Why Helsinn v. Teva Creates Inscrutable Uncertainty About the Scope of Prior Art Instead of Confirming Longstanding Law

By Hans Sauer
February 5, 2019

“Helsinn didn’t confirm longstanding law. That longstanding law changed with the enactment of the AIA anyway, and it would be foolish to assume that old judicial doctrines about secret commercialization of inventions are going to operate in “long-established” ways when forced into a new statute that was not designed to accommodate them.”

https://depositphotos.com/3490146/stock-photo-uncertainty-green-road-sign-over.htmlTo the casual observer, the Supreme Court’s January 23 decision in Helsinn v. Teva may seem like no big deal. In just a few pages of text, the Court informs us that Congress did not change the established meaning of “on sale” prior art when it rewrote Section 102 of the Patent Act in 2011. Move along, nothing to see here, right? More than a few commentators seem to assume that we’ll simply return to the pre-America Invents Act (AIA) status quo, and that sales of an invention, whether public or private, will just continue to trigger a familiar statutory one-year clock for filing a patent application.

But nothing could be further from the truth. In fact, the impact of private sales (and of non-public commercial uses) on the patentability of later-filed patent applications will be significant, and very different from pre-AIA law. Patent applicants and owners of patents that were issued under the AIA have every reason to worry about traps for the unwary.

Let’s start with the scope of the Helsinn opinion. The opinion makes clear that the AIA phrase “or otherwise available to the public” in the new 35 USC 102(a) is merely a catchall category that supplements, but does not modify, the preceding traditional enumerated categories of prior art: patented, printed publication, in public use, or on sale. Thus, to the extent these traditional categories had a settled judicial interpretation at the time of the AIA’s enactment, that old interpretation continues to apply just as it does for “on sale.” The settled patent-defeating effect of prior secret commercial uses immediately comes to mind. Not only is the Court’s reasoning directly applicable to commercial uses, the Court also more than hints that secret commercial sale and secret commercial use are to be treated similarly when it endorses dictum from the Federal Circuit’s 1998 Woodland Trust decision (“… an inventor’s own prior commercial use, albeit kept secret, may constitute public use or sale under 102(b), barring him from obtaining a patent.”).

It is safe to assume from this that the opinion reaches not just private sales, but also secret, business-internal “commercial” use of the invention—even if nothing was sold. Many readers may think that this still doesn’t make the decision a big deal. Prior to the AIA, it was well-understood that an inventor’s secret “commercialization” of an invention, through sale or use, could bar the inventor from later receiving a patent. It’s just going to be business as usual, right? Well, no. Helsinn created a host of problems that never were the law before or after the AIA. It’s not going to be business as usual for at least the following reasons.

Foreign Activities Now Count

Prior to the AIA, purely foreign use or sale of an invention did not count as prior art, regardless of whether it was public or secret. The AIA, however, eliminated all such geographic distinctions. If non-public commercialization through sale or use had a patent-barring effect if it occurred in the United States prior to the AIA, after the AIA it is now going to have that same effect even if it occurred outside the United States. This is an expansion that sets up traps for foreign and domestic patent applicants alike. Confidential transactions or activities in foreign countries that are perfectly acceptable under those countries’ patent laws, and that were always immaterial under U.S. patent law, can now have a patent-defeating effect in the United States. This was never the law before the AIA.

Don’t Assume There is Still a Grace Year (And if You Do Sell or Use Your Invention, Better Do So Publicly)

Prior to the AIA, an inventor who commercialized an invention—regardless of whether it was done publicly or confidentially—had up to one year to prepare and file a patent application. This was known as the “grace year;” a major feature of the pre-AIA system as discussed in the Supreme Court’s 1998 Pfaff opinion. But that grace year became history with the enactment of the AIA,  a fact that may not have sunk in with more than a few commentators who have been saying that commercial sale or use of an invention after Helsinn merely continues to trigger the familiar one-year window for filing a patent application.

