whether it's a supplier or not, then you don't meet the test.

[00:44:42] Speaker 07:
But if you do meet the test, then it doesn't matter who it is.

[00:44:45] Speaker 04:
I think that's right, yes.

[00:44:47] Speaker 04:
And I do think, though, that we are at, in this case,

[00:44:53] Speaker 04:
It was found by the lower court that, based on the facts, there was no sale here.

[00:44:58] Speaker 04:
And that was changed then.

[00:45:00] Speaker 04:
And I think the concern now, and as is very much highlighted by all the amici that have filed briefs here, the concern is that if a contract for manufacturing services is found to be a bar where every industry uses outsourcing and contract manufacturers and suppliers of all sorts,

[00:45:22] Speaker 04:
How do you know when the date, what is the starting point for when your bar is running, your one year is running?

[00:45:30] Speaker 04:
Companies don't even know.

[00:45:31] Speaker 04:
They won't know, much less try to game the system.

[00:45:35] Speaker 04:
No one's trying to allow anyone to do that.

[00:45:38] Speaker 04:
But they won't simply know.

[00:45:40] Speaker 04:
And indeed, in this case, in the medicines company case, the inventors didn't even appreciate their invention until after the bar date.

[00:45:48] Speaker 04:
So they certainly weren't putting this invention out into the public.

[00:45:53] Speaker 04:
And they didn't sell it.

[00:45:54] Speaker 04:
They didn't sell it until after the party.

[00:45:57] Speaker 04:
And I think Judge Stoll used the word competitive.

[00:46:01] Speaker 04:
It comes out of the statement in the Pfaff case by Lerner and Hand.

[00:46:06] Speaker 04:
And I think it's very important.

[00:46:08] Speaker 04:
He's actually talking about the policy.

[00:46:09] Speaker 04:
It is conditioned upon an inventor's right to a patent that he shall not exploit his discovery competitively after it is ready for patenting.

[00:46:19] Speaker 04:
The medicines company didn't exploit the invention competitively here.

[00:46:22] Speaker 04:
We're talking about the claimed drug product.

[00:46:26] Speaker 04:
Exploiting that invention competitively would mean the medicines company selling that drug product into the market and competing with their fellow pharma competitors.

[00:46:36] Speaker 07:
Which your response to your friend on the other side argues that any competitive advantage that you gain, such as stockpiling,

[00:46:44] Speaker 07:
would satisfy that test?

[00:46:46] Speaker 04:
Well, I don't think the law has ever been in this court, that any competitive benefit or competitive exploitation, using those words very broadly, that that constitutes an on-sale bar.

[00:46:59] Speaker 04:
Because we're talking about industry here.

[00:47:02] Speaker 04:
People don't make inventions, and they need a lot of help to bring that invention, either to test the invention and bring it to fruition, and much less to make it, sell it, everything else they have to do.

[00:47:14] Speaker 04:
And I think that's a major policy issue here that has been presented in this case, and I think it's very important.

[00:47:22] Speaker 04:
And that is whether it's the pharmaceutical industry that does a lot of outsourcing, but not just the farming industry.

[00:47:28] Speaker 04:
The cell phone industry, they make these phones.

[00:47:31] Speaker 04:
If they do it in a confidential relationship so that the invention, the knowledge of the invention doesn't go into the public, however you define public, and they control that transaction, that should not be an on sale bar.

[00:47:48] Speaker 04:
Stockpiling has been mentioned.

[00:47:50] Speaker 04:
Stockpiling by itself, however you define what stockpiling is, is not improper.

[00:47:55] Speaker 04:
It doesn't create a bar.

[00:47:57] Speaker 04:
Drug companies know when they get approval what the date is when they can launch their product.

[00:48:04] Speaker 04:
They know it in advance.

[00:48:06] Speaker 04:
They can't just wait until that date comes and then start making the product.

[00:48:11] Speaker 04:
And it takes sometimes a long time to make these products.

[00:48:14] Speaker 04:
And it's very expensive.

[00:48:16] Speaker 04:
And maybe they don't get the FDA approval.

[00:48:18] Speaker 02:
So if a small inventor hires a supplier and doesn't rely on a nondisclosure agreement,

[00:48:27] Speaker 02:
and just gives them the recipe, the playbook, from their patented technology.

[00:48:34] Speaker 02:
It's not patented yet, obviously.

[00:48:36] Speaker 02:
And then says, please make me this amount, and I'll pay you this amount.

[00:48:41] Speaker 02:
Is that going to be a trigger on sale?

[00:48:45] Speaker 04:
If they use that information and make a product that's covered by a claim, it could be.

