Supreme Court Rules AIA “On Sale” Bar Applies to Secret Sales

Last week, the Supreme Court of the United States issued a unanimous opinion in Helsinn Healthcare S. A. v. Teva Pharmaceuticals USA, Inc., No. 17-1229 (January 22, 2019), holding the sale of an invention to a third party who is contractually obligated to keep the invention confidential may place the invention “on sale” within the meaning of 35 U.S.C. § 102(a). The decision confirms that existing precedent concerning what constitutes “on sale” continues to apply despite the modifications to § 102 implemented by the America Invents Act (AIA). 

The Helsinn patent covers a 0.25 mg dose of palonosetron for treating chemotherapy induced nausea and vomiting. Almost two years before filing the application to which the patent claims priority, Helsinn entered into confidential license and supply agreements with a distributor—MGI Pharma, Inc. The agreements granted MGI the right to market and sell 0.25 mg and 0.75 mg doses of palonosetron in the US in exchange for upfront and future royalties. MGI agreed to exclusively purchase from Helsinn, and Helsinn agreed to meet MGIs supply requirements. The parties publicly reported the existence of the agreements, but not the dosage forms. In a later infringement suit, Teva asserted the claims of the Helsinn patent were invalid because the claimed invention was “on sale” by virtue of the MGI agreements more than one year before Helsinn filed its patent application. The district court determined the “on sale” bar did not apply because the public disclosure of the agreements did not disclose the dosage and, therefore, did not make the claimed invention available to the public. The Federal Circuit reversed, concluding the “on sale” bar applies regardless of whether the details of the invention are disclosed. The Supreme Court granted certiorari.

On review, the Court explained its decision in Pfaff v. Wells Electronics, Inc. established two conditions for application of the “on sale” bar pre-AIA: that the invention is (1) the subject of a commercial offer for sale; and (2) ready for patenting. The Court further explained that pre-AIA Federal Circuit precedent clearly established “secret sales” could be invalidating. Against that backdrop, the Court concluded, Congress’s choice to use the words “on sale” in § 102(a) evidenced its intent to adopt “the earlier judicial construction of that phrase.” Because Helsinn did not dispute its MGI agreements met the pre-AIA definition of “on sale,” the Court affirmed the Federal Circuit judgment invalidating Helsinn’s patent claims.

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