Instead of the old grace year, the AIA created certain “disclosure” exceptions under which the inventor’s own disclosures would be excluded from prior art for up to one year before the patent application filing date. Thus, in order to know whether a patent application can be filed at all after a confidential sale or trade secret commercial use, one would need to know whether such non-public activities would qualify as a “disclosure.” Arguably, a confidential sale might be deemed a disclosure from one party to another (albeit a confidential one), so maybe, just maybe, an inventor still has up to a year after such a transaction to file a patent application. But what if the invention wasn’t sold, but merely used commercially, under trade secrecy in the inventor’s own business? Most people would consider such use the antithesis of “disclosure,” however that word might be construed, and it is hard to see why the AIA’s “disclosures” exception would apply.

Bottom line, there is a high chance that, after Helsinn and under the AIA, commercialization of an invention through secret sale or use would instantly destroy the patentability of that invention—no more grace year for you. Not even a grace day. What’s more, if such a sale or use were instead conducted publicly, it would surely fall into the new “inventor disclosure” exception and would still be patentable for up to one year. Such irrational results, where the patentability of an invention would be preserved by public use but destroyed by secret use, were never the law before the AIA.

Your Patent May Now be Invalid Because of Someone Else’s Secret Activities

This is perhaps the most troubling implication of the Helsinn decision—not just because it is such a big departure from pre-AIA law, but also because at least one Justice understood what the Court was doing. Consider this short exchange from the Helsinn oral argument:

JUSTICE KAGAN: Mr. Jay, would the prior secret sale of an invention by somebody other than the patentholder invalidate the patentholder’s patent?

MR. JAY: I think the answer is yes, but I — I’ve not seen cases like that because I think it would be exceptionally difficult to discover.

Let this sink in for a moment. Before the AIA, it was well-understood that secret commercialization of an invention through sale or use by the inventor can operate like prior art against that inventor’s subsequent patent application. If you made a secret sale or commercial use of an invention, that sale barred YOU from getting a patent after a year, but not other inventors. This was well-established in the law; the Federal Circuit’s 1983 W.L. Gore case provides a good example. Roughly speaking, pre-AIA law treated secret commercialization as a form of self-inflicted harm that did not extend to innocent third-party patent applicants if the invention really wasn’t publicly available. The old Patent Act was full of such personal forfeiture provisions that ruined a patent applicant’s chance of getting a valid patent even if the invention, if it had been made by another, would have met all requirements for novelty and non-obviousness. Examples include abandonment under old section 102(c); premature foreign patenting under old 102(d); obviousness under section 103/old 102(f); suppression or concealment under old 102(g)—all of which were abolished in the AIA.

Squint as one might, the new section 102 simply does not contain one rule of novelty that applies only to one patent applicant and another rule of novelty that applies to all other patent applicants. If an instance of secret commercialization is prior art against one patent applicant (as Helsinn tells us it is), it must now also be prior art against all other patent applicants. And the new “inventor disclosure” exceptions at 102(b) do not help because they don’t shield innocent third-party applicants from the prior art effect of someone else’s secret sale.

To illustrate: Under the AIA after Helsinn, if inventor A makes a secret commercial sale of his invention, he creates prior art under 102(a)(1). That is now the default rule. The only way under which that secret sale would not constitute prior art would be through application of the new “inventor disclosures” exceptions at new 102(b). It is questionable whether that would work even for inventor A, because the answer depends on whether A “disclosed” his invention by selling it in secret. But whether or not A is shielded from the consequences of his secret sale is not the point here. The real concern is about inventor B, who had no connection to A, could not have known of A’s secret sale, and didn’t sell, use, or disclose her invention to anyone before diligently filing her patent application. B, arguably the more responsible actor, can’t invoke any of the new prior art exceptions (she did not “disclose”), and likely will find herself with an invalid patent because of A’s secret prior sale. That was never the law.

One final observation on this point: does it matter? Wouldn’t it be highly unlikely that such instances of secret, prior, third-party commercialization would ever be discovered in later patent infringement litigation? Who knows? Historic experience is nothing to go by, because in the past this question simply didn’t matter. Going forward, is it really that difficult to imagine well-heeled defendants in infringement litigation going out to a patentee’s competitors in the same technology to ferret out possible instances of non-public commercialization that would antedate the patent’s filing date?

