The Software IP Report

Secret Sales Are Still Prior Art under the On-Sale Bar

In a short, unanimous opinion, the Supreme Court held that “secret sales” count as prior art under the on-sale bar. The Court, in the anticipated case Helsinn Healthcare v. Teva Pharmaceuticals, found that Helsinn’s agreement to sell the patented product counted as prior art against its patent stemming from an application two years after the agreement, even though the details of the product were kept confidential.

This case begins with Helsinn developing the active ingredient for the drug Aloxi, which treats chemotherapy-induced nausea. In early 2000, Helsinn submitted the drug to the Food and Drug Administration (FDA) for clinical trials with the to-be-patented formulation of 0.25 mg of palonosetron. Later that year, Helsinn made a deal with a marketing partner to license and supply the drug. The agreement was publicly announced, and Helsinn made public submissions to the Securities and Exchange Commission. These public statements did not include the drug’s formulation, and the agreement obligated the marketing partner to keep that formulation confidential. Helsinn did not file a patent application until 2003, from which multiple patents issued, including U.S. Patent No. 8,598,219 (the ’219 patent).

In 2011, Teva applied to the FDA to make a generic version of Aloxi, now covered by the ’219 patent. Helsinn sued Teva for infringement, and Teva countered that the early sales counted as prior art under the on-sale bar.

The on-sale bar existed in the law before the America Invents Act (AIA) took effect—according to the Court, it was in “every patent statute since 1836.” The AIA kept the on-sale bar while changing the wording of the section in which it appears. Under pre-AIA law, an invention was unpatentable if “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.” The AIA changed that wording to “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public.”

The Court relied on this continuity of the on-sale bar before and after the passage of the AIA. The fact that Congress reenacted the same wording—“on sale”—created a presumption that Congress intended to preserve the law as it existed before the AIA. Under pre-AIA law, secret sales counted as prior art and could thus be used to invalidate a patent. The Supreme Court case Pfaff v. Wells Electronics established the conditions for the on-sale bar: the invention must be (1) “the subject of a commercial offer for sale” and (2) be “ready for patenting.”

To try to overcome the presumption that the law was unchanged, Helsinn focused on the catchall phrase “or otherwise available to the public,” which was introduced in the AIA. According to Helsinn, that phrase implies that all the items in the preceding list, including “on sale,” must be available to the public. The Court was unconvinced. The purpose of a catchall phrase at the end of a list is to capture situations left out of the list rather than restrict other items in the list, particularly when those items form the basis of a well-developed body of law.

Since the AIA did not change the law, the Pfaff factors still applied. The agreement to supply the marketing partner constituted a commercial offer for sale, and the FDA submissions among other evidence showed that the drug formulation was ready for patenting at that time. Therefore, the sale was prior art that anticipated the ’219 patent.

Lessons for Practice

First and foremost, this case demonstrates the importance of filing for a patent early. An application should ideally be on file before commercial activity commences. A one-year grace period exists for sales originating with the inventor, but it’s best not to rely on the grace period as foreign laws can differ.

In terms of its effect on the law, this case means that court decisions about the on-sale bar from before the AIA are still good law. The Court ruled that the on-sale bar before and after the AIA is the same; therefore, cases applying the on-sale bar from before the AIA are still good law.