Supreme Court Hears Helsinn v. Teva: Does On-Sale Bar Capture Secret Sales

By Steve Brachmann
December 9, 2018

SCOTUS Hears Helsinn v. Teva: Does On-Sale Bar Capture Secret SalesOn the morning of Tuesday, December 4th, the U.S. Supreme Court held oral arguments in the case of Helsinn Healthcare S.A. v. Teva Pharmaceutical USA (transcript of oral arguments here). This case asks the nation’s highest court to determine whether the sale of a patented invention which required the purchaser to keep the invention confidential (i.e.: a “secret sale”) qualifies as invalidating prior art under the on-sale bar found in 35 U.S.C. § 102(a)(1).

Oral arguments began with Kannon Shanmugam, counsel representing petitioner Helsinn, who discussed the changes to patent law wrought by the America Invents Act (AIA) of 2011, including the clarification of the on-sale bar. Shanmugan contended that, for a patented invention to be “on sale” in a way that triggers the on-sale bar, it has to be on sale to the public at large:

“And so, for instance, if after this argument in the lawyers lounge I turn to my friend, Mr. Jay, and I say, I see that you didn’t bring a coat today, I’ll sell you my coat for $5, I’m not sure that that would be putting my coat on sale in the same way that it would be if I turned around to the audience and said I’ll sell this coat to the highest bidder.”

Shanmugan contended that if the Supreme Court adopted the interpretation that required public availability to trigger the on-sale bar, it wouldn’t create a conflict with precedent set in cases like Pfaff v. Wells Electronics where sales occurring more than one year prior to the filing of a patent application were considered to be invalidating prior art. While Shanmugan agreed that Justice Learned Hand’s opinion in the Second Circuit’s 1946 decision in Metallizing Engineering v. Kenyon Bearing & Auto Parts did stand for the prospect that any sale has a commercial aspect for it, he argued that Justice Hand’s opinion didn’t preclude all pre-patent commercialization.

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The issue discussed at oral arguments was the way the AIA changed the language of Section 102. Shanmugam argued that Supreme Court precedence understands catch-all phrases found in statute as shedding light on the language preceding them; thus, “or otherwise available to the public” was an indication that to be “on sale” meant that the public had to have commercial access to the invention. Justice Brett Kavanaugh noted that multiple efforts to remove “on sale” from the prior statute had failed. “You don’t think it would have been easier to just change it directly, as many members of Congress tried to do repeatedly and failed?” Kavanaugh asked. Shanmugam argued that retaining the “on sale” provision while adding the new language ensured reaching all forms of prior art while clarifying that prior art must be publicly available.

Following Shanmugan was Malcolm Stewart, counsel representing the U.S. federal government in support of Helsinn. There were two reasons why Helsinn’s secret sale transaction with MGI Pharma shouldn’t trigger the on-sale bar provision, Stewart argued. First, MGI hadn’t agreed to administer Helsinn’s cancer therapy directly to patients but rather was to function as a reseller of the medicine. Second, the transaction was subject to various contingencies and so there was no assurance that title would pass to MGI.

Stewart analogized the situation to that of an iPhone, where a train of transactions with wholesalers and retailers before it reached consumers. He also argued that the Court’s decision in Pfaff strongly indicated that a sale for experimentation rather than a sale for using a product to achieve its intended benefits wasn’t a sale that would trigger the on-sale bar.

Next was William Jay, counsel representing respondent Teva, who argued that the term “on sale” covered not only sales but also offers for sale. Jay argued that offers for sale were important in part because the offer shows the inventor’s willingness to commercialize the invention, meeting the second half from the test from Pfaff which shows that the invention is ready for patenting.

Justice Samuel Alito said that the most serious argument for Jay to deal with was the plain meaning of the new statutory language under the AIA; if “on sale” meant on sale publicly and privately, then the “or otherwise available to the public” language wouldn’t make much sense in the context of the statute. “It would be nonsense because the meaning of “otherwise” is … to do the same thing in some other manner,” Justice Alito said. Jay countered by arguing that the function of the term “otherwise” indicated overlap between the invalidating categories in Section 102(a)(1) and the new catch-all provision added by the AIA. “We think that the best reading of this new category is that it creates a new set of invalidating prior art and it does not unsettle any of the prior categories, whether patented, described in a printed publication, in public use, or on sale,” Jay said.

Jay argued to the court that a virtue of Teva’s position is that there was no need to get into the question of what it means to be available to the public when considering a sale. He noted that the first part of the Federal Circuit’s decision below dealing with whether the Helsinn/MGI transaction was a sale instead of a development agreement, is a question Helsinn did not ask SCOTUS to take up in its petition for certiorari.

Shanmugam had reserved some of his time to deliver a rebuttal at the end of oral arguments. He contended that Jay’s position would wind up with the word “otherwise” being read out of the statute. One of various examples used to explore how the context of the statutory language should be used to interpret the meaning of the statute came from the Supreme Court’s 1920 decision in United States v. Standard Brewery, a case involving a provision of the Wartime Prohibition Act which prohibited the use of grains to manufacture “beer, wine, and other intoxicating malt or Venice liquor for beverage purposes.” The Supreme Court ended up holding that the statute didn’t apply to makers of non-alcoholic beer because the qualifying words “other intoxicating” couldn’t be rejected. “I would respectfully submit that Mr. Jay really has no alternative way of reading the very familiar term ‘otherwise,’” Shanmugam said.

A decision in the case is expected to be delivered by the end of the Court’s term in June 2019. “With the final few weeks of the Supreme Court’s term being dominated by the most important and contentious cases, I’d expect a decision in Helsinn sometime in April,” said Gene Quinn, patent attorney and President & CEO of IPWatchdog, Inc.

 

Image Source: Deposit Photos.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

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.

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There are currently 2 Comments comments. Join the discussion.

  1. Mark Martens December 10, 2018 3:30 am

    Conceptually interesting.

  2. Anon December 10, 2018 7:52 am

    Shanmugan faced a Court (particularly, but not exclusively Breyer) that simply lacks reverence for the limited authority of the Supreme Court – legislating from the Bench is thus indicated as a strong possibility of continuing.

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