In Helsinn Healthcare, the Federal Circuit Offers Guidance on the On-Sale Bar under the AIA

The sale of a product prior to filing a patent application, or “on-sale bar,” has long been a potential barrier to obtaining a patent in the United States.  Especially in the biotechnology space, which can involve a long development cycle and regulatory approval cycle, pre-clinical manufacturing and testing activity has the potential to limit patent rights by triggering the on-sale bar.

The Leahy-Smith America Invents Act (AIA), enacted in 2013, dramatically changed the on-sale bar, but left some contours of this law open to interpretation.   The Federal Circuit has just issued its first opinion on the “new” on-sale bar under the AIA in Helsinn Healthcare, S.A. v. Teva Pharmaceuticals USA (Fed. Cir. May 1, 2017).   The Federal Circuit’s opinion is a reminder that the on-sale bar is still a potential risk to patent applicants.  However, by working together with IP counsel prior to sale of product, and judiciously entering agreements with other parties, innovators may now have more options to develop their business and marketing goals while protecting their IP.

Prior to the AIA, 35 U.S.C. §102 barred patentability when an invention was sold or offered for sale in the United States more than a year before a patent application was filed, regardless of whether the sale was known to the public.   As amended under the AIA, the law now bars patentability for a sale anywhere in the world, but the invention must have been “on sale, or otherwise available to the public.”  Excerpts from the old and new versions of the law are shown below:

(emphases added)

In Helsinn Healthcare, Helsinn entered an agreement with a third party marketing partner to distribute and sell the drug palonosetron nearly two years before Helsinn filed its patent application.  The agreement specified the price, method of payment, and method of delivery, and was subsequently published in the marketing partner’s 8-K filing with the SEC.   The published sales agreement did not disclose all of the details that were claimed in Helsinn’s patent, for example dosage levels of the drug.  Nevertheless, the Federal Circuit held that Helsinn was barred from getting a patent because the sale itself was disclosed to the public, even though certain details of the invention were not:

We conclude that, after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale.

As such, the court in Helsinn Healthcare found that the patents at issue were invalid due to the on-sale bar. 

In dicta, the court alludes to some possible incentives for patent owners to maintain the secrecy of sales prior to filing a patent application.  For example, secret sales had been a bar to patentability under the old law (see, e.g., Woodland Trust v. Flowertree Nursery 148 F.3d 1368 (Fed. Cir. 1998)).  The Federal Circuit’s ruling did not directly address secret sales (since Helsinn’s sale had been disclosed to the public), but in dicta acknowledged statements from Congress that the AIA law was intended to eliminate the previous bar to patentability by secret sales (“[S]ubsection 102(a) was drafted in part to do away with precedent under current law that private offers for sale… may be deemed patent-defeating prior art” (emphasis in original)). 

The court in Helsinn Healthcare did not directly address whether the date of the sale itself or the date of the public disclosure is the date that triggers the on-sale bar under the AIA (in Helsinn Healthcare, both the sale and the disclosure occurred more than a year before the patent application was filed).  However, the court quoted floor statements from Congress implying that under the AIA, a sale would have to become public before the effective filing date in order to trigger the on-sale bar (Cong. Rec. 9782 (2011)(remarks of Sen. Smith)(“…an action must make the patented subject matter ‘available to the public’ before the effective filing date.”).

While the Helsinn Healthcare case does not guarantee that secret sales no longer trigger the on-sale bar, the Federal Circuit’s reasoning alludes to additional incentives for patent owners to keep sales secret prior to filing a patent application.