SCOTUS: AIA Does Not Limit Long-Standing “On Sale” Bar Precedent

Summary

In a recent unanimous decision, the United States Supreme Court rejected a patentee’s argument that the America Invents Act (“AIA”) narrowed or otherwise affected the “on sale” bar rule governing secret sales, invalidating a patent because the subject matter had been subject to a confidential license agreement years prior to the precipitating application.[1]

Factual Background

Petitioner Helsinn Healthcare S.A. (“Helsinn”) is a Swiss pharmaceutical company that makes a drug for chemotherapy-induced nausea.[2]  In September 2000, Helsinn partnered with MGI Pharma, Inc. (“MGI”) to market and distribute the drug in the United States.  Their license agreements included specific dosage information and required MGI to keep all Helsinn’s proprietary information confidential, but the fact of the license itself was announced in a joint press release.

In 2003, Helsinn filed a provisional application covering specific doses of its nausea drug.[3]  In May 2013, Helsinn filed the fourth of four applications that claimed priority to that 2003 date, ultimately issuing as U.S. Patent No. 8,598,219 (“the ‘219 Patent”).

Respondents Teva Pharmaceutical Industries, Ltd. and Teva Pharmaceuticals USA, Inc. (“Teva”) are generic drug manufacturers which sought FDA approval to market a generic version of Helsinn’s drug with the same dosage as that claimed in Helsinn’s ‘219 Patent.  Helsinn sued Teva for infringement, but Teva claimedthe ‘219 Patent was invalid because the claimed dosage was “on sale” more than one year before the 2003 provisional application to which the ‘219 patent claimed priority.

The district court determined the “on sale” bar did not apply because, under its interpretation of the AIA, an invention is not “on sale” unless the challenged sale made the invention available to the public.[4]  The district court reasoned that, because the substance of the Helsinn-MGI license agreement had not disclosed the specific dosage, the sale did not make the invention public.

The Federal Circuit reversed, however, because “the details of the invention need not be publicly disclosed” for a sale to fall within the AIA’s “on sale” bar.[5]  Instead, it only mattered whether “the existence of the sale is public[.]”  According to the appellate court, here, the fact of the Helsinn-MGI agreement had been publicly announced in a joint press release.

Legal Background

The phrase “on sale bar” refers to the patent statute’s language, which prevents a person from receiving a patent if “the invention was . . . on sale” in the United States “more than one year prior to the date of the [patent] application[.]”[6]  Similar language has been a part of every patent statute since 1836—including the statute in force immediately before the AIA took effect.  Then, in 2012, the AIA merely added the phrase “or otherwise available to the public.”  Ultimately, the relevant AIA section read: “A person shall be entitled to a patent unless . . . claimed invention was . . . in public use, on sale, or otherwise available to the public[.]”[7]

The pre-AIA on sale bar had been held to apply when the product was “the subject of a commercial offer for sale” and was “ready for patenting.”[8]  The Supreme Court’s precedent had made clear (under the pre-AIA language) that the sale, or offer of sale, need not make the invention itself available to the public.  Instead, for example, the Court in Pfaff held the inventor lost his rights without any regard to whether the offer of sale disclosed the details of the invention.  Other cases have similarly focused only whether the invention was sold, not whether the details of the invention had been publicly disclosed.[9]  The Federal Circuit has agreed with these cases, consistently holding that even “secret sales” can invalidate a patent.[10]

This Decision

The Supreme Court began its analysis with a foundational canon of legislative analysis, presuming that “when Congress reenacted the same [on sale bar] language in the AIA, it adopted the earlier judicial construction of that phrase.”[11]  Justice Thomas noted how, in arguing as amici, the United States acknowledged that “adding the phrase ‘otherwise available to the public’ . . . would be a fairly oblique way of attempting to overturn that settled body of law.”[12]  Instead, the Supreme Court held, “[t]he addition of ‘or otherwise available to the public’ is simply not enough of a change for us to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’”[13]  Thus, an inventor’s sale of an invention to a third party—even one who is obligated to keep the invention confidential—can qualify as prior art under § 102(a) of the AIA.[14]

Impact

While the new language of the AIA may have instilled some uncertainty about the new scope of the on sale bar, this decision answers those questions by clarifying that the on sale bar applies even to sales of an invention to a third party regardless of whether the sale results in the patented information being publicly known.  Small companies who may look to license their inventions for testing or (like Helsinn) financial reasons during the development stages are on notice that they must be vigilant in filing their patent applications early.  Specifically, in-house counsel should be constantly interfacing between the product development team and product commercialization team to understand the development timeline and what actions are being taken with respect to that product vis à vis any related patent applications.

Although the PTO and AIA’s own sponsor, Rep. Lamar Smith (R-TX), came out in favor of Helsinn’s position—and against the Federal Circuit’s decision as “indefensible”—it is clear that Congress will need to be more explicit if it desires to overturn case law interpreting the on sale bar.  Even though the PTO had taken the position that the AIA “does not cover secret sales or offers for sale,” this decision may likely cause an update to the Manual of Patent Examining Procedure.[15]

About the author: Patrick J. Mulkern is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. His practice focuses on intellectual property litigation and transactional matters, with a particular emphasis on patent, trademark, and trade secret litigation.  Mr. Mulkern is a registered patent attorney and his biography can be found here.

_______________________________________________

[1] See Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc., Case No. 17-1229, 586 U.S. ___ (Jan. 22, 2019).

[2] Id., Slip Op. at 2.

[3] Id., Slip Op. at 3.

[4] Id., Slip Op. at 4 (citing Helsinn Healthcare S.A. v. Dr. Reddy’s Labs. Ltd., 2016 WL 832089, at *45, *51 (D.N.J. Mar. 3, 2016)).

[5] Id. (citing Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc., 855 F.3d 1356, 1360 (Fed. Cir. 2017)).

[6] Id., Slip Op. at 5-6 (quoting 35 U.S.C. § 102(b) (2006 ed.)).

[7] Id., Slip Op. at 6 (quoting 35 U.S.C. § 102(a)(1) (2012 ed.)).

[8] See Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998).

[9] See, e.g., Elizabeth v. Pavement Co., 97 U.S. 126, 136 (1878) (“It is not a public knowledge of his invention that precludes the inventor from obtaining a patent for it, but a public use or sale of it.”).

[10] See, e.g., Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353, 1357 (Fed. Cir. 2001).

[11] Helsinn, 586 U.S. at ___, Slip. Op. at 7.

[12] Id., Slip Op. at 7-8 (quotations and citations omitted).

[13] Id., Slip Op. at 8 (emphasis added).

[14] Id., Slip Op. at 9.

[15] See Manual of Patent Examining Procedure, § 2152.02(d) (9th Ed., 2018).