April 26, 2020
Does licensing of your invention trigger an on-sale bar? The short answer is no. The licensing agreement covering the invention normally does not trigger the on-sale bar. On-sale bar is limitation on patentability. It provides that the invention cannot be patented if it was on sale one year prior to filing of the application for the invention.
The controlling case is In re Kollar, 286 F.3d 1326 (Fed.Cir.2002). In this case, the court held that the inventive process for preparing a product was not placed on sale by patentee’s contract with a third party one year prior to filing of the application for the process. The agreement called for the patentee to license its invention along with the technical know-how for implanting the invention and to coordinate possible future commercializing in exchange for royalty. No product using the inventive process, however, was sold or offered for sale. Absent such a forfeiture, the Court noted that the agreement amount to an ordinary license agreement and it is well established that the grant of a license to practice a patented invention, with or without accompanying technical information, does not itself create an on-sale bar.
Practice Note: There is an important lesson in this case for startups often engaging in negotiations with customers or investors. The lesson is to that these negotiations should not be in the context of selling or offering to sell the invention at least not prior to filing of the patent application. The negotiations can, however, be framed in the context of licensing the invention for future production of the product.
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