United States: Full Federal Circuit Curbs On Sale Bar's Threat To Patents

Biotech and pharmaceutical companies received critical guidance from the Federal Circuit yesterday, when the en banc court exempted a broad category of common manufacturing and supply arrangements from the reach of the patent law's "on sale" bar. In The Medicines Company v. Hospira, Inc., App. No. 14-1469 (Fed. Cir. 2016) (en banc), the Federal Circuit ruled unanimously that "the mere sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not constitute a 'commercial sale' of the invention" and does not create a potential bar to patentability under 35 U.S.C. § 102(b). The decision reduces the IP risk that smaller pharmaceutical companies faced when contracting out for manufacturing services during commercial development, and provides in-house counsel with signposts to craft agreements that will stay clear of the on sale bar.


The Medicines Company (MedCo) is a specialty pharmaceutical company that does not have its own manufacturing facilities and is not capable of making its products in-house. MedCo contracted with Ben Venue Laboratories ("Ben Venue") to manufacture its Angiomax® (bivalirudin) drug product. During production, MedCo developed a new process that reduced impurities in the drug product. MedCo paid Ben Venue to manufacture three commercial batches of the drug product in late 2006 for validation testing and ultimately commercial sale. Once manufactured by Ben Venue, the batches were placed in quarantine with MedCo's distributor (ICS) while testing was completed, and they were released from quarantine and made available for sale to consumers in August 2007.

MedCo filed two patent applications on this process in July 27, 2008, more than a year after receiving the commercial batches from Ben Venue but less than a year before the batches were released from quarantine and sold to consumers.


In 2010, MedCo sued Hospira in the District Court for the District of Delaware after Hospira filed Abbreviated New Drug Applications (ANDA) to market generic versions of Angiomax®. Hospira argued that the arrangements between MedCo and Ben Venue, and between MedCo and its distributor ICS, both violated the on sale bar and rendered MedCo's patents invalid.

The district court applied the two-step framework of Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998).1 The district court found that the three batches Ben Venue manufactured for MedCo did not trigger the on sale bar because the transactions between MedCo and Ben Venue were sales of contract manufacturing services and the claimed invention (the drug product) was not commercially offered for sale prior to the one-year critical date of July 27, 2007. The district court further held that the batches were made for experimental purposes in order to validate the new manufacturing processes. Additionally, the district court held that MedCo's contract with ICS was "a contract to enter a contract" and not an invalidating sale.

On appeal, a three-judge panel at the Federal Circuit reversed the district court's ruling regarding the applicability of the on sale bar, holding that the on sale bar applies because the inventor commercially exploited the invention before the critical date.2 The panel also reversed the finding that the experimental use doctrine applied, because the invention had been reduced to practice and known to work for its intended purpose.

In November 2015, the Federal Circuit granted MedCo's petition for rehearing en banc.


In its July 11, 2016 decision the en banc Court held "that a contract manufacturer's sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under §102(b)." It thus concluded that the transactions between MedCo and Ben Venue in 2006 and 2007 did not constitute commercial sales of the patented product.3

The Court laid out three reasons for its holding:

(1) Only manufacturing services were sold to the inventor; the invention was not. Ben Venue invoiced MedCo for manufacturing services, not for sale of an article of manufacture.

(2) The inventor maintained control of the invention. Ben Venue lacked "title" to the products, and "was not free to use or sell the claimed products or to deliver the patented products to anyone other than MedCo." Noting that section 2-106(1) of the Uniform Commercial Code describes a "sale" as "the passing of title from the seller to the buyer for a price," the court held that the absence of the transfer of title is a helpful (but not dispositive) indicator that a sale did not occur.

(3) "Stockpiling," standing alone, does not trigger the on sale bar. Stockpiling—or building inventory prior to a commercial sale—is, when not accompanied by an actual sale or offer for sale of the invention, mere pre-commercial activity in preparation for future sale. The court found it irrelevant that the manufacturing and "stockpiling" provided commercial benefit to both MedCo and Ben Venue; the important question was whether the transaction was a sale or offer for sale.

In reaching these conclusions, the Court gave weight to the real-world consideration that the prior decision would discriminate between companies that relied on outside manufacturers and those that did not. Recognizing that "we have never held that stockpiling by an inventor in-house triggers the on-sale bar," the full Court found "no reason to treat MedCo differently than we would a company with in-house manufacturing capabilities."

Notably, unlike some precedent cited by Hospira, the MedCo patents at issue covered the product itself, not the method of making it; the en banc Court suggested that the result might be different for patents that claim a method of manufacturing a product. In that situation, the sale of "manufacturing services" that performed the patented manufacturing method may be found to have put the method "on sale."4


The en banc decision limiting the reach of the on sale bar should be welcome news in the life sciences industry. The Federal Circuit also provides useful guidance to companies that engage contract manufacturers but hope to ensure that their transactions do not trigger the on sale bar. And it provides insight for patent prosecutors and due diligence attorneys reviewing earlier manufacturing agreements to evaluate patentability of later-issued patents.

Note, however, that the Federal Circuit expressly limited the decision to pre-AIA § 102(b). It remains to be seen whether the reasoning in this case will hold under the AIA.


1 Under Pfaff, the on sale bar renders a patent invalid if, more than a year before the subject patent applications were filed, the claimed invention was (1) the subject of a commercial offer for sale and (2) ready for patenting.

2 The Medicines Company v. Hospira, Inc., 791 F.3d 1368 (Fed. Cir. 2015). Because the three-judge panel concluded that the transactions between MedCo and Ben Venue violated the on sale bar, it did not address the transactions between MedCo and ICS.

3 The Court did not reach the questions of whether the transactions were subject to the experimental use exception, or whether the MedCo-ICS transaction gave rise to an independent on sale bar. These may be addressed by the original panel on remand.

4 The court distinguished D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1147 (Fed .Cir. 1983), Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516, 518 (2d Cir.1946), Scaltech, Inc. v. Retec/Tetra, LLC, 269 F.3d 1321, 1328-29 (Fed. Cir. 2001), and Plumtree Software, Inc. v. Datamize, LLC, 473 F.3d 1152, 1163 (Fed. Cir. 2006), all on the basis that they found the on sale bar triggered by the use, sale, or offer for sale of patented methods.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Matthew D'Amore
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.