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Supreme Court Rules That Even “Secret Sales” Can Place An Invention “On-Sale” Under the AIA
January 23, 2019

By Michael F. Snyder and Steven M. Kellner 

On January 22, 2019, the United States Supreme Court ruled that the sale of an invention to a third party who is obligated to keep the invention confidential may place the invention “on sale” for purposes of the Leahy-Smith America Invents Act (AIA). The case is Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc. With this decision, the Supreme Court answered a question about the “on-sale bar” to patentability that has lingered since the enactment of the AIA in 2011.

Prior to the AIA, it was settled law that a sale embodying an invention, whether public or private, occurring more than one year before the filing date of a patent application for the invention qualified as invalidating prior art and created an “on-sale bar.”

However, the AIA revised the language of 35 U.S.C. § 102 to state that a person may be entitled to a patent unless the claimed invention “was in public use, on sale, or otherwise available to the public” more than a year before the effective filing date of the application. (Emphasis added). The inclusion of the phrase “otherwise available to the public” led to speculation as to whether a confidential (non-public) sale would still trigger the “on-sale bar.”

The confusion came to a head when Teva Pharmaceuticals (Teva) challenged the validity of patents asserted by Helsinn Therapeutics (Helsinn). Helsinn entered into a confidential agreement with a third party for the marketing of products that included the patented subject matter. The agreement disclosed the patented subject matter and was entered into more than one year before Helsinn filed the patent applications. Relying on pre-AIA precedent, Teva argued that the agreement, even if it was confidential, triggered the “on sale” bar. Helsinn argued that the language of the AIA made it clear that a sale had to be public to trigger the “on sale” bar.

The Supreme Court agreed with Teva and held that the AIA did not change the meaning of Section 102 in regards to the “on sale bar.” The Supreme Court cited its own precedent interpreting Section 102 as supporting the holding that a sale or offer of sale need not make an invention available to the public to constitute invalidating prior art. The Court also noted that the Court of Appeals for the Federal Circuit (CAFC) had explicitly found that “secret sales” could invalidate a patent if more than one year before the filing date of a patent application on the invention. In short, the addition of the catch-all phrase “or otherwise available to the public” was not enough of a change for the Supreme Court to conclude that Congress intended to alter the meaning of “on sale” as meaning only public sales or offers for sale.

This decision, like many others, underscores the importance of filing a patent application as early as possible, and well before communicating details of the invention to any third parties, whether publicly or confidentially.