Granular Statute Language Could Have Broad Implications for Patent Seekers

Justices, arguing attorneys debate scope of meaning of ‘on sale’

The U.S. Supreme Court had its plate full of noteworthy cases for last week’s oral arguments. Among the most newsmaking were a potential re-interpretation of the Fifth Amendment’s double jeopardy clause and a case considering the reach of the Securities and Exchange Commission’s anti-fraud provisions. But also lurking on the docket was a patent case from the Federal Circuit asking the Supreme Court to clarify whether a wording change by the America Invents Act to an existing patent law also amounts to a substantive change. 

Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc. deals with the question of whether the AIA changed the on-sale bar in patent law  — which requires an inventor to file for a patent within a year after offering their invention for sale — to no longer include confidential sales. Patent lawyers have their eyes on the eventual outcome to provide clarity in how they’ll advise their clients. And depending how the ruling comes down, it could raise questions about the validity of patents filed while the case has worked its way through the courts.

“Anytime you change statutory language … you have an entire nation full of attorneys interpreting what that change means,” said Ryan Fletcher, a Merchant & Gould patent attorney. “Ambiguity is not a friend of attorneys when it comes to statutes.”

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Case Background

Before the AIA went into effect in 2012, the on-sale bar provision applied whether a sale of an invention is available to the public or confidential. But the AIA changed the language of the on-sale bar to include that an invention is not patentable if it was on sale “or otherwise available to the public…” for a year or more before filing for a patent. And now Helsinn has argued that change shifted the meaning of the on-sale bar to no longer include secret sales. The named respondent, Teva Pharmaceuticals USA, has claimed the AIA did not change the on-sale bar when it introduced the new wording. 

Key to this case, a “sale” does not necessarily mean a product bought by a consumer. Helsinn’s appeal involves agreements for licensing as well as supply and purchase between the company and MGI Pharma. The companies announced the agreements publicly, but did not disclose the pricing terms or the dosage for the drug Helsinn would develop and supply to MGI. Before the AIA was passed but more than a year after the agreements, Helsinn filed for and received three patents in 2003, 2005 and 2006. Helsinn received a fourth patent in 2013.

Teva in 2011 filed for permission for a generic version of the drug. In the filing, Teva claimed Helsinn’s patents weren’t valid, and that a generic version of the drug would not infringe, because the timing of the patents was outside the one-year window required by the on-sale bar.

Helsinn sued Teva for patent infringement in the U.S. District Court for the District of New Jersey. The court ruled in favor of Helsinn and specifically rejected Teva’s argument that Helsinn’s most recent patent violated the on-sale bar. Under the AIA, the court reasoned, the sale had to be “public.” Because the announcement of the agreements between Helsinn and MGI didn’t disclose the drug formula or pricing, the agreements didn’t count as a public sale.

But in a narrow decision, the Federal Circuit Court of Appeals reversed the district court’s ruling. It held the on-sale bar applies to sales that are publicly known, even if the details of the invention are kept secret. The U.S. Supreme Court agreed to hear the case last summer.

Does a Wording Change Equal a Legal Change?

Fletcher said Helsinn’s case is one of the first to address the interpretation of the wording change introduced by the AIA in the on-sale bar. “It was a wording change, but was it a legal change? We don’t know.”

He said having as much time as possible to monetize an invention tends to be an especially big deal in the pharmaceutical industry because it takes so much money to develop and bring a drug to market. But the Supreme Court’s eventual ruling would apply to any invention for which a patent is sought.

If the Supreme Court agrees with the district court, “it would allow companies who are developing products a little more leeway to develop their products internally [and] non-publicly before they had to file for a patent application,” Fletcher said. But some have also said Helsinn’s position would incentivize doing business in secret because it would provide an avenue for flouting the on-sale bar.

Fletcher said he hopes the Supreme Court’s eventual decision will clear up the ambiguity the AIA created, so that attorneys can give consistent advice to their clients about patenting inventions. “We just want clear, predictable, coherent statutes so that it’s clear how we have to advise our clients.”

He added it’s possible that after the change by the AIA to the on-sale bar’s wording, some companies may have waited a few years to file patent applications after non-public sales, believing the change meant the on-sale bar did not apply. A ruling from the Supreme Court that the AIA’s wording didn’t actually change the on-sale bar would raise potential validity issues for patents filed outside the one-year window.

The Scope of ‘On Sale’

Chief Justice John Roberts and Justice Brett Kavanaugh pressed Kannon Shanmugam, who argued for Helsinn, about the scope of what “on sale” means. Shanmugam acknowledged the meaning may have ambiguity about whether it specifically applies to something that’s widely available or also to a sale that’s privately offered to one other party.

“…I think that that doubt probably was eliminated before the AIA by the surrounding phrases, all of which, by respondents’ recognition, convey some notion of public availability,” he said. “And then any lingering doubt was completely removed by the inclusion of the catch-all phrase ‘in the AIA.’” 

Justice Ruth Bader Ginsburg asked Shanmugam to clarify whether he believes the on-sale bar never included secret sales. He said he believes previous decisions from lower courts that interpreted patent law to include non-public use or sales of inventions were outliers. And Congress’ purpose with changing the on-sale bar through the AIA, he said, was to shore up the conflict in case law they created.

“I think we would certainly acknowledge that Congress could have modified the language of “on sale,” but what Congress wanted to do, we would respectfully submit, was also to fix some of this outlying Federal Circuit case law on public use,” Shanmugam said.

Deputy Solicitor General Malcolm Stewart also argued in favor of Helsinn. During arguments by William Jay for Teva and the case’s other respondents, Justice Samuel Alito challenged the inclusion of secret sales by offering a hypothetical of the AIA’s wording of the on-sale bar that would explicitly include them. 

“So it says the claimed invention was patented, described in a printed publication, or in public use, on sale publicly or on sale privately, or otherwise available to the public,” Alito said. “That would be nonsense, wouldn’t it? … It would be nonsense because the meaning of “otherwise” is … to do the same thing in some other manner.”

Jay acknowledged that wording would be confusing. But he added even so, he believes it would still specify that a private sale would trigger the on-sale bar.

“So, of course, Your Honor sort of asked me to assume that this is a statute that’s being written from scratch, and I think that that takes off the table all of the history of the statute as it was before 2011,” Jay said. “But, second, even taking that off the table … the reason that your example was different from this statute is that, in your example, there’s one category, on sale privately, that doesn’t even have any overlap with available to the public.”

— Julia Cardi

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