Federal Circuit Rules that Public Sales Trigger the AIA On-Sale Bar Even if the Claimed Features Are Not Publicly Disclosed*

(*Originally published as a Michael Best client alert on May 2, 2017, co-authored by Richard L. Kaiser, Melanie J. Reichenberger, and Kenneth M. Albridge, III)

On May 1, 2017, the United States Court of Appeals for the Federal Circuit issued a decision substantively addressing, for the first time, the scope of the AIA on-sale bar.  In Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc., Nos. 2016-1284, 2016-1787, slip op. (Fed. Cir. May 1, 2017), the Federal Circuit ruled that the details of the claimed invention need not be publicly disclosed in the terms of sale or offer documents to trigger the on-sale bar.

Helsinn involved a patent directed to intravenous formulations of palonosetron for reducing or reducing the likelihood of chemotherapy-induced nausea that the parties agreed was governed by the AIA.  Helsinn, slip op. at 3, 4 n.1, 18.  Over two years before the effective filing date, however, the patentee had entered into a “Supply and Purchase Agreement” with an oncology-focused pharmaceutical company that markets and distributes in the United States.  Id. at 6.  Pursuant to the terms of the agreement, the distribution company agreed to purchase exclusively from the patentee, and the patentee agreed to supply requirements of a product covered by the patent.  Id. at 7.  Although most of the material information concerning the transaction was publicly disclosed in a joint press release and 8-K filing with the Securities and Exchange Commission, the price terms and at least one of the patented features—the specifically claimed dosage—were not.  Id. at 5-6, 8.

Following a bench trial, the district court held that “the AIA changed the meaning of the on-sale bar” such that a sale must now “publicly disclose the details of the invention” to trigger its application.  Id. at 10.  Because the claimed dosage was not publicly disclosed, the district court concluded that the AIA on-sale bar did not apply.  Id. The Federal Circuit disagreed.

Before enactment of the AIA, 35 U.S.C. § 102(b) barred the patentability of an invention that 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.”  35 U.S.C. § 102(b) (2006).  Under that earlier provision, the Federal Circuit had concluded confidentiality weighs against application of the on-sale bar but is not determinative.  Meds. Co. v. Hospira, Inc., 827 F.3d 1363, 1376 (Fed. Cir. 2016) (en banc).  By enacting the AIA, however, Congress amended § 102 to bar the patentability of an invention that was “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.”  35 U.S.C. § 102(a)(1) (2016) (emphasis added).

On appeal, the patentee, the government (including the USPTO) and a number of amici argued that the addition of the language “otherwise available to the public” requires that a sale be accompanied by public disclosure of “the details of the claimed invention,” relying on certain floor statements made by individual members of Congress.  Helsinn, slip op. at 19-22.  The Federal Circuit refused to endorse such a rule, reasoning that it “would work a foundational change in the theory of the statutory on-sale bar” and finding insufficient evidence in the legislative record that “Congress intended to work such a sweeping change.”  Id. at 22, 26.  Instead, the Federal Circuit concluded that, “after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale.”  Id. at 27.

Significantly, the Federal Circuit in Helsinn never explicitly concluded that a secret sale would avoid the AIA on-sale bar.  Rather, in light of the facts presented, which undisputedly involved a public sale, the Federal Circuit simply declined to go as far as the patentee, the USPTO and others were advocating, which was to require that the claimed invention be publicly disclosed in addition to the transaction itself.  Companies therefore should remain cautious in their approaches to pre-filing commercial activities, as the law in this area will undoubtedly continue to develop in the months to come.  The safest course continues to be filing a patent application prior to an outside disclosure.

Other Notable Decisions – Week of May 5, 2017

NantKwest, Inc. v. Lee, No. 2015-2095 (Fed. Cir. May 3, 2017) (non-precedential):  In NantKwest, the Federal Circuit affirmed a district court’s summary judgment of obviousness, even though the district court applied an incorrect claim construction.  The Federal Circuit analyzed the issue of obviousness using the correct construction, which it concluded “renders the district court’s erroneous construction harmless error.”  In doing so, the Federal Circuit found that the patentee’s expert testimony on the underlying factual issues failed to create genuine issues of fact, noting that the expert’s “reading of the prior art [was] contradicted by the prior art itself” and quoting Supreme Court precedent for the proposition that “[w]hen opposing parties tell two different stories, one of which is blatantly contradicted by the record, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment.”

 In re: Affinity Labs of Texas, LLC, Nos. 2016-1092, 2016-1172 (Fed. Cir. May 5, 2017) (precedential): In Affinity Labs, the Federal Circuit affirmed unpatentability findings of the Patent Trial and Appeal Board in consolidated reexamination proceedings.  Rejecting a patentee’s arguments for patent-based application of pre-AIA section 317(b)’s estoppel provisions, the Federal Circuit concluded that the section “plainly limited the scope of estoppel in all circumstances to only those claims actually challenged and for which the requesting party received an adverse final decision” in a district court or inter partes reexamination proceeding.  The Federal Circuit also addressed the role of licensing as objective evidence of non-obviousness, commenting that “the mere fact of licensing alone cannot be considered strong evidence of nonobviousness if it cannot also be shown that the licensees did so out of respect for the patent rather than to avoid the expense of litigation” and criticizing the patentee for failure to “enter the actual licenses into the record.”

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