On January 22, 2019 the Supreme Court affirmed the Federal Circuit’s ruling in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. (“Helsinn”) that a secret sale qualifies as prior art under the under the America Invents Act (AIA). The question in this case was whether an inventor’s sale of an invention to a third party qualifies as prior art for purposes of determining patentability under the AIA even though that third party was obligated to keep the invention confidential pursuant to a non-disclosure or confidentiality agreement. By affirming the Federal Circuit’s holding that secret sales do qualify as prior art under the AIA, Helsinn emphasizes the importance of filing patent applications before engaging in any type of activities that may constitute a sale.
As way of background, Helsinn Healthcare S.A. and MGI Pharma, Inc. entered into two agreements in 2001 regarding Helsinn’s palonosetron pharmaceutical product, a drug used in the prevention and treatment of chemotherapy-induced nausea and vomiting. In the first agreement, a license agreement, MGI agreed to distribute, promote, market, and sell Helsinn’s palonosetron product. In the second agreement, a supply and purchase agreement, MGI agreed to purchase exclusively from Helsinn any palonosetron product approved by the US Food and Drug Administration (FDA). While both agreements were disclosed publicly in press releases and Form 8-K filings, none of those disclosures mentioned specifics about the product, including its dosage formulations. Two years later, Helsinn filed provisional patent applications covering the product that ultimately resulted in patent protection for the formulation, including U.S. 8,598,219.
In 2011, Teva Pharmaceutical sought FDA approval to sell a generic version of Helsinn’s palonosetron product. In the Hatch-Waxman litigation that ensued, Teva argued that Helsinn’s patent was invalid because the invention was “on sale” more than a year before the first provisional patent application was filed through the Helsinn-MGI agreements.
The district court rejected Teva’s invalidity argument, holding that the post-AIA on-sale bar “requires that the sale or offer for sale make the claimed invention available to the public.” In the district court’s view, the invention was not on sale in the Helsinn-MGI agreements because it was not available to the public.
The Federal Circuit, however, reversed. In doing so, it rejected the requirement that specific details of the invention be disclosed publicly for it to constitute a sale.
The Supreme Court sided with the Federal Circuit, holding that a sale of an invention to a third party can qualify as prior art under § 102(a) even if that third party is required to keep the invention confidential. In doing do, the Supreme Court rejected the argument that Congress excluded secret sales from the on-sale bar in enacting the AIA, and found instead that “[t]he addition of ‘or otherwise available to the public’ is simply not enough of a change for us to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’”
The biggest take-away from Helsinn is that it emphasizes the importance filing patent applications early and not only relying on a confidentiality agreement when entering into discussions with a potential party. These patent applications should be filed before any sort of public disclosure or other patent-invalidating activities that constitute an offer for sale, such as a license agreement or supply agreement, or which may later be found to constitute an offer for sale, take place. Even early stage companies that have not fully committed to a final product should file a provisional patent application prior to entering into discussions with a potential partner. That provisional patent application can provide the company with an earlier filing date, but also importantly, it can protect the product from possible patent invalidation down the road.
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