CAFC Interprets AIA On-Sale Bar: Invention details need not be public for sale to be invalidating

By Gene Quinn
May 1, 2017

Judge Dyk

Judge Dyk

Earlier today the United States Court of Appeals for the Federal Circuit issued a major decision interpreting provisions of the America Invents Act (AIA), specifically the AIA on-sale bar provisions. In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the Federal Circuit panel of Judges Dyk, Mayer and O’Malley determined: “after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale” for the sale to be invalidating. In so reaching this ruling the Federal Circuit has largely done away with the belief that the AIA created some kind of safe harbor for sales that did not disclose the details of the claimed invention.

After first determining that a sale had occurred, the Federal Circuit turned to the language of the statute and the legislative history of the AIA. “We next address whether the AIA changed the meaning of the on-sale bar under 35 U.S.C. § 102 so that there was no qualifying sale as to the ‘219 patent,” Judge Dyke wrote.

Teva and various amici argued that the AIA did not change the law with respect to the meaning of the term “on sale,” while Helsinn and the government argued that the AIA did change the law, which no longer encompasses secret sales and requires that a sale make the invention available to the public in order to trigger application of the AIA on-sale bar. The argument of Helsinn and the government was primarily based on the legislative history, and more specifically floor statements made during debate of the AIA. Before proceeding to the merits of what was contained in the floor statements, the Federal Circuit pointed out the obvious – that floor statements are not typically reliable indicators of Congressional intent, citing the U.S. Supreme Court for support.

The Federal Circuit quoted excerpts from statements by Senator Patrick Leahy (D-VT), who explained in his opinion “Section 102(a) was drafted in part to do away with precedent under current law that private offers for sale… may be deemed patent-defeating prior art.” The Court also pointed to an excerpt from then Senator Jon Kyl (R-AZ), who explained in his opinion the AIA precluded the extreme results that occur from “commercialization that merely consists of a secret sale or offer for sale.”

Judge Dyk explained the Court declined the invitation to decide this matter more broadly than necessary, and would limit its ruling to the issue of sales, saying nothing about public use which is not before the panel at this time with these facts.

“The floor statements do not identify any sale cases that would be overturned by the amendments,” Dyke wrote. “Even if the floor statements were intended to overrule those secret or confidential sale cases… that would have no effect here since those cases were concerned entirely with whether the existence of a sale or offer was public. Here, the existence of the sale… was publicly announced in MGI’s 8-K filing with the SEC.”

Helsinn also argued that the “otherwise available to the public” language of the AIA required the details of the claimed invention be publicly disclosed before the AIA on-sale bar is triggered. Dyk wrote that such a rule would require “a foundational change in the theory of the statutory on-sale bar.” Not only would such a ruling require overruling Federal Circuit precedent, but such a ruling would require the panel to overrule Supreme Court precedent, which the Court was not about to do.

Dyk pointed out that there are no floor statements or anything else in the legislative history that suggest that a sale or offer for sale must itself publicly disclose the details of the claimed invention to become invalidating. To the contrary, then Senator Kyl acknowledged in the legislative history “once a product is sold on the market, any invention that is inherent to the product becomes publicly available prior art and cannot be patented.”

Had Congress wanted to so fundamentally change the law surrounding the on-sale bar they would have, and should have done so in clear language, Dyk explained.

Given the limited nature of the ruling, and the fact that it does not apply at all to public use, we can expect a series of additional rulings to continue to build out our understanding of the exact scope of the AIA on-sale bar. Having said that, for those who were anticipating relying on the legislative history as evidence that the AIA changed the law relative to secret sale and secret uses, Helsinn Healthcare has to raise significant doubts.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 6 Comments comments. Join the discussion.

  1. Anon May 1, 2017 4:15 pm

    So,…

    If I offer for sale a “genuine” Star Trek replicator machine that materializes any requested item, such an offer sale automatically [pun intended] creates prior art with NO actual invention details required…

    Dyk’s view, taken to its logical extreme brings about the exact opposite of the clear intentions of Congress, not to mention common sense.

    It is time for Dyk to be put out to pasture.

    Congress – take heed of what the judicial branch is doing. When you exercise your Constitutional power of jurisdiction stripping of the the non-original jurisdiction of patent appeals from the Supreme Court, do not forget to eradicate the trained simians in the cage of the CAFC and please create a new Article III patent court.

  2. anon May 2, 2017 4:23 am

    @1 I assume that you still have to be able to prove that your replicator machine actually worked (at the relevant date) and that, at least in theory, the invention was reverse engineerable (is that a word?). But I may be wrong. Didn’t study the details of this case.

  3. Anon May 2, 2017 11:52 am

    anon @2,

    No – that is the “kicker” in what Dyk has written – there need be no actual revelation of the ‘workings’ (or lack thereof) at the critical date of the sale, or offer for sale.

    The case itself may be less than clear in that point, given as in the instant case, Dyk also overturned the lower court’s determination as to “ready for patenting.”

    By that (overturning the lower court’s determination of “ready for patenting”) as it may, Dyk’s pronouncement eliminates the need for any revelation or even fact of working for the point that the critical date of sale (or offer for sale) is the date of prior art.

    That is the point of Dyk’s lunancy here.

  4. DaveR May 2, 2017 3:40 pm

    For whom is that sale invalidating per Judge Dyk? Certainly for the party offering or making the sale of the subject matter that would otherwise be patentable subject matter. But what about third parties who independently conceive of and develop the same or overlapping patentable subject matter and file for a US patent on same? Are they also to be barred? Would the same result occur if the otherwise patentable subject matter involved in the offer or actual sale is a process that was used to produce the product of that offer or sale? What if even the most sophisticated analytic analysis of the product that was sold could not result in disclosure or reconstruction of the process used to make that product? Is this CAFC decision barring patentability of that process subject matter to an independent third party inventor?

    The AIA needs to be amended, in more ways than Anon described. The area of conflict between patent and trade secret law could be reduced by action of Congress.

  5. Anon May 3, 2017 6:09 am

    DaveR,

    The direct answer to your questions as to third parties is yes – all parties are now barred by the prior art, even in the absence of any such prior art.

    One can easily extend this nullification to anything out of straight imagination by offering that (current state of imagination) “item” for sale. Actuality is no longer required, under the ultimate use of the Dyk “logic.”

  6. Jim Demers July 11, 2017 3:32 pm

    There are two different policies informing the on-sale bar. One is the “public disclosure” issue, which is really an aspect of the novelty requirement. This requires that the public be put in possession of invention itself. An offer for sale, without details of the structure of the product, or an offer for sale of a product produced by a secret process, does not create a bar under this aspect of the statute.

    The other policy is that a party should not be able to profit from an invention, and then at some later date (past any statutory grace period) apply for patent protection. That’s seen as an impermissible extension (into the past) of the 20-year monopoly granted by the patent statute. (The statute could fix this by shortening the term of the patent accordingly, but instead the law bars the patent entirely.) This policy requires that “secret sales” be counted as triggers of the on-sale bar; otherwise a party could simply attach an NDA to every sales offer, profit for many years, and only apply for a patent when reverse-engineered knock-offs seem imminent.

    The CAFC’s decision that public knowledge of the sale somehow triggers a bar makes absolutely no sense under either policy.

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