The Software IP Report

On-Sale Bar and the AIA: New Language, Same Meaning

Despite a change in statutory language, the applicability of the on-sale bar to pursuing patent rights under the America Invents Act (AIA) is unchanged from prior law, said the Federal Circuit in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. Here, the Federal Circuit held that the on-sale bar of the AIA applies to commercial sales regardless of whether the sale publicly discloses the invention.

A long time component of patent law, the on-sale bar is a limitation on the patentability of an invention. It provides that a patent cannot be obtained for an invention that was offered for sale more than a year before filing for such patent.

The AIA’s on-sale bar is codified at 35 U.S.C. § 102(a):

(a) Novelty; Prior Art.—A person shall be entitled to a patent unless—

(1) the claimed invention 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

Pre- AIA, Section 102(b) provides:

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 application for patent in the United States.

Before this case, the patent community had been debating the effect of the new phrase “otherwise available to the public” on the on-sale bar to patentability.

District Court History

The district court Helsinn had held that four patents asserted against Teva were not invalid. All of the patents-in-suit are directed to a similar drug formulation. Teva asserted as a defense that the patents were unenforceable based on a purchase agreement entered into by Helsinn more than one year prior to the patents’ respective earliest effective filing dates. Portions of the agreement were made public as part of a press release and a Securities and Exchange Commission filing. The public portions of the agreement did not disclose the patents’ claimed drug formulation.  Based on their respective filing dates, one patent was subject to the AIA provisions of the on-sale bar, and the other three were subject to the pre-AIA provisions.

Well-established precedent for the on-sale bar provisions of the pre-AIA Section 102 requires that the claimed invention be: 1) on sale or part of an offer for sale, and 2) that the invention be ready for patenting, i.e., reduced to practice. The district court found that Helsinn’s purchase agreement satisfied the first of these requirements for the three applications subject to the pre-AIA on-sale bar provisions. However, the court also found that, because the invention was awaiting FDA approval, it was not ready for patenting. Accordingly, the district court found that the pre-AIA on-sale bar did not render the three pre-AIA patents invalid.

Turning to the patent subject to the AIA, the district court stated that the AIA’s new “on-sale bar” statutory language changed the standard for what transactions qualify as a commercial sale or offer for sale. The court cursorily stated that, under the AIA, Helsinn’s purchase agreement did not create an on-sale bar to patentability because “the claimed invention itself was not disclosed.” And in any case, the patent subject to the AIA on-sale bar provisions was not ready for patenting at the time the purchase agreement was executed, which remains a requirement under the AIA.

Federal Circuit Decision

The Federal Circuit reversed the district court’s judgment, holding that the

asserted claims of the patents-in-suit were subject to an invalidating contract for sale prior to the critical date of January 30, 2002, and the AIA did not change the statutory meaning of “on sale” in the circumstances involved here. The asserted claims were also ready for patenting prior to the critical date.

According to the Federal Circuit, the statutory meaning of “on-sale” was not changed by the different statutory language of the AIA, at least as applied to the facts of Helsinn. The Court considered arguments from Teva and various amici that the addition of “otherwise available to the public” requires that a sale make the details of invention available to the public in order to trigger the on-sale bar. These arguments rested on the change in statutory language itself, and on floor statements made by members of Congress. The Court, however, was not persuaded. Instead, it looked to a long history of on-sale bar cases, reaching all the way back to Pennock v. Dialogue, decided by the Supreme Court in 1829, and based its reasoning on the public interests and purposes served by the patent system and the on-sale bar.

The Court also found that the “ready for patenting” standard applied by the district court also erroneous. The proper standard doesn’t require regulatory approval for patentability; there was adequate evidence in the record showing that the invention was in fact ready for patenting at the time the purchase agreement was executed.

The result: all four patents asserted by Helsinn are invalid.

Lessons for Practice 

The most obvious piece of advice stemming from Helsinn is also one that most practitioners provide regularly: file for patent protection as early as reasonably possible. Additionally, until the contours of the AIA on-sale bar provisions are better defined by the courts, consider whether any sale that could trigger the pre-AIA on-sale bar provisions is a sale that could trigger the AIA on-sale bar provisions.

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