Innovate Articles

So, When Can I Start Selling My Idea?

By: Matthew Moldovanyi

Did the Leahy-Smith America Invents Act (AIA) change when a sale becomes a sale?

Prior to the AIA, under U.S. patent law a person was entitled to obtain a patent unless the invention was “on sale in this country, more than one year prior to the date of the application for patent in the United States.”[1]

 The on-sale bar is a complicated portion of patent law that often requires a court to define what constitutes a sale. More specifically, under pre-AIA law, the on sale bar required that “[f]irst, the product must be the subject of a commercial offer for sale” and “[s]econd, the invention must be ready for patenting.”[2] Under the first prong, the question is “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.’ ”[3] Under pre-AIA jurisprudence, the on-sale bar included prior secret sales and offers-for-sale.[4] When the AIA was enacted it slightly changed the wording of 35 U.S.C. § 102 by adding the language "or otherwise available to the public." Did that change also alter the factors that determine whether a sale triggers the on-sale bar?

On December 4, 2018 the U.S. Supreme Court heard oral arguments in the case Helsinn Healthcare S.A. v. Teva Pharmaceutical USA. The issue before the Court was whether a sale of an invention that required the purchaser to keep the invention confidential (i.e., a “secret sale”)  qualifies as invalidating prior art under the on-sale bar under the post-AIA law, particularly 35 U.S.C. § 102(a)(1). Under 35 U.S.C. § 102(a)(1) a person shall be entitled to a patent unless “the claimed invention was . . . on sale, or otherwise available to the public before the effective filing date of the claimed invention.”[5]

In that case, Helsinn entered into both a License Agreement and a Supply and Purchase Agreement on April 6, 2001 with a pharmaceutical company that markets and distributes in the U.S. These agreements were announced in a joint press release of the two corporations and in the pharmaceutical company’s filing with the Securities and Exchange Commission. Information about the transaction was publicly disclosed except for price terms and specific dosage formulations. On January 30, 2003, Helsinn filed a provisional patent application covering the specific dosage formulations discussed in the two agreements. Four patents were granted on these dosage formulations, three pre-AIA and one post-AIA. In 2011, Teva filed an ANDA seeking FDA approval to market a generic version of the dosage formulation and indicating that the four patents were invalid/not infringed. Helsinn sued alleging infringement.

The focus of the case before the Supreme Court is whether the post-AIA patent is time-barred by the agreements between Helsinn and the pharmaceutical company. Teva asserts that the AIA retained the term “on sale” unmodified and that pre-AIA on-sale bar jurisprudence should apply. In contrast, Helsinn asserts that the phrase “otherwise available to the public” modifies the preceding language “on sale” and requires that the sale must make the claimed invention “available to the public” to trigger the on-sale bar. Because the announcement of the agreements between Helsinn and the pharmaceutical company did not disclose the specific dosage formulations, Helsinn argues that the claimed invention was not available to the public and thus the agreements do not trigger the on sale bar. Helsinn additionally relies on a number of floor statements made during the drafting of the AIA for support of its interpretation.[6]

The Federal Circuit decided the case narrowly on the facts agreeing with Teva that the on-sale bar jurisprudence was maintained post-AIA. The Federal Circuit concluded 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 the sale.[7] Regarding Helsinn’s arguments, the Federal Circuit found that “[t]here are no floor statements suggesting that the sale or offer documents must themselves publicly disclose the details of the claimed invention before the critical date.”[8]

Because of the potentially far reaching conclusions that could flow from the Supreme Court decision, a number of parties filed amicus briefs in this case. For example, the United States filed a brief in support of Helsinn arguing that “[t]reating every sale to a third-party distributor as making an invention ‘available to the public’ is inconsistent with Section 102(a)(1)’s text and purposes and would produce untoward results.”[9] Other briefs have noted a purpose of the AIA was harmonizing U.S. patent law with other countries arguing that “maintaining secret sales as a basis for losing the right to a patent would detract from Congress’s goal of further harmonizing U.S. patent law with that of other major industrialized nations.”[10]

On January 22, 2019, the Supreme Court issued its ruling in this case. In a unanimous opinion, the Court affirmed the Federal Circuit decision and agreed with Teva that the on-sale bar jurisprudence was maintained post-AIA. The Court found that “when Congress reenacted the same [on-sale] language in the AIA, it adopted the earlier judicial construction of that phrase.”[11] In response to the arguments of Helsinn, the Court found that “[t]he addition of ‘or otherwise available to the public’ is simply not enough of a change for us to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’”[12]

Following this ruling, “secret sales” will still trigger the on-sale bar as they did pre-AIA. The Court has left it up to Congress to change the law regarding “secret sales”.