SCOTUS Clarifies Scope of On-Sale Bar

The U.S. Supreme Court Recently Clarified the Scope of the On-Sale Bar Ruling That Secret Sales Can Invalidate Patent

The on-sale bar, a long-standing principle of U.S. patent law, provides that an invention is ineligible for patent protection if it has been offered for sale for over one year prior to the patent filing.

In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the U.S. Supreme Court unanimously held that the passage of the Leahy-Smith America Invents Act (AIA) did not alter prior precedent regarding the on-sale bar. Specifically, the Court ruled that “a commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’ under the AIA”.

Facts of Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc.

The AIA also redefined prior art, including the on-sale bar. As amended by the AIA, 35 U.S.C. 102(b) now states:

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.

The key issue before the Supreme Court was whether the insertion of the language “otherwise available to the public” altered the application of the on-sale bar. Petitioner Helsinn Healthcare S.A. (Helsinn) argued that the phrase limits the scope of the on-sale bar to only cover publicly available sales activity, a view which was supported by the U.S. Patent and Trademark Office (USPTO). Under its revised guidelines to patent examiners following enactment of the AIA, the USPTO explained, sales “among individuals having an obligation of confidentiality to the inventor” did not constitute prior art under the AIA.

The Federal Circuit disagreed. It held that the public disclosure of the existence of a commercial sale invalidates a patent, even if the claimed invention itself remains secret and is not available to the public.  “[T]he asserted claims of the patents-in-suit were subject to an invalidating contract for sale prior to the critical date of January 30, 2002, and the AIA did not change the statutory meaning of ‘on sale’ in the circumstances involved here,” the appeals court wrote.

Supreme Court’s Decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc.

The Supreme Court upheld the Federal Circuit’s decision, concluding that inventor’s sale of an invention to a third party that was obligated to keep the invention confidential qualified as prior art for purposes of determining the patentability of the invention. Justice Clarence Thomas wrote on behalf of the unanimous Court.

In reaching its decision, the Court noted that every patent statute since 1836 has included an on-sale bar. It also emphasized that its own precedent interpreting the pre-AIA on-sale bar provision supports the view that a sale or offer of sale need not make an invention available to the public to constitute invalidating prior art. “The Federal Circuit—which has ‘exclusive jurisdiction’ over patent appeals, 28 U. S. C. §1295(a)—has made explicit what was implicit in our precedents,” Justice Thomas added. “It has long held that ‘secret sales’ can invalidate a patent.”

The Court further concluded that the catch-all phrase “or otherwise available to the public” did not alter its conclusion. Justice Thomas explained:

As amicus United States noted at oral argument, if “on sale” had a settled meaning before the AIA was adopted, then adding the phrase “or otherwise available to the public” to the statute “would be a fairly oblique way of attempting to overturn” that “settled body of law.” Tr. of Oral Arg. 28. The 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.”

Key Takeaway

The Supreme Court’s decision makes it even more imperative for businesses to thoroughly review the structure of joint ventures and other development deals with an experienced intellectual property attorney to verify that the agreements can’t later be interpreted as an offer to sell a later-patented invention. As highlighted by the Court’s ruling, simply including confidentiality provisions in such agreements won’t shield the invention from invalidation under the on-sale bar. 

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, David A. Einhorn, at 201-806-3364.