Contracts Archives

Neck or Nothing? “Quotation” Invalidates On-Sale Bar

by Keval Amin | Dec 19, 2024 | America Invents Act, Patents

The US Court of Appeals for the Federal Circuit found the patents at issue invalid based on the patent owner’s “quotation” letter to a third party, concluding it was a commercial offer for sale under pre-America Invents Act (AIA) 35 U.S.C. § 102(b) notwithstanding the patent owner’s reservation of a post-quote acceptance. Crown Packaging Technology, Inc. v. Belvac Production Machinery, Inc., Case Nos. 22-2299; -2300 (Fed. Cir. Dec. 10, 2024) (Dyk, Hughes, Cunningham, JJ.)

Crown Packaging Technology owns patents for necking machines, which reduce the top diameter of metal beverage cans. The earliest priority date for the patents was April 24, 2008, setting the critical date of April 24, 2007. On November 14, 2006, Crown sent Complete Packaging Machinery a letter quoting one of its necking machines that embodied the claims of its patents.

Crown sued Belvac Production Machinery for infringing Crown’s patents. Belvac raised an invalidity defense under § 102(b), contending that Crown’s pre-critical-date letter to Complete Packaging constituted a commercial offer for sale, which rendered the patents invalid. On summary judgment, Crown argued that its letter could not create a binding contract, was not a commercial offer for sale, and was not an offer for sale “in this country” as required by § 102(b). The district court agreed with Crown, finding that the letter was merely an invitation to make an offer, not an offer in itself. At trial, the jury found the patents valid but not infringed. Both parties appealed.

The Federal Circuit reversed the district court’s validity determination, finding that Crown’s letter was an invalidating offer for sale under § 102(b). The Court’s analysis involved five factors:

Whether the subject of the offer embodied the claims of the patents.
Whether the offer occurred “in this country.”
Whether the offer predated the critical date.
Whether the invention was the subject of a commercial offer for sale.
Whether the invention was ready for patenting.

Crown conceded that the necking machine embodied the asserted patent claims, was ready for patenting, and that the letter predated the critical date. Thus, the dispute focused on whether the letter was a commercial offer for sale and whether it was made “in this country.”

The Federal Circuit determined that the letter was a commercial offer for sale. While labeled as a “quotation,” the letter included definite terms typically associated with a binding offer, such as pricing, delivery schedules, payment terms, warranties, and liability conditions. These terms established the mutual obligations of the parties. The Court found that the letter required immediate performance since Complete Packaging was obligated to pay 50% of the purchase price upfront and Crown committed to begin manufacturing upon receipt of payment. Also, despite an explicit clause requiring Crown’s written acceptance, the Court found that the letter was still a commercial offer for sale under established legal precedent.

The Federal Circuit also rejected Crown’s argument that the letter was not made “in this country.” Pre-AIA § 102(b) defines an offer made to a US company at its US [...]

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All the Benefits of a Reverse Triangular Merger, None of the IP Merger Mess

by Benjamin Ediger, Ph.D. | Mar 2, 2023 | Uncategorized

The US Court of Appeals for the Eleventh Circuit affirmed a district court’s summary judgment dismissal of plaintiff’s claim that the defendant failed to provide a payment conditioned on the sale, merger or transfer of certain intellectual property since ownership was not transferred via the merger. GSE Consulting, Inc. v. L3Harris Techs., Inc., Case No. 22-10647 (11th Cir. Feb. 8, 2023) (Rosenbaum, Lagoa, Wetherell, JJ.)

L3Harris specializes in defense and information technology and until recently was known as Harris Corporation. The name change from Harris to L3Harris was the result of a reverse triangular merger it executed over 2018 and 2019 whereby its subsidiary, Leopard Merger Sub, merged with its target, L3 Technologies.

In 2008, Harris and GSE combined forces to develop an oil sands heavy oil recovery process. In addition to yielding intellectual property relating to the process’s corresponding radio frequency heating technology, the collaboration resulted in a consulting agreement that would have extended through December 31, 2022. Under the consulting agreement, GSE provided its specialized infrastructure and energy consulting services on call and assigned all its rights to intellectual property developed under the agreement to Harris. In return, GSE received base pay and the right of first refusal for 10% of the direct labor workshare of Harris’s radio frequency heating projects.

