Publication

January 24, 2019Client Alert

Secret Commercial Sale of an Invention May Qualify as Prior Art

A recent decision by the Supreme Court confirms that changes to U.S. patent law that went into effect in late 2012 and early 2013 did not disrupt the well-settled meaning of what is “on sale” for purposes of determining whether secret sales are prior art (often referred to as the “on sale bar” to patentability). The Supreme Court also went a step further to make explicit what was inherent in its previous decisions.

Section 102(a) of the America Invents Act (AIA) addresses what constitutes prior art for purposes of determining whether a patent should be granted for an invention. More specifically, §102(a)(1) of the AIA states that

(a) 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; . . . .

(emphasis added)

The prior patenting or publication of an idea before filing an application are fairly well established ways in which an applicant will be denied a patent, subject to some exceptions that will not be elaborated on here. So too, is the concept that a patent will be denied if, prior to filing an application, an invention is in public use (again, subject to certain exceptions).

In Helsinn Healthcare v. Teva Pharma USA the Supreme Court addressed what constitutes whether an invention is “on sale” or “otherwise available to the public”. Helsinn Healthcare developed a treatment to address chemotherapy-induced nausea in 2001, and entered into agreements with MGI Pharma that granted MGI the “right to distribute, promote, market, and sell” the treatment. The agreements required the company to keep secret any proprietary information regarding the treatment. In 2003, Helsinn sought, and eventually obtained, patent protection for the treatment.

In 2011, Helsinn accused Teva Pharmaceutical of patent infringement in view of Teva’s efforts to commercialize a similar treatment. Teva responded by arguing that Helsinn’s patent was invalid under the on sale bar provision of §102(a) because Helsinn’s treatment was on sale long before Helsinn sought patent protection. The basis for Teva’s invalidity position hinged largely on knowing about the agreements between Helsinn and MGI thanks to a joint press release issued in 2001 by Helsinn and MGI to ‘celebrate’ the Helsinn/MGI partnership involving the treatment, and MGI’s redacted disclosure of the agreements with Helsinn in MGI’s Form 8-K filing with the SEC. After Helsinn won in District Court, the Federal Circuit reversed and held that the ‘secret sale’ of the treatment to MGI was subject to the “on sale bar” provisions of the AIA. The Federal Circuit had previously and consistently held that secret sales, or secret offers for sale, can be a bar to patentability of an invention. See Special Devices, Inc. v. Oea, Inc., 270 F. 3d 1353 (2001). In view of the Federal Circuit’s precedent, the reversal in Helsinn Healthcare was not surprising, especially when considering that the sale to MGI was not really secret. Helsinn then appealed to the Supreme Court, asking whether the sale of an invention to a third party under confidentiality obligations qualifies as prior art. In the end, the Supreme Court agreed with the Federal Circuit’s decision that a ‘secret’ sale can qualify as such. The public disclosure of the sale through the joint press release simply made it easier for the Court to come to this conclusion.

Helsinn Healthcare confirms, and makes explicit, that the “on sale bar” provisions of §102(a) may apply to a sale (or offer for sale) of an invention even when that sale is to a third party under an obligation to keep the invention secret. But Helsinn Healthcare itself is not significant – the decision mostly affirms that Supreme Court precedent regarding “secret sales” applies even after enactment of the AIA. The significant takeaway from Helsinn Healthcare – and reminder – is that the existence of a sale or offer for sale of an invention may preclude patentability of the invention, even if the sale is kept confidential and details of the invention are not disclosed. In other words, the “on sale bar” does not require that the claimed invention itself be available to the public. The “on sale bar” may apply to preclude patentability regardless of whether any detail about the claimed invention is publicly available.

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