Confidential Sales of an Invention Do Not Avoid the “On Sale” Bar Under the America Invents Act 

January 23, 2019

In a January 22, 2019, opinion, the U.S. Supreme Court held in Helsinn Healthcare S. A. v. Teva Pharmaceuticals USA, Inc., that under the America Invents Act (AIA), an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential qualifies as prior art and can invalidate a patent.

Background

The pre-AIA version of 35 U.S.C. §102 included the following bar to patentability:

A person shall be entitled to a patent unless —

 (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States.

35 U.S.C. §102(b) (emphasis added).

The AIA includes a similar provision:

A person shall be entitled to a patent unless . . . the claimed invention 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.

35 U.S.C. §102(a)(1) (emphasis added).

More than one year before Helsinn filed a provisional patent application covering its invention, Helsinn entered into a contract for the sale of the claimed invention. Because of the filing date of the application for the suit patent, the patent was governed by the AIA version of 35 U.S.C. §102.

The parties did not dispute that the invention claimed in Helsinn’s patent in suit was “on sale” within the meaning of the pre-AIA statute. Helsinn argued, however, that the addition of the phrase “or otherwise available to the public” in the AIA statute altered the meaning of on sale in such a way that if an invention’s sale was confidential (and, therefore, not available to the public), the invention was not on sale under the AIA statute. The Supreme Court disagreed.

The Supreme Court’s Decision

According to the Supreme Court, by the time Congress enacted the AIA, it was implicit from Supreme Court decisions “that a sale or offer of sale need not make an invention available to the public” (i.e., the sale could be confidential) to meet the on sale bar of pre-AIA 35 U.S.C. §102.1 Slip Op. at 6. And the “Federal Circuit — which has ‘exclusive jurisdiction’ over patent appeals, 28 U.S.C. §1295(a) — has made explicit what was implicit in our precedents. It has long held that ‘secret sales’ can invalidate a patent.”2 Slip Op. at 7.

In view of this “settled pre-AIA precedent on the meaning of ‘on sale,’” the Supreme Court “presume[d] that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.” Slip. Op. at 7. “The addition of ‘or otherwise available to the public’ is simply not enough of a change for us to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’” Slip Op. at 8.

Conclusion

The sale of an invention — even a confidential sale — remains a bar to patentability under the AIA. Patent applicants must take care to timely file patent applications so as not to allow a sale of an invention to effect a loss of valuable patent rights.

1 As support, the Court pointed to its decision in Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 67 (1998), where the Court held that “an offer for sale could cause an inventor to lose the right to patent, without regard to whether the offer discloses each detail of the invention. E.g., id., at 67.” Slip Op. at 6. And according to the Court, “[o]ther [Supreme Court] cases focus on whether the invention had been sold, not whether the details of the invention had been made available to the public or whether the sale itself had been publicly disclosed. E.g., Consolidated Fruit-Jar Co. v. Wright, 94 U. S. 92, 94 (1877) (‘[A] single instance of sale or of use by the patentee may, under the circumstances, be fatal to the patent …’); cf. Smith & Griggs Mfg. Co. v. Sprague, 123 U. S. 249, 257 (1887) (‘A single sale to another … would certainly have defeated his right to a patent …’); Elizabeth v. Pavement Co., 97 U. S. 126, 136 (1878) (‘It is not a public knowledge of his invention that precludes the inventor from obtaining a patent for it, but a public use or sale of it’).” Slip Op. at 6-7.

2 The Supreme Court cited the Federal Circuit’s decisions in Special Devices, Inc. v. OEA, Inc., 270 F. 3d 1353, 1357 (2001) (invalidating patent claims based on “sales for the purpose of the commercial stockpiling of an invention” that “took place in secret”) and Woodland Trust v. Flowertree Nursery, Inc., 148 F. 3d 1368, 1370 (1998) (“Thus an inventor’s own prior commercial use, albeit kept secret, may constitute a public use or sale under § 102(b), barring him from obtaining a patent”) as support. Slip Op. at 7. 

 

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