Joseph J. Farnan: Pre-Patent Commercial Negotiation Leads to On-Sale Bar

In a recent decision, district judge Joseph J. Farnan Jr. helped define the commercial boundaries of the on-sale bar’s offer requirement. In the underlying litigation, the accused infringers grounded their invalidity argument on the patentee’s alleged offer of the subject technology well before seeking its patent.

According to the patentee, its advances to a potential customer – which included a term sheet entitled “Bidder’s Offer” – were inchoate and therefore could not constitute a formal offer capable of acceptance. The Court rejected this position, noting that the patentee’s tender satisfied the traditional elements of an offer:

“Honeywell relies on the parties’ business relationship and the alleged custom and practice in the industry to argue that the AIMS Proposal could not be a formal offer for sale because further negotiation between the parties was expected. In the Court’s view, however, the fact that further negotiations might arise, or even be expected, does not preclude the AIMS Proposal from being an invalidating offer where, as here, the AIMS Proposal contained the essential terms of an offer and Honeywell manifested its intent to make an offer to Boeing.” (Slip op. at 10.)

Thus, according to the Court, “[i]n this case . . . we have a definite offer, capable of acceptance, in the contract sense, and such offers have always been sufficient to invoke the on-sale bar.” (Slip op. at 12.) With this negotiation history established, the Court entered judgment against the patentee on the defense of the on-sale bar.

Honeywell Int’l Inc. v. Nikon Corp., C.A. No. 04-1337-JJF (D. Del. Dec. 4, 2009) (Farnan, J.).

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