Supreme Court Rules that AIA Did Not Alter the On-Sale Doctrine
The U.S. Supreme Court recently ruled that the phrase “or otherwise available to the public” added to 35 U.S.C. § 102 in the America Invents Act (AIA) in 2011 did not change the “on-sale” doctrine, which provides that patent protection cannot be granted for an invention that was on-sale more than one year before the effective filing date of the patent. Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., No. 17-1229, slip op. (Jan. 22, 2019).
The case involved a Helsinn patent on a nausea drug for chemotherapy patients that was asserted against Teva. Teva alleged the Helsinn patent was invalid under the on-sale bar because Helsinn entered a licensing and distribution agreement to sell the drug more than one year before the patent application was filed. Helsinn countered that, while the existence of the sale was public, the details of the invention were not disclosed, and thus the sale should not invalidate the patent, because the invention was not “otherwise available to the public” as required by the AIA’s revisions to § 102.
The Supreme Court’s decision, which unanimously affirmed the Federal Circuit’s decision, confirms that confidential sales of an invention can still invalidate a patent under the AIA. Justice Clarence Thomas, who wrote for the Court, rejected Helsinn’s argument that “otherwise,” added when the AIA was passed, narrowed the on-sale bar to encompass only sales that made the details of the invention public.
The Court emphasized that because “the phrase ‘on-sale’ had acquired a well-settled meaning when the AIA was enacted, [the Court would] decline to read the addition of a broad catchall phrase to upset that body of precedent.” Moreover, Justice Thomas noted the Federal Circuit’s earlier rulings had made explicit what was implicit in the Supreme Court’s pre-AIA precedent: “secret sales” can invalidate a patent. “In light of this settled pre-AIA precedent on the meaning of ‘on sale,’ [the Court] presume[d] that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.”
The ruling maintains the pre-AIA law that “secret sales” start the clock for applying for a patent, which counsels in favor of seeking patent protection early in the development process. The decision also closes a potential loophole that would have allowed patent owners to derive a financial benefit from their inventions first and to apply for a patent later.
While some may say the decision makes it more difficult for inventors and companies to obtain investment early in the development process, there are alternative means to raise early investments without selling the invention. The decision also should serve as a reminder to scrutinize early-stage manufacturing, marketing, and other agreements, and to ensure there is close coordination between relevant stakeholders to avoid potentially triggering the on-sale bar (e.g., as the en banc Federal Circuit recognized in Medicines Co. v. Hospira, a “manufacturing services” and “stockpiling” agreement was not equivalent to a sale of the invention and did not trigger the on-sale bar).