The patents go to a software authoring tools, useful in creating kiosk software. Plumtree makes web-based "corporate portal" software used primarily in corporate intranet sites.

Plumtree had reason to fear Datamize, having been stung in 2002 by an infringement suit over parent '317, and being threatened with further action over the then-pending continuations: "We also believe that Plumtree will infringe the claims in the continuation patent application when it issues as a patent." Datamize indicated at the time that the patent had been allowed.

After filing an infringement suit in the Eastern District of Texas in September 2003, against nine companies, but not Plumtree, Datamize answered an interrogatory to list all products that Datamize considered infringing, Datamize included Plumtree's product as infringing.

After getting Datamize's original 2002 '317 suit booted over a jurisdictional issue in Montana, Plumtree sought a declaratory judgment against '317 in the Northern District of California. Naturally, Datamize counterclaimed infringement.

On July 9, 2004, in the first California action, the district court granted Plumtree’s summary judgment motion and held that the asserted claims of the ’137 patent were invalid for indefiniteness under 35 U.S.C. § 112, ¶ 2, because the term “aesthetically pleasing” rendered the claims too subjective. (This court eventually affirmed the grant of summary judgment. Datamize, LLC v. Plumtree Software, Inc., 417 F.3d 1342, 1356 (Fed. Cir. 2005)).

On the same day, the district court granted summary judgment in favor of Plumtree on the ’137 patent, Plumtree filed the present declaratory judgment action with respect to the ’040 and ’418 patents (“second California action”). Those patents are similar to the ’137 patent but do not include the “aesthetically pleasing” language. On October 15, 2004, Plumtree filed a motion for summary judgment on the ground that the ’040 and ’418 patents were invalid under the on sale bar because the methods of the patent claims had been on sale or offered for sale before the critical date (one year before the application date). Three days later, Datamize filed a motion to dismiss for lack of subject matter jurisdiction on the theory that Plumtree had not established a “reasonable apprehension” that Datamize would sue it for infringement of the ’040 and ’418 patents.

Plumtree’s summary judgment motion established the following undisputed facts.

In early 1993 Emmett and Kevin Burns formed Multimedia Adventures (“MA”) (which later assigned its patents to Datamize). By December 1994 Kevin Burns had completed development of the authoring tool which could be used to create an interactive kiosk system. On January 17, 1995, representatives from MA gave a presentation to representatives from the Ski Industry of America (“SIA”), sponsors of a ski industry trade show, offering to create a kiosk for the trade show. On January 25, 1995, SIA sent a letter to MA confirming that MA would provide a kiosk at the trade show in exchange for SIA’s “waiving the $10,000 sponsorship fee associated with participation in the electronic information center.” J.A. at 227. The trade show was held on March 3-7, 1995, in Las Vegas, NV, shortly after the February 27, 1995, critical date, and the kiosk was displayed when it was completed near the end of the first day of the show. The record establishes that the SkiPath kiosk was created with the authoring system and that the authoring system “embodied all the claims of all three of Datamize’s patents.” J.A. at 349.

The district court first considered Datamize’s motion to dismiss for lack of subject matter jurisdiction. The court concluded that declaratory judgment jurisdiction was proper because a “case or controversy” existed as to both the ’040 and ’418 patents. As to the ’040 patent, the court stated that “Datamize’s May 17, 2002, letter represented an ‘explicit threat or other action’ that would cause reasonable apprehension of an infringement suit.” Plumtree, slip. op. at 13. Although the letter was sent two years before Plumtree filed the declaratory judgment action, the court found that “there [was] no evidence . . . indicating that Datamize’s intention to pursue litigation over alleged infringement[] of [the] ’040 . . . [patent had] changed.” Id. at 18. The court noted that the May 17, 2002, letter did not refer to the ’418 patent. However, under the totality of the circumstances, the court concluded that Plumtree had a reasonable apprehension of suit regarding the ’418 patent because Datamize had already sued Plumtree on the parent ’137 patent, sued other defendants in the Texas action on the ’040 and ’418 patents, and identified Plumtree as infringing both patents. Accordingly, the court stated that “the amalgamation of (1) the May 17, 2002, letter, (2) the ’137 infringement suit and (3) the TX action represents an ‘explicit threat or other action’ that would cause Plumtree to have a ‘reasonable apprehension’ of suit.” Id. at 16 (internal quotations omitted).