[00:48:52] Speaker 04:
And it also could very well run the risk of disclosure.

[00:48:55] Speaker 02:
Well, when you say it could be, what extra would it turn on?

[00:48:59] Speaker 02:
You've been talking about how confidentiality is critical.

[00:49:03] Speaker 02:
You've been talking about how control is critical.

[00:49:07] Speaker 02:
Correct.

[00:49:07] Speaker 02:
And I'm giving you an example where

[00:49:10] Speaker 02:
There is, I guess, what you would call free commercial stockpiling going on that's no different than a large manufacturer would be doing in-house, but there's no NDA and there's no specificity in terms of

[00:49:25] Speaker 02:
how the supplier should go about its business other than following the invented technology.

[00:49:32] Speaker 04:
Judge Chen, that hypothetical to me sounds like the inventor has given up control.

[00:49:36] Speaker 04:
And if they've given up control and they don't have control over the invention, I think they may well be in the arena of a bar.

[00:49:44] Speaker 02:
Again, it depends on the facts.

[00:49:47] Speaker 02:
So it's now all of a sudden a commercial sale?

[00:49:50] Speaker 02:
What just happened there?

[00:49:51] Speaker 04:
Well, I don't know what happened in your scenario.

[00:49:53] Speaker 04:
If it was a sale of a product that's covered by a plane, then it could be.

[00:49:56] Speaker 04:
And then you'd have to look at it.

[00:49:57] Speaker 02:
I'm just trying to figure out if we're in a binary world.

[00:50:00] Speaker 02:
We're either adopting one side, which is you can never do these transactions without avoiding a trigger.

[00:50:09] Speaker 02:
Or we're on the other side, which could be your side, which is

[00:50:14] Speaker 02:
They never trigger.

[00:50:16] Speaker 02:
They never trigger the on-sale call.

[00:50:17] Speaker 04:
I would never say never.

[00:50:18] Speaker 04:
I think it depends on facts.

[00:50:20] Speaker 04:
It depends on the relationship between the inventor and whoever the third party is.

[00:50:25] Speaker 04:
If they don't have a confidentiality obligation, I think you're in the area of risk.

[00:50:31] Speaker 04:
Then you have to look at what they did.

[00:50:33] Speaker 04:
But why does that make it more commercial?

[00:50:36] Speaker 04:
Because I think, in the words of Faff, you are putting knowledge, knowledge of the invention, into the public domain.

[00:50:45] Speaker 04:
And the policy is, once you do that, however you do it, you can't take it back out of the public domain.

[00:50:52] Speaker 04:
That's the bar.

[00:50:52] Speaker 04:
I think that's the policy.

[00:50:53] Speaker 02:
So the supplier becomes a member of the public, in a sense?

[00:50:56] Speaker 02:
Who is?

[00:50:57] Speaker 02:
The supplier becomes a member of the public, in a sense, by not creating an NDA.

[00:51:03] Speaker 04:
In your hypothetical, if there's no confidentiality restriction, there's no other restriction by the inventor, they have no control over their invention, that entity, I suppose, could be a member of the public.

[00:51:14] Speaker 04:
Again, it would depend.

[00:51:15] Speaker 04:
I'm not here to take a position on what the public is.

[00:51:18] Speaker 04:
I'm three minutes into the conference.

[00:51:20] Speaker 05:
Why don't we hear from the inventor?

[00:51:21] Speaker 05:
Thank you.

[00:51:36] Speaker 00:
May I please support Megan Barbera on behalf of the United States?

[00:51:40] Speaker 13:
There are two reasons... Do you not cite the Shaw case in your brief?

[00:51:44] Speaker 13:
Do you think the Shaw case in the Supreme Court was wrongly decided, which held that a third-party sale can trigger the on-sale bar?

[00:51:53] Speaker 00:
No, a third-party sale can trigger the on-sale bar.

[00:51:58] Speaker 13:
Suppose there's a non-confidential third party sale to the inventor before the bar date.

[00:52:10] Speaker 13:
Would that be covered by the on-sale bar?

[00:52:12] Speaker 00:
The question in terms of whether the on-sale bar is going to be triggered under the text of the statute is whether the invention has been put on sale.

[00:52:22] Speaker 13:
No, but try to answer my question.

[00:52:24] Speaker 13:
I'm assuming a sale.

[00:52:25] Speaker 13:
Forget about the manufacturing services thing.

[00:52:28] Speaker 13:
And it's a public sale.

[00:52:29] Speaker 13:
It's not confidential.

[00:52:31] Speaker 13:
And it's a public sale by one company to the inventor.

[00:52:39] Speaker 13:
Is that a public sale within the meaning of the on-sale bar?

