United States: New Fed Circuit Decision Bolsters On-Sale Bar

Patent litigators will tell you that there are many ways to invalidate a patent. One of their favorites is a self-inflicted ground of invalidity known as the "on-sale bar." Under patent law, if you sell (or offer to sell) your invention more than one (1) year before you file your patent application, you invalidate your patent. This can often be a problem for entities who push publication of new technology (like universities) or for those who are unsure of the economic value of technology until it is actually shopped (like start-ups). These entities often find that they have valuable, patentable technology after having sold or shopped that technology publicly — rendering their patents invalid.

The passing of the America Invents Act by Congress brought some uncertainty to this area of patent law. The Act altered the statutory language creating the on-sale bar. What was unknown, however, was the effect of this alteration. Had Congress meant to change the scope of the on-sale bar or was the language an inconsequential update?

The case of Helsinn Healthcare SA v. Teva Pharmaceuticals USA Inc. allowed the Federal Circuit to weigh in on this new language. In interpreting this language from the America Invents Act, the Federal Circuit held that publicly known sales of inventions — even those that don't disclose the details of an invention — made one year before the filing of a patent application trigger the on-sale bar. This is in contrast to the prior opinion of the United States Patent and Trademark Office (USPTO) interpreting this language, which had held that a sale must make the invention available to the public in order to trigger the on-sale bar.

Background

Prior to passage of the America Invents Act, 35 U.S.C. § 102 stated that a person was entitled to a patent unless "the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States" (emphasis added). In other words, any sale of an invention prior to one year before filling a patent application precluded a patent covering that invention regardless of whether the sale made details of the invention — how it works — available to the public. Passage of the America Invents Act changed the language of 35 U.S.C. § 102 to read, in part, that a person 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" (emphasis added) with an exception for disclosures made within one year. 

The USPTO interpreted the "on sale" language as the same regardless of the change in language "except that the sale must make the invention available to the public." Manual of Patent Examining Procedure 2152.02(d). Under this interpretation, a sale among parties subject to "an obligation of confidentiality" does not trigger the on-sale bar.

The dispute in this case began with Helsinn filing suit against Teva alleging infringement of several of its patents directed to drugs for combating chemotherapy-induced nausea. At the District Court level, Teva argued that the patents were invalid under the on-sale bar due to a public sale more than a year before Helsinn applied for the asserted patents. The sale publicly disclosed the generalities of the invention but not key information such as the dosing necessary for successful administration. The District Court sided with Helsinn and the USPTO interpretation ruling that the phrase "otherwise available to the public" in the on-sale bar as modified by the America Invents Act required the sale to disclose the particulars of the invention to the public. As the sale at issue failed to do so, the on-sale bar was not triggered and the patents were found valid.

Helsinn v. Teva

On appeal, the Federal Circuit came to the opposite conclusion, that the rewording of the on-sale bar was not intended to change to the application of the on-sale bar to sales that do not disclose the details of the invention. In defending its position, Helsinn argued that floor statements made by members of Congress show an intent in allowing secret sales. For example, Helsinn pointed to comments made by Senator Leahy that the new on-sale bar would "do away with precedent under current law that private offers for sale or private uses or secret processes . . . may be deemed patent-defeating prior art." Notably, the Federal Circuit pointed out that these comments address secret sales, not the public, non-disclosing sales at issue in this case. The Federal Circuit thus discounted these comments while also refusing to rule on whether secret sales trigger the on-sale bar as amended.

Additionally, the Federal Circuit noted the long history of sales of any kind triggering the on-sale bar with cases at all levels beginning with the Supreme Court decision in Pennock v. Dialogue decided in 1829. That case and those stemming from it explain that to allow secret activities to avoid triggering the on-sale bar would be tantamount to allowing patentees to extend their monopoly beyond the time limit provided by Congress. In other words, an applicant for a patent could commercialize an invention such that the details are not disclosed to the public for a period of years, effectively enjoying a monopoly, and then followup with an application for a patent thereby continuing the monopoly. The Federal Circuit reiterated this public policy and found, quoting from Supreme Court precedent, that "if Congress intended to work such a sweeping change to our on-sale bar jurisprudence and 'wished to repeal ... [these prior] cases legislatively, it would do so by clear language.' Dir., OWCP v. Perini N. River Assocs., 459 U.S. 297, 321 (1983)." The floor statements of some members of Congress and a slight rewording of the on-sale bar were insufficient to override long settled application of the on-sale bar and the public policy behind such an application.

Therefore, the Federal Circuit held that "if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale" in order to preclude patents stemming from applications filed one year after the sale. As a result, Helsinn's patents are invalid. 

Important steps to take now and more questions raised

Taking a step back, this case illustrates the unsettled state of patent law following the changes made by the America Invents Act. Although passed in 2011, the effects of the law are still unknown in key areas as patents continue to issue and be asserted that implicate changed provisions of the law.

More specifically, this case illustrates the importance of filing patent application in a timely manner. The best practice is filing, at minimum, a provisional application prior to any public disclosure, including any commercialization. Following this case, patent applications should be filed within one year of the date of any sale or disclosure regardless of whether the activity was secret or not.

These general best practices apply even though the Federal Circuit refused to rule on the effect of other activities such as secret sales where the sale itself is not public knowledge. Other arguably non-public activities which could trigger the on-sale bar depending on the interpretation of the statute as amended include non-disclosing public use, secret commercialization, etc. Patent applications should be put in place prior to these activities occurring and at the very least should be in place within one year of such activity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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