. . . “These add-ons are for accessory items, not the basic necking machine itself. . . .”
Introduction
In Crown Packaging Technology, Inc. v. Belvac Production Machinery, Inc., 2022-2299, 2022-2300 (Fed. Cir. Dec. 10, 2024) (“Decision”), the Federal Circuit examined a “quotation” letter under pre-AIA 35 U.S.C. § 102(b) to determine if the letter constituted an on-sale bar of the patented inventions. Under this provision, a patent is invalid if the claimed invention was commercially offered for sale in the United States more than one year before the patent's priority date. The Federal Circuit reversed the district court’s summary judgment determination that the quotation did not constitute an offer for sale, finding instead that the quotation sufficiently constituted a commercial offer that could be accepted by the recipient to form a binding contract.
Background
The patents at issue—U.S. Patent Nos. 9,308,570; 9,968,982; and 10,751,784—cover high-speed necking machines, which are used in the manufacture of beverage cans to reduce the top diameter of the cans. This process, known as “necking,” involves progressively resizing the can’s top to a smaller diameter through multiple stages, ensuring that the can’s top will accommodate a standard-sized lid.
Crown, the patent holder, accused Belvac of infringing the asserted patents. Belvac responded by raising an invalidity defense under the on-sale bar, focusing on a 2006 letter that Crown sent to Complete Packaging Machinery (“Complete”). This letter, titled “Quotation Number Q22764,” contained a detailed quotation for Crown’s CMB3400 necking machine, including price, payment terms, and delivery conditions for the machine described in the letter. The letter also offered the ability to negotiate terms for certain customizations of the machine upon Complete’s request. The letter was sent from Crown’s location in England to Complete’s Arvada, Colorado address. Although Complete formally acknowledged acceptance of the letter, there was no evidence that Complete acted on the quotation letter or ever purchased Crown’s necking machine.
The November 14, 2006 quotation letter was sent to Complete more than one year before the earliest priority date of the patents—April 24, 2008. The district court nevertheless found the letter insufficient to trigger the on-sale bar, reasoning that it was merely “an invitation to make an offer, not an offer itself.” Decision at 5. The Federal Circuit disagreed and concluded that the letter met the statutory criteria for an on-sale bar to patentability.
The Federal Circuit’s Analysis
Under pre-AIA § 102(b), the on-sale bar requires the satisfaction of three statutory requirements: (1) the subject of the offer for sale must embody the claims of the asserted patent; (2) the offer must take place in the United States; and (3) the offer must occur more than one year before the patent application filing date or its earliest priority date. In Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), the Supreme Court identified two additional conditions that must be satisfied: (4) the invention was “the subject of a commercial offer for sale” and (5) the invention was, at the time, “ready for patenting.” Id. at 67.
The Federal Circuit noted that there was no dispute that the letter to Complete was sent more than one year before the patents’ earliest priority date and that the described necking machine embodied the claims of the asserted patents. Nor was there any dispute that Crown’s necking machine was “ready for patenting.” With these elements largely undisputed, the court focused its analysis on (1) whether the letter to Complete constituted a commercial offer for sale of the invention and (2) whether the offer was made “in this country.”
Issue 1: Was the Letter a Commercial Offer for Sale?
To determine whether the letter constituted a commercial offer for sale, the Federal Circuit explained that it applies its own law, thereby analyzing the issue “‘under the law of contracts as generally understood.’” Decision at 7-8 (quoting Meds. Co. v. Hospira, Inc., 881 F.3d 1347, 1351 (Fed. Cir. 2018). Citing Hamilton Beach Brands, Inc. v. Sunbeam Prods., Inc., 726 F.3d 1370, 1374 (Fed. Cir. 2013), the court emphasized that the key question is whether the communication was sufficiently definite to form a binding contract upon acceptance. The Federal Circuit explained that the analysis must consider the totality of the circumstances, focusing on the definiteness of terms and whether the parties intended to be bound. See Decision at 8 (citing Atlanta Attachment Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1365 (Fed. Cir. 2008)). Importantly, while the letter to Complete indicated that English law applied to the transaction, the court clarified that it applies U.S. law in analyzing the on-sale bar issue under § 102(b). See Decision at 7 n.3.
In its summary judgment ruling, the district court concluded that the letter was merely an invitation to negotiate rather than a binding commercial offer for sale. It emphasized the letter’s label as a “quotation” and its inclusion of a provision requiring Crown’s written acceptance of Belvac’s order before an agreement could be finalized. Based on these factors, the district court found the letter insufficiently definite to qualify as an offer capable of creating a binding contract, even upon Belvac’s acceptance.
