Under the Leahy-Smith America Invents Act, does the sale by an inventor of a claimed invention trigger the “on sale” bar to patentability if the sale does not disclose details of the claimed invention to the public?
Helsinn Healthcare S.A. (“Helsinn”) sought and received four patents, beginning in 2003, for a drug developed pursuant to a licensing agreement with another pharmaceutical company. Though the drug’s formula remained confidential, the news of the deal was made public. In 2011, Teva Pharmaceuticals USA, Inc. (“Teva”) applied to the Food and Drug Administration for approval of a generic version of the drug, and—within that application—certified that Helsinn’s patents were invalid. Helsinn sued for patent infringement, arguing that the on-sale bar provision of the America Invents Act (“AIA”) does not apply to licensing agreements like the one Helsinn entered, because the confidentiality agreement in place meant that the invention was not publicly available. Helsinn then argues that adopting a different interpretation would conflict with the AIA’s two goals of aligning U.S. patent law with international standards and incentivizing prompt filing under the first-to-file standard. On the other hand, Teva asserts that the AIA’s on-sale bar provision does apply based on the plain meaning of “on sale” as illustrated by two-hundred years’ worth of statutory interpretation. Teva additionally counters that Helsinn’s interpretation would invite the secret-commercialization tactics that extend a company’s monopoly over inventions and that the AIA sought to eliminate. The Supreme Court’s decision has vast implications for patent-holders in the United States, may chill biotechnological innovation, and may adversely affect the public by extending monopolies over certain drugs and thus undermine the development of competition in the biotechnical market.
Questions as Framed for the Court by the Parties
Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.
Petitioner Helsinn Healthcare S.A. (“Helsinn”) owns four patents: U.S. Patent No(s). 7,947,724 (“724 patent”), 7,947,725 (“725 patent”), 7,960,424 (“424 patent”), and 8,598,219 (“219 patent”), which relate to the drug palonosetron used in the treatment of chemotherapy-induced nausea and vomiting (“CINV”). Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. at 4. The 219 patent is governed by the Leahy-Smith America Invents Act, 2011 (“AIA”), while the remaining three patents are governed by pre-AIA law. Id at 4, 9. Helsinn acquired the patent rights to palonosetron in 1998 from another corporation and applied to the Food and Drug Administration (“FDA”) for Phase III clinical trial of the drug in early 2000s, proposing to study two dosages of palonosetron: 0.25 mg and 0.75 mg. Id at 6.
On April 6, 2001, prior to FDA approval of the drug, Helsinn and MGI Pharma Inc (“MGI”) entered into both a licensing agreement and a supply and purchase agreement, which were publicly announced in a joint press release and in a filing by MGI with the Securities and Exchange Commission (“SEC”). Id. Under the terms of the agreements, MGI agreed to pay royalties to Helsinn for the sale of palonosetron in the United States and Helsinn agreed to supply MGI’s requirements of palonosetron, depending on whichever of the two dosages was approved by the FDA. Id. at 7. MGI’s SEC filings disclosed all the details covered by the two agreements except the price terms and the two specific dosages of palonosetron. Id. at 8.
In September 2002, Helsinn successfully completed its Phase III clinical trials and filed a New Drug Application for the 0.25 mg dose of palonosetron with the FDA. Id. at 9. On January 30, 2003 Helsinn, more than a year after it had entered into the agreements with MGI, filed a provisional patent application for the 0.25 mg dose. Id. After FDA granted its approval for the 0.25 mg dose in July 2003, Helsinn filed and obtained the pre-AIA patents between 2005 and 2006. Id. In May 2013, Helsinn filed a fourth patent application that was issued as the 219 patent. Id. Helsinn claimed to be the first inventor with regard to all four patents (“priority”) based on the provisional patent application it filed on January 30, 2003. Id.
Respondent Teva Pharmaceuticals USA, Inc (“Teva”), a generic drug manufacturer, filed an Abbreviated New Drug Application with the FDA in 2011 seeking approval for a generic 0.25 mg palonosetron product. Id. at 9. In its filing, Teva included a certification that Helsinn’s patents were invalid and/or not infringed by the generic version that it sought approval for. Id.
