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.
A Whistleblower Just Filed a Complaint Against Your Company: Here's What to Do Now
Few situations create more uncertainty than learning that an employee has filed a whistleblower complaint. Questions arise immediately: Is the allegation legitimate? Should the employee be placed on leave? Do we need to notify our insurance carrier? Are we now prevented from disciplining the employee if there are unrelated ongoing work related issues? There is […]
Assignment for the Benefit of Creditors: An Alternative to Bankruptcy for Distressed Businesses
When a business reaches the point where it can no longer service its debts or otherwise resolve its liabilities, management is often faced with a difficult question: is a bankruptcy filing necessary or is there another way to perform an orderly liquidation or sale of the business assets? While Chapters 7 and 11 of the […]
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know
For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]
Estate Planning for Digital Assets Under New Jersey Law
As our personal and financial lives increasingly move online, estate planning must evolve to address a new category of property: digital assets. From email accounts and social media profiles to cryptocurrency and cloud-stored business records, these assets often carry both financial and sentimental value. Yet, without proper planning, they can become inaccessible—or even lost—upon incapacity […]
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
