Does A Private Sale Trigger The 'On-Sale Bar' For Patents?

From oral arguments in this case, it’s not clear how the Supreme Court will ultimately decide.

On Tuesday, the Supreme Court heard oral arguments in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc., a patent case that doesn’t actually involve the more technical aspects of many patent cases, but instead is a statutory interpretation question that may be determined on the plain language of the statute.

The America Invents Act (AIA), which passed in 2011 and went into effect in 2012, made significant revisions to patent law in the United States and, unsurprisingly, has resulted in litigation since then. One of the most significant changes altered our historical first to invent system to a first to file system (in line with the patent systems in most of the developed world) and the resulting amendments have raised additional issues. Helsinn presents a relatively simple question of statutory interpretation: does a private sale qualify as being “on sale, or otherwise available to the public” under patent law? If an invention is in public use, on sale or otherwise available to the public prior to filing the patent application, it is not eligible for patent protection.

Our patent laws have always prevented the patenting of an invention if it has been described in prior art. This bar to patenting has also traditionally applied if the invention was “on sale” before the application, including where the sales were private or secret. At issue is whether AIA has changed this historic interpretation (though petitioners in the case argue that the law on this point wasn’t fully settled), when it changed the definition of prior art to include the phrase “in public use, on sale, or otherwise available to the public.” Here, Helsinn entered into a marketing agreement for his pharmaceutical product, in which he disclosed information about his invention but required a confidentiality agreement. Generic manufacturer, Teva Pharmaceuticals, challenged Helsinn’s patent, arguing that the invention had been disclosed in an earlier sale, thus triggering the “on-sale bar.” Helsinn argued that because the sale was not made available to the public, it did not qualify as prior art under AIA. The Court of Appeals for the Federal Circuit held that a private sale is indeed enough to bar patenting.

During oral arguments this week, Mr. Shanmugam, attorney for the Helsinn argued that there is a difference between “sale” and “on sale,” suggesting that the latter requires the making available to the public. Justice Kavanaugh countered this assertion, questioning, “Isn’t it always the case that if you offer it to even one person or to a small group of people, it’s on sale?”

Mr. Shanmugan argues that Teva Pharmaceutical’s case “is really a junior varsity version of congressional ratification.” Instead, Shanmugan argues that when Congress enacted AIA, it clarified the on-sale bar, to mean a public sale was required. Justice Kavanaugh didn’t seem to buy this argument, though, and said, “If that was a clarification, it was a terrible clarification because there were a lot of efforts, as you well know, to actually change the ‘on sale’ language, and those all failed.” Indeed, other proposed language would have directly addressed this issue instead of making the modest changes that has resulted in some ambiguity in the present language. Later during oral arguments, Justice Kavanaugh comes back to this point, suggesting that Shanmugan’s reliance on legislative history is misplaced (and the legislative history reveals arguments supporting both sides in this case): “Isn’t this a classic example of trying to snatch victory from defeat in some of the legislative statements? In other words, there was this law before, as Justice Kagan mentions, a huge effort to change it, lots of proposals to change it. They all fail, and then a couple statements said on the floor on which you’re relying. I think the legislative history read as a whole, goes exactly contrary.”

A determination in the case may turn on whether the justices view the law as settled to include private sales as triggering the on-sale bar. Indeed, when Justice Kagan asks Mr. Stewart, representing the Solicitor General (supporting Helsinn’s side) to accept this assumption and questions whether AIA would have changed this interpretation, Stewart acknowledges that the AIA would not have unsettled it: “I think that would be a fairly oblique way of attempting to overturn kind of a settled body of law.”

On the other side of the argument, Justice Alito seems to view the language of AIA as clearly separating public sales from private sales in applying the on sale bar. Justice Alito tells Mr. Jay, attorney for Teva Pharmaceuticals, “Well, I think the most serious argument you have to deal with is the meaning — the plain meaning — the fairly plain meaning of the new statutory language. So you say ‘on sale’ means on sale publicly or on sale privately, right? . . . suppose that the statute had been amended to read just the way it does, except . . .with one exception. 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. That would be nonsense, wouldn’t it?”

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From oral arguments in this case, it’s not clear how the Court will ultimately decide. As Ronald Mann points out at SCOTUSblog, several justices were relatively quiet during arguments in Helsinn. While the court could try to decide the question presented purely on the plain language of AIA, several justices appear inclined to try to determine the historical understanding of what triggered the on sale bar and whether Congress intended to change this through passage of AIA.

Oral arguments in Helsinn ended on a note of levity. After multiple instances where SCOTUS justices noted the “excellent” briefs submitted on both sides — including briefs by amici — Chief Justice Roberts ended the argument, submitting the case and stating, “I am sure we’ll come up with an excellent opinion.”


Krista L. Cox is a policy attorney who has spent her career working for non-profit organizations and associations. She has expertise in copyright, patent, and intellectual property enforcement law, as well as international trade. She currently works for a non-profit member association advocating for balanced copyright. You can reach her at kristay@gmail.com.

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