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The Risk of Losing Patent Rights When an Invention Is ‘On Sale’

Posted on May 25, 2017 in Articles

This article originally appeared in The Legal Intelligencer on May 23, 2017.

One of the most frequent ­errors ­committed by inexperienced ­inventors is the untimely sale or public use of their invention. The sale of a ­product that includes a new invention—before a patent application is filed—destroys patent rights in many countries. Not so in the United States, where U.S. law provides a 12-month “grace period” to file for patent protection after a public use or sale. Even if an invention is sold, an inventor has 12 months in which to file a U.S. ­patent application and preserve patent rights. Sometimes, however, even 12 months of grace is not enough. Blunder after blunder has occurred when an invention has been sold, more than 12 months have elapsed, and the inventor has attempted to secure patent rights in the United States. But when is an invention considered to have been sold? And what are the details of a sale that starts the running of the 12-month clock?

Earlier this month, the U.S. Court of Appeals for the Federal Circuit tackled this very important issue in Helsinn Healthcare v. Teva Pharmaceuticals USA, 2016-1284 (Fed. Cir. 2017). Helsinn filed suit against Teva for infringement of Helsinn’s patents relating to Palonosetron—a ­medication used for treatment of side effects ­associated with chemotherapy treatment. Teva, ­however, counter argued, that Helsinn sold its ­patented medication more than one year before Helsinn’s patent application filing date, and therefore the asserted patents were invalid.

In fact, more than two years before ­applying for its patent, Helsinn and a ­pharmaceutical distribution company ­entered into a supply and purchase ­agreement that was contingent on approval of the ­medication by the Food and Drug Administration (FDA), and that omitted specific dosage formulations and price terms.

On Sept. 16, 2012, the Leahy-Smith America Invents Act (AIA) went into effect, and with it, significant changes to the U.S. patent system. The on-sale bar provision of the AIA is governed by 35 USC 102, which bars patentability of a claimed invention that was “patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” The provision is subject to a one year grace period.

Because the Helsinn supply and purchase agreement did not disclose the dosages of the medication, Helsinn argued that the “on-sale” provisions of 35 USC Section 102 did not apply unless the sale “discloses the invention to the public.” In the words of the court, “The suggestion is that Congress required that the details of the claimed invention be ­publicly disclosed before the on-sale bar is triggered.” The Federal Circuit disagreed, citing the landmark U.S. Supreme Court case Pennock v., Dialogue, 27 U.S. (2 Pet. 1,19 (1829), relating to sales before seeking U.S. patent protection: “If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make, and sell his invention publicly, and thus gather the whole profits of it, ­relying upon his superior skill and knowledge of the structure; and then, and then only, when the danger of competition should force him to secure the exclusive right, he should be allowed to take out a patent, and thus exclude the public from any farther use than what should be derived under it [during the life of the patent]; it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.”

Some of the basic principles by which the patent system operates in the United States today have not changed since Pennock was decided in 1829. The patent system in the United States was created by Article 1, Section 8, Clause 8 of the U.S. Constitution. Sometimes referred to as the “intellectual property clause” (also known as the patent and copyright clause), this paragraph empowers Congress “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” When it was created, the objective of the patent system was to ­promote the growth of technology by encouraging inventors to share the details of their inventions with the public. As an incentive to make that disclosure, and as a reward for making that disclosure, the patent system provides inventors with a monopoly on their inventions for a fixed amount of time (provided, of course, each invention is new and ­nonobvious, and ­pertains to patentable subject matter). While the patent statutes provide a grace period at the end of which patent protection must be sought, the length of that grace period is balanced by the need to limit when an inventor’s monopoly on an invention expires. Thus, allowing one inventor to profit from an invention while delaying seeking patent protection places that inventor at an economic ­advantage over other inventors who comply with the one-year grace period requirement, and thus adversely affects the goal of the patent system (which encourages prompt invention disclosure in exchange for a ­monopoly on that invention). Those same issues exist today.

In Helsinn, the fact that all of the details of the invention were not set forth in the supply and purchase agreement were irrelevant to the court’s decision. As stated in the opinion, “We have … not required that members of the public be aware that the product sold actually embodies the claimed invention.” Furthermore, the mere act of “publicly offering a product for sale that embodies the claimed invention places it in the public domain” and thus starts the one year clock for filing for patent protection. “The patented product need not be on-hand or even delivered prior to the critical date to trigger the on-sale bar.”

The bottom line is that the mere act of offering a product for sale can trigger the “on-sale” bar of the patent statutes. Furthermore, as long as the sale is public, as stated in Helsinn, “the details of the invention need not be publicly disclosed in the terms of sale” for the “on-sale” bar to be triggered.

Business owners need to ensure that patent protection—for inventions that might have economic value—is procured in a timely manner. As soon as the sale of a product embodying a new invention is being contemplated, it is important to ­assess the technology in order to determine whether patent protection is warranted, and equally important, to not lose the ability to seek patent protection by exceeding the on-sale bar grace period.

– By Lawrence E. Ashery

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