Supreme Court - Helsinn Healthcare S.A. v. Teva Pharmaceutical USA, Inc. - Secret Commercial Sales of Invention Can Bar Patent

In Helsinn Healthcare v. Teva Pharmaceutical, the United States Supreme Court held that a commercial sale to a third party who is required to keep the invention confidential may place the invention "on sale" under the American Invents Act.

Justice Thomas speaking for a unanimous Court stated that the "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). This case requires us to decide whether the sale of an invention to a third party who is contractually obligated to keep the invention confidential places the invention 'on sale' within the meaning of §102(a)."

"More than 20 years ago, this Court determined that an invention was 'on sale' within the meaning of an earlier version of §102(a) when it was 'the subject of a commercial offer for sale' and 'ready for patenting.' Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 67 (1998). We did not further require that the sale make the details of the invention available to the public. In light of this earlier construction, we determine that the reenactment of the phrase 'on sale' in the AIA did not alter this meaning. Accordingly, a commercial sale to a third party who is required to keep the invention confidential may place the invention 'on sale' under the AIA."

For additional commentary see Professor Ronald Mann's Opinion analysis: Justices affirm ruling that secret sales of invention bar later patent and my post America Invents Act - On Sale Bar, 35 USC 102.

Copyright © 2019 Robert Moll. All rights reserved.

Supreme Court - Helsinn Healthcare S.A. v. Teva Pharmaceutical USA, Inc. - Hearing Transcript

The United States Supreme Court held a hearing in Helsinn Healthcare v. Teva Pharmaceutical this week.

The issue: "Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention."

For additional details see the hearing transcript and Professor Ronald Mann's argument analysis and America Invents Act - On Sale Bar, 35 USC 102

Copyright © 2018 Robert Moll. All rights reserved.

Federal Circuit - The Medicines Company v. Hospira, Inc. - On Sale Bar of Product-By Process Claim Requires Commercial Sale or Offer for Sale

An inventor will lose US patent rights if an invention is held to be "on sale" more than one year before filing the patent application. Because inventors often engage in business activity before filing the application, attorneys often dispute in litigation if the activity placed the invention on sale. In The Medicines Company v. Hospira, Inc. the Federal Circuit revisited this issue en banc for pre-AIA cases. It concluded that to be on sale a product must be the subject of a commercial sale or offer for sale, and that a commercial sale is one that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code. The product-by-process claims were held not invalid since the contract manufacturer was considered the inventor of manufacturing services where neither the title to the embodiments nor the right to market them passed to the supplier. 

Copyright © 2016 Robert Moll. All rights reserved.

America Invents Act - On Sale Bar, 35 USC 102

Prior to the America Invents Act (AIA), the on sale bar has been a frequent way inventors lose U.S. patent rights. Basically, US patent law gave an inventor one year to file a US patent after the first offer for sale of an invention ready for patenting. Thus, it tackles inventors that are commercializing the invention too early before they file the patent application. See the U.S. Supreme Court's landmark decision Pfaff v. Wells Electronics, Inc. in 1998.

The AIA makes dramatic changes to 35 USC 102 that may increase loss of U.S. patent rights since the scope of the one year grace period is uncertain, a prior sale no longer needs to be "in this country" (USA), and in particular it is unclear how the grace period is narrowed with respect to non-public sales.

We don't have court decisions, however, the USPTO has published the Examination Guidelines For Implementing The First Inventor To File Provisions Of The Leahy-Smith America Invents Act (Examination Guidelines) and other USPTO educational materials that can guide our analysis of the new grace period.

The starting point for understanding the new grace period is the statutory language:

35 U.S.C. 102(a)(1) states "a person shall be entitled to a patent unless the claimed invention was ... on sale, or otherwise available to the public before the effective filing date of the claimed invention. Thus, 102(a)(1) tells us generally of activities that will result in denial of patent protection."

35 USC 102(b)(1) states, however, that "a disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if

(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor. Thus, 102(b)(1) tells us of the circumstances where the 102(a)(1) activities will be excused for one year."

