Companies who seek patent protection for their technology should be aware of a recent Federal Circuit decision that broadly construes the “on sale” bar to include confidential sales, and thus increasing the time pressure to file for a patent. The Federal Circuit’s recent denial of en banc review in Helsinn Healthcare v. Teva Pharmaceuticals leaves standing a prior construction of the “on sale” bar under the America Invents Act.
It often happens that parties enter into confidential agreements for commercial exploitation of technology they intend to patent. These parties need to be aware that these agreements might well be deemed a “sale,” triggering the one-year clock for the on-sale bar.
The issue revolves around whether the American Invents Act of 2011 changed the scope of the patent “on sale” bar – by which protection is barred for inventions that are commercially offered for sale more than one year before filing of the patent application − to include confidential or secret sales. The Federal Circuit opinion holds that “[i]f the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale.” The Federal Circuit refused to address the broader question of completely secret transactions.
Counsel advising companies seeking patent protection should look out for any commercial exploitation – including by confidential agreement with other parties – of technology in the process of a patent application. Where that has occurred, there may be a need to move quickly to file a patent within the one-year window.
The Patent Act has long included what is known as the “on sale” bar, meaning that if the invention is being offered for commercial sale more than one year prior to the application, then patent rights are barred. This included what is known as “confidential sales” – meaning that the technology remained confidential, usually due to contractual confidentiality restrictions, but the sale itself might be announced by the parties.
Helsinn Healthcare involved four patents for a pharmaceutical delivery technology and such a confidential transaction. The transaction took place more than a year prior to the applications.
Three of the patents were applied for prior to passage of the America Invents Act of 2011. The Federal Circuit easily found that these three were subject to the on-sale bar under pre-AIA law.
But a fourth patent was subject to the AIA. When Congress enacted the AIA, it amended the relevant statutory language to bar the patentability of an "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." 35 U.S.C. § 102(a)(1) (emphasis added). This language, argued the patent owner, meant that “on sale” must be of the type which makes the invention “available to the public.” Confidential sales would not count.
The Federal Circuit rejected that argument because of an almost 200-year-old Supreme Court decision of the pre-AIA statute held that the public sale of an item that nevertheless withhold but from "the public the secrets of [the] invention" is still subject to the on-sale bar. Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 19, 7 L.Ed. 327 (1829). The legislative history of the AIA indicated an intent to overrule other precedents, but not Pennock. So the Federal Circuit concluded that “[i]f the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale.”
The sale in Helsinn had been publicly announced by the patent owner in SEC filings, and thus under the Pennock rule, the bar applied. The Federal Circuit left open two issues:
- What of a completely secret sale – one that is not announced at all to the public? The Federal Circuit declined to address that, since the facts of the case included a public sale, even if the technology was kept secret.
- Do confidential sales count as “prior art?” Suppose there is a confidential sale involving particular technology. Then someone (either the same owner or someone else) files on a different, but related technology. Suppose further that it is then argued that the first technology renders the invention disclosed in the patent obvious under 35 USC 103. Section 103 speaks about “prior art” rendering an invention obvious. Is a confidential sale – one where the sale is announced publicly, but the technology is kept confidential – “prior art” under Section 103?
As the AIA becomes more relevant (since it will apply to all patents filed after its passage in 2011), these issues will likely be litigated and clarified. In the meantime, parties who expect to seek patent protection for technology should be aware that commercial transactions concerning the technology – even if confidential – may still give rise to the on-sale bar. Of course, that does not mean that patent protection is lost – it simply means that diligence is required in filing an application before the 12-month bar kicks in.