Fabless Semiconductor Companies, the Patent On Sale Bar, and the New America Invents Act: Have Fabless Companies Been Shortchanged, or Is Change Coming?

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Should semiconductor companies that limit their in-house activities to designing products, and that outsource the manufacturing of those products, be treated differently under our patent laws than companies that design and manufacture under the same roof? The question itself may lead two reasonable people to two reasonable answers. However, in Special Devices, Inc. v. OEA, Inc., the Federal Circuit made it clear that under current law, the answer is “yes.” A company that outsources the manufacturing of its products has one year from the “sale” of its manufactured products from the manufacturer to the company to apply for a patent that covers its products; otherwise it will be barred from ever receiving a patent on its invention. In contrast, a company that manufactures its products in-house does not need to worry about starting its one-year patent clock until it sells its products to its end-users. This article will analyze this current application of the “on sale bar,” which stems from the Federal Circuit’s decision, and will discuss what the future might hold under the newly-passed America Invents Act—Congress’s first substantial change to United States patent law since the Patent Act of 1952.

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