The Supreme Court Holds that Non-Public Sales May Trigger the On Sale Bar Under the America Invents Act

Summary

On Tuesday, January 22, 2019, the U.S. Supreme Court held in a unanimous decision that, even where the details of the invention are kept confidential, a commercial sale may place the invention “on sale” under the Leahy-Smith America Invents Act (“AIA”).  Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc.

Issue – Scope of the On Sale Bar Under the AIA

Before the AIA, an earlier sale could render a claimed invention unpatentable, even if the sale did not publicly disclose the invention.  The AIA includes a provision which states that: “A person shall be entitled to a patent unless . . . the claimed invention was . . . on sale, or otherwise available to the public before the effective filing date of the claimed invention.”  35 U.S.C. § 102(a)(1).

The “on sale” language of the AIA is the same as that of the pre-AIA statute, but the AIA introduced the phrase “or otherwise available to the public.”  At issue was whether by adding this new phrase, the AIA limited the on sale bar to apply only to public sales, or whether the pre-AIA standard (that non-public sales also fell under the on sale bar) was unchanged by the AIA.

Facts of the Case

In 2000, Helsinn entered into a license agreement and a supply and purchase agreement under which Helsinn would supply the drug palonosetron to a third party.  Both agreements required the third party to keep any proprietary information confidential.  In 2003, Helsinn filed a provisional application covering its palonosetron formulations.  Later, Helsinn filed a patent application claiming priority to the 2003 provisional application that matured into the ’219 patent.

Generic drug manufacturer Teva requested approval from the FDA to market a generic version of palonosetron.  Helsinn filed suit alleging infringement of the ’219 patent.  In defense, Teva asserted that the ’219 patent was invalid under the on sale bar.

The District Court determined that the on sale bar did not apply because, under the AIA, an invention is not considered to be “on sale” unless the sale or the offer for sale made the claimed invention available to the public.  The Federal Circuit reversed, concluding that if the existence of the sale is public (as was the case here), the details of the invention need not be publicly disclosed to trigger the on sale bar.  Following the Federal Circuit’s denial of its petition for rehearing en banc, Helsinn petitioned for certiorari, which the Supreme Court granted.

Supreme Court Decision

The AIA includes the same “on sale” language as the pre-AIA statute, but adds the catchall phrase “or otherwise available to the public.”  The Court considered whether this change in language altered the meaning of “on sale.” In a unanimous decision, the Court held that this change to the statutory language did not alter the scope of the on sale bar.

The Court noted that, although it had never addressed the precise question presented in this case, its precedent concerning the pre-AIA statute suggested that a sale, or offer for sale, need not make an invention available to the public to trigger the on sale bar.  Federal Circuit precedent made this suggestion explicit, holding that even “secret sales” can invalidate a patent.  In light of the settled pre-AIA precedent, the Court determined that when Congress reenacted the statute using the same “on sale” language in the AIA, it adopted the earlier judicial construction of the phrase.  The Court rejected Helsinn’s argument that such a construction reads “otherwise” out of the statute because Helsinn’s argument placed too much weight on the catchall phrase.  Given the well-settled meaning of the phrase “on sale,” the Court declined to read the addition of “otherwise available to the public” so broadly as to upset that body of pre-AIA precedent.

Observations

The Court’s decision applies pre-AIA precedent to the AIA on sale bar.  The Court interpreted the AIA on sale bar more broadly than the Patent and Trademark Office, which has interpreted the on sale bar of the AIA to exclude non-public sales.  The Court’s decision leaves patent claims covering inventions that were sold, or offered for sale, more than one year before the priority date at risk of invalidation, even when such sales or offers kept the invention confidential, or otherwise failed to make the invention publicly available.  The Court’s decision highlights the importance for patentees to get applications on file before selling, or offering to sell, an invention.