CAFC Clarifies AIA On-Sale Bar Rule

  • Aug 26 2017
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  • Category: Blog

Do public sales constitute prior art even without disclosing the invention?

On May 1, a ruling by the U.S. Court of Appeals for the Federal Circuit clarified the scope of the on-sale bar provision of the America Invents Act (AIA). In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the Federal Circuit ruled that the public sale of an invention invalidates a patent, even if the sale did not publicly disclose details of the invention.

The Backdrop

Helsinn held four patents for drugs derived from palonosetron hydrochloride for treating nausea in patients undergoing chemotherapy. Two years before filing its first patent, Helsinn entered into an agreement granting MGI Pharma an exclusive license to any drugs that were ultimately approved by the Food and Drug Administration. The parties publicly disclosed the agreement in a joint press release as well as in MGI’s Form 8-K filing with the Securities and Exchange Commission. The filing contained a partially redacted version of the agreement which did not disclose dosage levels of the drug.

Helsinn subsequently applied for and obtained patents for its drugs and brought an infringement suit under the Hatch-Waxman Act, alleging Teva’s proposed generic drugs infringed Helsinn’s patents. For its part, Teva argued that the publicly disclosed licensing agreement barred patentability under the AIA’s on-sale provision.

In its ruling, the District Court of New Jersey disagreed, finding that because Helsinn’s sale did not disclose details of the invention, it was not public, and that only public sales trigger the on-sale bar provision. The decision hinged on the meaning of the relevant provision of the U.S Code that had been revised by the AIA (35 U.S.C. § 102), which states in part:

A person shall be entitled to a patent unless the claimed invention was patented, described in a patented publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.

On appeal, the Federal Circuit disagreed with the lower court, finding that the details of the invention did not need to be disclosed to the public for the AIA’s on-sale bar provision to apply. In particular, the court rejected Helsinn’s arguments that (1) the AIA changed the meaning of the term “on sale,” and (2) the phrase otherwise available to the public limited the scope of the on-sale bar to public sales.

The court’s ruling included a discussion of the legislative history of the AIA and floor statements of lawmakers, noting that there was nothing to indicate Congress intended to change the law concerning the on-sale bar. The Federal Circuit also made clear that its ruling was limited to the issue of public sales and questions of public use were not under consideration in this case.

The Takeaway

Although this ruling provides guidance on the application of the on-sale bar rule to public sales, the court did not decide whether secret sales qualify as prior art. In this regard, if you have questions regarding how licensing agreements or any sales arrangements may impact your patent rights, you should engage the services of experienced intellectual property attorneys.