Distribution Agreement Considered a Commercial Offer and On-Sale Bar

Distribution Agreement Considered a Commercial Offer and On-Sale BarMeds. Co. v. Hospira, Inc., Nos. 2014-1469, 2014-1504, (Fed. Cir. Feb. 6, 2018) (Before Dyk, Wallach, and Hughes, J.) (Opinion for the court, Hughes, J.).

The Medicines Company owns patents ‘727 and ‘343, which cover an improved process for manufacturing a bivalirudin product, marketed as Angiomax. The improved mixing method covered by the patents was incorporated into the company’s master batch record on October 25, 2006 and used by Ben Venue Laboratories, a contract manufacturer, on all Angiomax batches since October 31, 2006. On February 27, 2007, The Medicines Company entered into a Distribution Agreement with Integrated Commercialization Solutions, Inc. (ICS). On July 27, 2008, The Medicines Company filed the ‘727 and ‘343 patent applications.

Hospira, submitted an Abbreviated New Drug Application (“ANDA”) to the Food and Drug Administration (“FDA”) to market generic Angiomax, The Medicines Company sued Hospira for infringement of the ‘727 and ‘343 patents under 35 U.S.C. § 271(e)(2). Hospira asserted patent invalidity. The district court held that the patents were neither invalid nor infringed, and both parties appealed.

The Federal Circuit affirmed the court’s finding of non-infringement. It reversed the finding that the Distribution Agreement between The Medicines Company and ICS was not a commercial offer for sale, for the purposes of the on-sale bar, and remanded for a determination of whether this offer covered the patented invention.

First, Hospira did not infringe the patented method because its mixing process did not satisfy the “efficient mixing” limitation of the ‘727 and ‘343 patents. Rather than adding the pH-adjusting solution at a controlled rate and using both a paddle mixer and homogenizer, as required by the claims, Hospira added the solution in three portions using a single mixer.

Second, under the on-sale bar, a patent is invalid if, before the critical date: (1) the product is the subject of a commercial offer for sale, and (2) the invention is ready for patenting. Pfaff v. Wells. Elecs., Inc., 525 U.S. 55, 67 (1998). The Uniform Commercial Code (UCC), while not dispositive, is a useful guide for determining if a commercial offer for sale was made.  Here, the Distribution Agreement between Medicines Company and ICS established a commercial offer for sale, by providing:

  1. That The Medicines Company desired to sell the product to ICS and ICS desired to purchase and distribute the product;
  2. The price of the product;
  3. The purchase schedule; and
  4. That title would pass from The Medicines Company to ICS.

The term allowing The Medicines Company to reject submitted purchase forms did not defeat this from being considered an offer for sale within the meaning of 35 U.S.C. § 102. This was true because the Agreement required The Medicines Company to use commercially reasonable efforts to fill the purchase orders.  Additionally, because The Medicines Company derived the majority of its revenue from Angiomax sales, a rejection of an order was unlikely.

The Federal Circuit reiterated that the on-sale bar does not exempt commercial agreements between a patentee and its supplier or distributor. It is the commercial character of the transaction that is more relevant than the parties involved when assessing whether there was a commercial offer for sale.

For the on-sale bar to apply, the invention as defined by the patent claims must be on sale. The Court remanded for a determination of whether the Distribution Agreement offered for sale the Angiomax product created by the improved mixing process claimed by the ‘727 and ‘343 patents.

Finally, the Court affirmed the district court’s holding that the invention was ready for patenting before the critical date. An invention is ready for patenting when it is reduced to practice or is “depicted in drawings or described in writings of sufficient nature to enable a person of ordinary skill in the art to practice the invention.” Hamilton Beach Brands, Inc. v. Sunbeam Prods., Inc., 726 F.3d 1370, 1375 (Fed. Cir. 2013). Here, Ben Venue reduced the invention to practice by producing batches of Angiomax using the patented process by following the master batch record which disclosed how to do so.

Take Away

A distribution agreement between a patentee and its supplier or distributor may constitute a commercial offer for sale for the purposes of the on-sale bar even the agreement does not specifically dictate the amount of product to be sold. Including the product price, purchase schedule, and terms that establish a transfer of title are sufficient to constitute a commercial offer for sale if the agreement actually covers the patented invention.

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Robert Schaffer

Robert Schaffer is an intellectual property partner at Troutman Sanders. Bob applies more than 30 years of experience to IP counseling and litigation. His work includes patent procurement, strategic planning and transactional advice, due diligence investigations, district court patent cases, and Federal Circuit appeals. He regularly handles complex and high-profile domestic and international patent portfolios, intellectual property agreements and licensing, IP evaluations for collaborations, mergers, and acquisitions. In disputed court cases Bob’s work includes representing and counseling client in ANDA litigations, complex patent infringement cases and appeals, and multidistrict and international cases. In disputed Patent Office matters his work includes representing and counseling clients in interferences, reexaminations, reissues, post-grant proceedings, and in European Oppositions. For more information and to contact Bob please visit his profile page at the Troutman Sanders website.

Robert Schaffer

Joseph Robinson has over 20 years of experience in all aspects of intellectual property law. He focuses his practice in the pharmaceutical, life sciences, biotechnology, and medical device fields. His practice encompasses litigation, including Hatch-Waxman litigation; licensing; counseling; due diligence; and patent and trademark prosecution. He has served as litigation counsel in a variety of patent and trademark disputes in many different jurisdictions, and has also served as appellate counsel before the Court of Appeals for the Federal Circuit. Joe also focuses on complex inter partes matters before the U.S Patent and Trademark Office, inventorship disputes, reexaminations and reissues. His experience includes numerous interferences, a particular advantage in new U.S. Patent and Trademark Office post-grant proceedings. He also counsels on patent–related U.S. Food and Drug Administration issues, including citizen petitions, Orange Book listing, and trademark issues. For more information and to contact Joe please visit his profile page at the Troutman Sanders website.

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