[00:52:43] Speaker 00:
That may well be a public sale.

[00:52:46] Speaker 00:
If the third party in that case is making the invention available to interested members of the public and the inventor happens to purchase the invention from the third party, then you have, assuming, as your honor does, that there is a sale of the invention.

[00:53:02] Speaker 00:
So say in that case, the invention is a product, you have a transfer of title,

[00:53:07] Speaker 00:
in the product from a third party to the inventor or any other member of the public, you may find there that the on-sale bar is satisfied.

[00:53:18] Speaker 05:
Now, there may be additional facts in terms of whether... No, your answer sort of raises a question that called out at me from the briefs, because you consistently are talking about sale and defining it as available to the public.

[00:53:32] Speaker 05:
And I'm never sure how broad that is.

[00:53:35] Speaker 05:
I mean, what if I'm a

[00:53:37] Speaker 05:
person that deals, I provide commercial products to five users.

[00:53:43] Speaker 05:
I'm not making a, I don't typically in my business tax actions deal with putting it on sale for the whole country.

[00:53:51] Speaker 05:
I just deal with these five purchasers constantly.

[00:53:53] Speaker 05:
Is that not

[00:53:54] Speaker 05:
Is that not available to the public?

[00:53:57] Speaker 05:
Do you mean something broader than that?

[00:53:58] Speaker 00:
That sounds like it would be a public sale.

[00:54:00] Speaker 00:
If your interested public for your business is five people and you make the invention available to those five people and they purchase it from you, they take title to the invention from you, then we know, for example, from FAF, that an offer for sale to even one interested member of the public can trigger the on sale bar.

[00:54:20] Speaker 05:
So a sale to the inventor would be sufficient.

[00:54:23] Speaker 05:
Wouldn't that satisfy available to the public, as you use that term?

[00:54:27] Speaker 00:
It could well satisfy available to the public.

[00:54:30] Speaker 00:
Now, whether something is available to the public is an inquiry that this court undertakes in a number of contexts.

[00:54:37] Speaker 00:
This wouldn't be a new undertaking for the court, of course.

[00:54:40] Speaker 00:
In, for example, the printed publication context, there's questions about, in the Hall case, for example, whether

[00:54:47] Speaker 00:
a thesis that has been indexed and catalogued in a university library in Germany is available to a member of the public exercising diligence to obtain that.

[00:54:56] Speaker 00:
So in the vast majority of cases we would expect to find an inventor who has come up with a new idea, who wants to commercialize that, make a profit from it, is going to put it

[00:55:07] Speaker 00:
on sale, but again on the margins there may be cases where there's a question about whether an interested member of the public could get access to the invention.

[00:55:16] Speaker 16:
Here if it's only to one party, namely the inventor, that's not the public.

[00:55:24] Speaker 00:
It may well not be that the invention has been put on sale in that context.

[00:55:30] Speaker 11:
It might depend on the limitations.

[00:55:32] Speaker 00:
Indeed, it could depend on the limitations.

[00:55:34] Speaker 00:
If you had, say, a confidentiality or non-disclosure agreement could be very relevant in that context.

[00:55:41] Speaker 03:
And again, these are questions, of course, about whether- I guess what I keep hearing is that if you start with a third party sale to the inventor non-confidential, whether that makes the good on sale may depend on whether it is also available to others.

[00:56:03] Speaker 03:
That is, if not yet offered or sold to others, but in some sense available to somebody else.

[00:56:11] Speaker 00:
That is correct.

[00:56:12] Speaker 00:
Right.

[00:56:12] Speaker 00:
If no other member of the public could get access to the invention, then it's unlikely that's going to be available to the public in the relevant sense.

[00:56:21] Speaker 03:
So judging an individual sale, you'd need to widen the view to something other than the specific terms of that transaction to look what else the seller might be doing by way of either making it or not making it available to anybody else.

[00:56:38] Speaker 00:
I think that's correct, Your Honor.

[00:56:40] Speaker 13:
What about the cases like Benito boats and payoff and some of these early cases talk about public knowledge of the invention?

[00:56:47] Speaker 13:
as triggering the on-sale bar meeting.

[00:56:50] Speaker 13:
So in the instance where there's a sale from a third party to the inventor, which is non-confidential and the public learns about the sale, wouldn't that be covered by the on-sale bar?

[00:57:04] Speaker 00:
The cases do talk about public knowledge and public knowledge undergirding the on-sale bar.

[00:57:09] Speaker 00:
Now we know from FAF that you also have to satisfy

[00:57:14] Speaker 00:
the two prongs of theft, where you have a sale.

