By David Taylor, Esq.
On January 22, 2019, the U.S. Supreme Court issued its long-awaited decision, Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc., No. 17-1229, ___ S.Ct. ___, 2019 WL 271945 (2019), addressing the effect of Congress’ passage of the Leahy-Smith America Invents Act (“AIA”) (2011) on prior art, in particular “secret sales.”
For an invention to be patentable it must be, among other things, novel and non-obvious over the prior art. Prior to the enactment of the AIA, “prior art” included a sale or offer for sale that occurred in the United States more than one year prior to the effective filing date of a patent application, even if the sale or offer for sale was subject to a duty of confidentiality (also known as a “secret sale”). 35 U.S.C. § 102(b) (pre-AIA); Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353, 1357 (2001).
Many in the patent community believed that the AIA changed the long-held pre-AIA precedent that “secret sales” are prior art that can invalidate a patent. This belief stemmed from AIA Section 102(a)(1), which provides that an inventor is “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” (emphasis added). (Section 102(b)(1) identifies exceptions for disclosures made one year or less before the effective filing date. These exceptions are not relevant to Helsinn.)
Those advocating that the AIA changed the law argued the “otherwise available to the public” language of the AIA’s Section 102(a)(1) was a “catchall” that required all of the preceding categories of prior art, including “on sale” activities, to be “available to the public” in order to constitute prior art. Indeed, that is how the U.S. Patent & Trademark Office (“PTO”) has interpreted the AIA. See Manual of Patent Examining Procedure (“MPEP”) § 2152.02(d).
Helsinn involved agreements between the patentee Helsinn and MGI, a US company, under which MGI agreed to purchase a drug from Helsinn and to keep proprietary information concerning the drug confidential. The agreements were publicly announced in a joint press release and a SEC filing, but neither disclosed the specific dosage formulations of the drug. A patent application on the drug’s formulation was filed nearly two years later.
The District Court determined that the patented invention was not “on sale” under the AIA, despite the purchase agreement, because the specific dosage formulations were not publicly disclosed in the announcements. Helsinn Healthcare S.A. v. Dr. Reddy’s Labs Ltd., 2016 WL 832089 (D.N.J. Mar. 3, 2016). The Federal Circuit reversed, 855 F.3d 1356, 1360 (2017), but seemingly hinged its decision on the finding that the sale was “otherwise available to the public” because the existence of the sale was publicly disclosed by the announcements.
The Supreme Court affirmed, but on different grounds. The Court unanimously held that secret sales remain on-sale prior art that can invalidate a patent under the AIA, irrespective of whether the “existence” of the agreement is publicly disclosed. In the words of the Court, “a commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’ under the AIA.” The Supreme Court reached its decision by couching the AIA as a “reenactment” of settled pre-AIA precedent on the meaning of “on sale,” and presuming that when Congress reenacted the same “on sale” language of the pre-AIA statute in the AIA it adopted the earlier judicial construction of that phrase. The Supreme Court viewed the AIA’s addition of the “otherwise available to the public” catchall phrase as capturing material that does not fit neatly into Section 102(a)(1)’s enumerated categories, although the Court did not hint at what that other “capture [d] material” may be.
In the end, all of the scholarly and professional debate over the meaning of five words in the AIA has met a rather anticlimactic end. To quote a famous proverb, the more things change, the more they stay the same. Pre-AIA precedent perseveres. An “on-sale bar,” whether pre-AIA or AIA, is triggered if the invention is (1) the subject of a commercial offer for sale not primarily for experimental purposes and (2) ready for patenting. Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998). Confidentiality of the sale is irrelevant.
Helsinn serves as a cautionary reminder to inventors seeking to protect their innovations, and to their attorneys, to conduct an adequate due diligence investigation by identifying activities that may trigger a bar to patentability under AIA Section 102(a), and calendaring dates associated with the bar to ensure that a patent application covering the innovation is timely filed in the PTO and thereby not susceptible to a genuine invalidity attack.
David Taylor is a partner with the law firm of Berenato & White, LLC in its Bethesda office. The firm concentrates its practice in the area of intellectual property.