In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc., the U.S. Supreme Court has held that a confidential sale of an invention to a third party may place the invention “on-sale” for the purpose of the America Invents Act (“AIA”). No. 17-1229, Slip Op. at 1. In a unanimous opinion, the court maintained that the AIA did not change the meaning of an on-sale bar, and a patent cannot be issued on an invention that was “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” Id. at 1 citing 35 U. S. C. §102(a)(1). Justice Clarence Thomas authored the opinion for the court.

What the Ruling Means

If a patent owner sells an invention to a third party more than one year before a patent application is filed, and even though the parties are obligated to keep the sale a secret, the sale can be used to invalidate the patent. The on-sale bar doctrine is nearly 200 years old, and it prevents inventions in public use or sale from receiving a patent. The court affirmed that Congress did not alter the long-standing meaning of the doctrine in the AIA.

How the Ruling May Impact Your Business

Taft has always advised our clients to file a patent application as soon as the invention is ready for patenting. The AIA changed the patent system in the United States, moving from first-to-invent to first-to-file, in line with a majority of other countries. This systemic change in the patent system further increased the importance of filing early, and today’s decision affirms that advice. If you are contemplating the sale of an invention, it is always a good business practice to file a patent application prior to the sale.

Procedural History

One of the important provisions of the AIA was to limit prior art to objective references that are publicly available. However, Congress did not expressly alter the “on-sale” bar language. The pre-AIA on-sale bar language stated: “A person shall be entitled to a patent unless …. (b) the invention was patented or described in a printed publication in this or a foreign country or 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.”  Pre-AIA 35 U.S.C. § 102(b). The parallel provision of the AIA states that “[a] person shall be entitled to a patent unless . . . (1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” AIA 35 U.S.C. § 102(a)(1) (emphasis added). Thus the issue became whether the AIA’s addition of “otherwise available to the public” amended the on-sale bar doctrine.

In this case, Helsinn’s patent described palonosetron intravenous formulations, used to reduce chemotherapy-induced nausea and vomiting. The priority provisional patent application was filed on January 30, 2003. Therefore, the critical date for the on-sale bar is January 30, 2002, i.e., sale or public use prior to that date may invalidate the patent.

On April 6, 2001, before the critical date, Helsinn had entered into an exclusive license, supply and purchase agreement with MGI Pharma. The agreement was disclosed publicly both in the 8-K SEC filing as well as in a joint press release but did not include the dosage strength or other terms relating to the claimed invention. Teva argued that this agreement trigged the on-sale bar invalidating the asserted claims.

The district court upheld the validity of Helsinn’s patents. Helsinn Healthcare S.A. v. Dr. Reddy’s Labs. Ltd., 2016 WL 832089, *45, *51 (D NJ, Mar. 3, 2016). The court found that the patents governed by the pre-AIA law were valid because the claimed invention was not reduced to practice before the critical date, and therefore was not ready for patenting. As to the patent governed by the AIA (because it had the effective filing date after March 16, 2013), the court held that the AIA changed the meaning of the on-sale bar and § 102(a)(1) now “requires a public sale or offer for sale of the claimed invention.” The court explained that “public” meant that the sale must publicly disclose the details of the invention and the Helsinn-MGI agreement did not disclose all the elements.

The Federal Circuit reversed the district court decision, noting that the agreement had all the hallmarks of a commercial contract for sale, including that it was binding as of its effective date and obligated Helsinn to sell the claimed invention. 855 F. 3d 1356, 1360 (Fed. Cir. 2017). Furthermore, the Federal Circuit held that if Congress wanted to fundamentally change the law regarding on-sale bar, it would have done so in clear language. The Federal Circuit also found that the invention was ready for patenting before the critical date, as completion of Phase III studies and final FDA approval are not required.

The Supreme Court affirmed the Federal Circuit, noting that every patent statute since 1836 has included an on-sale bar provision. It highlighted several Federal Circuit decisions, which had long held that “secret sales” can invalidate a patent. E.g., Special Devices, Inc. v. OEA, Inc., 270 F. 3d 1353, 1357 (2001) (invalidating patent claims based on “sales for the purpose of the commercial stockpiling of an invention” that “took place in secret”); Woodland Trust v. Flowertree Nursery, Inc., 148 F. 3d 1368, 1370 (1998) (“Thus an inventor’s own prior commercial use, albeit kept secret, may constitute a public use or sale under §102(b), barring him from obtaining a patent”). Slip Op. at 7.

Helsinn argued that the addition of “or otherwise available to the public” in the AIA version of § 102 limited the prior art to public sale. However, the Supreme Court disagreed, holding that the phrase “on sale” had acquired a well-settled meaning when the AIA was enacted, and it declined to overturn that precedent.  Id. at 8.