[00:57:17] Speaker 00:
And that sale itself has to make the invention available to the public.

[00:57:22] Speaker 00:
Now, it may be that you have a sale.

[00:57:25] Speaker 00:
The inventor uses the invention and the public.

[00:57:28] Speaker 00:
There is some scenarios where you could have a public use.

[00:57:35] Speaker 00:
The public gains knowledge of the invention.

[00:57:37] Speaker 00:
And you may have a bar triggered in that scenario.

[00:57:40] Speaker 00:
I don't believe it's a case of mere knowledge of the invention would satisfy the facts and the absence of it.

[00:57:47] Speaker 05:
I'm sure it's inflating the public use for sale.

[00:57:49] Speaker 05:
I mean, at least in the statute of existence at this time, it says public use for sale.

[00:57:54] Speaker 05:
It seems to me a lot of the hypotheticals you're throwing back at us in terms of our cases where we've examined public use, not the sale portion of it.

[00:58:05] Speaker 00:
No, we are not conflating public use and on sale.

[00:58:08] Speaker 00:
And if I may explain, the statute on its terms says both public use and on sale.

[00:58:16] Speaker 00:
Now, there may be cases where you have a public use, but you have no sale or offer to sell the invention.

[00:58:22] Speaker 00:
Take, for example, an offer to rent or the rental of the invention.

[00:58:27] Speaker 00:
There's been no transfer of title.

[00:58:29] Speaker 00:
There's no actual sale to the invention.

[00:58:30] Speaker 00:
But the public is using it.

[00:58:32] Speaker 00:
That's public use, but not on sale.

[00:58:34] Speaker 00:
And on sale, remember, is not just an actual sale of the invention, but also an offer to sell the invention.

[00:58:41] Speaker 00:
So you may have an offer to sell the invention.

[00:58:44] Speaker 00:
It's possible nobody takes you up on that offer.

[00:58:46] Speaker 00:
For other reasons, the invention's not actually sold.

[00:58:49] Speaker 00:
So you don't end up with any public use of the invention.

[00:58:52] Speaker 00:
You may satisfy the FAF test.

[00:58:55] Speaker 00:
but you don't actually end up with public use.

[00:58:59] Speaker 00:
Now, again, Congress and the Supreme Court have made clear that the two terms are conceptually related.

[00:59:06] Speaker 00:
That's, you know, further underscored and emphasized in the America Invents Act, where we know that both public use and on sale

[00:59:13] Speaker 00:
mean that the invention is made available to members of the public.

[00:59:17] Speaker 02:
But just so I understand, is it your view that sales for on-sale are basically subsumed by public use?

[00:59:26] Speaker 02:
And so the one distinction that you have between on-sale and public use is that on-sale encompasses offers for sale?

[00:59:34] Speaker 00:
Not at all.

[00:59:35] Speaker 02:
So what would be some examples of sales that aren't public uses?

[00:59:41] Speaker 00:
So say, taking the facts of this case and changing them slightly, Your Honor, if you had process claims, for example, as opposed to product claims here, in that case, you may not need the transfer of title to satisfy the sale prong.

[00:59:55] Speaker 00:
So you may have the invention itself put on sale, but only back to the inventor, the medicines company now.

[01:00:03] Speaker 00:
So you may have a sale in that context.

[01:00:06] Speaker 00:
But it's not going to be public.

[01:00:09] Speaker 00:
You wouldn't have any public use or public sale in that.

[01:00:14] Speaker 00:
What do you need to make it public then?

[01:00:17] Speaker 05:
I mean, assuming there's not a confidentiality agreement of any kind going anywhere, what more do you need than the sale if you sell it back to the inventor?

[01:00:28] Speaker 05:
And let's assume you've transferred title or even whatever.

[01:00:32] Speaker 05:
What more do you need than the sale to the inventor?

[01:00:36] Speaker 05:
Are you saying that a seal to one person isn't sufficient?

[01:00:39] Speaker 05:
Or are you just saying something that could be a vendetta?

[01:00:41] Speaker 00:
No, a seal to one person can be sufficient.

[01:00:43] Speaker 00:
And I don't want to underestimate the importance of the non-disclosure and confidentiality arrangement.

[01:00:51] Speaker 00:
But if you took those away, and Benvenue would be able to sell, let's say we had an actual sale of the vendetta, Benvenue would be able to sell the vendetta to any comers.

[01:01:00] Speaker 00:
to Haspera, anybody else who came, then I think the court would be able to conclude that the invention at that point had been made

[01:01:09] Speaker 00:
available to interested members of the public.

[01:01:12] Speaker 13:
There's a problem here.