Helsinn subsequently sued Teva in the United States District Court for the District of New Jersey (“district court”) alleging patent infringement. Id. at 9–10. Critically, the AIA contains an “on sale” bar which prevents a person from obtaining a patent if the claimed invention was “in public use, on sale, or otherwise available to the public” more than a year before the filing date of the patent application. Section 3(b) of the Leahy-Smith America Invents Act, codified at 35 U.S.C. § 102. The district court found that Teva had infringed all four of Helsinn’s patents and, specifically regarding the 219 patent, rejected Teva’s argument that Helsinn’s agreement with MGI violated the “on sale” bar. Helsinn at 10. The court held that the AIA’s “on sale” bar did not apply because the sale had to be “public” and, because the SEC filings did not disclose the pricing and dosage, the agreement did not constitute a public sale. Id. at 10.
On appeal, the Court of Appeals for the Federal Circuit (“Federal Circuit”) reversed, holding that if the sale is publicly known, the “on sale” bar is triggered regardless of whether the details of the invention were publicly known. Id. at 27. On June 25, 2018, the Supreme Court of the United States granted certiorari. Orders and Proceedings, 17-1229.
THE PROPER CONSTRUCTION OF SECTION 102(A)(1)
Helsinn argues that the plain text of § 102(a)(1) of AIA requires that a “sale” be “available to the public” in order to prevent an inventor from patenting the invention in question. Brief for Petitioner, Helsinn Healthcare S.A. at 18. According to Helsinn, the catch-all provision (“or otherwise available to the public”) that completes the list provided in § 102(a)(1), and covers exceptions to an invention’s patentability, requires that each of the list’s items “must be read in light of the final, comprehensive category.” Id. at 19. In other words, Helsinn maintains, the phrase “otherwise available to the public” applies to each exception to patentability—like the “sale” exception—instead of being a new, discrete category. Helsinn cites several Supreme Court cases that support their argument that catch-all provisions using “otherwise” inform the language preceding the provision, which in turn supports their argument that “on sale” must be read in light of the public-availability modification. Id. at 19. Rejecting this “familiar canon of statutory construction,” Helsinn posits, would render the provision’s term “otherwise” superfluous and thus would violate this Court’s rule against creating superfluity. Id. at 23, 39. Further, Helsinn asserts that the noscitur a sociis canon of interpretation confirms this reading, as the canon would resist any interpretation that does not apply the consistent characteristic (public availability) to all items on the list because such an interpretation would give “on sale” unintended breadth and make “on sale” inconsistent with the remaining items. Id. at 20. Because the on-sale provision does not cover agreements that do not make the invention publicly available, and because Helsinn’s development agreement does not remove any knowledge already in the public domain, Helsinn argues that the agreement does not undermine the patentability of the product. Id. at 47.
Teva counters that Helsinn’s catch-all interpretation leads to irreconcilable redundancies and conflicts with two centuries’ worth of judicial decisions on the meaning of the term “on sale.” Brief for Respondents, Teva Pharmaceuticals USA, Inc. at 30–31. Moreover, Teva also contends that its interpretation would not render the term “otherwise” superfluous; rather, it acknowledges the overlap between the three categories listed in § 102(a)(1) in order to prevent confusion. Id. at 31. Indeed, the noscitur a sociis canon also does not support Helsinn’s interpretation, according to Teva, because this doctrine only applies where there are two potential meanings of an ambiguous term to choose between. Id. at 33. Because the canon cannot be invoked to change a clear term’s meaning, Teva maintains, it therefore cannot modify the on-sale provision. Id. Additionally, the canon does not support Helsinn’s view because Congress enacted the provisions of §102(a)(1) at various times, according to Teva, and for the same reason Helsinn’s reliance on Supreme Court precedent is misplaced; the cases that Helsinn cites involve lists created entirely at once, and Teva argues that the AIA’s staggered implementation therefore precludes noscitur a sociis. Id. at 34.