The USPTO educational materials states to understand the exceptions of 35 USC 102(b), we must define three terms: disclosure, inventor, and one year or less. An inventor and one year or less are defined consistent with pre-AIA law. The term disclosure is defined in a new way to include evidence that the claimed invention was on sale.

Interpreting how the on sale bar requires (or doesn't) require "disclosure" is likely to be a litigation hot spot. The Examination Guidelines stated that "a number of comments suggested that public availability should be a requirement for “on sale” activities under AIA 35 U.S.C. 102(a)(1), and that non-public uses and non-public sales or offers for sale do not qualify as prior art under the AIA. The comments suggesting that public availability should be a requirement for 'on sale' activities under AIA 35 U.S.C. 102(a)(1) gave the following reasons: (1) The catch-all phrase 'otherwise available to the public' in AIA 35 U.S.C. 102(a)(1) and case law cited in the legislative history of the AIA supports the view that 'available to the public' should be read as informing the meaning of all of the listed categories of prior art in AIA 35 U.S.C. 102(a)(1); (2) the removal of derivation under pre-AIA 35 U.S.C. 102(f) and prior invention under pre-AIA 35 U.S.C. 102(g) as prior art indicates that the AIA intended to do away with 'secret' prior art; (3) public availability is the intent of AIA, and for the Office to construe the statute otherwise would erode the availability of patent protection in the United States, and weaken the economy; (4) interpreting the 'on sale' provision to require public availability is good public policy in that it would lower litigation costs by simplifying discovery, and would reduce unexpected prior art pitfalls for inventors who are not well-versed in the law."

Okay, that is one interpretation of the statute. But other comments "suggested that the legislative history of the AIA is insufficient to compel the conclusion that Congress intended to overturn pre-AIA case law holding that an inventor's non-public sale before the critical date is a patent-barring 'on sale' activity as to that inventor. One comment suggested that commercial uses that are not accessible to the public are nonetheless disqualifying prior art because Metallizing Engineering and other pre-AIA case law interpreting 'public use' and 'on sale' continue to apply under the AIA, and do not require public availability. The comment further suggested that commercial uses that are accessible to the public, even if such accessibility is not widespread, are disqualifying prior art to all parties. Another comment suggested that Metallizing Engineering and other forfeiture doctrines should be preserved because they serve important public policies. Another comment suggested that if the Office does adopt the position that Metallizing Engineering is overruled, and that any sale under AIA 35 U.S.C. 102(a)(1) must be public, the Office should promulgate a rule requiring that any secret commercial use of the claimed invention more than one year prior to the effective filing date be disclosed to the Office. Another comment indicated that sales between joint ventures and sales kept secret from the 'trade' should still be considered prior art under AIA 35 U.S.C. 102(a)(1)."

Here is how the USPTO responded: "A patent is precluded under AIA 35 U.S.C. 102(a)(1) if '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.' AIA 35 U.S.C. 102(a)(1) contains the additional residual clause 'or otherwise available to the public.' Residual clauses such as 'or otherwise' or 'or other' are generally viewed as modifying the preceding phrase or phrases. Therefore, the Office views the 'or otherwise available to the public' residual clause of the AIA's 35 U.S.C. 102(a)(1) as indicating that secret sale or use activity does not qualify as prior art."

This suggests a secret sale prior to filing an application needs no grace period because it is not prior art. However, this seems to allow for secret commercialization of the invention more than one year before filing the application, which is contrary to many decades of case law.

The USPTO says its "interpretation of AIA 35 U.S.C. 102(a)(1) also ensures that the AIA grace period can extend to all of the documents and activities enumerated in AIA 35 U.S.C. 102(a)(1) that would otherwise defeat patentability. In addition, this interpretation avoids the very odd potential result that the applicant who had made his invention accessible to the public for up to a year before filing an application could still obtain a patent, but the inventor who merely used his invention in secret one day before he filed an application could not obtain a patent."

If the goal is prompt disclosure to the public of the claimed invention I am not sure this is odd. Further, the USPTO's concern that a secret sale one day before the filing date bars a valid patent from issuing seems misplaced since the USPTO says a secret sale is not prior art requiring an exception to the general rule barring pre-filing activity.