[01:01:14] Speaker 13:
It seems to me when you talk about public sale, there are potentially two definitions of that.

[01:01:20] Speaker 13:
One is a sale to a member of the public.

[01:01:23] Speaker 13:
The other one is public awareness of the sale.

[01:01:27] Speaker 13:
And don't half of Benito boats in these earlier cases say that the public awareness of the sale makes it come within the on-sale bar?

[01:01:39] Speaker 00:
I don't, those cases talk very clearly about public sale, putting the invention in public commerce, making the invention on sale to the public generally.

[01:01:50] Speaker 00:
That dates back both Benito Boats and FAFSAIT PENEC, which talks extensively about the public sale of the invention.

[01:01:59] Speaker 13:
They talk about public awareness too.

[01:02:01] Speaker 00:
They also, they do also talk about public awareness and certainly public awareness is

[01:02:08] Speaker 00:
one of the factors that undergirds the on-sale bar.

[01:02:13] Speaker 00:
But as Pfaff says, right before it talks about public awareness of the invention or knowledge of the invention undergirding the on-sale bar, it quotes from Pennic where the Supreme Court, and this is in 1829 before Congress had codified the on-sale bar,

[01:02:30] Speaker 00:
His voluntary act or acquiescence in the public sale and use is an abandonment of his right.

[01:02:37] Speaker 00:
So I don't understand those cases to be saying the knowledge of the invention standing alone was ever sufficient.

[01:02:43] Speaker 07:
As I understand the government's position, what you're saying is that the on sale, that it has to be sold to a member of the public who would use it.

[01:02:53] Speaker 07:
So as I understand it, you're saying it could be just one person.

[01:02:57] Speaker 07:
Right?

[01:02:57] Speaker 07:
So I'm going to sell medicine to you.

[01:03:02] Speaker 07:
And I'm the inventor.

[01:03:04] Speaker 07:
That's a sale.

[01:03:05] Speaker 07:
And you're a public.

[01:03:06] Speaker 07:
You're the member of the public.

[01:03:07] Speaker 07:
Right?

[01:03:07] Speaker 07:
Even if I sell it to you and say, you can't tell anyone I sold it to you, and it has to be used very secretly, it's still a public sale.

[01:03:16] Speaker 07:
Correct?

[01:03:17] Speaker 07:
Because you're a member of the public.

[01:03:18] Speaker 00:
And you would be willing to sell it to any other member of the public who came to you?

[01:03:22] Speaker 07:
Do I have to be willing to sell it to any other member of the public?

[01:03:25] Speaker 00:
Well, if no other member of the public could find out about the invention or get the invention from you, I mean, again... Then it might not be a public use, but it's a public sale, correct?

[01:03:38] Speaker 00:
Again, these are the type of fact-specific inquiries that this court frequently addresses in the context of public use.

[01:03:46] Speaker 13:
What about a single sale to a member of the public?

[01:03:52] Speaker 13:
It doesn't have to be made available to more than one person, correct?

[01:03:58] Speaker 00:
That is correct.

[01:04:02] Speaker 00:
non-disclosure agreement, no promise of secrecy there.

[01:04:05] Speaker 07:
Why does the promise of secrecy matter if you're actually a member of the public that I'm selling it to?

[01:04:10] Speaker 00:
I apologize.

[01:04:12] Speaker 00:
If you are selling it just to a member of the public, and you're making the invention available to that member of the public, then yes, one sale.

[01:04:19] Speaker 07:
With a secrecy agreement.

[01:04:22] Speaker 00:
You may have a secrecy agreement in place, and that may still qualify.

[01:04:28] Speaker 11:
Well, the secrecy agreement is to say,

[01:04:31] Speaker 11:
You have to promise not to tell anyone that I violated the bar.

[01:04:41] Speaker 00:
And again, the secrecy agreements may be important, but we don't, of course, if everything turned on whether there was a non-disclosure agreement, it would be very easy for parties to structure transactions in a way that would really game the system.

[01:04:54] Speaker 07:
But I understood your whole argument to be that you need to focus on that in order to be an on sale,

[01:05:01] Speaker 07:
the sale has to go to a member of the supposedly using public.

[01:05:05] Speaker 07:
So under your scenario, if the sale is to the inventor and to no one else, then that wouldn't be an on sale.

[01:05:15] Speaker 07:
That wouldn't be a sale for purposes of the on sale bar.

[01:05:19] Speaker 00:
Correct.

[01:05:19] Speaker 00:
Assuming there was a sale, in that scenario, that's not going to be a sale to an interested member of the public.

[01:05:26] Speaker 00:
Correct.

[01:05:27] Speaker 07:
So we're not talking about Shaw, where there's a third party who's also making the invention.

