'; On-sale bar to patentability may take another turn after Helsinn

On-sale bar to patentability may take another turn after Helsinn

October 20, 2016

An applicant for a patent has to meet several statutory requirements before the applicant’s application for a patent is allowed and issued as a patent. In addition, there are several statutory bars which will preclude an applicant from obtaining a patent. One such bar can be the prior sale of an invention claimed within a patent application. However, due to a change in the law, a sale that would have previously been a bar under the old law may not be a bar under the current law.

The Leahy-Smith America Invents Act (AIA) went into full force on March 16, 2013. Prior to the AIA, the statute read, “A person shall be entitled to a patent unless…(b) the invention was… in public use or on sale in this country, more than one year prior to the date of application for patent in the United States…” 35 U.S.C. § 102(b) (2006), amended by AIA, Pub.L. No. 112-29, 125 Stat. 254 (2011), emphasis added. This applies to any patent that is in-force and that resulted from an application that was filed prior to, or that has all of its claims entitled to a priority date prior to, March 16, 2013. The so-called “on-sale bar,” a sale in the U.S. by an inventor of a claimed invention before the critical date (more than one year prior to the inventor’s filing of a U.S. patent application encompassing the invention) bars the inventor from patenting that invention.

The Supreme Court ruled that the pre-AIA on-sale bar applies if the activities in question occurred before the critical date and the claimed invention was ready for patenting and was the subject of a commercial offer for sale. Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998), reh’g denied, 525 U.S. 1094. Thus, a full sale is not required; only a commercial offer for sale is required. As long as acceptance of the offer would constitute a contractual obligation to sell, no actual acceptance need be found to find that an inventor violated the on-sale bar of pre-AIA Section 102(b). In re Theis, 610 F.2d 786, 791 (CCPA 1979).

The language of pre-AIA Section 102(b) includes “…in public use or on sale in this country…” The word “public” modifies “use” only and not “sale.” Hobbs v. United States, Atomic Energy Commission, 451 F.2d 849, 859-860 (5th Cir. 1971), reh’g denied. Thus, any non-public, secret sale or commercial offer for sale can still trigger the pre-AIA on-sale bar. It should be noted that the sale or offer for sale of rights in the invention typically does not trigger the on-sale bar. Rights in the invention include those that arise through assignment, Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1267 (Fed. Cir. 1986) abrogated on other grounds by Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc), or licensing, Elan Corp., PLC v. Andrx Pharms. Inc., 366 F.3d 1336, 1341 (Fed. Cir. 2004), of the invention.

There has never been a blanket “supplier exception” to the pre-AIA on-sale bar. An inventor who paid a supplier to make the invention may still run afoul of the bar. However, the Court of Appeals for the Federal Circuit (Federal Circuit) recently ruled that “The focus must be on the commercial character of the transaction, not solely on the identity of the participants.” The Medicines Co. v. Hospira, Inc., 827 F.3d 1363, 1380 (Fed. Cir. 2016) (en banc). Although not dispositive, if title to the invention does not pass to the supplier, this weighs in favor of finding there was no sale of the invention. For example, if the inventor simply pays a service fee to the supplier for making the invention, there may be no sale of the invention, only the sale of manufacturing services, as was found in Hospira.

There are many unexpired patents and pending patent applications that fall under the pre-AIA law, and commercial activity that could potentially affect those would have already occurred. For any applicant thinking of filing a patent application which claims are not fully entitled to priority before March 16, 2013, the application will fall under the AIA. Section 102(a)(1) of the AIA states, “A person shall be entitled to a patent unless—(1) the claimed invention 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.A. § 102(a)(1) (West 2015). The AIA no longer ties sales activity geographically to the U.S. and no longer ties the critical date to the filing of a patent application just in the U.S. The AIA also provides an exception to this section, where an inventor still has one year after disclosing the invention to file an application. 35 U.S.C.A. § 102(b)(1) (West 2015). The U.S. Patent and Trademark Office (USPTO) has interpreted the exception to include public commercial sales activity.

Importantly, the AIA has been interpreted by one district court to exclude any sales activity that is non-public or secret. Helsinn Healthcare SA v. Dr. Reddy’s Labs., Ltd, No. 11-3962 (MLC), 2016 WL 832089, at *45 (D.N.J. March 3, 2016). The “or otherwise available to the public” was interpreted as qualifying “on sale” such that any sale or offer for sale must be public. The USPTO filed an amicus brief, in the pending appeal to the Federal Circuit, which supported the district court’s interpretation. The Federal Circuit recently held oral arguments in the case. Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., No. 16-1284 (Fed. Cir. argued Oct. 4, 2016). Should the Federal Circuit confirm the district court and USPTO’s interpretation of the AIA statutory language, inventors/applicants would be able to engage in a sale of the invention so long as it is kept secret.