In Sanho Corp. v. Kaijet Technology Int’l Ltd., the U.S. Court of Appeals for the Federal Circuit addressed the scope of the prior art exception in U.S. law that deals with conditions for patentability, which provides “[a] disclosure shall not be prior art to a claimed invention under subsection [102](a)(2) if . . . the subject matter disclosed had, before such subject matter was effectively filed under subsection (a)(2), been publicly disclosed by the inventor.” In this case, the court affirmed a decision by the U.S. Patent Trial and Appeals Board (PTAB) that the prior art in question, a private but non-confidential sale of the invention by the inventor, did not qualify for the exception.

U.S. Patent No. 10,572,429 (the ‘429 patent) “concerns ‘[a] port extension apparatus for extending ports of an end-user device,’ such as a laptop computer.” The ‘429 patent’s priority date is April 27, 2017. Kaijet filed an inter partes review petition that argued the claims of the ‘429 patent were obvious based on various combinations, all of which included U.S. Patent Application Publication No. 2018/0165053 (Kuo) as one piece of the prior art. Kuo has an effective filing date of Dec. 13, 2016, before the priority date of the ‘429 patent.

Sanho argued that Kuo was not prior art, however, because of a private sale of a device called the HyperDrive, which allegedly embodied the invention. According to the opinion, Mr. Zhuowen Liao, the inventor of the ’429 patent, offered to sell the HyperDrive to Sanho’s owner on Nov. 17, 2016. After obtaining a HyperDrive sample, Sanho placed an order for 15,000 HyperDrive units on Dec. 6, 2016, that was accepted by Mr. Liao’s company, GoPod Group Ltd. (constituting an actual sale).

The court noted Sanho had made no showing that the sale of the HyperDrive that predated Kuo’s effective filing date was publicized in any way or that there were any such sales other than the private sale of HyperDrives from the inventor to Sanho. The PTAB found that, on these facts, there had not been a public disclosure of Kuo prior to the priority date of the ‘429 patent within the meaning of 35 U.S.C. § 102(b)(2)(B).

Public or Not Public?

The Federal Circuit framed the issue as “whether a non-confidential but otherwise private sale results in an invention’s subject matter being ‘publicly disclosed’ for purposes of section 102(b)(2)(B).” The court reviewed § 102’s descriptions of prior art and their exceptions and concluded by stating the “(b)(2)(B) exception … applies only to prior patent filings by another and provides that such a ‘disclosure shall not be prior art’ if ‘the subject matter disclosed had . . . been publicly disclosed by the inventor.’”

Sanho argued that § 102(b)(2)(B) should be construed to include all the “disclosure[s]” described in § 102(a)(1), including situations in which the invention was “on sale.” In support, Sanho relied on the U.S. Supreme Court’s decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., which held that a private commercial sale can constitute a disclosure under § 102(a)(1). The Federal Circuit, however, rejected Sanho’s argument that “publicly disclosed” in § 102(b)(2)(B) has the same meaning as “disclosed” in § 102(a)(1).

The Federal Circuit first noted that the language was not the same, which “suggests that Congress intended the phrases to have different meanings.” Instead, the court found that the “public disclosures” of the exception must be a subset of the “disclosures” that constitute prior art. Later in the opinion, the court also rejected Sanho’s argument that the meaning of “publicly disclosed” was the same as “public use” in § 102(a)(1).

The court also found that Sanho’s reading of the § 102(b)(2)(B) exception was contrary to the purpose of the exception to protect “an inventor who discloses his invention to the public before filing a patent application because the inventor has made his invention available to the public—a major objective of providing patent protection in the first place.” Finally, the court concluded that the legislative history states that “public disclosure” requires that the invention be made available to the public.

Key Takeaways

Correct or not, the ruling in this case leaves U.S. patent law in an anomalous position. Based on Helsinn, a private, confidential sale of the invention can be prior art in the right circumstances. Based on this case, a non-confidential sale of the invention is not an exception to the prior art.

This big picture view where heads the public wins and tails the patentee loses seems patently unfair and unwise. Perhaps this case will spur Congress to take action to clarify the meaning of and interplay between the various subsections of § 102. In the meantime, inventors would be wise to make it a best practice to file a patent application before commercializing or publicly disclosing their inventions.