[01:05:31] Speaker 07:
We're talking about this issue where a supplier sells it back to the inventor.

[01:05:38] Speaker 00:
That's correct.

[01:05:38] Speaker 00:
And of course, all of this presupposes that there actually is a sale, which

[01:05:43] Speaker 00:
as we've argued, didn't occur in this case since the claims are directed to products and there was no transfer of title.

[01:05:50] Speaker 00:
Benvenue never had title in the product, so there's no sale at all in this case.

[01:05:54] Speaker 13:
So there's a sale, a public sale, the public knows about it, from a supplier to the inventor, an actual sale, and it's not confidential.

[01:06:05] Speaker 13:
That is still outside the on-sale bar.

[01:06:14] Speaker 00:
And the inventor has asked the supplier to produce the invention and sell it back to the inventor.

[01:06:20] Speaker 00:
I think that is outside the on-sale bar, because if we don't... Even if it's public?

[01:06:26] Speaker 00:
I mean, you may have a problem at that point where you've got a public use or something else, but it's not going to be a sale to an interested member to the public.

[01:06:41] Speaker 00:
if it's only to the investor.

[01:06:42] Speaker 00:
Now if that supplier can sell it to any other comers, of course that is going to be a different scenario.

[01:06:49] Speaker 00:
But if we know anything about what public means, I think it means

[01:06:54] Speaker 00:
that if you have a supplier providing manufacturing and invention for an inventor who cannot manufacture the invention in house and providing it back to the inventor that that is not what we would think of as a public sale because of course the statute uses the language on sale which generally means

[01:07:16] Speaker 00:
available to customers, available for purchase.

[01:07:18] Speaker 00:
And if the invention isn't available for purchase, but it's just the inventor contracting with somebody else to produce the invention and provide it back to the investor.

[01:07:28] Speaker 07:
So if Benvenue sold it to a third party, then that would be a disqualifying use.

[01:07:37] Speaker 00:
Assuming you had a transfer of title

[01:07:41] Speaker 00:
from Ben Venue to the third party, which we know under the facts of this case wouldn't happen.

[01:07:46] Speaker 00:
But if you had an actual sale, you could have, I mean, the medicines company may have contract claims against them or other claims.

[01:07:53] Speaker 00:
But you, at that point, would have a public sale of the invention.

[01:07:57] Speaker 12:
If we adopted the position, the government's position, would we have to overrule special devices?

[01:08:07] Speaker 12:
Or I understand your arguments that just some clarification would be enough.

[01:08:11] Speaker 12:
What's the clarification?

[01:08:14] Speaker 00:
In special devices, of course, the parties in that case, or the inventor in that case, conceded that the two prongs of the FAF test were satisfied.

[01:08:23] Speaker 00:
that there had, in fact, been a commercial offer for sale and that the invention was ready for patenting.

[01:08:29] Speaker 00:
And the only thing that was urged there was that this court adopt an extra statutory supplier exception.

[01:08:35] Speaker 00:
Now, to the extent this court and special devices suggested that secret sales back to the inventor would be disqualifying sales under the on-sale bar, we think that's incorrect in light of Supreme Court

[01:08:50] Speaker 00:
long-standing Supreme Court precedent and congressional intent.

[01:08:54] Speaker 00:
But I don't understand that this argument about whether the sale was public was properly presented in that case or in the Brassler decision where I believe it was first argued at oral argument in this court and wasn't presented in the briefs.

[01:09:08] Speaker 05:
Thank you.

[01:09:17] Speaker 09:
Thank you.

[01:09:19] Speaker 09:
So let me begin by addressing the medicines companies argument for a reinterpretation of special devices.

[01:09:31] Speaker 09:
And I thought I heard Mr. Hug say that what he would suggest that we do is reinterpret special devices so that there would be an exception for manufacturer sales, contract manufacturing sales.

[01:09:46] Speaker 09:
if there was this extra level of control where the patentee exercised some level of control and the contract manufacturer was just a pair of laboratory hands.

[01:10:06] Speaker 09:
So I didn't understand him to be making that argument in his brief.

[01:10:11] Speaker 09:
And I think it's a weak argument.

[01:10:15] Speaker 09:
because it doesn't reach the thing that we're concerned about, which is how contract manufacturers operate with their customers in the real world.

[01:10:23] Speaker 09:
That's not how it's done in the real world.

[01:10:26] Speaker 09:
Contract manufacturers are independent from their customers in the real world.

[01:10:30] Speaker 09:
And in fact, that was true in this case.

[01:10:32] Speaker 09:
There's no evidence in the record supporting the medicines company conducted that kind of control or exercise that kind of control over Benvenu in this case.

