« Back Federal Circuit Clarifies Scope of the AIA’s "On-Sale Bar" Rule

May 3, 2017

On May 1, 2017, the U.S. Court of Appeals for the Federal Circuit reversed a decision from the District of New Jersey and held that 35 U.S.C. § 102(a) of the America Invents Act ("AIA"), otherwise known as the "on-sale bar," functions to invalidate patents on inventions sold before securing a patent, regardless of whether the sale resulted in the invention at issue being publicly disclosed. See Helsinn Healthcare S.A., v. Teva Pharmaceuticals USA, Inc., et al., Case Nos. 2016-1284, 2016-1787 (Fed. Cir. May 1, 2017). The court also held that "the fact that a transaction was subject to regulatory approval would not, absent more, prevent it from being a sale for purposes of the on-sale bar."

In Helsinn Healthcare, the plaintiff/appellee Helsinn Healthcare S.A. ("Helsinn") had three patents that pre-dated the AIA and one post-AIA patent. Before passage of the AIA, the "on-sale bar" stated that an inventor was entitled to a patent, so long as the invention was not "on sale … more than one year prior to the date of application." Now, under § 102(a) of the AIA, patents are allowed unless the claimed invention was "on sale, or otherwise available to the public" before a patent is filed. In ruling for Helsinn, the district court held that "otherwise available to the public," as used in the AIA, means that only public sales trigger the "on-sale bar." Thus, Helsinn’s patents were not subject to invalidation because, in its sales, it did not disclose details of the invention. The Federal Circuit overturned the district court’s decision and found that the "otherwise available to the public" phrase in the AIA "evidently meant that the public sale itself would put the patented product in the hands of the public. …" The sale need not make the details of the invention public in order to invalidate the patents.

Almost two years before receiving its patents, Helsinn had entered into a purchase and license agreement for the distribution of its prescription drug. The Federal Circuit held that "after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale. …" With respect to Helsinn’s argument that the "on-sale bar" did not apply because the drugs were awaiting FDA approval, the court distinguished prior decisions on the basis that Helsinn’s drug was already developed and was already subject to a contract for sale that identified both price and quantity. The holdings invalidated Helsinn’s three pre-AIA and one post-AIA patents.

The on-sale bar issue will be further fleshed out after the federal circuit rules on the pending matter of The Medicines Company v. Hospira, Inc., Appeal No. 2014-1469, 2014-1504. There, The Medicines Company (“TMC”) entered into a distribution agreement with an exclusive distributor before the critical date. Hospira has asked the federal circuit to determine whether TMC’s distribution agreement constitutes an offer to sell the claimed invention.

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