Flashback: Contract Law Governs Commercial Offers for Sale under Pfaff

Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041 (Fed. Cir. 2001)

This case dealt with interpretation of § 102(b), the "on sale" bar. The critical date in this case was November 12, 1991. Group One contacted Hallmark on June 24, 1991, stating "We have developed a machine which can curl and shred ribbon so that Hallmark can produce the product you see enclosed--a bag of already curled and shredded ribbon.... We could provide the machine and/or the technology and work on a license/royalty basis." Hallmark expressed some interest, and the parties continued their correspondence. However, as tends to happen, Hallmark eventually decided to create their own ribbon curling machine and gave Group One the blow-off. Group One predictably sued Hallmark for patent infringement, and Hallmark countered with the "on sale" bar.

The main issue was whether the communications that occurred between Group One and Hallmark in June 1991 constituted a "commercial offer for sale" under the first prong of the Pfaff test. The Federal Circuit held that the offer sale must meet the level for an offer for sale in the contract sense, stating: "Applying established concepts of contract law, rather than some more amorphous test, implements the broad goal of Pfaff, which, in replacing this court's "totality of the circumstances" test with more precise requirements, was to bring greater certainty to the analysis of the on-sale bar." Additionally, "Because of the importance of having a uniform national rule regarding the on-sale bar, we hold that the question of whether an invention is the subject of a commercial offer for sale is a matter of Federal Circuit law, to be analyzed under the law of contracts as generally understood." In so holding, the Federal Circuit directed courts to look to the Uniform Commercial Code or the Restatement of Contracts "to define whether…a communication or series of communications rises to the level of a commercial offer for sale." The Federal Circuit reversed, finding that the communications between Group One and Hallmark did not constitute an offer for sale.

For an update on what happened later on, click here.