[01:10:40] Speaker 09:
In fact, it was the opposite.

[01:10:44] Speaker 14:
Your argument is Benvenue made a sale here, correct?

[01:10:49] Speaker 14:
Benvenue made a sale here, correct.

[01:10:50] Speaker 14:
So if something would qualify as a sale, then if it were offered for sale similarly, it would be an invalidating preemption under the statute.

[01:11:02] Speaker 14:
So is your view also that if there hadn't actually been a consummated sale, but if Benvenue, a manufacturer, had simply come to the patentee and offered to manufacture it for the patentee, that would also be an invalidating event?

[01:11:16] Speaker 09:
Oh, gosh.

[01:11:17] Speaker 09:
I mean, I don't know.

[01:11:19] Speaker 14:
Well, everything that's been a sale has predicated an offer for sale, correct?

[01:11:25] Speaker 14:
You can't have a sale if there was no offer to sell.

[01:11:28] Speaker 14:
But the hypothetical.

[01:11:29] Speaker 14:
Under your view of this sale,

[01:11:32] Speaker 14:
Benvenue's offer to the patentee, even if rejected, would have created an invalidating event.

[01:11:38] Speaker 09:
Well, no, that's not my view at all.

[01:11:39] Speaker 09:
I mean, my view is that that would never happen.

[01:11:42] Speaker 09:
It's an impossibility.

[01:11:43] Speaker 09:
The hypothetical isn't helpful.

[01:11:44] Speaker 09:
It doesn't elucidate the problem because a contract manufacturing... It's not very often that people suggest that I'm unhelpful, but please continue.

[01:11:54] Speaker 09:
I was taking issue with the hypothetical, your honor.

[01:11:57] Speaker 09:
I didn't mean any disrespect, of course.

[01:11:59] Speaker 09:
But how could the contract manufacturer go and offer to make an invention unless the invention's already been disclosed to the contract manufacturer?

[01:12:07] Speaker 09:
So the hypothetical is not a real-world hypothetical.

[01:12:11] Speaker 09:
And that's part of the problem with what... Yes, but suppose it was disclosed.

[01:12:14] Speaker 14:
Suppose the patent is supposed to bend the new cane and said, you know, got anything, want me to make it?

[01:12:19] Speaker 14:
The patentee says, well, I do have this thing.

[01:12:22] Speaker 14:
They talk about it, discloses it, Benvenue makes an offer to manufacture it, but the offer is rejected by the patentee.

[01:12:28] Speaker 14:
That would absolutely, under all of the law, have to qualify as a disqualifying offer for sale.

[01:12:35] Speaker 14:
If the ultimate sale would have been disqualifying, then the offer has to likewise create a disqualifying event.

[01:12:42] Speaker 09:
Well, I don't understand that, Your Honor.

[01:12:45] Speaker 09:
I still can't imagine a circumstance where that could arise in the real world.

[01:12:51] Speaker 09:
And sometimes I'm accused of lacking sufficient imagination, and maybe that's what the problem is.

[01:12:59] Speaker 09:
And it is so far from what happened here that I don't have- That's the rule of law you're asking for.

[01:13:09] Speaker 14:
You're asking for a rule of law wherein if a patentee seeks a contract with a manufacturer to manufacture goods,

[01:13:18] Speaker 14:
Likewise, an offer that had existed in that form would create an invalidating event.

[01:13:23] Speaker 09:
So I don't think that's what I'm asking for, Your Honor.

[01:13:25] Speaker 09:
What I'm asking for is I'm asking this court not to disturb the law that exists currently.

[01:13:29] Speaker 09:
That's all I'm asking for.

[01:13:30] Speaker 09:
I'm not asking for the court to change anything.

[01:13:33] Speaker 09:
I'm not asking for the court to soften or limit the experimental use exception, which was a concern to some of the amici.

[01:13:42] Speaker 09:
My client is a pharmaceutical company.

[01:13:44] Speaker 09:
We want a robust experimental use.

[01:13:47] Speaker 09:
doctrine.

[01:13:48] Speaker 09:
I'm not asking for anything unusual.

[01:13:50] Speaker 09:
What I'm saying is, I think at the end of the day, what I'm saying is these cases that have been decided over the last 25 years or so and that fit within FAF, these are wise cases.

[01:14:01] Speaker 09:
This is the accumulated wisdom of this court working over and over and over again in different FAF patterns and actually grappling with what happens in the real world in a way that the proposals from the government and from the medicines company do not.

[01:14:15] Speaker 09:
If you adopt either one of the approaches suggested by them, two things will happen.

