Supreme Court to Decide Whether Private Sales Trigger On-Sale Bar

Supreme Court to Decide Whether Private Sales Trigger On-Sale Bar

In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc., SCOTUS Must Decide Whether Private Sales Trigger On-Sale Bar

In early December, the U.S. Supreme Court heard oral arguments in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc., one of the most closely watched intellectual property cases of the term. The key issue before the Court is whether private sales trigger the on-sale bar, as amended under the Leahy-Smith America Invents Act (AIA).

Pursuant to the on-sale bar, an invention is ineligible for patent protection if it has been offered for sale for over one year prior to the patent filing. Historically, the on-sale bar applied to any sale of an invention, even if the sale was conducted privately.

Court Must Interpret AIA Amendment to On-Sale Bar

As discussed more fully in a prior article, the AIA converted the U.S. patent system from a first to invent system to a first to file system. To facilitate these changes, Congress amended the statutory definition of prior art, including the on-sale bar. 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 question before the Court is whether the above language, specifically the phrase “otherwise available to the public,” changes the types of transactions covered by the on-sale bar. The U.S. Patent and Trademark Office (USPTO) asserts that the phrase limits the scope of the on-sale bar to only cover publicly available sales activity. However, 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.

In reaching its decision, the Federal Circuit noted that, prior to the AIA, it consistently held that an inventor’s secret sale of an invention to another party could constitute a “commercial offer for sale.” It went on to conclude that there was insufficient evidence to reverse that precedent, finding that Congress’s intent to change the law was not sufficiently clear.

Oral Arguments in Helsinn Healthcare v. Teva Pharmaceuticals

Petitioner Helsinn Healthcare S.A. (Helsinn) maintains that the AIA’s version of the on-sale bar limits its scope to only cover publicly available sales activity. Meanwhile, Teva Pharmaceuticals USA, Inc. (Teva) contends that Helsinn triggered the on-sale bar when it entered into a confidential licensing agreement.

During oral arguments, Helsinn’s counsel argued that there is a distinction between “sale” and “on sale,” maintaining that the language used in the AIA requires availability to the public. “The on-sale bar, like the other bars in the definition, reaches only a disclosure that makes the claimed invention available to the public,” Kannon Shanmugam told the court. “That interpretation is consistent with the plain text of the definition and its legislative history.”

Several justices, most notably Justice Brett Kavanaugh, questioned the distinction. “Isn’t it always the case that if you offer it to even one person or to a small group of people, it’s on sale?” he asked.

Justice Kavanaugh was also skeptical of Helsinn’s reliance on the AIA’s legislative history to suggest that Congress intended to bring private agreements under the purview of the on-sale bar. “If that was a clarification, it was a terrible clarification because there were a lot of efforts, as you well know, to actually change the ‘on sale’ language, and those all failed,” he stated.

Justices Samuel Alito and Elena Kagan seemed to buy the argument that the AIA separated public sales from private sales with respect to the on-sale bar. While questioning Teva Pharmaceuticals’ attorney, Justice Alito said:

Well, I think the most serious argument you have to deal with is the meaning — the plain meaning — the fairly plain meaning of the new statutory language. So you say ‘on sale’ means on sale publicly or on sale privately, right? . . . suppose that the statute had been amended to read just the way it does, except . . .with one exception. So it says the . . . claimed invention was patented, described in a printed publication, or in public use, on sale publicly or on sale privately, or otherwise available to the public. That would be nonsense, wouldn’t it?

SCOTUS to Rule By June 2019

Based on oral arguments, it is possible that the justices could overturn the Federal Circuit’s decision. Of course, we won’t know for sure until the Court releases its opinion sometime before the term ends in June 2019. Either way, the Supreme Court’s decision will hopefully create a clear test for whether a patent transaction falls under the on-sale bar.

If you have any questions, please contact us

If you have any questions or if you would like to discuss how the Court’s decision may impact your company’s trademark rights, contact me, Jason LaBerteaux, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.