Next the district court considered Plumtree’s motion for summary judgment. The court held both the ’040 and ’418 patents invalid under the on sale bar rule. The court concluded that “the on-sale bar [was] triggered by the facts of this case” because there was “an agreement to ‘perform’ a method claim” before the critical date. Id. at 23. The basis for this holding was the fact that “[a]t the January 17, 1995, meeting, MA offered to provide its interactive electronic kiosk system during the March 1995 trade show.” Id. at 21 (internal quotations omitted). The court found that MA received consideration because “MA was granted a ‘prime location’ and its fee was waived in exchange for the display of MA’s kiosk.” Id. The court noted that MA’s meeting with SIA on January 17, 1995, and the subsequent agreement both occurred before the February 27, 1995, critical date. The court then stated that “the agreement with SIA embodied all of the claims of the ’040 and ’418 patents” because “the kiosk at the trade show embodied all of the claims.” Id. at 24-25. Accordingly, the court granted summary judgment in favor of Plumtree.

The CAFC agreed that Plumtree was under threat.

A declaratory judgment action may be brought where there is an “actual controversy” between “interested” parties. See 28 U.S.C. § 2201 (2000); Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937); BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 977 (Fed. Cir. 1993). This court has developed a two-part test for determining whether an “actual controversy” exists. “There must be both (1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity.” Sierra Applied Scis., Inc. v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1373 (Fed. Cir. 2004) (quoting BP Chems., 4 F.3d at 978). Here the parties do not dispute that the second prong is met. Accordingly, we need only determine, under the first prong, whether Plumtree had a “reasonable apprehension” that it would face an infringement suit on the ’040 and ’418 patents.

This court looks to “the ‘totality of the circumstances’ in determining whether [the] conduct meets the first prong of the test.” Arrowhead Indus. Water, Inc., 846 F.2d at 736.

Our decision in Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953 (Fed. Cir. 1987), is directly on point. In that case, Releasesomers sued Goodyear in state court for misappropriation of trade secrets. While the trade secret litigation was pending, patents were issued to Releasomers that were “directed to essentially the same technology involved in the state trade secret litigation.” Id. at 954. We noted that “the situation here indicates that these parties are themselves currently embroiled in a protracted dispute in state court over the commercial technology generally covered by the . . . patents.” Id. at 955. We found that “[b]y suing Goodyear in state court for the same technology as is now covered by the patents, Releasomers has engaged in a course of conduct that shows a willingness to protect that technology,” and a reasonable apprehension of suit. Id. at 956; see also Vanguard Research, Inc. v. PEAT, Inc., 304 F.3d 1249, 1255 (Fed. Cir. 2002) (finding reasonable apprehension where PEAT sued Vanguard for misappropriation of trade secrets regarding the same technology and stating that “[f]iling a lawsuit for patent infringement would be just another logical step in [PEAT’s] quest to protect its technology”).

Here, before Plumtree commenced this declaratory judgment action, Datamize had sued Plumtree on the parent ’137 patent. Although the ’040 and ’418 patents do not share the same “aesthetically pleasing” language as the ’137 patent, the three patents all describe a similar technology and share a common specification. Here, as in Goodyear and Vanguard, “[b]y suing [earlier] for the same technology as is now covered by the patents [in suit], [the patent holder] has engaged in a course of conduct that shows a willingness to protect that technology,” Goodyear, 824 F.2d at 956, and has created a reasonable apprehension of suit.

The appeals court dug into the details that supposedly tripped the on-sale bar. In short, the patentees (MA) got a trade show discount before the critical date, by touting their new technology. But was it the patented technology?

On January 17, 1995, representatives from MA gave a presentation to the representatives from SIA at SIA’s headquarters in Virginia. At the time of the presentation, the authoring tool had been reduced to practice, but MA had not yet used the authoring tool to create a kiosk product. The slides used during MA’s presentation refer to “proprietary authoring tools” that “allow rapid updating” and “support new technologies as they appear.” However, Emmett Burns later testified that he could not “recall telling SIA any of the particulars of the authoring tool at the SIA meeting.” J.A. at 549. He stated that he did not explain how the authoring tool allowed for “rapid updating” because “even if [h]e explained any of it[,] [t]hese people . . . are not technology people; and they go into a different space if you start to get into that.” J.A. at 550. Rather, Emmett Burns testified that the purpose of the presentation was to show SIA what the ultimate kiosk product, entitled “SkiPath,” “would be like.”

