Federal Circuit Clarifies On-Sale Bar Under America Invents Act

Federal CircuitHelsinn Healthcare S.A. v. Teva Pharms. USA, Inc., (Fed. Cir. May 1, 2017) (Before Dyk, Mayer, and O’Malley, J.) (Opinion for the court, Dyk, J.)

Helsinn entered into a contract for sale of its anti-nausea product more than one year before applying for its three pre-AIA patents (the critical date). The parties agreed that the same critical date applied to its for post-AIA patent. The four patents are directed to reducing chemotherapy-induced nausea and vomiting in cancer patients using intravenous delivery of low-concentration palonesetron. The Federal Circuit reversed the district court and held that Helsinn’s pre-AIA patent claims, “were subject to an invalidating contract for sale prior to the critical date,” and furthermore, “the AIA did not change the statutory meaning of ‘on sale’ in the circumstances involved here.” The asserted claims of the post-AIA patent were also ready for patenting prior to the critical date.

On April 6, 2001, before the critical date, Helsinn entered into two agreements with MGI Pharma, Inc., including a Supply and Purchase Agreement. The agreements were announced via press release, which included redacted copies (price and specific dosage formulations were omitted). The Supply and Purchase Agreement included a provision conditioning performance on favorable clinical trials and FDA approval. On January 7, 2002, Helsinn prepared a preliminary statistical analysis of the earliest Phase III Trial. On January 30, 2003, Helsinn filed a provisional application covering the formulation (making the critical date January 30, 2002).

In 2011, Teva filed an ANDA seeking FDA approval to market a generic version of Helsinn’s patented product. Helsinn sued Teva for patent infringement based on the ANDA filing. The district court found that Teva’s generic product infringed Helsinn’s patents. Teva argued that the patents were invalid under the on-sale bar, because of the Supply and Purchase Agreement. The district court disagreed. For the pre-AIA patents, it applied the two-step inquiry in Pfaff v. Wells Electronics. First, was there a sale or offer for sale of the patented product? Second, was the claimed invention ready for patenting? The court concluded that the Supply and Purchase Agreement operated as a contract for future sale, and the invention was not reduced to practice and ready for patenting at the time of the Agreement. For the post-AIA patent, the court found that the AIA changed the on-sale bar, to require a “public” offer for sale. While the existence of the Agreement was made public, dosage covered by the agreement were not publicly disclosed. Teva appealed.

The Federal Circuit addressed three issues: 1) whether the invention of the pre-AIA patents was subject to a sale or offer for sale prior to the critical date; 2) whether the AIA changed the meaning of the on-sale bar; and 3) whether the invention was ready for patenting as of the critical date.

The Court found that the Supply and Purchase Agreement operated as an offer for sale. It had the hallmarks of a commercial offer for sale. This differed from Medicines Co. v. Hospira, Inc., where the contract was not an offer for sale, due to an absence of the passage of title, the confidential nature of the transaction, and the absence of commercial marketing. The Court found none of those characteristics in Helsinn’s Supply and Purchase Agreement. The Court rejected Helsinn’s argument that there was no offer for sale because performance was contingent on FDA approval of the product. A contract containing a condition precedent is a valid and enforceable contract. Thus, conditioning an agreement on regulatory approval, without more, does not prevent it from being a sale for purposes of the on-sale bar. 

The Court declined to address whether the AIA overturned case law relating to secret or confidential sales. Regarding the legislative history, statements made by Senator Kyl did not identify any cases that would be overruled. Exempting confidential sales from the on-sale bar would not matter in this case anyway, because the Agreement was publicly announced, including detailed information about palonosetron and its uses. The Court also rejected Helsinn’s arguments that the on-sale bar requires disclosure of the details of the claimed invention, including the dosage of palonosetron. A commercial offer to sell occurs when a product embodying the invention is sold because the public possesses the invention upon delivery or commercialization of the invention. There is no added requirement that the details of the invention be publicly disclosed for an offer to sale to fall within the on-sale bar pre-AIA. In particular, Congress did not intend to change such requirements for the on-sale bar when passing the AIA.

Finally, the Court found that the district court clearly erred in finding that reduction to practice had not occurred prior to the critical date because the product had not received final FDA approval.  The completion of Phase III studies and final FDA approval are not pre-requisites for an invention to be ready for patenting. Whether an invention is reduced to practice and therefore ready for patenting depends on whether it works for its intended purpose, in this case, to reduce nausea from chemotherapy. There must be some “demonstration of the workability or utility of the claimed invention,” comprising evidence that goes “beyond a probability of failure” but not “beyond a possibility of failure.” FDA approval is a more rigorous and demanding standard. Earlier clinical results, before the critical date, “established that the patented invention would work for its intended purpose.”

The Federal Circuit reversed the district court’s findings on invalidity, finding all asserted claims of all four patent invalid under the on-sale bar, including the post-AIA patent.

 The on-sale bar, before and after the AIA, does not require a finding that the offer or sale disclosed the details or claimed features of the invention, so long as the product embodies those features when sold. An invention is reduced to practice, and ready for patenting, when it is reasonably shown to work for its intended purpose, which for a pharmaceutical product is not contingent upon FDA approval.

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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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There are currently 1 Comment comments.

  1. DV May 7, 2017 11:26 am

    “the Court found that the district court clearly erred in finding that reduction to practice had not occurred prior to the critical date because the product had not received final FDA approval. The completion of Phase III studies and final FDA approval are not pre-requisites for an invention to be ready for patenting.”

    It is surprising, despite Scott v. Finney,34 F.3d 1058, 1063, 32 USPQ2d 1115, 1120[(Fed.Cir. 1994)], the district court in this case still relied on phase III and FDA approval!