On June 25th, the the U.S. Supreme Court agreed to hear Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc., on appeal from the Federal Circuit. The case will ask the Supreme Court to decide whether an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention under the terms of the Leahy-Smith America Invents Act (AIA). In other words, is a secret sale prior art?
Helsinn Healthcare appealed the finding of the Federal Circuit, which reversed the lower court’s ruling, holding that asserted claims of Helsinn’s patents-in-suit were subject to an invalidating contract for sale prior to January 30th, 2002, which is the critical date occuring one year before the filing of a provisional patent application to which all the Helsinn patents-in-suit claim priority. The Federal Circuit also held that the AIA did not change the statutory meaning of “on sale” and that the asserted claims were ready for patenting prior to the critical 2002 date. Therefore, the secret sale was considered prior art by the Federal Circuit.
To assess some of the reasons why the Supreme Court likely decided to take up Helsinn’s appeal, and some of the arguments we are sure to see again at the merits stage, we explore some of the amicus briefs filed with the Supreme Court encouraging them to take up the case on appeal.
The non-profit association U.S. Inventor, which represents 13,000 inventor and business members argued that the Supreme Court should take up Helsinn because the Federal Circuit’s decision in the case conflicts with the language of 35 U.S.C. § 102(a)(1), specifically that a person cannot earn a patent for an invention if the claimed invention was “otherwise available to the public before the effective filing date of the claimed invention.” By construing Section 102(a)(1) to include prior art sales that did not make the invention available to the public, as was the case in the Helsinn/MGI Pharma transaction involving the claimed invention that took place in April 2001, U.S. Inventor argues that this interpretation undermines Congress’ goal in passing the AIA to harmonize American patent law with patent law from other countries.
U.S. Inventor also argues that the Federal Circuit’s decision in Helsinn comes at a time that the United States is facing an innovation crisis. U.S. Inventor cites China surpassing the U.S. in funding for artificial intelligence startups and patent applications filed as well as a significant drop in the number of angel and seed stage funding rounds in the U.S. The Federal Circuit’s Helsinn decision represents yet another difficulty facing small inventors, U.S. Inventor argues:
“The Federal Circuit has created a Hobson’s choice for the small inventor, both alternatives of which are detrimental to innovation and against the public interest: collaborate and develop your invention but give up your patent rights by doing so (thus killing the invention, and keeping the public from benefiting from it in the process), or patent it but do not enter into the agreements necessary to develop it, and thus leave it and the patent sitting on a shelf (thus killing the invention, and keeping the public from benefiting from it in the process).”
U.S. Inventor also argued that the interpretation of the “on sale” language of Section 102(a)(1) to include secret sales would be contrary to a natural reading of the text; that the opinion is contrary to the legislative history of Section 102(a) which shows that Congress intended to revise the scope of invalidating art so as not to include secret sales; that the opinion is contrary to U.S. Patent and Trademark Office guidelines and interpretation of the AIA; and that the Federal Circuit’s opinion is inconsistent with established canons of statutory construction.
BIO is the principal trade association representing the biotechnology industry and includes more than 1,000 members; about 90 percent of BIO’s corporate members are small or mid-size enterprises with revenues under $25 million. BIO’s concerns involve the effects of the Federal Circuit’s Helsinn decision on smaller firms with fewer resources which are more dependent on partnering and external funding, publicly reported business transactions which could now be considered patent-defeating events well before the small firm knows which of its experimental compounds is even worth patenting.
BIO argues that the Supreme Court should provide guidance on the 2011 amendments to Section 102(a) created by Congressional passage of the AIA. This guidance isn’t available from the decision by the Federal Circuit, which provided an atextual interpretation of Section 102(a) involving no statutory construction of the 2011 amendments. BIO’s brief says that the Federal Circuit’s concerns that its own jurisprudence on the “on-sale” would be abrogated are overstated and the change is not likely to be fundamental. Further, Circuit Judge Kathleen O’Malley’s concurring opinion from the denial of en banc rehearing in Helsinn is the only textual analysis of the 2011 amendments, and BIO argues that this analysis reads too far into latter parts of the Section 102 statute.
Inconsistencies between the Federal Circuit’s decision and the government’s statutory interpretation of pre-AIA Section 102(a) casts doubt on thousands of patents according to BIO’s brief. In examination guidelines, the USPTO has instructed examiners to disregard secret sale activity as invalidating prior art. Since examining patent applications under these prior art guidelines in March 2013, more than 300,000 patents have been examined and granted under first-inventor to file provisions of the AIA. Further guidance is needed so that innovators can pursue patenting, commercial transactions and business activities without fearing that they’ve inadvertently lost their right to patent an invention. The USPTO’s statutory interpretation of Section 102(a) is also supported by the legislative history of the AIA, which indicates that Congress intended prior art under that statute to be art that is “available to the public.”
