Celanese v. ITC: Can a Secret Manufacturing Process Be Patented After Sale of the Resulting Product?

by Dennis Crouch
The Federal Circuit held oral arguments on March 4, 2024 in the important patent case of Celanese Int’l. v ITC , 22-1827 (Fed. Cir. 2024).
The question: Under the AIA, does sale of a product by the patent applicant prohibit the patentee from later patenting the process used to make the product? 
Background
Celanese developed an improved process for making the artificial sweetener acesulfame potassium ( Ace-K ). For several years, Celanese kept its Ace-K manufacturing process a trade secret while selling the Ace-K product it produced. In 2016, over a year after it began selling Ace-K, Celanese filed patent applications on its heretofore secret Ace-K process.
When competitor Anhui Jinhe began importing Ace-K into the U.S., Celanese sued Jinhe for patent infringement at the International Trade Commission (ITC). Jinhe argued Celanese’s asserted process patent claims were invalid under the AIA’s “on-sale bar” because Celanese had sold Ace-K made by the later-claimed process more than one year before filing for its patents.
The ITC ruled for Jinhe, holding that Celanese’s patent claims were invalid under the on-sale bar. It held that under pre-AIA Federal Circuit precedent, a patentee’s sale of a product made by a secret process placed the process “on sale” under the statute, thus invalidating later patent claims to the process. The ITC ruled that the AIA did not change this rule and that the process claims were invalid under the on-sale bar. Celanese appealed.
The case has major implications for the relationship between patent rights and trade secret rights. Historically, an inventor could choose to protect a new manufacturing process either by patenting it or by keeping it as a trade secret – but not both. The “on-sale bar” was the statutory hook that prevented an inventor from commercially exploiting a secret invention for several years and then also obtaining a patent monopoly.  But, the problem is that the statute expressly asks whether the invention was “on sale.”  Here, the claimed invention – the process of manufacturing – was not being sold or disclosed by the sale.
Although the statute does not distinguish between sales by the patentee and those by an unaffiliated third party, Federal Circuit case law does make a distinction.  For the court, pre-filing sales by the patentee have create a much broader bar to patenting than do sales by the third party.  Compare D.L. Auld Company v. Chroma Graphics Corp. , 714 F.2d 1144 (Fed. Cir. 1983) (sale of product by patentee prevents patenting of manufacturing process) with W.L. Gore & Assocs., Inc. v. Garlock, Inc. , 721 F.2d 1540 (Fed. Cir. 1983) (sale of product by a third party who had kept its process secret does not prohibit an independent inventor to patent the process).  This differential concept was first popularized by the Judge Learned Hand decision in Metallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co. , 153 F.2d 516 (2d Cir. 1946). Celanese notes that the Supreme Court has never endorsed Metallizing ‘s holding.
But many manufacturers prefer to keep novel processes as trade secrets initially, before their value is clear, while still preserving the option to later seek patents. The pharmaceutical, chemical, and semiconductor industries, in particular, rely heavily on long-held trade secrets and could be impacted if the Federal Circuit alters the long-held interpretation.  Celanese argues that its approach promotes disclosure of trade secrets, while the other side note that the approach promotes unfair extension of exclusive rights.
Celanese’s Arguments
Although there is Federal Circuit case law on point, Celanese argues that the AIA supersedes the Federal Circuit’s pre-AIA rule that sales of products made by a secret process place the process “on sale.” In particular, congress amended Section 102 to focus on whether the “claimed invention” is on sale, rather than simply the “invention.”  Although in most pre-AIA situations, the Federal Circuit was already defining the invention as the claimed invention, this on-sale issue is one area departure. According to the patentee, Congress “doubled down” on the textual meaning in a way that calls on the Federal Circuit to reconsider its precedent.  Arguing on behalf of Celanese, Deanne Maynard argued that “The process is not on sale. End of story.”
Celanese also contends its interpretation aligns with the AIA’s purpose of harmonizing U.S. patent law with the rest of the world, where sale of a product does typically not preclude later patenting of the process.  See AIA Section 3(p) (sense of Congress that moving to first-to-file will “promote harmonization of the United States patent system with the patent systems commonly used in nearly all other countries throughout the world … and thereby promote greater international uniformity and certainty in the procedures used for securing the exclusive rights of inventors to their discoveries.”).  Celanese further argues its reading matches other AIA provisions that presuppose secret activities are not invalidating, such as the prior use defense.
ITC and Jinhe’s Arguments
The ITC and Jinhe counter that the Supreme Court’s 2019 decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc . held that in the AIA, Congress did not change the meaning of “on sale” from the pre-AIA statute. They argue Helsinn requires applying the settled pre-AIA rule treating a patentee’s sale of products made by a secret process as invalidating sales of the process.
The sole question for the commission below and this court now is, did Congress change what it means for a process to be on sale when it enacted the AIA? The answer to that question clearly has to be no, given the unanimous holding in Helsinn that Congress did not alter the meaning of on sale when it enacted the AIA. . . . It is dispositive.
Benjamin Richards arguing on behalf of the ITC.
The ITC and Jinhe contend Celanese focuses too narrowly on the AIA’s “claimed invention” language and that there is no meaningful distinction from the prior  statute’s use of “invention” and the new “claimed invention” even in the context of the on-sale bar.  They argue the operative statutory term is “on sale,” which the Federal Circuit gave a well-established meaning before the AIA that Congress implicitly adopted by reenacting the same term in the AIA.
The ITC and Jinhe also that policy concerns about patentees inequitably extending their monopolies by serially invoking trade secret and patent rights still apply under the AIA, so the on-sale bar must still invalidate late-sought patents on secret processes previously used for commercial gain.
In Helsinn – like in Deere – the court noted a presumption that Congress intended to reenact well established patent law.  The patentee argues that the reenactment cannon has much less weight in this situation — offering three key reasons:

