On January 22, 2019, the Supreme Court issued a decision in Helsinn Healthcare S.A. et al. v. Teva Pharmaceuticals USA, Inc., No. 17-1229. The Supreme Court unanimously held that the America Invents Act (AIA) on-sale bar, like the pre-AIA on-sale bar, extends to “secret sales.”
Under pre-AIA law, a sale or offer for sale of an invention—including an inventor’s “secret” sales to a third party that is required to keep the invention confidential—could act as a bar to patentability. The AIA retained the pre-AIA “on sale” terminology but added the catch-all phrase “or otherwise available to the public.” The US Patent and Trademark Office (USPTO) subsequently issued guidelines explaining that the AIA on-sale bar does not cover “secret sales” and explained that activities are “secret” if they are among individuals having an obligation of confidentiality to the inventor. The district court that decided the Helsinn case initially applied the USPTO interpretation, holding that Helsinn’s pre-critical-date sale, which was under an agreement of confidentiality, did not trigger the AIA on-sale bar. In May 2017, however, the Federal Circuit reversed the district court decision, holding that “secret sales”—at least those sales in which the existence of the sale is public but the details of the invention are kept confidential—can trigger the AIA on-sale bar.
In an opinion authored by Justice Thomas, the Supreme Court unanimously affirmed the Federal Circuit’s decision and unambiguously held that the “or otherwise available to the public” language added by the AIA did not alter the settled meaning of the on-sale bar as extending to “secret sales.” The Court held that “on sale” has a settled meaning under pre-AIA precedent, and it presumed that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of the phrase. Notably, the decision potentially sweeps more broadly than the Federal Circuit’s decision, which suggested, without definitively holding, that at least public disclosure of the existence of a sale (albeit not the details of what was sold) may be required under the AIA. By contrast, the language in Justice Thomas’s opinion seemingly reverts to the pre-AIA meaning of “on sale,” which extends to sales that were entirely confidential (i.e., sales whose very existence was unknown to anyone other than the buyer and seller).
The holding that the meaning of “on sale” did not change with the enactment of the AIA largely preserves the pre-AIA status quo with respect to “secret sales.” One effect is that companies will be able to apply lessons from pre-AIA on-sale bar case law and structure transactions to avoid triggering the on-sale bar. For example, parties may structure transactions as licenses or as sales of manufacturing services instead of manufactured products. See The Medicines Co. v. Hospira, Inc., 827 F.3d 1363 (Fed. Cir. 2016).
However, companies should be aware that certain changes may make the AIA on-sale bar more onerous than the pre-AIA on-sale bar. For example, the AIA removed the “in this country” requirement for sales, so secret sales around the world may trigger the on-sale bar. In addition, there may be particular consequences for sales and offers within the 1-year grace period, since the meaning and scope of the exceptions under AIA 102(b) are largely untested by the courts, and are more limited in significant ways than the previous grace period provided under pre-AIA 102(b) (e.g., there is no ability to antedate a subsequent disclosure or patent filing of a modified form of the invention made by a purchaser or offeree by showing an earlier date of invention). Thus, it is even more important to file initial patent applications prior to beginning sales activities whenever possible in order to avoid potential loss of rights.
You can download the full Supreme Court decision here, and read more about the background of the case here.
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