Supreme Court Follows “On Sale” Bar Precedent in America Invents Act Decision

Earlier this year, the Supreme Court addressed the “on-sale” provision of the AIA, 35 U.S.C. Sec 102(a), in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. In this case, the patent owner, Helsinn, entered into a license agreement and a supply and purchase agreement with a third party. These agreements gave the third party the right to distribute, promote, market and sell the drug in question. In return, Helsinn received upfront and future royalty payments. The agreements required the third party to keep Helsinn’s proprietary information confidential. The effective filing date of Helsinn’s patent was nearly two years after the two agreements were executed.

The District Court held that the “on sale “ bar did not apply, concluding that under the AIA, an invention is not “on sale” unless the sale or offer made the claimed invention available to the public. The Federal Circuit reversed, concluding that if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of the sale to fall within the AIA on sale bar.

The Supreme Court affirmed. The issue as phrased by the Court was whether, under the AIA, “an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.” The Court concluded “such a sale can qualify as prior art.” As noted by the Supreme Court in its Pfaff decision over twenty years ago, every patent statute since 1836 included an on sale bar provision. Under Pfaff, the Court had ruled (pre-AIA) the on sale bar applies if two conditions are met. First, the product must be the subject of a commercial offer for sale. Second, the invention must be ready for patenting (which can be shown by proof of reduction to practice, or drawings or descriptions of the invention that are sufficiently specific to enable a person of skill in the art to practice the invention). The Court noted it had previously suggested that a sale or offer need not make an invention available to the public. It also noted the Federal Circuit’s decisions had made explicit that “secret sales” could invalidate a patent.

The Court’s decision was based on its determination that when Congress reenacted the on sale bar language in the AIA that was found in the pre-AIA statute, that Congress had adopted the earlier judicial construction of that phrase. The fact that additional language appears in the AIA statute (“otherwise available to the public) did not change that body of precedent according to the Court. The Court also noted that Helsinn was not asking the Court to re-visit pre-AIA precedent. Since it had concluded that Congress did not alter the meaning of “on sale” when the AIA was enacted, the Court held an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential can qualify as prior art under Section 102(a).