On Jan. 22, 2019, Supreme Court affirmed the Federal Circuit & held that a commercial sale to a third party who is required to keep the invention confidential may place the invention “on sale” under §102(a).
This long standing battle is between Helsinn & Teva, related to the drug called Aloxi® which is used to treat chemotherapy-induced nausea and vomiting. Petitioner Helsinn Healthcare acquired the right to develop palonosetron, the active ingredient in Aloxi, in 1998. In early 2000, it submitted protocols for Phase III clinical trials to the Food and Drug Administration (FDA), proposing to study a 0.25 mg and a 0.75 mg dose of palonosetron. In September 2000, Helsinn announced that it was beginning Phase III clinical trials and was seeking marketing partners for its palonosetron product. Helsinn found its marketing partner in MGI Pharma, Inc. (MGI), which markets and distributes drugs in the USA. Helsinn and MGI entered into two agreements: a license agreement and a supply and purchase agreement. The license agreement granted MGI the right to distribute, promote, market, and sell the 0.25 mg and 0.75 mg doses of palonosetron in the USA. Under the supply and purchase agreement, MGI agreed to purchase exclusively from Helsinn any palonosetron product approved by the FDA. Both agreements included dosage information and required MGI to keep confidential any proprietary information received under the agreements. Later, Helsinn and MGI announced the agreements in a joint press release, and MGI also reported the agreements in its Form 8–K filing with the Securities and Exchange Commission. Neither the 8–K filing nor the press releases disclosed the specific dosage formulations covered by the agreements.
On January 30, 2003, nearly two years after Helsinn and MGI entered into the agreements, Helsinn filed a provisional patent application covering the 0.25 mg and 0.75 mg doses of palonosetron. Over the years Helsinn granted few patents from this family including U. S. Patent No. 8,598,219 (filed in May 2013) which is relevant to this case. US’219 patent is governed by the AIA because it was filed after the enactment of AIA. Teva in 2011 sought approval from the FDA to market a generic 0.25 mg palonosetron product. Helsinn then sued Teva for infringing its patents, including the ’219 patent. In defense, Teva asserted that the ’219 patent was invalid because the 0.25 mg dose was “on sale” more than one year before Helsinn filed the provisional patent application covering that dose in January 2003. The District Court then determined that the “on sale” provision did not apply. It concluded that, under the AIA, an invention is not “on sale” unless the sale or offer in question made the claimed invention available to the public. Helsinn Healthcare S. A. v. Dr. Reddy’s Labs. Ltd., 2016 WL 832089, *45, *51 (D NJ, Mar. 3, 2016). The Federal Circuit reversed in 2017. It held that “if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale” to fall within the AIA’s onsale bar. Because the sale between Helsinn and MGI was publicly disclosed, it held that the on-sale bar applied. Helsinn filed writ for certiorari & Supreme Court granted it.
The AIA precludes a person from obtaining a patent on an invention that was “on sale” before the effective filing date of the patent application:
“A person shall be entitled to a patent unless . . . 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.” 35 U. S. C. §102(a)(1).
Supreme Court’s Analysis:
The question presented was whether, under the AIA, an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention?
Here is what Supreme Court held –
“A commercial sale to a third party who is required to keep the invention confidential may place the invention “on sale” under §102(a). The patent statute in force immediately before the AIA included an on-sale bar. This Court’s precedent interpreting that 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. See, e.g., Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 67. The Federal Circuit had made explicit what was implicit in this Court’s pre-AIA precedent, holding that “secret sales” could invalidate a patent. Special Devices, Inc. v. OEA, Inc., 270 F. 3d 1353, 1357. Given this settled pre-AIA precedent, the Court applies the presumption that when Congress reenacted the same “on sale” language in the AIA, it adopted the earlier judicial construction of that phrase. The addition of the catchall phrase “or otherwise available to the public” is not enough of a change for the Court to conclude that Congress intended to alter the meaning of “on sale.” Paroline v. United States, 572 U. S. 434, and Federal Maritime Comm’n v. Seatrain Lines, Inc., 411 U. S. 726, distinguished. Pp. 5–9”.
In short, court rejected Helsinn’s argument that AIA changed the language & meaning of §102 with respect to “on-sale bar”. Court held that Congress enacted the AIA in 2011 against the backdrop of a substantial body of law interpreting §102’s on-sale bar. Precedents suggest that a sale or offer of sale need not make an invention available to the public. In light of this settled pre-AIA precedent on the meaning of “on sale,” Congress reenacted the same language in the AIA & adopted the earlier judicial construction of that phrase. The addition of catchall phrase “or otherwise available to the public” is simply not enough of a change to conclude that Congress intended to alter the meaning of the reenacted term “on sale” as argued by Helsinn. Court said that Helsinn’s argument placed too much weight on §102’s catchall phrase. Given that the phrase “on sale” had acquired a well-settled meaning when the AIA was enacted, court declined to read the addition of a broad catchall phrase to upset that body of precedent. Therefore, finally Supreme Court held that Congress did not alter the meaning of “on sale” when it enacted the AIA & thus an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under §102(a).