The Federal Circuit disagreed, emphasizing that it is the substance of the communication, not its label, that controls, and that a communication may constitute an offer even if further formalities, such as the offeror’s acceptance of the order, are contemplated. See Decision at 9 (citing Junker v. Medical Components, Inc., 25 F.4th 1027 (Fed. Cir. 2022)). The Federal Circuit noted that while the letter to Complete was labeled as a “quotation,” it satisfied the statutory requirement of a commercial offer for sale because it contained all essential terms for forming a binding contract. See Decision at 9 (citing Junker, 25 F.4th at 1035 (letter using the word “quote” satisfied commercial offer requirement)). Specifically, the court identified a specific price for the CMB3400 machine, payment terms requiring a 50% deposit, and delivery timelines as evidence of definiteness. Significantly, the letter was not broadly distributed to other potential buyers but instead was sent only to Complete, indicating that the letter was not an unsolicited invitation to negotiate. See Junker, 25 F.4th at 1035 (quotation sent to only one company); Merck & Co. v. Watson Lab’ys, Inc., 822 F.3d 1347, 1351 (Fed. Cir. 2016) (widely distributed unsolicited quotes are not “offers”).
Moreover, the court held that the letter’s requirement of Crown’s written acceptance of Belvac’s order “does not prevent the letter from being a commercial offer for sale.” Decision at 12. In particular, the Federal Circuit pointed to evidence of Crown’s own business practices in other contexts. The court noted that Crown routinely processed orders without issuing formal acceptances, relying instead on “Order Acknowledgments” to confirm receipt of orders. This practice indicated that customer acceptance of the offer alone was sufficient to create a binding contract, even in the absence of Crown’s own written acceptance of the customer’s order.
Crown further attempted to defend the district court’s summary judgment ruling by arguing that the letter’s inclusion of terms allowing customization of the specified necking machine demonstrated the lack of a specific and binding offer. The court rejected that argument, noting that “[w]hile Crown argues that the product was customizable, there is no dispute that Complete could have accepted an offer for the patented invention in the described form.” Decision at 13. The court also explained that Crown’s additional offer of “Optional Extra Equipment” or “special paint” “does not mean that the terms of the alleged offer are not otherwise sufficiently definite.” Id. The court noted in passing that “[t]hese add-ons are for accessory items, not the basic necking machine itself.” Id. Thus, “taken as a whole,” the Federal Circuit concluded that “the letter to Complete was a commercial offer for sale under the meaning of § 102(b)”. Id.
Issue 2: Was the Offer Made “In This Country”?
The district court did not directly address whether the offer was made “in this country” under pre-AIA § 102(b), as it had already determined that the letter did not constitute a commercial offer. However, on appeal, Crown argued that (1) the letter’s origin outside the United States precluded it from meeting this requirement and (2) the letter did not contemplate that the necking machine was “for use in the United States.” Decision at 13-14.
The Federal Circuit disagreed, noting that in In re Caveney, 761 F.2d 671 (Fed. Cir. 1985), the court previously held that an offer directed to a U.S.-based entity at its U.S. address qualifies as being made in the United States. The court emphasized that the letter to Complete was explicitly addressed to its Colorado office and recorded in Crown’s internal system as directed to “CPM, USA.” Decision at 14. These facts satisfied the requirement that the offer be made “in this country.”
After addressing the letter’s origin, the court turned to Crown’s argument regarding the location of the intended use of the necking machine. Specifically, Crown argued that its offer could not trigger the on-sale bar because the invention was not “sold for use in the United States.” Decision at 14. The Federal Circuit dismissed this argument by noting that in Caterpillar Inc. v. International Trade Commission, 837 F. App’x 775 (Fed. Cir. 2020), the court previously held that an offer made in one country can trigger the on-sale bar if directed to an entity in the United States, regardless of where the invention is ultimately used. The court emphasized that Crown’s offer met this standard because it was explicitly directed to a U.S. entity and contained terms that could create a binding contract upon acceptance.
Conclusion
The Federal Circuit’s decision in Crown Packaging v. Belvac underscores the importance of evaluating the totality of circumstances in determining whether a communication constitutes a commercial offer for sale. The decision also reaffirmed that offers directed to U.S. entities at U.S. locations meet the statutory requirement of being made “in this country.” Finally, this case serves as a cautionary tale for patent holders by emphasizing the need to coordinate their patent filings with their companies’ commercial activities. Otherwise, the temptation to quickly commercialize an invention may ultimately defeat a patent holder’s ability to exclude competitors from the marketplace.
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