UPDATED (Originally Published on Aug 27, 2013)

The Federal Circuit’s recent decision in Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc., Appeal No. 2012-1581 illustrates the danger to patent holders of potentially triggering an “on-sale” bar when outsourcing product manufacturing, or even product development, to third-parties that may themselves make invalidating offers for sale.

Hamilton Beach accused Sunbeam of infringing a patent generally directed towards a portable slow cooker kitchen appliance, with fasteners to secure the slow cooker’s lid. Prior to appeal, the district court found that Sunbeam did not infringe the asserted patent, and that the patent was invalid under 35 U.S.C. § 102(b). Section 102(b) bars a patent on any invention that has been “on sale in this country, more than one year prior to the date of application for patent in the United States.”

On appeal, the Federal Circuit affirmed that the patent was invalid under § 102(b). Notably, in the transaction at issue, it was a Hamilton Beach supplier who made an offer to sell slow cookers that embodied the invention to Hamilton Beach. One generally thinks of an on-sale bar as being triggered by the patent holder or inventor, however this case is a reminder of how an on-sale bar can occur throughout the manufacturing and supply chain – even well before a product is intended for end-use customers.

In a recent summary judgment decision (coincidentally in a case that also involves a cooking device – banking trays), a district court found a manufacturer’s proposal and detailed presentations to the patentee to be commercial offers for sale of a patent-ready device, triggering an on-sale bar. See Orbis Corp. v. Rehrig Pacific Co., No. 12-cv-1073-JPS (E.D. Wis. Sept. 10, 2013)(D.I. 72).

In an age where outsourced manufacturing is commonplace, accused infringers should not overlook the facts surrounding how any embodying products were first manufactured as a potential means to attack patent validity. In addition, the holding in Hamilton Beach may be applicable even outside the context of patents covering physical manufactured products – for example, where some portion of software development have been outsourced.