• The Supreme Court Holds that the “On Sale” Patent Bar Still Means “On Sale”
  • January 22, 2019 | Author: Charles Malcolm Yeomans
  • Law Firm: Leech Tishman Fuscaldo & Lampl, LLC - Pittsburgh Office
  • The U.S. Supreme Court provided clarity this week in unanimously holding that the Leahy-Smith America Invents Act (“AIA”) did not change the meaning of the “on sale” bar to patentability. The decision provides another incentive to prospective patentees to file for patent protection as early as possible under the AIA.

    The U.S. patent system seeks to encourage disclosure of novel and nonobvious advances in technology and design in exchange for exclusive rights to practice such inventions for a limited period of time. However, there are certain conditions to the granting of such exclusive rights. For example, U.S. patent law has included some form of a statutory “on sale” bar to patentability since 1836. The on sale bar serves to prevent an inventor from securing a patent for subject matter that the inventor has already disseminated to the public through a sale or offer to sell.

    Prior to enactment of the AIA, the on sale bar was codified at 35 U.S.C. § 102(b) and prohibited grant of a patent if “the invention was . . . in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States[.]” In enacting the AIA, Congress generally tracked the language of the pre-AIA § 102(b) prohibition in new 35 U.S.C. § 102(a)(1) with the exception of a new catch-all phrase. The new prohibition recites that a person shall be entitled to a patent unless “the claimed invention was . . . in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention[.]” (emphasis added). However, Congress retained the “on sale” terminology included in the previous statute in enacting the AIA.

    In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., a dispute arose as to whether the catch-all phrase modified the meaning of the on sale bar. In Helsinn, Helsinn developed a drug for treating chemotherapy-induced nausea that included specific dosages of palonosetron as the active ingredient. While it was seeking approval from the U.S. Food and Drug Administration (“FDA”) to sell the drug, Helsinn entered into a license agreement and a supply and purchase agreement with MGI Pharma, Inc. that granted MGI the right to distribute, promote, market and sell the drug in the U.S. These agreements included the specific dosage information and an obligation for MGI to keep any proprietary information it received from Helsinn confidential. Almost two years after Helsinn entered into the agreements with MGI, Helsinn filed a provisional patent application directed to the specific dosages of palonosetron that were included in the agreements with MGI. Helsinn filed an additional application in May of 2013 that claimed priority back to the prior provisional application, and that application matured into U.S. Patent No. 8,598,219 (“the ‘219 Patent”). The ‘219 Patent is governed by the AIA by virtue of its filing date.

    Teva Pharmaceutical Industries, Ltd. sought approval from the FDA to make a generic palonosetron product and was sued by Helsinn for infringing the ‘219 Patent. Teva countered that the ‘219 Patent was invalid because the claimed invention was “on sale” when Helsinn entered into the agreements with MGI more than one year prior to Helsinn filing its provisional patent application. However, Helsinn argued that catch-all phrase included in the AIA changed the meaning and scope of the on sale bar to be limited to sales that publicly disclose the invention, and that the confidential nature of the agreements with MGI did not constitute a disqualifying sale or offer for sale because they did not disclose the invention to the public or otherwise make the invention publicly known. While the existence of the agreements was publicly known, the underlying terms, including the dosages included in the ‘219 Patent’s claims, were confidential. The District Court agreed with Helsinn that the AIA changed the scope of the on sale bar, but the Federal Circuit reversed on appeal. The Supreme Court granted certiorari to determine “whether, under the AIA, an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.”

    The Court ultimately held that the agreements were considered to represent an on sale bar despite the fact that the terms of the agreements prohibited public disclosure of the invention. In reaching this conclusion, the Court noted the substantial body of case law interpreting the pre-AIA on sale bar that existed at the time Congress enacted the AIA, including Federal Circuit precedent holding that “secret sales” can invalidate a patent. In view thereof, the Court presumed “that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.” While the Court noted the additional catch-all phrase included in the AIA, it was not persuaded that this added phrase indicated that Congress intended to change the meaning of the re-enacted “on sale” terminology. Instead the Court concluded that the catch-all phrase was intended to capture any other disclosure that should be included within the scope of prior art but does not fit neatly into one of the AIA’s enumerated categories.

    The decision clarifies that pre-AIA jurisprudence with respect to the on sale bar applies to patents that are governed by the AIA, and serves as another incentive to file for patent protection as soon as possible after an invention is ready for patenting.