By Kristin Holmes

The Supreme Court recently clarified the post-AIA meaning of “on sale” in Helsinn Healthcare S.A. v. Teva Pharmaceutical USA, No. 17-1229, 2019 WL 271945 (Jan. 22, 2019). The issue in this case is whether the sale of a patentable product to a third party, who is contractually obligated to keep the invention confidential, places the invention “on sale” within the meaning of post-AIA 35 U.S.C. §102(a)(1). At the heart of the question is whether the current statute overrules the body of pre-AIA case law interpreting the phrase “on sale.”

Helsinn is a pharmaceutical company that obtained four patents for treating chemotherapy-induced nausea and vomiting, all of which claimed priority to a provisional patent filed on January 30, 2003. The patent in question is the fourth patent, U.S. Patent No. 8,598,219, filed May 23, 2013 and subject to post-AIA 102. While undergoing clinical trials and awaiting FDA approval Helsinn sought to commercialize the product. On April 6, 2001, Helsinn entered into a supply and purchase agreement with Teva for the product. Though the sale was public, the specific details of the invention, including dosage, remained confidential.

The purpose of patent law is to promote science and innovation with the exchange of exclusive patent rights for the full disclosure of an invention to the public. The award of a patent rights without a timely disclosure of the invention would arguably give the inventor an unfair advantage and stifle competition.

The current statute, known as the American Invents Act (AIA), bars patenting an invention that is “in public use, on sale, or otherwise available to the public,” 35 U.S.C. § 102 (a) (1), whereas the previous statute bars patenting of an invention that is “in public use or on sale.” Pre-AIA 35 U.S.C. 102(b). The previous statute does not contain the “catchall” phrase “or otherwise available to the public.”

In a unanimous decision, the Court upheld the body of pre-AIA case law interpreting the “on sale” bar, and decided that the “catchall” provision is not enough to change the meaning of the phrase “on sale.” Notably, the pre-AIA case law establishes that a claimed product is “on sale” when it is (1) commercially offered for sale, and (2) ready for patenting. See Pfaff v. Wells Electronics, 525 U.S. 55, 67 (2005). According to Pfaff, it does not matter whether the details of the invention are disclosed to the public. Thus, a public sale of the invention constitutes a statutory bar even where the details of the invention are kept confidential. Helsinn upholds this precedent.

The Court’s decision in Helsinn means patentees must be diligent in seeking protection. The decision has significant importance to the pharmaceutical and biotech industries, which invest more time and money in development rather than production. To avoid unnecessary investment in an unmarketable product, it is often advantageous to engage in purchase agreements early on, even before patent rights are secured. At the same time, a later filing date allows the patentee to capitalize on the most profitable period of a product’s lifetime.  

Understandably, pharmaceutical and biotech companies have to balance difficult decisions regarding when to secure agreements and when to secure patent rights. U.S. patent law attempts to provide some relief for these difficult decisions by allowing the invention to be on sale for up to a year before an application is filed.

In any industry the aim is to maximize profits. Patents create a scarcity and exclusivity by which investors can maximize profits by extending the life of the patent. A later issued patent prolongs the patent owner’s exclusive rights and buys time to ensure there is a market for the invention. The best thing companies can do to preserve their rights, regardless of industry, is to coordinate between different departments to strategize the best time to offer an invention for sale and apply for patent protection within a year of any first offer for sale.

Author: Kristin Holmes is part of the Technology and Intellectually Property Clinic at DePaul University College of Law and a student extern at Beem Patent Law Firm.