The Federal Circuit Interprets the On-Sale Bar Under the America Invents Act

Author: Robert Andris

On May 1, 2017, the Federal Circuit Court of Appeals took its first opportunity to interpret the on-sale bar provision of 35 U.S.C. Section 102 under the Leahy-Smith America Invents Act (“AIA”). In Helsinn Healthcare v. Teva Pharmaceuticals, Nos. 2016-1284, 2016-1787, 2017 US App Lexis 7650 (Fed. Cir. May 1, 2016), the court held that the AIA did not change the meeting of the on-sale bar and there was overwhelming evidence that, before the critical date, the patented invention at issue in that case was reduced to practice and ready for patenting.

The case at bar involved four patents covering the pharmaceutical product known as Aloxi. This composition contains the active ingredient palonosetron. Aloxi was sold by plaintiffs as approved for the prevention and treatment of cancer chemotherapy- induced nausea and vomiting (“CINV”). Three of the patents-in-suit were governed by the patentability requirements of the pre-AIA version of Section 102, while one patent was governed by the new language of Section 102 as provided in the AIA. Plaintiff filed suit against various generic drug manufacturers. After an 11-day bench trial, the district court in New Jersey issued a one-page Memorandum of Decision. The court held that the patents were infringed, not invalid as obvious, and that the requirements for the on-sale bar under either version of the statute were not met. The Federal Circuit Court of Appeals reversed and entered judgment in favor of defendants.

The appellate panel focused its opinion entirely on the pre- and post-AIA versions of the on-sale bar. In cases involving patents with effective filing dates before March of 2013, the old version of the on-sale bar applies. Interpretation of the pre-AIA version of the on-sale bar is governed by the two-step frame-work enunciated by the Supreme Court in Pfaff v. Wells Electronics, 525 U.S. 55 (1998). There, the Court held that: (1) there must be a sale or offer for sale; and, (2) that the claimed invention must also be ready for patenting at least one year before the critical in order for the on-sale bar to apply.

More recently, in Medicines Co. v. Hospira, 827 F.3d 1363 (Fed. Cir. 2016), an en banc panel of the Federal Circuit interpreted when there was “a sale or offer for sale” for purposes of the bar. In order to qualify, the exchange in question must be “analyzed under the law of contracts as generally understood” and “must focus on those activities that would be understood to be commercial sales and offers for sale . . .” According to the Uniform Commercial Code (“UCC”), a sale occurs when there is a “contract between parties to give and to pass rights of property for consideration which the buyer pays or promises to pay the seller for the thing bought or sold.” Because the plaintiff in Helsinn admitted that it entered into a Supply and Purchase Agreement with a third party many years before the first application was filed, and despite the fact that the Agreement was conditioned on FDA approval, the court found an offer for sale had been made and, therefore, the first element of Pfaff was met. Likewise, the court found that the three pre-AIA patents met the ”ready for patenting” element because the Supply and Purchase contract disclosed all of the relevant limitations of the patents themselves, including the precise compounds involved as well as dosages.

Turning to the revised version of the on-sale bar, the court noted that, before the AIA, Section 102(b) barred the patentability of an invention that was “ . . . in public use or on sale in this country, more than one year prior to the date of the application for patent.” Under the AIA, however, new Section 102(a)(1) bars patentability if the invention was “ . . . in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” Plaintiff argued that Congress’ addition of this “available to the public” language added the requirement that the invention be disclosed to the public in order for the bar to apply. The Federal Circuit disagreed, stating: “Requiring such disclosure as a condition of the on-sale bar would work a foundational change in the theory of the statutory on-sale bar.” Instead, the same requirements of a commercial offer and readiness for patentability apply. Accordingly, for the same reasons, the Federal Circuit held that in Helsinn, the first three patents were barred and the fourth patent was likewise invalid.

For a copy of the slip opinion, click here.

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