THE INFLUENCE OF LEGISLATIVE HISTORY
Helsinn argues that the legislative history surrounding the 2011 amendment to § 102(a)(1) requires the same result as the plain language interpretation of the section itself: the “on sale” bar does not apply to sales that do not make the invention publicly available. Brief for Petitioner at 27. Helsinn points to proposed patent reform bills from 2005 onward which demonstrate Congress’ concern that the prior art patentability restriction be limited by the public-availability requirement. Id. at 25–26. The AIA’s two eponymous sponsors also confirm the catch-all provision’s limitation to the “on sale” bar, according to Helsinn, as both Senator Leahy and Representative Smith explain that they intended the amendment to prevent private offers or sales of inventions from triggering the prior art provision. Id. at 28–29. In fact, Helsinn claims that Senator Kyl noted that the AIA amendment specifically meant to clarify the sales category of prior art, explaining that the first-to-file patent scheme provided sufficient incentive to file and that the bill no longer needed an expansive definition of prior art; Helsinn asserts that this confirms the company’s plain text interpretation. Id. at 27–28. The lower court’s reasoning, according to Helsinn, merely attempts to minimize the sources Helsinn cites without asserting any history that actually supports its holding. Id. at 29. Helsinn posits that Judge O’Malley’s concurring opinion, noting that Congress rejected bills eliminating sales from prior art, does not address the real question at issue: what triggers the on-sale provision. Id. at 30. That Congress decided to retain and clarify the on-sale provision, rather than eliminate it, Helsinn contends, does not support Teva’s contention that the on-sale provision covers the confidential transaction at issue. Id.
Teva replies that Helsinn’s legislative-history argument improperly relies on Senator Kyl’s post hoc analysis which came after his failure to repeal the on-sale provision. Brief for Respondent at 39–40. The provision’s drafting history, according to Teva, illustrates that the on-sale provision was initially contemplated without any public-availability provision or that it was used to replace that provision. Id. at 42. Teva notes that contemporaneous statements from Congress indicate the general agreement that the on-sale provision would maintain its pre-amendment meaning if it were to remain in the statute, and Teva argues that Senator Kyl’s pre-amendment statements reinforce this agreement. Id. 42–43. That Senator Kyl so drastically changed his approach after the amendment passed maintaining the on-sale language emphasizes why such post-passage floor statements are so unreliable, according to Teva, and should not overcome the opinion within pre-passage legislative history that Teva puts forth. Id. at 43.
WHICH INTERPRETATION BETTER SERVES AIA’S PURPOSES?
Helsinn claims that, beyond the plain text interpretation and legislative history, AIA’s stated purposes also support its interpretation of § 102(a)(1). Brief for Petitioner at 30. Congress aimed to harmonize U.S. patent law with the patent systems of other countries, Helsinn maintains, including those of China, Korea, Japan and many European countries, by shifting from a first-to-invent to a first-to-file system. Id. at 31. This new system incentivizes prompt filing and worked to resolve the issue of secret commercialization that plagued the earlier system, and Helsinn argues that Congress’ decision to narrow the on-sale provision aligns with the adjusted incentives. Id. at 32. Helsinn also notes that the lower court’s interpretation would render AIA’s post-grant-review procedure completely unmanageable, citing Senator Kyl for support, as the alternative tribunals were not designed to handle the intense discovery required in secret-sale claims. Id. at 35. Helsinn alleges that Teva’s interpretation would create significant uncertainty in the U.S. patent system and therefore stifle innovation, particularly in small companies requiring outside capital; therefore, Helsinn posits that Teva’s view should not displace the plain-text interpretation that Helsinn puts forth. Id. at 47–48.
Teva, in response, argues that Helsinn’s interpretation would undermine the AIA’s purposes because it would allow inventors to extend their monopoly over an invention by entering into pre-patenting commercialization agreements subject to confidentiality. Brief for Respondent at 46. Teva notes that, though Helsinn’s agreement only involved one other party, Helsinn’s interpretation would not prevent a company from engaging in such secret sales with multiple companies or even from forcing consumers to sign such confidentiality agreements to further extend the life of the monopoly surrounding the invention. Id. at 47. Teva also asserts that Helsinn’s international arguments are unconvincing: just because the U.S. sought to become more aligned with international patent law does not mean that the U.S. sought alignment in every aspect. Id. at 51. Teva further claims that nothing in the provision’s text limit “public” to exclude distributors such as MGI, that the $11 million deal with MGI constitutes the buyer-seller relationship of a typical commercial sale, and that Helsinn could have avoided undermining the product’s patentability by seeking an investor rather than a buyer to develop the drug. Id. at 56–58.
