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BASF Corp. v SNF Holding Co: Section 102 Dissected

In BASF Corp. v. SNF Holding Co, Appeal No. 2019-1243 (Fed. Cir., April 8 2020), a Fed. Cir. panel of Judges Lourie, Moore and Chen – Lourie writing—reviewed the district court’s holding that a BASF patent (U.S. Pat. No. 5,663,329) on a process for preparing high m.w. polymers was invalid in view of an earlier process carried out by the Celanese Corp. The panel also reviewed the district court’s further finding that the Celanese process evidenced prior art knowledge and use of the patented invention within the meaning of 35 USC 102(a), and that the Celanese process constituted both a public-use bar and an on-sale bar to the patented invention under 102(b). The panel reversed the court’s finding of an on-sale bar, and found that the court had misinterpreted section 102(a) and the public use bar of 102(b), and reversed and remanded the court’s grant of summary judgement for further fact-finding.

This was a pre-AIA patent, so the relevant parts of s. 101(a) relate to third party action, including a bar to patenting of the invention was known or used by others in the US prior to the invention thereof by applicants. Section 102(b) bars patenting if the invention was in public use or on sale in this country, more than one year prior to the date of the application for patent. The BASF claims recited carrying out the polymerization in a tubular reactor having a conical taper at the end having certain dimensions, and removing the “gelatinous reaction mixture” by injecting an inert gas into the reactor. Previously, inert gas streams were not effective in removing the polymer from the bottom end of the reactor.

The purported prior art was generated by a process created by Sanyo, that was exclusively licensed to Celanese to make, use and sell the polymers in the US. Sanyo provided technical support to help Celanese with plant start-up. Celanese was required to protect the secrecy of Sanyo’s confidential information, and could only disclose the information within Celanese on a need-to-know basis. Employees and subcontractors were also required to sign confidentiality agreements.

The district court’s summary judgment order was based on its opinion that “one person’s use of knowledge” is all that is required for an invention to be known and used by others in accord with 102(a). The court stated that “whether prior use is secret or confidential is immaterial.”  Since the Celanese plant was up and running, and technical information had been provided to Celanese and to Hoechst AG—that purchased Celanese well prior to the priority date of the ‘329 patentthe court granted summary judgment that the BASF claims were anticipated under 101(a).

The district court also granted summary judgment of invalidity based on both the public-use and on-sale bars of 102(b). The exclusive license was found to be a sale. The court also found that the use of the process by Celanese prior to the priority date of the patent, was “in many respects accessible to the public”, since Hoechst gave tours of the Celanese plant” and a newspaper article “depicted the plants interior.”

The Fed. Cir. first addressed the court’s interpretation of “known or used” in s. 102(a). BASF argued that the extensive confidentiality agreements demonstrated that the invention was not publicly accessible. SNF argued that a single person’s knowledge or use is sufficient to defeat novelty, and that the confidentiality agreements were “simply extraneous.” The Fed. Cir. agreed with BASF and extensively discussed the caselaw and legislative history of the “known or used” prong of 102(a), concluding that “[t]his court has uniformly interpreted the ‘known of used’ prong of s. 102(a) to mean ‘knowledge or use which is accessible to the public.” [citing inter alia Pennock v Dialogue, 27 US (2 Pet.) 1 (1829), in which the Court faced the self-generated bar that would apply to the inventor’s activities prior to filing for a patent, and so interpreted “know and used” as implicitly limited to knowledge ‘by the public” prior to the date of the invention. In Pennock, the Supreme Court also endorsed a bar an inventor who publicly use of sold his invention from later obtaining a patent, e.g., when a competitor entered the marker: “This provision was later modified to apply to public-use or on-sale activities by parties other than the inventor.”

The Fed. Cir. discussed the 1850 decision in Gaylor v. Wilder:

“[W]here the prior user has successfully concealed his work from the public, such prior knowledge or use is unavailable as prior art because the prior user has ‘not contributed to the store of knowledge in the art.”…As we have noted in the context of the s. 102(b) public use bar, both the existence of relevant confidentiality  agreements and the degree to which they were honored are evidence of whether prior knowledge and use were accessible to the public but are not necessarily conclusive.” [emphasis supplied]. Because of the disagreement between the parties as to the extent and efficacy of the confidentiality agreements mentioned above, the Fed. Cir. reversed the grant of summary judgment of invalidity and remanded for the determination of SNF’s s. 102(a) defense at trial.

The panel then tackled the “public use” bar of s. 102(b). They first agreed with BASF that there had been a failure of the court to properly address whether or not the Celanese process was “public” since: “If the use identified by the defendant was not successfully concealed or hidden from those who lack any ‘limitation or restriction, or injunction of secrecy’, Egbert v. Lippmann, 104 US (14 Otto) 33m 336 (1881), then it is a public use within the meaning of s. 102(b). However, the panel found a failure of proof on this question. Citing Dey, L.P. v. Sunovion Pharma, 714 F.3d 1351…(Fed. Cir. 2012), the panel listed factors to be fully considered upon remand, such as “the nature of the activity that occurred in public, public access to and knowledge of the public use, existence of an actual or implied confidentiality obligation, and the relevant knowledge of observers.”

The panel made short work of SNF’s contention that “a third party’s commercial exploitation of a secret process creates a per se pubic use bar to another inventor”, stating that it “is simply wrong.” The panel discussed the “Metalizing rule” which held both that the inventor’s commercial exploitation of her then secret process, while the process itself was not publicly used or on sale did, in fact, create a 102(b) bar to a later attempt to obtain a patent and that ”such exploitation by a third party does not create a public use bar.” The panel cited Gore, 721 F.2d at 1530 for the proposition that “patent law favors the later inventor who shares his knowledge with the public over the prior inventor who conceals his invention.” The panel reversed the court’s summary judgment of invalidity and remanded for determination of the public-use defense at trial.

I am getting tired of typing and of watching snow showers come and go, so I won’t spend much time summarizing the “on-sale” bar section of the opinion. The panel simply held that an exclusive license is not a sale, (“Unlike in Minton, the essential feature of the claimed process here were not embodied in a product sold or offered for sale before the critical date”). The panel also found that the acquisition of Celanese by Hoechst did not amount to a sale of the claimed process, “since there was no product sold that embodied the essential features of the [Celanese] process.”(If the claim had been to the polymerization equipment, would the outcome have been different?”) The panel reversed the summary judgment of invalidity and directed entry of partial summary judgment for BASF.

This opinion seems to be longer than it might have been had the panel simply rejected SNF’s invalidity arguments, but its thorough analyses of both sides of the interpretation of 102 (a) and (b) makes it a model working document on validity/invalidity arguments when a patent on a process is in suit.

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