Further, BIO argues that the Federal Circuit’s decision may have extraordinary extraterritorial implications which weren’t intended by Congress. “By including within the ambit of 102(a)’s on-sale bar commercial activity that does not convey an invention to the public, the Court of Appeals’ decision for the first time extends a patent-defeating effect to foreign conduct having no nexus with, and being undetectable from, the United States,” BIO argues. BIO also contends that leaving the Federal Circuit’s Helsinn decision in place serves no productive policy as it weakens harmonization with international patent law and creates uncertainty for businesses and the public.
PhRMA represents a collection of biotech and pharmaceutical firms that collectively invested $65.5 billion during 2016 alone in efforts to discover and develop new medicines. PhRMA notes that more than 350 new medicines have been approved by the U.S. Food and Drug Administration and that the drug development process is both risky and expensive.
PhRMA first argues that review of the Federal Circuit’s decision in Helsinn is warranted because the decision calls into question countless numbers of issued or pending patents. PhRMA goes above the estimate in BIO’s brief by citing the 1 million patents issued and 3 million patent applications filed since the AIA took effect. These patents “and innumerable more to come” now face the added uncertainty of being unpatentable under the scope of the on-sale bar as defined by the Federal Circuit. PhRMA also cites Congressional intent behind the AIA and USPTO guidance which were meant to exclude sales which didn’t disclose aspects of the claimed invention to the general public from the on-sale bar. This issue is especially important to pharmaceutical companies that make large investments into research and development which may be protected by only a handful of patents.
Further, PhRMA argues that the Federal Circuit misread Supreme Court precedent on sales of the invention which render the invention unpatentable. Such precedent extends from SCOTUS’ 1829 decision in Pennock v. Dialogue which abrogated an inventor’s rights to claim patent protection for a method of making a hose because the claimed invention had been in commercial sale for years prior to filing the patent application. The public nature of the on-sale bar was reiterated by the Supreme Court in 1998’s Pfaff v. Wells Electronics, PhRMA argues. However, PhRMA contends that the Federal Circuit mistakenly assumed that the Supreme Court endorsed a broader reading of the on-sale bar in Pfaff despite repeated references made by SCOTUS to sales that put the public in possession of the invention.
Congressman Lamar Smith (R-TX), one of the original lead sponsors of the AIA, filed his own amicus brief encouraging the Supreme Court to take up Helsinn in the interest of interpreting Section 102(a)(1) in such a way that is faithful to the legislative text. Smith argues that, when properly construed, the “on-sale” bar can only invalidate a patent claim if the subject matter defined by the claim has become publicly accessible by the sale activities. The replacement of Section 102 that occured with passage of the AIA was a major change in the legislative approach to patent law, intended to harmonize U.S. patent law with international systems, requires the court to construe the statutory language of that section de novo.
If simply construed as written, Congressman Smith argues that the newly enacted Section 102(a)(1) sets out a single “public accessibility” standard in which the only “on sale” activities which could invalidate patent claims are those sales in which the subject matter defined by the claim became publicly accessible through those sale activities. Smith also notes that only one committee report relating to the House version of the AIA was issued during the Congress in which the AIA was enacted, and that report notes that the language “available to the public” was added to clarify the scope of relevant prior art, “as well as to emphasize the fact that it must be publicly accessible.” Smith also took exception to Circuit Judge Timothy Dyk’s majority opinion in the May Helsinn decision at the Federal Circuit which quoted Section 102(a)(1) to read “invention” and not “claimed invention,” which Smith called yet another indication that the Federal Circuit did not properly construe the statute in making its decision in Helsinn.
Finally, Congressman Smith argues that the Federal Circuit’s panel decision cannot properly be upheld as a matter of nonstatutory, judge-made law because the holding does no more than contradict the statute itself and frustrates Congressional objectives in enacting the AIA. Given that Congress enacted the AIA in large part for harmonization with international patent law, the fact that the “on sale” bar described in the Federal Circuit’s decision doesn’t exist in any other nation’s patent law suggests that there’s no necessity for this particular bar. Given that the AIA changed to a first-inventor-to-file system through passage of the AIA, Smith argues that the “on sale” bar “actually violates rather than vindicates the ‘promoting progress’ objective for the patent system.” Smith also called the Federal Circuit’s reliance on Pennock to be “misplaced” based on the argument that the inventor in Pennock licensed the invention to a seller who sold the article of manufacture publicly. “If so, Pennock stands for nothing more than the incontrovertible novelty-defeating principle later expressed by this Court as, ‘That which infringes if later, anticipates if earlier.’” Smith’s brief reads.