Secret Sale Of Patent: A Prior Art
On January 22, 2019, in the recent ruling of Helsinn Healthcare S.A. v. TevaPharmaceuticals USA, Inc., No. 17-1229, the US Supreme court held that inventors lose patent protection for inventions that they had sold or offered to sell more than a year before submitting the patent application - even if those sales were confidential and did not publicize the invention’s details.
The Facts of the Case
The petitioner (Helsinn Healthcare S.A.) makes treatment for chemotherapy-induced nausea and vomiting using the chemical palonosetron. While the petitioner is developing his palonosetron product it entered into two agreements with another company granting him the right to sell, distribute, promote, market a 0.25 mg dose palonosetron in the United States. The clause in the agreement states that the company must keep confidential any proprietary information received under the agreements.
After 2 years, in January 2003, the petitioner files a provisional patent application of a 0.25 mg dose of palonosetron. For over the next 10 years, the petitioner filed four patent applications that claimed priority date January 2003. The petitioner filed his fourth application in 2013, which covers a fixed dose of 0.25 mg of palonosetron in a 5 ml solution (’219 patent) and covered by the Leahy-Smith America Invents Act(AIA).
In 2011, respondents (Teva Pharmaceutical Industries Ltd. &Teva Pharmaceuticals USA, Inc.) sought approval to market a generic 0.25 mg palonosetron product.
The petitioner sued the respondents for infringing their patents including the ’219 patent. Respondent countered stating that the ’219 patent was invalid under the “on-sale” provision of the AIA, which precludes a person from obtaining a patent 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, [35U. S. C. §102(a) (1)]. Because 0.25 mg dose was “on-sale” more than one year before the petitioner filed the provisional patent application in 2003.
The District Court held the decision by saying that AIA’s “on-sale” provision did not apply because the public disclosure of the agreements did not disclose the 0.25 mg dose. Further, the Federal Circuit reversed the district court judgment, holding that the sale was publicly disclosed, regardless of whether the details of the invention were publicly disclosed in the terms of the sale agreements.
Question of Law
The Leahy-Smith America Invents Act (AIA) bars a person from receiving a patent 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.” [35 U.S.C. §102(a)(1)].
Whether the sale of an invention to a third party who is contractually obligated to keep the invention confidential places the invention “on-sale” within the meaning of §102(a)?
The AIA precludes a person from getting a patent on an invention that was ‘on sale’ before the effective filing date of the patent application:
“A person shall be entitled to a patent unless . . . 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.” 35 U. S. C. §102(a)(1).
Moreover, §102(b) (1) talks about the exception for certain disclosures made within a year before the effective filing date. Disclosures described in §102(a)(1) are usually said as ‘prior art’.
A patent statute before the enactment of AIA contains a similar prescription known as “on-sale bar:
“A person shall be entitled to a patent unless—
“(a) the invention was known or used by others in this country or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or
(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.” 35 U. S. C. §§102(a)–(b)
District Court -The District Court determined that the “on-sale” provision did not apply. It concluded that, under the AIA, an invention is not “on-sale” unless the sale or offer in question made the claimed invention available to the public. This is because the companies’ public disclosure agreements between Helsinn (petitioner) and MGI (other company) did not disclose the 0.25 mg dose, the court determined that the invention was not “on-sale” before the critical date.
Federal Circuit – The Federal Circuit has reversed the judgment of the District Court. FC concluded that “if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale” to fall within the AIA’s on-sale bar. Because the sale between Helsinnand MGI was publically disclosed, it held that the on-sale bar applied.
Supreme Court–A US federal patent system encourages the creation and disclosure of new, useful, and nonobvious advances in technology and design by granting inventors “the exclusive right to practice the invention for a period of years”.Further, its goals of motivating innovation and enlightenment while avoiding monopolies that unnecessarily stifle competition.
Congress has imposed many conditions on the “limited opportunity to get a property right in an idea”, one such condition is that the on-sale bar that reflects Congres's reluctance to permit an inventor to remove existing knowledge from public use by obtaining a patent covering that knowledge. It would materially restrict the progress of science and the useful arts to allow an inventor to ‘sell his invention publicly’ and later ‘take out a patent’ and ‘exclude the public’ from any farther use than what ought to be derived thereunder.
Congress enacted the AIA law in 2011 against the backdrop of a substantial body of law interpreting §102’s on-sale bar. Since 1836, every patent has included an on-sale bar. In 1998, the same court determined that the pre-AIA on-sale bar applies when two conditions are satisfied more than a year before an inventor files a patent application.
1. The product must be the subject of a commercial offer for sale; 2. The invention must be ready for patenting.
The precedents of the same court suggest that a sale or offer of sale need not make an invention available to the public. An offer for the sale can cause an investor to lose the right to a patent, without considering whether the offer discloses each detail of the invention.
In light of this settled pre-AIA precedent on the meaning of ‘on sale’, the court presumed that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.The new §102 retained the exact language used in its predecessor statute (on sale) and added only a new catchall clause (or otherwise available to the public). If ‘on sale’ had a settled that means before the AIA was adopted, then adding the phrase ‘or otherwise available to the public’ to the statute ‘would be a fairly oblique way of attempting to overturn’ that ‘settled body of law’. The addition of ‘or otherwise available to the public’ is simply not enough of a change to conclude that Congress intended to alter the meaning of the re-enacted term ‘on sale’.
The Court rejected Helsinn’s argument that the AIA’s additional words “otherwise available to the public” limit the preceding terms in § 102 to disclosures that make the claimed invention available to the public. The Court concluded that this addition “is simply not enough of a change for us to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’
The Supreme Court affirmed the Federal Circuit held that, under the AIA, an inventor’s sale of an invention to a third party under a confidentiality agreement qualifies as being “on-sale” for purposes of barring a patent on that invention.
Further, an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under §102(a).