SCOTUS: Confidential Sale of Invention Triggers 1-Year Deadline for Patent Application

(We are delighted to host this client alert written by Kristen Elia, a student in our companion clinic, the Startup Law Clinic.)

Attention all aspiring inventors! Your patent applications could be rejected as a result of prior confidential sales of your patentable invention, as re-emphasized in a recent Supreme Court ruling. In brief:

  • The on-sale patent bar prohibits the issuance of a patent to an inventor where the invention was sold more than a year prior to the filing of a patent application for the invention.
  • On January 22, 2019 in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the Supreme Court affirmed that even “secret sales”, in which the invention is required to be kept confidential, trigger the on-sale patent bar.
  • The fact that the patent bar is triggered by confidential sales is not new law. However, this Supreme Court ruling confirms the scope of the on-sale bar in the wake of ambiguous language in the America Invents Act, a 2013 update to the federal patent statute.
  • Inventors should consult a patent attorney before commencing sales of their inventions or executing manufacturing, development, or other similar commercialization agreements, as language in those agreements that is unnecessarily broad could potentially trigger the on-sale bar.

What is the America Invents Act, and what is the “on-sale bar”?

The federal patent system has two somewhat contradictory goals: to protect the public’s right to benefit from and improve upon knowledge existing in the public domain, while also providing an inventor temporary exclusive ownership rights to their own creations.[1] Because issued patents provide exclusive rights for a significant number of years (twenty years from the date the application is filed), Congress has imposed several limitations on an inventor’s ability to obtain a patent. One such limitation is known as the “on-sale bar.”

The current Patent Act (Title 35 of the US Code), as recently amended by the America Invents Act (“AIA”), includes an on-sale bar which provides that if an invention is “sold” more than a year before a patent application for the invention is filed, the patent application will be denied. This is because the invention has effectively already been disclosed to the public, and thus has become “prior art.” Prior art refers to any invention that is publicly available or understood, in whole or in part, before the effective filing date of an inventor’s patent application. See 35 U.S.C. § 102. Congress is unwilling to issue an inventor a patent which would allow the inventor “to remove existing knowledge from public use” for the inventor’s exclusive use and benefit.[2]

Confusion Over Scope of On-Sale Bar After AIA  

In the years since the enactment of the on-sale bar, the federal courts have consistently held any commercial sale of an invention, even sales which were “confidential” (meaning either subject to non-disclosure agreements or otherwise kept secret from the public), would prevent issuance of a patent.[3] However, the AIA revised the Patent Act’s language regarding the on-sale bar. In relevant part, the revised on-sale bar reads: “A person shall be entitled to a patent unless . . . (1) 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.” 35 U.S.C. § 102(a)(1). Specifically, the AIA’s revision added the bolded language to the on-sale bar. The US Patent and Trademark Office (“USPTO”) interpreted the revised language to mean that confidential sales of inventions did not trigger the on-sale bar. This confusion over the applicability of the on-sale bar was finally addressed by the Supreme Court in Helsinn.

Helsinn Healthcare S.A. is a Swiss pharmaceutical company that entered into two license agreements with MGI Pharma, Inc. (“MGI”) in 2001 for MGI to distribute, promote and market Helsinn’s invention, a treatment drug for chemotherapy side effects (a dose of 0.25 mg of palonosetron in a 5 ml solution). Under the license agreements, MGI was required to keep Helsinn’s proprietary information, including dosage details, confidential.

In 2011, Teva Pharmaceuticals USA, Inc. (“Teva”) sought approval from the FDA to market a generic version of the 0.25 mg palonosetron drug. Helsinn then sued Teva for patent infringement. Teva countered there was no patent infringement, because Helsinn’s patent covering the 0.25 mg of palonosetron was invalid because Helsinn’s license agreements with MGI in 2001 placed the dose “on-sale” more than one year before Helsinn filed the provisional patent in 2003.

In its decision, the Supreme Court confirmed that secret sales of an invention can invalidate an issued patent and that the AIA did not change the scope of the on-sale bar. The Supreme Court rationalized Congress was well aware of the judiciary’s consistent application of the bar to any invention sale, whether public or not. Therefore, if Congress intended to exclude confidential sales from the on-sale bar, this would have been explicitly reflected in the AIA’s revised language.

What does this mean for patent applicants?

This Supreme Court decision definitively confirms that any sale of an invention more than a year prior to filing a patent application for the invention will trigger the on-sale bar, even if the commercial sale is covered by a non-disclosure agreement. In addition, inventors should be aware that agreements that traditionally occur before actual sales, such as manufacturing, evaluation or development agreements, could inadvertently trigger the on-sale bar if the license language in the agreement is not narrowly drafted. Before entering into any agreements with third parties involving your patentable invention, including any manufacturing or other agreements in the commercialization process, be sure to consult a patent attorney.

 References

[1] Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., No. 17-1229, slip op. at 5 (U.S. Jan. 22, 2019); Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151 (1989).

[2] Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 64 (1998).

[3] See Helsinn at 7.

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