Supreme Court Turns Back the Clock on Prior Art in the U.S.

By Jonathan Osha 

On January 22, 2019, the U.S. Supreme Court issued a unanimous decision in Helsinn v. Teva,[1] holding that non-public or confidential sales of inventions that are “ready to be patented” continue to qualify as prior art despite the changes that were made to §102 by the Leahy-Smith America Invents Act (AIA).

Prior to the AIA, 35 U.S.C. §102 defined the “on sale bar” as follows:

A person shall be entitled to a patent unless … (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States … (emphasis added).

In connection with the change from the “first to invent” system to the “first inventor to file” system in the United States, the AIA changed the prior art definition in §102 as follows (underlining indicates additions; strike-through deletions):

A person shall be entitled to a patent unless … the claimed invention was patented, or described in a printed publication, in this or a foreign country or in public use, or on sale in this country, or otherwise available to the public before the effective filing date of the claimed invention more than one year prior to the date of the application for patent in the United States….

The removal of references to “foreign country,” “this country,” and “the United States” reflected an objective of the AIA to remove national boundaries from the definition of prior art.  The change from “more than one year prior to the date of the application” to “before the effective filing date of the claimed invention” reflected an objective to tie prior art to the effective filing date – wherever that might be – rather than to filing in the U.S.[2]  Thus, the meaning of these changes is well-understood.  However, the meaning of the phrase “or otherwise available to the public” has caused considerable debate.

On one hand, “or otherwise available to the public” could be a fifth category of disclosures that would create prior art.  Under this construction, which I will call “Construction 1,” there would be five distinct categories (patents, publications, public use, on sale, and available to the public (by some other means)) and each of these categories would be modified by the ending language: “before the effective filing date of the claimed invention.”  A clearer rewording of §102 to comport with this construction might be (showing the author’s edits):

A person shall be entitled to a patent unless … the claimed invention was, before the effective filing date of the claimed invention: 1) patented;, 2) described in a printed publication;, or 3) in public use;, 4) on sale;, or 5) otherwise available to the public before the effective filing date of the claimed invention ….

On the other hand, the phrase “or otherwise available to the public” could also be read as modifying all of the prior four categories due to the use of the word “otherwise.”[3]  Under this theoretical construction (which I will call Construction 2), §102 might be reworded as follows (showing the author’s edits):

A person shall be entitled to a patent unless … the claimed invention was made available to the public by being patented, described in a printed publication, or in public use, on sale, or by some other means otherwise available to the public before the effective filing date of the claimed invention ….

Patents, printed publications, and public use are, by their very nature, available to the public.  A sale, however, can be public, private, or something in-between.  For example, a “sale” could be a public sale where the claimed invention is open to the public for all to see, a public sale where the claimed invention is sold but, due to its nature, is not known or visible to the public, a sale the existence of which is known to the public but the details – including the details of the claimed invention – are subject to a confidentiality agreement, or a completely confidential, private sale.  Construction 2 would require that, for a sale to be prior art, it would have to make the claimed invention available to the public.  Construction 1 would not modify “on sale” by “available to the public” and thus would preserve the possibility that non-public sales could be prior art.  This is precisely the issue considered by the Supreme Court in Helsinn.

To fully understand the implications of this seemingly semantic discussion, it is necessary to go back 20 years to the Supreme Court’s decision in Pfaff v. Wells Electronics (“Pfaff”).[4]  In that case, Mr. Pfaff had been asked by Texas Instruments to develop a new computer chip socket.  He began work in November of 1980, and sent detailed engineering drawings to a manufacturer in February or March of 1981.  Also in March of 1981 he showed a concept sketch to Texas Instruments, resulting in a written confirmation of a purchase order for 30,100 of his new sockets on April 8, 1981.  The manufacturer then proceeded to make the sockets, and filled the order in July, 1981.   Mr. Pfaff filed for a patent on April 19, 1982.  Under the then-existing law (pre-AIA §102), if the invention was “on sale” more than one year prior to the filed date the patent would be invalid.