Copyright © 2013 Robert Moll. All rights reserved.

Leader Technologies v. FaceBook - Provisional Fails to Save Patent from On Sale Bar and Public Use

In Leader Technologies v. Facebook the Federal Circuit held all of the asserted claims of U.S. Patent No. 7,139,761 (the '761 patent) were invalid under 35 U.S.C. § 102(b), because Leader had offered for sale and publicly demonstrated software that embodied the claims prior to the critical date.

The founder of Leader Technologies (Leader) Mr. McKibben and Jeffrey Lamb conceived the invention in 1999. Then they developed software to build a commercial product referred to as Leader2Leader®, which they completed around 2002. Around that time, Leader offered for sale Leader2Leader® and demonstrated it to a number of companies. For example, in January 2002, Leader presented a white paper to the Wright Patterson Air Force Base and offered 20,000 software licenses to Leader2Leader®.The white paper described the functionality of Leader2Leader®. Leader stated it was commercializing the product for the government, commerce and education and the platform was operational with low user volumes. In November 2002, Mr. McKibben demonstrated the Leader2Leader® software to Boston Scientific, a demonstration that he described as flawless. By December 8, 2002, Leader had demonstrated and offered Leader2Leader® to a number of other companies, including American Express and The Limited.

In seeking US patent protection, Leader initially filed a 60-page provisional application on December 11, 2002 (pages 1-7 are in the style of a patent application, but the detailed description section is sketchy and pages 8-60 have only pseudo code rather than source code for a number of claim limitations. Query how much should this matter?) and a non-provisional application on December 10, 2003.

The Federal Circuit said the central issue was whether the Leader2Leader® product admittedly in public use and on sale prior to December 10, 2002 fell within the scope of the asserted claims, rendering them invalid under 35 U.S.C. § 102(b). Given how much it would have helped it is curious the Federal Circuit did not explain why the critical date was not December 11, 2001 based on the provisional application. To understand why you have to review the trial court's opinion: Leader Techs., Inc. v. Facebook, Inc., 770 F. Supp. 2d 686 (D. Del. 2011). The trial court found that substantial evidence supported the jury's ruling that the '761 patent was not entitled to the priority date of the provisional application. The court noted claims are entitled to the earlier filing date of the provisional application only if the prior application describes the invention in sufficient detail so that one skilled in the art can conclude that the inventor invented the claimed invention as of the filing date sought.

As the court did not believe this was the case stating:

Leader contended that its expert, Dr. Herbsleb, demonstrated that each element of the asserted claims was supported by the provisional application. However, Dr. Herbsleb also admitted at trial that the source code in the provisional application on which he relied to support the presence of numerous claim elements was only a "pseudo code." According to Dr. Herbsleb, "pseudo code" is not a real programming language and cannot function if compiled into an executable program. Leader contends that one of Dr. Herbsleb's students, Dr. Cataldo, built an implementation of an embodiment of the '761 patent based on the provisional application; however, Dr. Herbsleb testified this embodiment did not actually work and, in any event, it did not rely on the code disclosed in the provisional application because that code, again, was incomplete pseudo code. Moreover, the co-inventor of the '761 patent, Jeff Lamb, testified that certain elements were missing from the provisional application, such as the tracking movement of users and the associating metadata with user created content elements. Accordingly, the Court concludes that the evidence was sufficient to support the jury's conclusion that the asserted claims of the '761 patent are not entitled to the priority date of the provisional application. Consequently, the appropriate critical date for purposes of applying the on sale bar and public use bar is December 10, 2002, which is one year prior to the filing date of the '761 patent.

It may sound like another typical case where someone lost its US patent because the invention was commercialized too early, but this is not why the Leader Technologies v. Facebook is so instructive. Instead, it tells us the specification of a provisional application must support each claim that is subsequently submitted with the nonprovisional application to maintain the provisional filing date. Finally, a provisional specification may not support the claims which may not be discovered until invalidating commercialization has occurred.

Copyright © 2012 Robert Moll. All rights reserved.