On January 25, 1995, SIA sent a letter to MA confirming the agreement that MA would “participat[e] as [a] sponsor of the ‘interactive’ portion of the electronic information center of Mountain Visions at SIA.” J.A. at 227. The letter stated that in exchange for SIA “waiving the $10,000 sponsorship fee associated with participation in the electronic information center.”...

On January 26, 1995, Kevin Burns “filled out an exhibit space contract for [MA’s] exhibit space at the tradeshow” and paid $2,430 in exhibit space fees. J.A. at 531. The exhibit space contract stated that “the type of product” MA would display was a “computer kiosk.” J.A. at 196. Emmett Burns later testified that the agreement between SIA and MA was that in exchange for space at the trade show, MA would “put the system in the store.” J.A. at 382. He explained that “the system” was “the multimedia kiosk” (SkiPath). Id.

The trade show was held on March 3-7, 1995 (after the February 27, 1995, critical date) in Las Vegas, NV. Kevin Burns testified that “a Mulitmedia Adventures product” was demonstrated and that there was a demonstration of the “kiosk system,” which was called “SkiPath.” J.A. at 350-52. The record establishes that “SkiPath [was] created with the authoring system” and that the authoring system embodied all the claims of all three of Datamize’s patents. J.A. at 347-50. Kevin Burns also testified, somewhat confusingly, that “the network kiosk system that was demonstrated in March of 1995 at the Las Vegas show emod[ied] all the claims” of the ’040 and ’418 patents. J.A. at 347. Although Kevin Burns began creating SkiPath before the January 17 meeting, the programming and testing of the SkiPath product was not completed until the end of the first day of the trade show. Thus, the record is not clear whether the patented process was used before the critical date.

The CAFC vacated the summary judgment and remanded because the current record was not sufficiently developed to determine: (1) that the commercial offer before the critical date was "of the patented invention," or, alternately (2) "that MA in fact performed each of the steps of the patented process before the critical date pursuant to the contract." (2) meets the on-sale bar because a company is profiting from its invention more than a year prior to the patent. The court itself provided the roadmap for Plumtree to proceed.

The Supreme Court in Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), has set forth a two-part test for determining whether there was a sale or offer for sale for purposes of § 102(b). First, “the product must be the subject of a commercial [sale or] offer for sale.” Id. at 67. Second, “the invention must be ready for patenting.” Id. The second condition is met by “proof of reduction to practice before the critical date.” Id. Here the parties agree that the authoring tool was reduced to practice in the winter of 1994. Accordingly, we need only consider the first prong of the Pfaff test.

A commercial sale or offer for sale necessarily involves consideration. See Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1048 (Fed. Cir. 2001); Restatement (Second) of Contracts § 71 (1981). We agree with the district court that MA received valid consideration. SIA awarded MA floor space at the trade show and waived $10,000 sponsorship fee normally charged to show participants. Datamize argues that waiver of the $10,000 sponsorship fee did not constitute consideration because Plumtree did not demonstrate that the fee waiver was “somehow due to the invention.” We do not find this argument persuasive.

However, on this record, we cannot sustain the district court’s conclusion that the method claims are invalid under the on sale bar rule. The district court reasoned that “the agreement with SIA embodied all of the claims of the ’040 and ’418 patents” because “the kiosk at the trade show embodied all of the claims.” Plumtree, slip op. at 24. In so holding, the district court relied on Kevin Burns’s testimony that “the network kiosk system that was demonstrated in March of 1995 at the Las Vegas show embod[ied] all the claims” of the ’040 and ’418 patents. These statements reflect confusion as to the nature of the patented product. Here the invention reflected in the method claims is a process for creating a kiosk system, not the kiosk system itself. The kiosk system itself is not patented. The court’s focus on whether the kiosk system somehow embodied the claims of the patent was misplaced, and the district court’s reasoning does not support a grant of summary judgment. Nor does the record support the ultimate result reached by the district court.

In our view, Plumtree could meet the first prong of the Pfaff test under either of two alternative theories. First, Plumtree could demonstrate that before the critical date MA made a commercial offer to perform the patented method (even if the performance itself occurred after the critical date). Second, Plumtree could demonstrate that before the critical date MA in fact performed the patented method for a promise of future compensation. Under the second theory, Plumtree would not need to prove that the contract itself required performance of the patented method. We address these alternative theories in turn.

