Supreme Court Confirms That A Confidential Or "Secret" Sale Of An Invention Can Invalidate A Later Patent

In attempting to market, sell, or license unpatented technology, do not assume that a non-disclosure agreement will preserve your ability to patent that technology later on. The United States Supreme Court recently confirmed that the sale of an invention to a third party may preclude patent protection, even if the third party is required to keep the invention confidential. Helsinn Healthcare S. A. v. Teva Pharmaceuticals USA, Inc. et al., 580 U.S. ____ (Jan. 22, 2019). As a practical matter, Helsinn demonstrates the importance of filing patent applications on an invention before or, in some cases, within one year of the time an invention is put “on sale” to the public or privately. As explained below, a party cannot rely on confidentiality agreements in private transactions to maintain potential patent rights. Timely applying for a patent is critical to preserve your ability to patent an invention. 

The “On Sale” Bar

The Leahy-Smith America Invents Act (“AIA”) bars a person from receiving a patent on an invention that was “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U.S.C. § 102(a)(1). In other words, if the invention was “on sale” before the filing date of an application for a patent, Section 102(a)(1) generally bars patent protection for that invention (subject to certain exceptions discussed below). Note that an invention need not be fully-developed and available to the public to be “on sale.” An invention can be “on sale” within the meaning of the patent laws if, for instance, the invention was sold in tangible form, or if the “sale” included drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to make or manufacture the invention.

Section 102(b) creates a limited exception to the rule requiring a patent application to be filed before an invention is put “on sale.” When the inventor or certain other persons associated with the inventor sells the patented invention, Section 102(b)(1) provides a one-year grace period following the first sale in which to seek patent protection. 35 U.S.C. § 102(b)(1). The dispute in Helsinn involved the interpretation of the “on sale” bar in the context of a pre-application sale of an invention.

The Dispute Between Helsinn and Teva

Helsinn, a pharmaceutical company, manufactures a drug that uses a compound called palonosetron to treat chemotherapy-induced nausea. Needing a marketing partner for its palonosetron product, Helsinn entered into a license agreement and a supply and purchase agreement with third party MGI Pharma. Helsinn provided details of its invention—a palonosetron treatment with a 0.25 mg dosage—to MGI under the terms of the agreements. The Helsinn-MGI agreements required MGI to keep confidential any proprietary information received under the agreements, including the details of the invention. Both Helsinn and MGI publicly announced the existence of the agreements, but did not publicly disclose the specific dosage formulations.

Nearly two years later, Helsinn filed a patent application that eventually resulted in U.S. Patent No. 8,598,219 (“’219 Patent”). The ’219 Patent described and claimed the invention Helsinn previously disclosed to MGI pursuant to the agreements.

When Helsinn later sued Teva for infringing the ’219 Patent, Teva asserted that the ’219 Patent was invalid because the invention was “on sale” more than one year before Helsinn filed the provisional patent application covering that dosage. Specifically, Teva asserted that the agreements between Helsinn and MGI put the invention “on sale” before the critical date of the ’219 Patent. As a result, Teva alleged, the claims of the ’219 Patent were invalid in light of the on-sale bar.

The Supreme Court’s Decision

The Supreme Court agreed with Teva. It concluded that the details of the invention need not be publicly disclosed in order for the AIA’s on-sale bar to apply. The Court reasoned that the patent statute in force before the AIA took effect included an on-sale bar, and that the cases were clear that both sales to the public and “secret” sales made between private parties subject to confidentiality obligations would give rise to the on-sale bar. Given this settled pre-AIA law, the Court found that when Congress reenacted the same “on sale” language in the AIA, it did not intend to alter the meaning of “on sale” and create a new exception to the on-sale bar that would allow parties to avoid the bar by selling an invention under a confidentiality agreement.

Practice Pointer

This decision demonstrates the importance of promptly filing a patent application on inventions that may be patentable, particularly if you plan to license or otherwise disclose the invention to a partner or other third party. Disclosing an invention in a license agreement, sales agreement, or other contract more than one year before filing a patent application may give rise to the on-sale bar, thereby preventing patent protection. Where an inventor seeks to market unpatented technology, he or she should work closely with counsel before doing so to avoid unintentionally waiving potential patent rights.  

The Helsinn case arose in the context of pharmaceutical products, but the rule applies with equal force to any circumstance in which an invention is placed “on sale” publicly or privately. The bar to patentability may arise whether the invention is sold in tangible form (i.e., the widget changes hands), or whether the offer for sale merely describes the invention in sufficient detail “to enable a person skilled in the art to practice the invention” (i.e., the widget is sufficiently described in an agreement). You should therefore file a patent application within one year of any disclosure of an invention to a third party in a license or other commercial arrangement that could be considered a “sale.” As explained in Helsinn, confidentiality agreements that prohibit disclosure of the invention will not inoculate these activities from application of the on-sale bar of Section 102(a).

For parties in patent infringement disputes, it is crucial to identify and understand all prior attempts to market, license, or sell the invention at issue, regardless of whether those activities were confidential. As in the Helsinn case, such activities could be the “silver bullet” that invalidates an asserted patent.

Please contact Jason S. Angell or Chris Hohn with any questions regarding this article.

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