In The Medicines Co. v. Hospira, Inc., Slip Op. 2014-1469, 2014-1504 (Fed. Cir. July 11, 2016) the Federal Circuit en banc held that a contract manufacturer’s sale to the patentee of manufacturing services, where neither title to the patented embodiments nor the right to market the same passed to the manufacturer, does not constitute an invalidating sale under 35 U.S.C. § 102(b) (pre-AIA).[1] In so holding, the Federal Circuit asserted that commercial benefit is not enough to trigger the on-sale bar. Rather, the transaction must be one in which the product is commercially marketed, e.g., the subject of a sale or offer that “bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.”
Background
Plaintiff The Medicines Co. (“MedCo”) sued defendant Hospira, Inc. (“Hospira”), alleging that Hospira’s Abbreviated New Drug Applications (“ANDAs”) for generic bivalirudin infringed MedCo’s U.S. Patent Nos. 7,582,727 (“the ’727 patent”) and 7,598,343 (“the ’343 patent”) for MedCo’s drug product Angiomax®. The ’727 and ’343 patents contain product and product-by-process claims directed to pharmaceutical batches of bivalirudin that recite maximum levels of an impurity, Asp9 -bivalirudin, generated during the compounding process.
Hospira raised several invalidity grounds, including that the § 102(b) (pre-AIA) on-sale bar was triggered when MedCo paid third-party contractor Ben Venue to manufacture Angiomax® batches meeting the claim limitations more than one year before the filing date of the ’727 and ’343 patents. After the district court upheld the validity of both patents, a Federal Circuit panel reversed, holding that Ben Venue’s activities triggered the on-sale bar. MedCo sought en banc review of the panel decision.
En Banc Decision
In Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998), the Supreme Court held that pre-AIA § 102(b)’s on-sale bar applies to invalidate a patent when, before the critical date, the claimed invention (1) was the subject of a commercial offer for sale, and (2) was ready for patenting. The Federal Circuit’s en banc decision in this case focused on the Pfaff test’s first prong: whether the invention was the subject of a commercial sale or offer for sale.
The Court offered three main reasons for holding that no invalidating sale had occurred based on Ben Venue’s activities. First, the Court held “the mere sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not constitute a ‘commercial sale’ of the invention.” The Court found that only Ben Venue’s manufacturing services, and not MedCo’s patented invention, were sold in this case. Of note, the patent claims at issue in this case were product and product-by-process claims, and not process or method claims. Second, the Court held that “stockpiling” by the purchaser is not improper commercialization under § 102(b) (pre-AIA), but instead constitutes “pre-commercial activity in preparation for future sale.” The Court moreover emphasized that § 102(b) (pre-AIA) is not triggered by a general “commercial benefit,” but rather requires a “commercial sale or offer for sale.” Third, the Court found there was no invalidating commercial sale where the patentee maintained control of the invention, e.g., where MedCo retained title to the Angiomax® batches that Ben Venue manufactured, and did not authorize Ben Venue to sell them to others.
The Court’s en banc decision overrules prior on-sale bar cases, such as Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001), to the extent they would have dictated a different result. However, the Court stated that it still does not recognize a blanket “supplier exception” to the on-sale bar, and that the on-sale analysis focuses on the commercial nature of the transaction, rather than on the parties’ identities. Thus, the Court noted as dicta that a transfer from a supplier to an inventor could constitute an invalidating sale if the supplier had title to the patented product or process, had “blanket authority” to market the product or disclose the manufacturing process to others, or had sold the product at “full market value.”
[1]Congress amended 35 U.S.C. § 102 in 2011 as part of the America Invents Act (“AIA”). The Court’s opinion addresses the pre-AIA version of the statute applicable in this case, and not whether or to what extent § 102(b) may differ post-AIA