United States: Supply and Purchase Agreement Triggers On-Sale Bar Provision of 35 USC § 102(b)

The US Court of Appeals for the Federal Circuit reversed the district court and found that a Supply and Purchase Agreement between Helsinn and third-party MGI Pharma, Inc. (MGI) before the critical date of the asserted patents constituted a sale of the claimed invention. The court concluded that, after the Leahy-Smith America Invents Act (AIA), the details of the invention need not be publicly disclosed in the terms of sale. The court also noted that it did not broadly hold that distribution agreements will always be invalidating under § 102(b), merely that the Agreement at issue was. Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. et al, Case Nos. 2016-1284, 2016-1787 (Fed. Cir. May 1, 2017) (Dyk, J.).

Helsinn owns four patents directed to formulations and use of palonosetron in reducing the likelihood of chemotherapy-induced nausea and vomiting (CINV). All four patents claim priority from the same provisional application, filed on January 30, 2003. Three of the patents were filed before the effective date of the AIA, while one was filed after the AIA effective date. On April 6, 2001, during Phase III clinical trials, Helsinn entered into two agreements with MGI, agreeing to sell palonosetron products (defined as having 0.25 mg or 0.75 mg doses of palonosetron) to MGI for an upfront payment of $11 million, plus ongoing royalties. The agreements were announced in a press release and in MGI's Securities and Exchange Commission (SEC) filings, which included partially redacted copies of both agreements. Neither the press release nor the SEC filings disclosed the actual dosage amounts of palonosetron. Ultimately, the US Food and Drug Administration (FDA) approved Helsinn's application to market a 0.25 mg palonosetron product.

Teva subsequently filed an abbreviated new drug application (ANDA) seeking approval to market a generic version of Helsinn's 0.25 mg palonosetron product. Helsinn brought suit against Teva, alleging infringement of various claims of its four palonosetron patents. Teva defended on the ground that asserted claims were invalid under the on-sale bar provision of 35 USC § 102(b). The district court found that the patents-in-suit were not invalid. With respect to the three pre-AIA patents, the district court found there was a commercial offer for sale before the critical date, but that the invention was not ready for patenting. With respect to the fourth patent, governed by the AIA, the district court concluded that there was no commercial offer for sale because the AIA changed the relevant standard and, in any event, the invention was not ready for patenting.

The Federal Circuit reversed and specifically addressed the following three questions: (1) whether the inventions claimed in Helsinn's pre-AIA patents were subject to a sale or offer for sale prior to the critical date; (2) whether the AIA changed the meaning of the on-sale bar under 35 USC § 102(b) such that there was no sale as to the invention claimed Helsinn's fourth (post-AIA) patent; and (3) whether the inventions were ready for patenting at the time of the sale or offers for sale.

As to the first question, the Federal Circuit found that there was a sale of the pre-AIA patented palonosetron products. The court relied heavily on the framework for determining whether there is an offer for sale set forth in its recent en banc decision in Medicines Co. v. Hospira, Inc., 827 F.3d 1363 (Fed. Cir. 2016). In Medicines, the court explained that the question of an on-sale bar must be "analyzed under the law of contracts as generally understood" and "must focus on those activities that would be understood to be commercial sales and offers for sale in the commercial community." In this context, the court found that the Supply and Purchase Agreement contained all the hallmarks of a commercial offer for sale (e.g., price, method of payment and method of delivery). It obligated MGI to purchase exclusively from Helsinn and obligated Helsinn to supply MGI's requirements of the 0.25 and 0.75 mg doses of palonosetron products if approved by FDA. And while certain terms of the Supply and Purchase Agreement were redacted from the public copy of the agreement, the court found there was no argument that the transaction itself remained confidential.

The court expressly rejected Helsinn's arguments that the Supply and Purchase Agreement was not a commercial sale because: (1) it was contingent upon FDA approval; and (2) it was uncertain because it covered the 0.25 mg dose, the 0.75 mg dose, and both doses. The court found that an agreement contracting for the sale of the claimed invention contingent on regulatory approval is still a commercial sale as the commercial community would understand that term. Helsinn also argued that Medicines stands for the proposition that commercial activities with a third-party should not be invalidating if those same activities could be performed in-house without triggering the on-sale bar. The court rejected this argument stating that "[s]uch a broad principle would largely eviscerate the on-sale bar provision except as to sales to end users; that was not the holding of Medicines."

Addressing whether the AIA changed the meaning of the on-sale bar under 35 USC § 102, the court held that the change to the on-sale bar language in § 102 did not change the outcome in this particular case because the sale between Helsinn and MGI was public. Prior to the AIA, settled law established that even secret sales of a claimed invention triggered the on-sale bar. By enacting the AIA, Congress amended § 102 to bar the patentability of an invention that was "patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention." 35 USC § 102(a)(1). Helsinn argued that the AIA changed the law by adding the "otherwise available to the public" phrase. According to Helsinn, the on-sale bar now does not encompass secret sales and requires that a sale make the invention available to the public in order to trigger application of the on-sale bar. The district court agreed with Helsinn and found that this change in language removed the ability of a secret sale to invalidate a patent. The Federal Circuit reversed because it found the sale between Helsinn and MGI was public, holding that the on-sale bar only requires the sale to be public, not the details of the invention to be public.

Finally, the Federal Circuit found that under the ready-for-patenting framework of Pfaff, the patented invention, i.e., the use of 0.25 mg dose of palonosetron to reduce the likelihood of CINV in patients, was actually reduced to practice and ready for patenting prior to the critical date. The Federal Circuit relied on Helsinn's Phase III trial and summary of the trial data (both before the critical date) that showed over 80 percent of patients receiving 0.25 palonosetron experienced relief from nausea for 24 hours, as required by the claims of the asserted patents.

Accordingly, the Federal Circuit reversed the district court and found all the asserted patents invalid under both the pre-AIA and post-AIA versions of the on-sale bar.

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