Selling Your Invention Too Early May Cost You Your Patents

In a unanimous opinion, the US Supreme Court solidified that inventors lose patent protection for inventions that they had sold or offered to sell more than a year before submitting the patent application - even if those sales were confidential and did not publicize the invention’s details.

The decision in Helsinn Healthcare v Teva provides much needed certainty and continues to incentivize innovation-driven businesses to apply for patents before engaging in sales and marketing activity.

At issue was the scope of the on-sale bar, a part of US patent law since 1836. Before Congress enacted the America Invents Act in 2011, the bar prohibited patenting of an invention “on sale in [the United States] more than one year prior to the date of the application for patent in the United States.”

The AIA amended the statutory language to prohibit patenting of an invention “on sale, or otherwise available to the public.” Helsinn argued that this change meant that sales which kept the invention’s details private no longer triggered the on-sale bar.

The court disagreed, finding that the addition of the catch-all language was not enough to modify the longstanding application of the bar to private sales.

What does Helsinn mean for your company? If your company seeks patents, then the decision means that business, development, and IP teams should all work hand-in-hand because a lack of communication could ultimately result in the unforeseen loss of your market position or licensing revenue. If your company is challenging a patent, then the decision means seeking discovery on commercial aspects of product development.

Pharmaceutical companies seeking patents will need to file for patents sooner to avoid the on sale bar. As the facts of Helsinn demonstrate, establishing business relationships before a product is ready for Food and Drug Administration approval will prove challenging.

Helsinn, a Swiss pharmaceutical company, sought a US distribution partner as it was beginning its Phase III trials for Aloxi (palonosetron), a drug to treat chemotherapy-induced nausea and vomiting. Helsinn found that partner in MGI Pharma, and the two companies entered into a supply and purchase agreement and an accompanying license.

About two years later, Helsinn filed a provisional patent application, then four more applications derived from that application during the following ten years. Even though the agreements required MGI to keep the composition’s details confidential, the Aloxi-related patents were invalidated because the on-sale bar does not require public disclosure to trigger. The patent applications were filed too late.

Going forward, litigation about the on-sale bar is likely to focus on the fact-specific issue of whether a corporate arrangement constitutes a “sale.” For example, the Federal Circuit held in The Medicines Co v Hospira that a “sale” must include a commercial offer for sale.

There, the court found that a contract manufacturer’s services to MedCo did not trigger the on-sale bar because MedCo always held title to the drugs and the manufacturer had no right to market the products it produced. By contrast, Helsinn did not dispute that its agreements - which gave MGI the obligation to purchase its drugs from Helsinn and the rights to distribute, promote, market, and sell Aloxi in exchange for upfront payments and royalties - were “sales.”

Because the on-sale bar remains a potent weapon for generic competitors, there will likely be increased interest in litigation focused on third-party commercial transactions among drug manufacturers, co-marketers, suppliers, and distributors.

This article originally appeared in The Pharma Letter. (Subscription required)