The Wrap-Up

A Chinese and a Korean company conduct confidential negotiations in Hong Kong. An undisclosed transaction takes place under which custom-designed machine control modules are sold for trade secret use in the purchaser’s manufacturing plant in Vietnam. One week after that secret sale and 8,000 miles away, a U.S. patent applicant who independently invented, and has no connection to these events, files a patent application in the USPTO. An invalid patent issues in due course, because neither the applicant nor the examiner could have known of the secret Hong Kong transaction between these unrelated parties. Sound absurd or unfair? That may depend on one’s perspective. The point is only this: Helsinn didn’t confirm longstanding law. That longstanding law changed with the enactment of the AIA anyway, and it would be foolish to assume that old judicial doctrines about secret commercialization of inventions are going to operate in “long-established” ways when forced into a new statute that was not designed to accommodate them. Instead of needed clarity, businesses and patent owners are only left with uncertainty that is greater than it ever was under pre-AIA law.

Image Source: Deposit Photos
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Copyright: Feverpitch 

The Author

Hans Sauer

Hans Sauer is Deputy General Counsel and Vice President for Intellectual Property for the Biotechnology Innovation Organization (BIO), a major trade association representing more than 1,000 biotechnology companies from the medical, agricultural, environmental, and industrial sectors. At BIO, he advises the organization’s board of directors, amicus committee, and various staff committees on patent and other intellectual-property-related matters. Before taking his current position at BIO in 2006, he was chief patent counsel for MGI Pharma Inc. in Bloomington, MN, and senior patent counsel for Guilford Pharmaceuticals Inc. in Baltimore, MD. Mr. Sauer holds a M.S. degree in biology from the University of Ulm in his native Germany, a Ph.D. in neuroscience from the University of Lund, Sweden, and a J.D. degree from Georgetown University Law Center, where he serves as adjunct professor.

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 15 Comments comments. Join the discussion.

  1. Josh Malone February 5, 2019 7:59 pm

    Conclusion – AIA was an ill-conceived, stupid, gargantuan self destruction of the United States Patent system. I am working with US Inventor to put it back to together.

  2. Lost In Norway February 6, 2019 5:46 am

    I must admit skepticism and unease when the ruling came down that a secret sale is prior art by “business as usual” argumentation. Even if I do believe that these should be prior art, I understand that maybe there needs to be a different threshold than before; now that activity all over the world by those that you can’t control is involved. However, what worried me more was that the language of the statute seemed pretty clear.

    The idea that there was nothing in the law as written that indicated that secret sales as prior art had changed, was strange. SCOTUS pretty much said that since it wasn’t explicitly written out, they couldn’t see how the standard had changed and they were going to “clean up” this oversight. I find that worrying, particularly in light of what they did in Alice. What is next on the list?

  3. Anon February 6, 2019 6:58 am

    Josh,

    Reminds me of a classic joke cast in an AIA version:

    Q: how does the AIA make you into a millionaire?

    A: start with 10 million…

  4. EG February 6, 2019 8:58 am

    Hey Hans,

    Just more proof that the AIA is the Abominable Inane Act. Shame on Congress for passing such an ill-conceived and poorly drafted piece of legislation, if you can call it that.

  5. Jeffrey Sheldon February 6, 2019 10:32 am

    excellent article. Will be drawing on it in a course I teach.

  6. Josh Malone February 6, 2019 12:50 pm

    Anon, I laughed at your joke upon first read. Then I grieved because I personally know several inventors who were millionaires and now they are broke or in debt because of the AIA. It is an ongoing massive transfer of wealth to the 1%

  7. SteveT February 6, 2019 3:14 pm

    I fear this decision will create a cottage industry for fabricating back-dated “secret sales.”

    Background: I’ve seen fabricated documents produced to courts. My jaw has dropped as attorneys I once thought honest submit them, and on one occasion watched a judge not only allow one into evidence, but used that back-dated fabrication as the foundation of a decision.