CHILLING EFFECT ON INNOVATION IN BIOTECHNOLOGY INDUSTRY
The Bar Association of the District of Columbia (“D.C. Bar”), supporting Helsinn, argues that upholding the Federal Circuit’s decision would discourage innovation in the bio-technology sector, particularly among start-ups and small pharmaceutical and biotechnology companies. Brief of Amicus Curiae Bar Association of the District of Columbia, in Support of Petitioner at 6–7. The D.C. Bar asserts that these companies are significant contributors to their industry as studies have shown that the majority of drugs approved by the FDA are developed by small companies. Id. The D.C. Bar further elaborates that these small corporations lack the resources to have in-house vertical integration to develop and distribute their drugs and frequently contract with third party business partners to support research and development, and therefore subjecting such agreements to an “on sale” bar would make these companies hesitant to engage in time consuming and expensive research to develop innovative solutions. Id. at 11. The United States, in support of Helsinn, also emphasizes how the Federal Circuit’s interpretation of the AIA’s “on sale” provision penalizes only small corporations that rely on third party investment and partnerships while not impacting larger corporations that are able to carry out these pre-commercial activities in-house. Brief of Amicus Curiae United States, in Support of Petitioner at 28.
Intel Corporation (“Intel”), appearing in support of Teva, argues that concerns about impact on innovation in the biotechnology industry are misplaced because current patent law provides ample protection that encourages innovation. Brief of Amicus Curiae Intel Corporation, in Support of Respondent at 6–7. Intel explains that the “on sale” bar is triggered only if the invention is at a stage that is ready for patenting and is the subject of a commercial offer for sale. Id. at 7. Intel’s contends that the type of agreements anticipated by Helsinn and its amici would not satisfy these requirements if they related solely to development of the product. Id. at 7. Teva, in its brief, responds to the United States’ concern that the Federal Circuit’s interpretation of the “on sale” bar unfairly impacts only small companies arguing that when companies such as Helsinn contract with a third party it is to start making profits on the product before patenting it. Brief for Respondents, Teva Pharmaceuticals USA Inc., et al at 57. Teva asserts that transactions such as the one between Helsinn and MGI are made not to outsource a function that a company does not have the capability to perform by itself but rather to make money from the product immediately. Id.
EXTENDED MONOPOLY AND IMPACT ON QUALITY OF LIFE OF THE PUBLIC
The Biotechnology Innovation Ogranization (“BIO”), in support of Helsinn, points out the impracticalities of avoiding the “on sale” bar by filing patent applications as soon as agreements with third parties are entered into. Brief of Amicus Curiae Biotechnology Innovation Organization, in Support of Petitioner at 23. BIO explains that wasteful filing of patent applications solely to avoid future patentability issues does not serve any public purpose and will only result in hundreds of patent applications being filed for products, most of which will not be commercially viable. Id. The D.C. Bar further adds that the cost of filing such patent applications will be significant and could discourage small businesses from entering the industry. Brief of D.C. Bar at 14. This could directly impact the quality of life of people, according to the D.C. Bar, as drugs such as the one developed by Helsinn in the present case to improve lives of cancer patients would not be developed anymore. Id.
Intel argues that the one-year grace period provided in the AIA is sufficient to assess commercial viability in order to file a patent application. Brief of Intel, at 7–8. The Association for Affordable Medicines (“AAM”), in support of Teva, warns that adopting Helsinn’s interpretation of the “on sale” bar that not only the sale but also the details of the claimed invention are to be publicly known would have the disastrous impact of giving some pharmaceutical companies a near monopoly over life-saving drugs. Brief of Amicus Curiae Association for Affordable Medicines, in Support of Respondent at 16. The AAM refutes the claim that upholding the Federal Circuit’s decision would impair the quality of life of the public by discouraging innovation by arguing that Helsinn’s interpretation would grant patent owners longer monopolies, which in turn would create the risk of pushing generic drug manufacturers out of the market completely. Brief of AAM, at 21. The AAM asserts that generic manufacturers will be unable to enter the market if by the time the patent expires the drug has been superseded by research and is thus not relevant anymore. Id.
- Robert L. Maier, Supreme Court Set to Tackle ‘Secret’ Patented Sales Under AIA, New York Law Journal (Aug. 7, 2018).
- Gene Quinn, Supreme Court to hear Helsinn v. Teva, decide AIA Secret Sales, IPWatchdog (June 26, 2018).