January 22, 2019

Supreme Court Holds That AIA Did Not Change Scope of On-Sale Bar

3 min

On January 22, 2019, the United States Supreme Court in the matter of Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc. held that the sale of a patented invention to a third party who is contractually obligated to keep the invention confidential can trigger the "on-sale" bar of the Leahy-Smith America Invents Act (AIA). The Supreme Court's Helsinn decision clarifies statutory language in the AIA that has been a source of considerable confusion to patent litigants. The decision also requires that intellectual property owners take care to ensure that public disclosure of their business dealings does not interfere with their patent rights.

In this case, Helsinn entered into agreements in 2001 with a third party, MGI, under which MGI would purchase and distribute Helsinn's 0.25 mg Aloxi® (palonosetron) drug product in the United States, and under which MGI was required to keep Helsinn's proprietary information confidential. The MGI agreements were publicly disclosed in MGI's 2001 8-K statement—but were redacted to shield the price terms and the 0.25 mg dose. Helsinn subsequently obtained four patents covering its 0.25 mg dose, including U.S. Patent No. 8,598,219, which was filed after the March 2013 effective date of the AIA and thus was subject to its provisions.

Helsinn then sued Teva in the District Court for the District of New Jersey for infringing the '219 patent. Teva countered that the '219 was invalid under the AIA on-sale bar, which precludes a person from obtaining a patent on an invention that was "in public use, on sale, or otherwise available to the public before the effective filing date of the invention." 35 U.S.C. § 102(a)(1). The District Court rejected Teva's argument, reasoning that the public disclosure of the agreements in MGI's 8-K did not trigger the AIA on-sale bar because it did not disclose the 0.25 mg dose, and thus did not disclose the patented invention. On appeal, the Federal Circuit reversed, holding that the existence of the sale from Helsinn to MGI was publicly disclosed in the 8-K, and that this disclosure was sufficient to trigger the AIA on-sale bar, even if the details of the patented invention were not disclosed.

In a unanimous decision authored by Justice Thomas, the Supreme Court affirmed the Federal Circuit. The Supreme Court began by observing that all patent statutes since 1836 have included an on-sale bar, and that a substantial body of law interpreting those statutes—including the Supreme Court's last on-sale bar decision, Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998)—has held or suggested that "a sale or offer for sale need not make an invention available to the public" to trigger the bar. In that regard, the Supreme Court noted that the Federal Circuit "has long held that 'secret sales' can invalidate a patent." Accordingly, the Supreme Court held that "[i]n light of this settled pre-AIA precedent on the meaning of 'on sale,' we presume that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of the phrase."

The Supreme Court rejected Helsinn's argument that the addition of the language "otherwise available to the public" to the AIA version of the on-sale bar limited the preceding term "on sale" to disclosures that make the claimed invention available to the public. The Supreme Court characterized the "otherwise" language in the AIA as a "catchall" that "captures material that does not fit neatly into the statute's enumerated categories but is nevertheless meant to be covered," and explained that, "[g]iven that the phrase 'on sale' had acquired a well-settled meaning when the AIA was enacted, we decline to read the addition of a broad catchall phrase to upset that body of precedent."