The Federal Circuit vacated the district court’s finding of invalidity based on the on-sale bar because, despite sworn testimony admitting sales of the patented product more than one year beforehand, the invention was not "ready for patenting" before the critical date. Gemmy Industries Corp. v. Chrisha Creations Ltd., Case No. 05-1110 (Fed. Cir. June 22, 2006) (Newman, J.).
Gemmy’s patent is directed to an inflatable decorative holiday figure. More than a year before Gemmy filed its patent application, Gemmy exhibited certain prototype inflatable Halloween and Christmas figures at a Hong Kong trade show to potential customers. The prototypes were inflated by a hair dryer through a long tube, whereas the patent claims required that the assembly have a fan in the base for inflation. Although the inflatable figures were seen by retailers and quote sheets were made available at the exhibit, the district court found that no sales orders were taken at that time. The first commercial shipments of the products were made within the one-year grace period.
Gemmy filed suit charging patent and copyright infringement and other commercial torts. Gemmy filed an affidavit of its president stating that Gemmy had been selling its inflatable product line since the date of the Hong Kong show and that each product is made up of a base containing a fan unit. Chrisha, citing the affidavit’s admission of product sales, moved for summary judgment of invalidity based on the on-sale bar. In response, Gemmy submitted a new declaration by its president seeking to modify the statements of his prior affidavit to say he knew the prototypes at the Hong Kong display underwent several structural changes, including the box fan in the base and other claimed elements, before the commercial product was available for sale. A sales representative and contemporaneous photographs corroborated that the early prototypes were inflated using an external hair dryer.
The district court granted Chrisha’s motion for summary judgment of invalidity based on the on-sale bar, finding that Gemmy "developed, displayed to customers, marketed and quoted to customers for sale [prior to the critical date]."
On appeal, Gemmy argued that the inflatable figures were incompletely developed when exhibited in Hong Kong. Gemmy also argued that there was undisputed evidence that the exhibited prototypes were inflated with a hair dryer, not the base fan required by the claims, and therefore not "ready for patenting" under the requirements of Pfaff v. Wells Electronics. Although the burden was on Chrisha to show the product was both ready for patenting and the subject of a commercial offer for sale before the critical date under Pfaff, Chrisha argued the initial affidavit of Gemmy’s president shifted the burden of proof, requiring Gemmy to explain why its president initially made an incorrect averment and provide evidence of its first sale and when the engineering design was completed.
While the Federal Circuit agreed that a party cannot simply contradict an earlier sworn statement, it found credible evidence existed to support the contradiction. It further found the district court’s determination that the exhibited prototypes did not have a base containing a fan unit irreconcilable with its determination on summary judgment that the prototype was ready for patenting. Thus, the Federal Circuit concluded that the undisputed evidence that the product displayed was not the patented invention removes it from meeting the requirement of Pfaff that "the patented invention must be ‘fully disclosed’ in the product that was on sale."
Gemmy also argued the commercial offer of sale requirement under Pfaff also was not met, as the "quote sheets" distributed in Hong Kong omitted key terms of a sale and were comparable to a publication of promotional information indicating no more than preparation to place the product on sale. Although Chrisha argued the purpose of the displays to customers in Hong Kong was to solicit orders and that orders must have been taken at some time because deliveries were made about eight months later, the Federal Circuit noted that the district court did not state that its summary judgment was based on any discovery sanction even though Gemmy, under a claim of privilege, refused discovery of its sales records and engineering design documents. In light of these findings, the Federal Circuit vacated the summary judgment of invalidity and preliminary injunction predicated thereon, concluding that the on-sale issue could not be decided adversely to Gemmy on summary judgment because disputed material facts, if viewed favorably to Gemmy, do not support the judgment.
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