The Supreme Court found that Mr. Pfaff’s invention was indeed “on sale” prior to April 19, 1981, despite the fact that it had not been “reduced to practice” (built) by that time and despite the fact that delivery on the contract occurred after the critical date.  The Court established a two-prong test to determine when the on-sale bar applies:

  • The product must be the subject of a commercial offer for sale; and
  • The invention must be ready for patenting.

In this case, the Court found that Mr. Pfaff’s acceptance of the purchase order in March of 1981 established that this was a commercial sale and further found that the manufacturing drawings sent in March of 1981 were sufficiently detailed to show the invention was “ready for patenting” at that time.

The Pfaff test can create significant difficulty for parties involved in development contracts because it is not always clear at what point in time an invention under development is “ready for patenting.”  And, of course, none of Mr. Pfaff’s activity was “public.”

The Helsinn case arises on facts similar to those of Pfaff.  Helsinn, while developing the drug ALOXI® (used to treat side-effects of chemotherapy), had entered into a license and distribution agreement with another pharmaceutical company (MGI Pharma) under which MGI Pharma agreed to distribute the drug in the future if it was approved by the FDA.  The existence of the agreement was made public, but the details of the drug and dosage information were not.  In addition, MGI Pharma was required by the terms of the agreement to keep these details confidential.  Helsinn filed for a patent in January, 2003, nearly two years after entering into the agreement. A later patent application was filed in 2013 claiming priority to the January, 2003, filing and thus was covered by the post-AIA version of §102.

Helsinn sued Teva Pharmaceutical Industries, Ltd. and Teva Pharmaceuticals USA, Inc. (collectively “Teva”) for patent infringement.  Teva countered with the argument that Helsinn’s claims (specifically, the claims to a 0.25mg dose) were on sale more than one year before the filing date of the patent.  The District Court, applying the post-AIA version of §102, found that the “on sale” provision did not apply because the public disclosure the agreements did not disclose the 0.25mg dose.  The Federal Circuit reversed, holding that the claimed invention was “on sale” regardless of whether the details were publicly disclosed.  For a full analysis of the Federal Circuit decision, see our earlier article here:

https://oshaliang.com/newsletter/section-102-bar-provision-unchanged-for-now/

The Federal Circuit’s decision was relatively narrow because it was based in part on the fact that the existence of the sale – albeit not all the details of the invention – was made public.  The Supreme Court went further, finding by unanimous decision that “secret” commercial sales can place an invention “on sale” under the AIA.  Specifically, the Court found the “or otherwise available to the public” language does not modify “on sale” and thus held the pre-AIA case law (including Pfaff) is still applicable to §102 as amended by the AIA:

More than 20 years ago, this Court determined that an invention was “on sale” within the meaning of an earlier version of §102(a) when it was “the subject of a commercial offer for sale” and “ready for patenting.” Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 67 (1998). We did not further require that the sale make the details of the invention available to the public. In light of this earlier construction, we determine that the reenactment of the phrase “on sale” in the AIA did not alter this meaning. Accordingly, a commercial sale to a third party who is required to keep the invention confidential may place the invention “on sale” under the AIA.

While the Supreme Court found the Pfaff test to remain applicable despite the AIA changes to §102, and further clarified that making the details public is not a requirement for an invention to be “on sale,” the facts of the case did not result in the Court addressing the effect of the deletion of “in this country” from the on sale provision of §102.  Indeed, in the post-AIA version of §102, “on sale” is no longer geographically limited.  Thus, this decision has the potential for profound impact on what sorts of acts anywhere in the world may give rise to an on-sale bar to issuance of a U.S. patent.

[1] Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., 586 U.S. ___ (2019), viewable athttps://www.supremecourt.gov/opinions/18pdf/17-1229_2co3.pdf .

[2] The one year grace period for the inventor’s own disclosures is now found in the “exceptions” to prior art 35 U.S.C. §102 (b)(1).

[3] “Otherwise” inherently implies a relation to something else and can be defined as “in a different way or manner,” “in different circumstances,” or “in other respects.”  Merriam-Webster online dictionary  https://www.merriam-webster.com/dictionary/otherwise accessed February 2, 2019.

[4] Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 67-68 (1998), viewable at http://cdn.loc.gov/service/ll/usrep/usrep525/usrep525055/usrep525055.pdf.