Section 102 Bar Provision Unchanged…For Now

By: Carlyn Burton

In the first consideration of the substantive amendments of the Leahy-Smith America Invents Act (AIA), the US Court of Appeals for the Federal Circuit in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc.[i] weighed the statutory amendment of the on-sale bar provision.

The on-sale bar, found within section 102 of the patent act, serves as a bar to patentability to prevent an inventor from commercializing an invention for a prolonged period before filing an application for the invention. Whether the commercial activities give rise to a bar is established by a two-prong test of (1) whether there is a sale or an offer for sale of the claimed invention and (2) whether the claimed invention was ready for patenting by the critical date.[ii] The AIA amendments affect only the first prong.

Among other changes, including expanding the geographic scope of the bar, AIA’s amendment to section 102 bars patentability of an invention that is “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…” (AIA 35 U.S.C. § 102(a)(1), emphasis added). The key issue in Helsinn was the interpretation of the added language “or otherwise available to the public” and whether this clause excludes secret sales from the scope of the bar to patentability.

The district court found—and a number of amici, including the United States, supported the court’s position—that the amendment of the statutory language to add “or otherwise available to the public” was intended to modify “public use” and “on sale.” Indeed, the district court found that the Purchase and Supply Agreement at issue in Helsinn was a commercial offer for sale under pre-AIA section 102, but that the same agreement was not a commercial offer for sale under AIA because section 102(a)(1) requires “a public sale or offer for sale.” Under such interpretation, the sale or offer would have to make the invention (and the details thereof) available to the public in order to trigger the on-sale bar. This interpretation is not only found within the briefs to the federal circuit. Examination guidelines issued by the U.S. Patent and Trademark Office following the enactment of AIA instructed examiners that “secret sale or use activity does not qualify as prior art” under the AIA.[iii] Further, the Manual of Patent Examining Procedure states that “[t]he phrase ‘on sale’ in AIA 35 U.S.C. 102(a)(1) is treated as having the same meaning as ‘on sale’ in pre-AIA 35 U.S.C. 102(b), except that the sale must make the invention available to the public.”[iv]

The federal circuit reviewed the legislative history of AIA and failed to find support for the argument presented by Helsinn and amici that Congress intended to change the meaning of the on-sale bar in AIA. Thus, the court declined to accept the argued interpretation and instead narrowly decided the case on the basis that the existence of the sale was publicly disclosed in an SEC filing and that there is no requirement that the details of the claimed invention be publicly disclosed in the terms of sale. In finding so, the court stated that “[i]f Congress intended to work such a sweeping change to our on-sale jurisprudence and ‘wished to repeal…prior cases legislatively, it would do so by clear language.’”

Without a requirement that a sale make the details of the invention publicly available, the on-sale bar seems largely unchanged. Without sweeping changes to the on-sale bar provision, the factors relevant to consideration of a pre-AIA sale and offer for sale still apply in the post-AIA world. In fact, at issue in Helsinn are a single Purchase and Supply Agreement for a formulation to an anti-nausea and vomiting drug and four patents, three of which fall under pre-AIA section 102 and one of which falls under post-AIA section 102. The court addresses in detail the nature of the commercial sale as it relates to the pre-AIA patents and then refers to its prior remarks in concluding that the transaction constitutes a sale for the post-AIA patent. The Helsinn transaction obligated the purchaser to purchase exclusively from Helsinn and obligated Helsinn to meet the purchaser’s supply requirements for the drug if approved by the FDA. The court contrasts such transaction to the contracted manufacturing services in the recent en banc decision, The Medicines Company v. Hospira, Inc.[v] In Medicines, the federal circuit largely rested its decision that the contracted manufacturing services were not a commercial sale on three characteristics: the absence of title transfer, the confidential nature of the transaction, and the absence of commercial marketing of the invention. By contrast, in Helsinn, title transfer was expressly contemplated, a redacted copy of the Purchase and Supply Agreement was present in SEC filings, and Helsinn publicly sought marketing partners for its product. Thus, the federal circuit stated that the Supply and Purchase Agreement was an offer or contract for sale that unambiguously placed the invention on sale, regardless of the fact that the details of the invention were not publicly disclosed.

While the court did not find that the added phrase “or otherwise available to the public” modified the on-sale bar (at least not in the broad manner argued by the parties), the interpretation of the added phrase is yet to be addressed. A plain-language reading of the statute appears to indicate that it is a catchall or potential additional category of barring activities, effectively broadening the provision rather than narrowing it. According to the federal circuit, AIA did not eliminate pre-AIA case law that the details of the invention need not be disclosed to the public for the on-sale bar provision to bar patentability. Further, this holding does not extend to secret or confidential transactions, because the existence of the agreement and a redacted copy thereof were made publicly available in SEC filings. Under pre-AIA case law, while confidentiality can be a factor weighing against a conclusion of a commercial sale, it is not determinative: confidential transactions can be patent-invalidating sales under the on-sale bar. Therefore, it is possible that if presented with a different set of facts that the court could find that secret sales do not trigger the on-sale provision. Given that this is the first federal circuit interpretation of the AIA amendment, the amendments to section 102 will certainly continue to be examined as AIA patents are increasingly granted and litigated.

[i] No. 2016-1284, 2016-1787 (Fed. Cir. May 1, 2017).

[ii] Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 67-68 (1998).

[iii] Examination Guidelines for Implementing the First Inventor To File Provisions of the Leahy-Smith America Invents Act, 78 Fed. Reg. 11,059, 11,062 (Feb. 14, 2013).

[iv] MPEP § 2152.02(d) (9th ed. 2015).

[v] 827 F.3d 1363 (Fed. Cir. 2016).