[01:14:19] Speaker 09:
Number one, people will file their patents later, and that's not good.

[01:14:23] Speaker 09:
The other thing that will happen is you'll just substitute litigation over what is sufficiently public for the litigation that has been already decided by this court as to what constitutes a sale for purposes of the on-sale part.

[01:14:35] Speaker 09:
I don't see any advancement

[01:14:37] Speaker 09:
that will benefit the law from that.

[01:14:39] Speaker 09:
And I have yet to hear how the public benefits from changing these rules.

[01:14:42] Speaker 09:
It's easy for lawyers now to counsel their clients by saying, well, you can't do that because of special devices.

[01:14:48] Speaker 09:
You can't do that because of plundering.

[01:14:50] Speaker 09:
In Ray Kohler says you shouldn't do that.

[01:14:51] Speaker 09:
You should file your patent application because of the old case.

[01:14:57] Speaker 09:
We can tell our clients what to do.

[01:14:59] Speaker 09:
If you change that, we're going back to square one.

[01:15:01] Speaker 09:
And I'm also worried about the fact that

[01:15:04] Speaker 14:
I don't understand why it would be so difficult.

[01:15:06] Speaker 14:
Just tell your client you can manufacture in advance of sale.

[01:15:10] Speaker 14:
You just can't sell.

[01:15:12] Speaker 14:
I don't see why that would be such a difficult burden on a lawyer like you.

[01:15:15] Speaker 14:
I feel like you could manage that.

[01:15:19] Speaker 09:
Well, I would probably take a more conservative view, at least unless

[01:15:25] Speaker 09:
Congress would have do something sweeping and change the law in a profound way where it was clear.

[01:15:31] Speaker 09:
I think they tried to do that in the AIA.

[01:15:33] Speaker 09:
I think these facts might result in a different outcome under the AIA, although I don't take that position beyond Ken of this case.

[01:15:41] Speaker 09:
But I don't think that's appropriate here.

[01:15:44] Speaker 09:
And I plead with the court to be very circumspect, as I know you will be.

[01:15:50] Speaker 09:
in sweeping aside all of this jurisprudence that we've relied on for a long time and has served us well.

[01:15:55] Speaker 09:
And no one has pointed to any difficulty that the lower courts have experienced in applying these rules.

[01:16:01] Speaker 09:
And no one has said why the public is better off if you make these changes.

[01:16:05] Speaker 07:
Before you run out of time, I want to ask you, you don't mention anything in the red brief here before the full court with respect to the supplier contract or the distribution contract with ICS.

[01:16:19] Speaker 07:
Is that still an issue as it relates to the on-sale bar as far as you're concerned?

[01:16:23] Speaker 07:
Yes.

[01:16:24] Speaker 09:
I mean, if we have to go back and continue litigating this case, we would still want the panel to whom it's assigned to address and resolve that issue.

[01:16:36] Speaker 09:
My view is that's a compelling argument for on-sale activity.

[01:16:39] Speaker 09:
And it wasn't reached in the opinion that we got of the panel, which has now been vacated, and it wasn't argued here today.

[01:16:46] Speaker 09:
So we're not waving that argument when we would continue

[01:16:49] Speaker 09:
want to press that argument if there's additional litigation.

[01:16:53] Speaker 09:
And I'm not sure if I have time or where I am.

[01:16:57] Speaker 05:
We've given you a little bit of time, so don't feel compelled to use it.

[01:17:02] Speaker 09:
Well, I just gave you my summation a moment ago.

[01:17:06] Speaker 09:
The laws that we have now, the rules that we have now, are pretty well understood.

[01:17:12] Speaker 09:
They work fairly.

[01:17:13] Speaker 09:
We know what to do with them.

[01:17:14] Speaker 09:
And it seems to be making a sweeping change right now when really the future is going to be controlled by the AIA.

[01:17:19] Speaker 09:
And I predict the court will have the opportunity very shortly to deal with these issues under the AIA.

[01:17:25] Speaker 09:
And that will be the set of rules that will control the future.

[01:17:30] Speaker 09:
In the meantime, I don't hear any reason justified by a public benefit that's been identified for doing anything as sweeping as my colleagues

[01:17:43] Speaker 09:
have suggested, and I ask the court not to do that.

[01:17:46] Speaker 05:
Thank you.

[01:17:47] Speaker 09:
And I apologize if I've offended anybody by minimizing their hypotheticals.

[01:17:52] Speaker 09:
Thank you.

[01:17:53] Speaker 05:
Thank you.

[01:17:54] Speaker 05:
Thank all parties in the cases submitted.

[01:17:57] Speaker 05:
All rise.