    PS: @Josh — are you proposing to “put back together” the AIA or the US Patent System?

  8. Anon February 6, 2019 3:17 pm

    It is an ongoing massive transfer of wealth to the 1%

    Cheered on by more than one philosophical camp at that.

    As I have long attempted to keep people aware of, the “anti-patent” that fosters such as the AIA comes from more than one angle.

    Those that seek to promote innovation and want a strong patent system have to fight a multi-front war.

  9. John O February 6, 2019 3:35 pm

    Hans,

    Wouldn’t secret commercial uses over a year of another before the filing date of a patent be subject to the prior user defense? In that case, I can’t imagine secret commercial uses qualifying as prior art given the clear Congressional intent to create only a narrow safe harbor for prior users instead of allowing them a total prior art defense.

  10. Anon February 6, 2019 5:58 pm

    SteveT,

    It’s worse than that: the shenanigans may be entirely perpetrated under foreign direction/control (and by “foreign” I include entities that may ALSO have a presence in the US and be considered a Juristic US person), and such “direction/control” may be entirely outside of US jurisprudential control/discipline.

    The AIA opened up things world-wide. One heckavu Pandora’s box…

  11. Anon February 7, 2019 7:34 am

    John O,

    The PUR (Prior User ‘R’ight) is a submarine defense AGAINST a patent holder.

    You are correct though in bringing this out for discussion, as clearly the PUR was viewed as a defense against the ‘stick’ of the patent holder for the single entity that can prove the particular secret use met the requirements of PUR, and NOT – as the Helsinn decision renders the situation: a bomb that destroys the patent against all.

    The Royal Nine aimed for “simplicity” when such simplicity violated Einstein’s admonition against simplicity, and they did so (yet again) at the expense of the patent holder.

    Congress: wake up, take back your authority, and keep your authority by exercising your Constituional power of jurisdiction stripping.

  12. Hans February 7, 2019 10:24 am

    John O – I agree. If Congress wanted non-public commercial use to be prior art, why would it have created a prior commercial user defense? If you commercially used the invention behind your factory walls you could just use that to invalidate any later patent; you wouldn’t need the special non-infringement defense at Section 273.
    Your question, however, goes to Congressional intent. It is fairly clear that the Supreme Court here didn’t care what Congress may have intended, and you rightly point to yet another provision of the AIA that doesn’t make sense if the Supreme Court is right.

    To my mind, the AIA sure looks like a very poor fit for our traditional categories of ‘secret prior art.” That fact could have told the Court something about Congressional intent. And looking at least a little bit at the statutory context of the new section 102 would have helped to construe the new “otherwise available to the public” language.

    But maybe that would have been too complicated. The Court may have thought this case is so easy. During oral argument they were joking and laughing about it.

  13. Todd Juneau February 9, 2019 3:31 pm

    Thanks Hans. Brilliant insight. Helsinn made me wonder where does this all end? As I think about the routine activities of in-house inventors, start-up companies, and Universitiy researchers, I wonder which of these activities might constitute a commercial use or a sale? I’m glad you wrote this.

  14. PTO-Indentured February 12, 2019 9:26 am

    Ambiguity in patent rule-making is all that is needed to keep U.S. patents severely compromised. Show us Congress and the PTO that you know how — and are willing — to remove the fog.

  15. Anon February 12, 2019 12:50 pm

    The PTO’s (proper) role is to execute the law.

    As Director Iancu expressly notes, that law (vis a vis the Common Law re-written — and continuely BEING re-written dictates of the judicial branch) has rendered a Gordian Knot of conflicts.

    THAT Gordian Knot cannot be “executed” properly or consistently, no matter the protocol provided.

    THAT Gordian Knot may be cut with the Kavanaugh Scissors.***

    Else, it is up to a fractured (and mostly captured) Congress to somehow address that Gordian Knot.

    *** the concept of the Kavanaugh Scissors has been explored across a number of recent and semi-recent threads, but boils down to a pair of pronouncements coming from Justice Kavanaugh: one in a holding and one in oral arguments.

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