Supreme Court Holds That Non-Public Sales are Invalidating Under Post-AIA Section 102

In a closely watched case directly addressing open questions after the enactment of the America Invents Act (AIA), a unanimous Supreme Court (Thomas, J.) held in Helsinn v. Teva that a sale to a third party, despite being confidential, nevertheless triggered the long-standing meaning of “on sale” under §102(a).

Gibbons previously reported on this much anticipated decision. As background, Helsinn owns patents directed to reducing the likelihood of a serious side effect of chemotherapy treatment. Almost two years before applying for a patent, Helsinn and a third party entered into a license agreement and a supply and purchase agreement. The agreements were publicly announced, but required the third party “to keep confidential any proprietary information received under the agreements.” The Federal Circuit held that because the sale between Helsinn and the third party was publicly disclosed, the on-sale bar applied.

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.” By enacting the AIA, 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.”

In reviewing the Federal Circuit’s decision, the Supreme Court reasoned that Congress “enacted the AIA in 2011 against the backdrop of a substantial body of law interpreting §102’s on-sale bar.” Although acknowledging that the Court “has never addressed the precise question presented in this case,” its precedents “suggest that a sale or offer of sale need not make an invention available to the public.” Moreover, turning to Federal Circuit precedent, the Court noted that it “has long held that secret sales can invalidate a patent.” In light of this “settled pre-AIA precedent” on the meaning of “on sale,” the Supreme Court presumed that “when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.”

The Court rejected Helsinn’s view noting that it had placed “too much weight” on §102’s catchall phrase “otherwise available to the public.” In doing so, the Court held the phrase ‘on sale’ had acquired a well-settled meaning when the AIA was enacted, and the Court “decline[d] to read the addition of a broad catchall phrase to upset that body of precedent.” Thus, in line with the Court’s decision, regardless of the timing of Section 102, any bona fide commercial sale of an invention that is ready for patenting, more than one year prior to filing, will eliminate the right to a patent in that invention.

In the face of this decision, diligence in filing patent applications before exploring options to exploit them commercially is recommended. It will be even more critical to monitor closely business development and investment partnerships to ensure that any agreements for valuable IP does not destroy the companies’ patent rights. From a practical perspective, it is important to understand the on-sale bar doctrine especially when working with third parties. It is important not to enter into agreements that would qualify as commercial sales until developing and executing an IP protection plan. As part of this plan add terms that maintain strict confidentiality. Also, for entities looking to acquire IP, it is critical to conduct thorough diligence on prior sales and “public uses” of any inventions to be purchased or licensed if the intent is to seek patent protection.

Gibbons is well-equipped to address questions regarding the on-sale bar. We will continue to monitor developments in patentability law and provide updates as applicable.

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