The consulting agreement also included several payment conditions to benefit GSE or mitigate its risk. GSE believed that the Harris-L3 merger triggered the following condition to the tune of $4 million:

6.b. Payments calculation for the following to be 3% of market capitalization, capped at $4M:

in the event the IP is sold, merged or transferred and the primary basis of the sale is not the IP.

GSE argued that the intellectual property relevant to the consulting agreement had “merged” because the Harris-L3 plan of merger addressed that intellectual property and included it in the merger. GSE therefore issued a $4 million invoice to L3Harris.

L3Harris rejected the invoice, arguing that while the plan of merger addressed the relevant intellectual property, the relevant language declared that the merger would have no effect on Harris and L3’s respective ownership interests: “all such rights will survive unchanged after the consummation of the [merger].” According to L3Harris, ownership of the relevant intellectual property did not change through the merger. Not long after rejecting GSE’s invoice, L3Harris also shut down its radio frequency heating program.

GSE subsequently filed a lawsuit alleging breach of contract, and the parties filed competing summary judgment motions. GSE maintained its position that it was owed $4 million but also argued that if the district court found the payment provision ambiguous then it should consider testimony from those who brokered the agreement demonstrating that a corporate merger was sufficient to trigger payment. L3Harris argued that the provision was unambiguous and thus Florida law prohibited considering extrinsic evidence. L3Harris also argued that its merger didn’t involve anything that triggered payment (i.e., the relevant intellectual property was not sold, merged or transferred).

The district court granted [...]

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No Bite on Parties’ Unenforceable Agreement to Agree to Sell Apple Trees

by Paul Devinsky | Sep 9, 2020 | Food, Beverage & Agribusiness

The US Court of Appeals for the Federal Circuit affirmed a grant of summary judgment, finding that the option provision in the parties’ contract was an unenforceable agreement to agree. Phytelligence, Inc. v. Wash. State Univ., Case No. 2019-2216 (Fed. Cir. Aug. 27, 2020) (Reyna, J.).

Phytelligence is an agricultural biotechnology company that used tissue culture to grow trees for sale to nurseries and growers. In 2012, Phytelligence and Washington State University (WSU) began discussing an arrangement to grow WA 38 apple trees, a new apple cultivar that WSU developed and patented. The parties executed a propagation agreement, which included a provision that granted Phytelligence an option to participate as a provider and/or seller. If WSU’s cultivar became available for licensing, Phytelligence would need to sign a separate contract with WSU or WSU’s agent to exercise the option to become a provider and/or seller.

WSU eventually began requesting proposals from companies interested in commercializing WA 38. Phytelligence did not submit a proposal. In 2014, WSU accepted a proposal from Proprietary Variety Management (PVM) and entered into a management contract granting PVM an exclusive license to propagate and sell WA 38. Three years after WSU entered into this management contract, Phytelligence notified WSU that it wanted to exercise its option to participate as a provider and/or seller under the propagation agreement. WSU responded that under the propagation agreement, Phytelligence had to sign a separate contract with WSU to exercise the option and directed Phytelligence to PVM. Phytelligence rejected all of PVM and WSU’s options for selling WA 38, and the agreement between the parties was terminated.

Phytelligence sued WSU, alleging breach of the propagation agreement and seeking damages and specific performance. WSU moved for summary judgment, arguing that the option provision of the propagation agreement was an unenforceable “agreement to agree.” The district court agreed and granted WSU’s motion. Phytelligence appealed.

The Federal Circuit affirmed the dismissal. The Court stated that an agreement to agree was an agreement to do something that requires a further meeting of the minds, and without such a meeting, the agreement would not be complete. The Court found that an agreement to agree is unenforceable because courts are unable to fix the liability of parties based on agreements that are too indefinite and uncertain. Turning to the agreement between Phytelligence and WSU, the Court explained that the plain language of the propagation agreement required the parties to sign a separate contract to exercise the option, thus rendering the provision an unenforceable agreement to agree. The Court also rejected Phytelligence’s argument that the extrinsic evidence supported its theory that the option was an enforceable contract with open terms. The Court instead found that the communications between the parties revealed that WSU did not commit to any definite terms for a future license with Phytelligence.