The novelty of “on sale inventions” under a confidentiality agreement with regards to an “on sale” invention: the US Supreme Court rules

In its ruling of 22th January 2019, the US Supreme Court, in the case of Helsinn Healthcare S.A: v. TEVA Pharmaceuticals USA INC., et al.,  had the opportunity to interpret the Leahy-Smith America Invents Act (AIA) with respect to how this impacts on the issue of the novelty of an invention. 

In the case at hand, the petitioner is Helsinn, a Swiss pharmaceutical company that makes Aloxi, a drug for  treating chemotherapy-induced nausea and vomiting. In early 2000, Helsinn submitted protocols for Phase III clinical trials to the Food and Drug Administration (FDA), proposing to study a 0.25 mg and a 0.75 mg dose of palonosetron.

Shortly thereafter, Helsinn began to seek out marketing partners. As a result, MGI Pharma Inc and Helsinn entered into two agreements, a licensing agreement and a supply and purchase agreement. Both agreements included a confidentiality clause, under which MGI was required to keep confidential any proprietary information received under the agreements. The co-operation between the companies was publicly disclosed, without however in any way disclosing any technical information. 

Nearly two years after the signing of the agreements, Helsinn filed a provisional patent application covering the specific dosage of palonosetron. During the ten years that  followed the execution of the co-operation agreements four patent applications were filed, including patent application 219, granted by the USPTO in May 2013.  

Teva is a generics manufacturer that in 2011 sought approval form the FDA to market a generic 0.25 mg palonosetron product. Helsinn sued Teva for patent infringement, and Teva counterclaimed that patent 219 was invalid since the invention had been “on sale” for more than a year before Helsinn filed the provisional patent application.  The on-sale bar is a limitation on patentability codified at 35 U.S.C. § 102. It provides that an invention cannot be patented if it has been for sale for over one year prior to the patent filing.

The Federal District Court of New Jersey in Helsinn Healthcare S. A. v. Dr. Reddy’s Labs. Ltd., (2016 WL 832089, *45, *51), ruled that the “on sale” provision would only be applicable if the sale or offer to sell made the invention “available to the public”. Since the information exchanged under the agreement was protected under a confidentiality clause, Helsinn’s invention was not “on sale”.

The Federal Circuit (855 F. 3d 1356, 1360 (2017)) reversed this result. It concluded that “if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale” in order to fall under the AIA "on sale bar". Taking into consideration that the co-operation between Helsinn and MGI was publicly disclosed, the on-sale bar was applicable.

On appeal, the Supreme Court affirmed this result.  It points to the importance of the novelty of the invention as a requirement for patentability and underlines that it would materially retard the progress of science and the useful arts to allow an inventor to sell his invention publicly and only later patent it,  thereby  removing it from any further public use during the term of the patent.

Referring to precedents such as Pfaff v. Wells Electronics In, 525 U.S. 55, 67, the Court concluded that the sale or offer for sale need not make an invention available to the public to be novelty-destroying. In the specific case, it is not contested that the invention  has been “on sale” for a longer period of time than one year. Thus, the novelty of the invention is destroyed.

Helsinn  attempted to argue that the phrase following the “on sale” exception, namely “or otherwise available to the public”, presupposes that the “on sale provision also involves an “availability to the public” requirement. However, the Court  was not persuaded,  stating  that this phrase simply covers inventions that have been available to the public in other ways than those referred to in the provision, and that they too should be equally novelty-destroying.

A rather surprised IPKat, after the ruling of the Supreme Court

Final Thoughts 

What we have is  public disclosure of a commercial co-operation between two commercial entities that  describes the purpose of the co-operation, but does not however provide any disclosure of the technical details of the invention, but is nevertheless novelty destroying (if disclosed a year before the patent application is filed). Since  this is the first time the US Supreme Court  addressed  this  specific  question, this ruling is obviously of  interest. This Kat wonders, however, whether   the interpretation adopted is a bit too strict…already having second thoughts when it comes to your next press release?

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