The loophole for on-sale bar is for sales that were made primarily for experimental use related to the claimed invention. There must be documented evidence of such. Another crucial test to limbo the on-sale bar is that the experimentation was controlled (by the later patentee). Another critical element is that the customer was aware that sale was for experimental use. "Indeed, this court has effectively made control and customer awareness dispositive."

GM didn't keep records to support experimental use, nor kept control, nor was the customer aware that the sales were for experimental use. Needless to say, the CAFC upheld the District Court's invalidity finding.

From the ruling -

In order for a patent claim to be held invalid under the on-sale bar of § 102(b), two conditions must be satisfied before the critical date. First, the claimed invention must be the subject of a commercial sale. Second, the claimed invention must be ready for patenting. Pfaff, 525 U.S. at 67-68. “Before the Supreme Court’s decision in Pfaff, this court used a multifactor, ‘totality of the circumstances’ test to enforce the on-sale bar.” EZ Dock, Inc. v. Schafer Sys., Inc., 276 F.3d 1347, 1351 (Fed. Cir. 2002). Following Pfaff, we now apply the two-part test “‘without balancing various policies [of the bar] according to the totality of the circumstances.’” Id. (quoting Weatherchem Corp. v. J.L. Clark, Inc., 163 F.3d 1326, 1333 (Fed. Cir. 1998)).

We have recognized that the first prong “involves a determination of whether a commercial offer for sale [or sale] has occurred, applying traditional contract law principles.” Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1352 (Fed. Cir. 2002).

...the first prong of the Pfaff test entails an assessment of whether the circumstances surrounding a pre-critical date sale objectively show that it was primarily made for experimentation.

[T]he question posed by the experimental use doctrine, assessed under the first prong of the two-part on-sale bar test of Pfaff, is not whether the invention was under development, subject to testing, or otherwise still in its experimental stage at the time of the asserted sale. Instead, the question is whether the transaction constituting the sale was not incidental to the primary purpose of experimentation, i.e., whether the primary purpose of the inventor at the time of the sale, as determined from an objective evaluation of the facts surrounding the transaction, was to conduct experimentation.

Allen Eng’g, 299 F.3d at 1353 (citing EZ Dock, 276 F.3d at 1356-57 (Linn, J., concurring)) (internal citations and quotations omitted). If the sale was primarily for experimentation rather than commercial gain, then the sale is not invalidating under § 102(b). Monon, 239 F.3d at 1258 (“[E]vidence that the . . . sale of the patented device was primarily experimental may negate an assertion of invalidity.”).

It is important to recognize that this court has limited experimentation sufficient to negate a pre-critical date public use or commercial sale to cases where the testing was performed to perfect claimed features, or, in a few instances like the case here, to perfect features inherent to the claimed invention. See, e.g., EZ Dock, 276 F.3d at 1353 (experimentation focused on durability of claimed polyethylene floating dock in turbulent water of the Mississippi River, although durability was not a claim limitation); Seal-Flex, Inc. v. Athletic Track & Court Constr., 98 F.3d 1318, 1320 (Fed. Cir. 1996) (experimentation focused on durability of claimed all-weather activity mat under harsh weather conditions, but durability was not a claim limitation); Manville, 917 F.2d at 550-51 (experimentation focused on durability of claimed self-centering, lightpole luminaire under severe winter conditions in Wyoming, even though durability was not a claim limitation). Here, EMD designed its field program to verify durability, a feature, although unclaimed, we hold is inherent to the new planetary bearings. Hence, evidence showing that EMD’s field program has the requisite objective indicia of experimentation may negate EMD’s pre-critical date sale of the new planetary bearings to Union Pacific.

Few decisions address how to determine if a pre-critical date public use or sale is experimental rather than a public use or sale under § 102(b), even though the doctrine has been in existence since City of Elizabeth v. Pavement Co., 97 U.S. 126 (1878).3 But certain things are settled. Significantly, an inventor’s subjective intent to experiment cannot establish that his activities are, in fact, experimental.

When sales are made in an ordinary commercial environment and the goods are placed outside the inventor’s control, an inventor’s secretly held subjective intent to “experiment,” even if true, is unavailing without objective evidence to support the contention. Under such circumstances, the customer at a minimum must be made aware of the experimentation.

LaBounty Mfg., Inc. v. U.S. Int’l Trade Comm’n, 958 F.2d 1066, 1072 (Fed. Cir. 1992) (citing In re Brigance, 792 F.2d 1103, 1108 (Fed. Cir. 1986)). Thus, while EMD officials may have subjectively believed they were conducting experimentation under actual use conditions, their beliefs cannot establish that EMD’s sales were primarily for experimentation.

We have generally looked to objective evidence to show that a pre-critical date sale was primarily for experimentation. For example, in T.P. Laboratories, Inc. v. Professional Positioners, Inc., 724 F.2d 965, 972 (Fed. Cir. 1984), we indicated that various objective indicia may be considered in determining whether the inventors engaged in experimentation:

The length of the test period is merely a piece of evidence to add to the evidentiary scale. The same is true with respect to whether payment is made for the device, whether a user agreed to use secretly, whether records were kept of progress, whether persons other than the inventor conducted the asserted experiments, how many tests were conducted, how long the testing period was in relationship to tests of other similar devices.

Id. at 971-72; see also Baker Oil Tools, Inc. v. Geo Vann, Inc., 828 F.2d 1558, 1564 (Fed. Cir. 1987) (listing similar types of objective evidence to be considered in determining if a public use or sale is experimental).

