Supreme Court Finds That The AIA Did Not Change Settled Pre-AIA Law That A “Secret” Sale May Trigger The On-Sale Bar
On January 22, 2019, the United States Supreme Court issued an opinion affirming a decision by the Court of Appeals for the Federal Circuit (CAFC) that the Leahy-Smith America Invents Act (AIA) did not change the “on sale” bar. Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., 586 U.S., case no. 17-1229. The Supreme Court held that a commercial sale to a third party may still place the invention “on sale” under 35 U.S.C. § 102(a)(1) of the AIA, even if the third party was required to keep confidential the details of the invention.
Subject to certain exceptions for disclosures made within one year of the effective filing date of the claimed invention, 35 U.S.C. § 102(a)(1) of the AIA provides that a person is barred from receiving a patent if “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 of the claimed invention.” Prior to the enactment of the AIA, the relevant statute (35 U.S.C. § 102(b)) included the “public use” and “on sale” bar language, but omitted the phrase, “or otherwise available to the public.” The pre-AIA statute read: “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.”
In this case, Helsinn sued Teva over three pre-AIA patents, and one AIA patent, relating to a drug used to treat chemotherapy-induced nausea and vomiting. With respect to the AIA patent, Teva argued that a sale by Helsinn more than one year before the effective filing date of the patent triggered the on sale bar, even though the underlying invention was not itself made public—just as the sale would have prior to the AIA’s enactment. More particularly, over one year prior to the patent’s effective filing date, Helsinn entered into confidential license, supply and purchase agreements with a third party. The parties issued a joint press release and publicly disclosed redacted versions of the agreements that described the sale of the drug in general terms, but omitted the details of the allegedly novel claimed dosage of alonosetron. In other words, only the fact that the sale of the drug occurred was publicized; the dosage—i.e., in terms of patentability—was not publicly disclosed.
The district court rejected Teva’s argument, finding that, because the AIA added the phrase, “or otherwise available to the public,” the sale under a confidentiality agreement was a “secret,” non-qualifying sale, and the joint press release also did not qualify, as it did not disclose the details of the invention.
The CAFC reversed the district court’s decision, holding 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.” Helsinn Healthcare S.A. et al. v. Teva Pharmaceuticals USA, Inc., 855 F.3d 1356, 1371 (Fed. Cir. 2017) (emphasis added).
In affirming the CAFC’s decision, the Supreme Court held that an inventor’s sale of an invention to a third party who is obligated to keep confidential the invention’s details may still qualify as prior art under the AIA. According to the Supreme Court, Congress enacted the AIA against the backdrop of a substantial body of pre-AIA Supreme Court and Federal Circuit law interpreting the “on sale” bar, including the Supreme Court’s 1998 decision in Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 67 (1998) (holding that an offer for sale could bar a patent, without regard to whether the offer discloses the details of the claimed invention). Based on this “settled pre-AIA precedent,” the Supreme Court presumed that Congress adopted the earlier construction of “on sale” when it included it in the AIA, and found that the catchall phrase, “or otherwise available to the public,” was not enough to conclude that Congress intended to alter the meaning of “on sale” and would be an “oblique way” to overturn settled law.
With confirmation that “secret” sales may still trigger the on-sale bar post-AIA, patentees need to continue to carefully monitor dealings with third parties and public disclosures in order to avoid losing out on otherwise patentable inventions.