Under the first theory, Plumtree would have to demonstrate that before the critical date MA made a commercial offer to perform the patented method. A commercial offer is “one which the other party could make into a binding contract by simple acceptance (assuming consideration).” Group One, 254 F.3d at 1048. Under this standard, it is clear that the offeror must be legally bound to perform the patented method if the offer is accepted. See Linear Tech. Corp. v. Micrel, Inc., 275 F.3d 1040, 1050 (Fed. Cir. 2001) (stating that there was no offer where communication did not “indicate LTC’s intent to be bound” (citing Restatement (Second) of Contracts § 26 (1981)). Whether there has been a commercial offer is governed by federal common law. See Scaltech, 269 F.3d at 1328; Group One, 254 F.3d at 1047.

Whether MA made a commercial offer to perform the patented method is governed by our decision in Scaltech, where before the critical date Scaltech made a commercial offer to perform a patented method. There we stated that “the fact that the process itself was not offered for sale but only offered to be used by the patentee . . . does not take it outside the on sale bar rule.” Scaltech, 269 F.3d at 1328. We reasoned that “[t]he on sale bar rule applies to the sale of an ‘invention,’ and in this case, the invention was a process.” Id. We then asked whether there was a “commercial offer” and whether the offer was “of the patented invention.” Id. We concluded that Scaltech’s offer before the critical date to perform the patented method implicated the on sale bar because the commercial “offer for sale . . . satisf[ied] each claim limitation of the patent.” Id. at 1329-30.

Here, as in Scaltech, there has been a commercial offer before the critical date of February 27, 1995, because there was a binding contract between MA and SIA. The more difficult question is whether the commercial offer was “of the patented invention.” We have stated that “the invention that is the subject matter of the offer for sale must satisfy each claim limitation of the patent.” Id. at 1329. Datamize admits that “SkiPath [was] created with the authoring system” and that the authoring system “embodied all the claims of all three of Datamize’s patents.” J.A. at 349. On its face, however, the written agreement between MA and SIA did not unambiguously require use of the patented method. The agreement did require MA to “provide the software/hardware package necessary to produce the interactive touch-screen information center as presented to SIA on January 17, 1995 in McLean, Virginia.” J.A. at 227. This reference to the software/hardware package is ambiguous as to whether it required MA to provide the kiosk system software or to perform the patented method. Moreover, Plumtree has made no showing that extrinsic evidence would compel an interpretation that MA was bound to perform the patented method. Therefore, the record does not provide a basis for summary judgment on this issue.

We now turn to the second possible theory. Even if Plumtree did not agree before the critical date to perform the patented process, Plumtree could prevail on summary judgment if it demonstrated that MA in fact performed each of the steps of the patented process before the critical date pursuant to the contract. In In re Kollar, 286 F.3d 1326 (Fed. Cir. 2002), this court considered whether granting a license to perform a patented method violated the on sale bar. After concluding that there was no sale under the particular facts of that case, we noted that “[a]ctually performing the process itself for consideration would . . . trigger the application of § 102(b).” Id. at 1333; see also Minton v. Nat’l Ass’n of Sec. Dealers, 336 F.3d 1373, 1378 (Fed. Cir. 2003) (quoting In re Kollar, 286 F.3d at 1333). We have explained that “the intent of [§ 102(b)] is to preclude attempts by the inventor or his assignee to profit from commercial use of an invention for more than a year before an application for patent is filed.” D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1147 (Fed. Cir. 1983); see also In re Kollar, 286 F.3d at 1333 (“Surely a sale by the patentee . . . of a product made by the claimed process would constitute . . . a sale because that party is commercializing the patented process in the same sense as would occur when the sale of a tangible patented item takes place.”). Performing the steps of the patented method for a commercial purpose is clearly an attempt to profit from the commercial use of an invention. Consequently, performing the patented method for commercial purposes before the critical date constitutes a sale under § 102(b).

However, Plumtree has not on this record established that MA actually performed all of the patented steps before the critical date pursuant to the contract. While it is apparent that Kevin Burns used the authoring tool to create the kiosk system, the kiosk system was not finished until after the critical date, and it is unclear whether Burns performed each of the patented method steps before the critical date. Accordingly, summary judgment was not appropriate in this case.