Recently, we catalogued and consolidated all these considerations into a list of thirteen objective factors: (1) the necessity for public testing; (2) the amount of control over the experiment retained by the inventor; (3) the nature of the invention; (4) the length of the test period; (5) whether payment was made; (6) whether there was a secrecy obligation; (7) whether records of the experiment were kept; (8) who conducted the experiment; (9) the degree of commercial exploitation during testing; (10) whether the invention reasonably requires evaluation under actual conditions of use; (11) whether testing was systematically performed; (12) whether the inventor continually monitored the invention during testing; and (13) the nature of the contacts made with potential customers. Allen Eng’g, 299 F.3d at 1353 (citing EZ Dock, 276 F.3d at 1357 (J. Linn, concurring)). This list is not exhaustive, and all of the experimentation factors may not apply in a particular case. See Brigance, 792 F.2d at 1108. They simply represent various kinds of evidence relevant to the question of whether pre-critical date activities involving the patented invention – either public use or sale– were primarily experimental and not commercial.

This court, however, has held or at least suggested that certain evidentiary showings can be dispositive of the question of experimentation. In In re Hamilton, 882 F.2d 1576 (Fed. Cir. 1989), we stated:

First, we may agree with [the inventor] that control is not the “lodestar” test in all cases involving experimental use. It is nonetheless an important factor. The experimental use doctrine operates in the inventor’s favor to allow the inventor to refine his invention or to assess its value relative to the time and expense of prosecuting a patent application. If it is not the inventor or someone under his control or “surveillance” who does these things, there appears to us no reason why he should be entitled to rely upon them to avoid the statute.

Id. at 1581 (internal citation omitted and emphasis in original). We observed that nothing in the record showed that the Hamilton inventor knew what, if anything, the customer was doing in terms of testing the invention. As a result, we concluded that the inventor’s purpose in making the sale was not primarily experimental.

Following Hamilton, this court again emphasized the importance of control in Lough v. Brunswick Corp., 86 F.3d 1113 (Fed. Cir. 1996). In particular, this court said that an inventor must show control over the alleged testing to establish experimentation. Id. at 1120. Additionally, the Lough court placed critical emphasis on experimental records. After listing various objective indicia of experimentation, which included both whether records or progress reports were made concerning the testing and the extent of control the inventor maintained over the testing, this court stated: “The last factor of control is critically important, because, if the inventor has no control over the alleged experiments, he is not experimenting. If he does not inquire about the testing or receive reports concerning the results, similarly, he is not experimenting.” Id. The Lough court also stated: “When one distributes his invention to members of the public under circumstances that evidence a near total disregard for supervision and control concerning its use, the absence of these minimal indicia of experimentation require a conclusion that the invention was in public use.” Id. at 1122 (emphasis added). Hence, this court held, based primarily upon the absence of control and records, that the inventor’s public use of the claimed invention was not experimental.

Two years after Lough, in a concurring opinion in C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340 (Fed. Cir. 1998), Judge Bryson urged that control and recordkeeping are vital to a showing of experimentation.4 “Certain factors, such as the requirement that the inventor control the testing, that detailed progress records be kept, and that the purported testers know that testing is occurring, are critical to proving experimental purpose.” Id. at 1380 (citing Lough, 86 F.3d at 1120; 2 Donald S. Chisum, Chisum on Patents § 6.02[7][c] (1998). Judge Bryson stressed awareness by the purported testers that testing is occurring. He suggested or at least implied that consideration of these three factors form the first, and potentially decisive, step in determining whether a public use or sale was primarily experimental. Indeed, we discern that Judge Bryson applied only these three factors to conclude that the on-sale bar applied.

The facts of this case are analogous to those in U.S. Environmental Products, Inc. v. Westall, 911 F.2d 713 (Fed. Cir. 1990). In Westall, this court affirmed a district court’s conclusion that a patent was invalidated by a sale more than one year before the filing date. That conclusion was based primarily on (1) the lack of written progress records and the failure to adhere to a testing schedule; (2) the inventor’s failure to maintain control over the testing; and (3) promotion of the invention during the testing. In this case, as in Westall, the evidence shows that neither the in-house tests . . . nor the field tests . . . were under the control of the inventor or his company. There is little or no evidence of any written progress records; indeed, the inventor was apparently never provided with any test results. Finally, the communications between [a company with which the inventor was associated] and [the customer] throughout the purported testing period emphasized commercial sales and projections, not controlled experimentation.

Id. at 1381 (internal citation omitted).

We agree with Judge Bryson that a customer’s awareness of the purported testing in the context of a sale is a critical attribute of experimentation. If an inventor fails to communicate to a customer that the sale of the invention was made in pursuit of experimentation, then the customer, as well as the general public, can only view the sale as a normal commercial transaction. Indeed, our predecessor court recognized in In re Dybel, 524 F.2d 1393, 1401 (C.C.P.A. 1975), that “[an inventor’s] failure to communicate to any of the purchasers or prospective purchasers of his device that the sale or offering was for experimental use is fatal to his case.” And, “we have held that the assertion of experimental sales, at a minimum, requires that customers must be made aware of the experimentation.” Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1186 (Fed. Cir. 1993) (citing LaBounty, 958 F.2d at 1072; Dybel, 524 F.2d at 1401). Accordingly, we hold not only that customer awareness is among the experimentation factors, but also that it is critical.

Our precedent has treated control and customer awareness of the testing as especially important to experimentation. Indeed, this court has effectively made control and customer awareness dispositive. See, e.g., Lough, 86 F.3d at 1120; Hamilton, 882 F.2d at 1581. Accordingly, we conclude that control and customer awareness ordinarily must be proven if experimentation is to be found.