Supreme Court Hears Arguments on On-Sale Bar for Patentability

On-Sale Bar for Patentability

Does a secret sale of a patented invention that occurred before the filing of a patent application count as invalidating prior art? That question was the recent focus of oral arguments before the Supreme Court recently in the case of Helsinn Healthcare S.A. v. Teva Pharmaceutical USA.

Before the passage of the America Invents Act (“AIA”) in 2011, the question had been well settled. Section 102 of the Patent Act, defining conditions for patentability, stated that a person was entitled to a patent for an invention unless the invention was “in public use or on sale in this country, more than one year prior to the date of application for patent…” Courts interpreted that any form of the sale, public or private, of the invention that occurred one year before the filing date of the patent application would qualify as invalidating prior art, creating an “on-sale bar” for patentability.

With the passage of the AIA, Section 102 was amended to state that a person would be entitled to a patent unless the claimed invention “was in public use, on sale, or otherwise available to the public” more than a year “before the effective filing date” of the application.[1] (Emphasis added). The addition of the italicized portion has led to speculation as to whether or not the sale has to be disclosed to the public in order to trigger the on-sale bar. Helsinn gives the Supreme Court the first opportunity to answer the question.

Helsinn entered into a confidential agreement with a third party for the marketing and distribution of Helsinn’s pharmaceutical product. The agreement, which did disclose patented subject matter, was executed well more than a year before Helsinn filed the patent applications that ultimately issued into the patents asserted against Teva. Teva challenged the validity of the patents, arguing the on-sale bar was triggered based upon the earlier private sale between Helsinn and the third party distributor. The Court of Appeals for the Federal Circuit agreed with Teva, finding that the private sale qualified as invalidating prior art. Helsinn subsequently appealed to the Supreme Court.

During oral arguments heard last month, counsel for Helsinn argued that the section 102 amendments made it clear that for a sale to invalidate a patent, the sale had to be made publicly. Helsinn pointed to the other public examples of prior art surrounding this portion of the statute, as well as made a distinction between “sale” (not found in the statute) and on sale (found in the statute), with the later implying availability to the public. Helsinn’s counsel went further and stated that the “or otherwise available to the public” was included as a catch-all phrase to eliminate any doubt to the interpretation.[2]

Counsel for Teva disagreed with Helsinn’s position, arguing that “on sale” has an establishing meaning as including all sales, public and private. Teva’s counsel went on further to state that the catch-all phrase wasn’t meant to change the meaning of on-sale, but to add a new category of invalidating art.

The Justices did not make it easy to determine how the Court will apply the on-sale bar. Chief Justice Roberts (“If something’s on sale, it doesn’t have to be on sale to everybody. It could be just I’m going to sell something to you”) and Justices Kavanaugh (“You don’t think it would have been easier to just change it directly” as opposed to having a catch-all phrase to imply availability) and Sotomayor (the amendment should have stated “on sale to the public”) all made statements indicating that the on-sale bar applies to all sales, private and public.  However, Justices Alito (if on sale meant publicly and privately, and was written that way, then the catch all phrase otherwise available to the public “would be nonsense”) and Kagan had statements that leaned in the other direction.  We will see how this turns out when the written opinion is issued, which we should expect sometime in June.

The takeaway is that there is a way to avoid being impacted regardless of the decision reached by the Supreme Court: filing patent applications covering any inventive concept before entering into agreements with third parties regarding the inventive concept.

Matthew Warenzak is a Partner in the Intellectual Property Practice of Smith, Gambrell & Russell, LLP. He is an experienced IP counsel, specializing in the enforcement and procurement of patents for his clients.

[1] 35 U.S.C. § 102(b(1) provides a one year grace period for disclosures made by the inventor himself.

[2] The Solicitor General also presented arguments in support of Helsinn’s position that the on-sale bar did not apply in this situation.