Reenactment cannon cannot reject plain language of the statute — and here the statute unambiguously requires the “claimed invention” itself, not products made using the claimed invention, to be “on sale.”
The Supreme Court had never endorsed the pre-AIA interpretation that a patentee’s sale of products made by a secret process places the process “on sale.” There was thus no “well-settled” or “judicial consensus” on this issue for Congress to adopt.
Further, there are very few Federal Circuit cases on point and so even there, the doctrine is hardly well-settled.

The ITC cites several treatises in response, including Donald S. Chisum, Chisum on Patents § 6.02[5][b] (2022) (“[I]t is now well established that commercial exploitation by the inventor of a machine or process constitutes a public use even though the machine or process is held secret.”).  Celanese cited the same section Chisum’s treaties that recognized the “unclear” justification for treating patentee sales different from those of a third party.  See also, Dmitry Karshtedt, Did Learned Hand Get It Wrong?: The Questionable Patent Forfeiture Rule Of Metallizing Engineering , 57 VILL. L. REV. 261(2012).
Although it was not discussed in the briefs or oral arguments, there is a key Supreme Court case on-point: Kewanee Oil Co. v. Bicron Corp. , 416 U.S. 470, 490-91 (1974).  In that case, the court explained that trade secret law is not preempted by patent law. — finding that the two can co-exist.  However, one justification for this co-existance is that inventors will need to choose one or the other — and most will choose patents.
Nor does society face much risk that scientific or technological progress will be impeded by the rare inventor with a patentable invention who chooses trade secret protection over patent protection. The ripeness-of-time concept of invention, developed from the study of the many independent multiple discoveries in history, predicts that if a particular individual had not made a particular discovery others would have, and in probably a relatively short period of time. If something is to be discovered at all very likely it will be discovered by more than one person.
Id. See Camilla Hrdy and Sharon Sandeen, The Trade Secrecy Standard for Patent Prior Art , 70 Am. U.L. Rev. 1269 (2021) (“Crucial to the [ Kewanee ] Court’s reasoning was the assumption that an inventor cannot get both forms of protection; instead, the inventor has to patent within one year or rely on trade secrecy.”).
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Deanne Maynard of Morrison Foerster argued the case on behalf of the patentee Celanese. Benjamin Richards argued for the ITC and Nicole Saharsky of Mayer Brown argued for Anhui Jinhe.  The case is held before Judges Reyna, Mayer, and Cunningham.  In my view, Judge Reyna is likely to lead the court in siding with the ITC and keeping the longstanding rule that on its face appears to be a court-designed rule to better serve justice.  The key aspect from Oral Arguments is as follows:

Judge Reyna: Doesn’t your argument lead us to a point to where we begin to move away from the foundation for exclusivity? And I’m talking about the dedication to the public of something in return for that exclusivity. And here, if the process remains secretive, but yet you get to continue selling products made by that process, you have advantage of the exclusivity, but you haven’t dedicated anything to the public.
Maynard: So actually, Your Honor, our reading does encourage people who are protecting their processes by trade secrets to patent them. And that’s what we did here. Our reading of the statute, this would be protected. If we wanted to keep it never dedicated to the public, we could have just kept it as a trade secret. But under our reading of the statute, it actually encourages parties to apply for a patent, disclose the patent, and have that for a limited time.


Later, Anhui Jinhe’s counsel picked upon on these issues.
Nicole Saharsky: Celanese is doing exactly what the on-sale bar was intended to prevent, which is keeping something secret, the inventor making money off of it, commercializing it, waiting to seek a patent in order to extend the monopoly. I think the NAM amicus brief is unabashed that that’s the rule that they want. And Celanese does not dispute that that’s what they’re doing here.
This policy debate is at the heart of the dispute and it is juxtaposed to the plain statutory language.

Briefs:

Celanese On Sale Brief
On Sale Amicus
ITC Brief
Responsive Brief for Jinhe
Celanese On Sale Reply