For US patent applications filed post introduction of the America Invents Act (AIA) (which changed from first-to-invent to first-to-file), sale and offer for sale made in confidence of a product that is subsequently patented will not count as prior disclosure in the United States. Put simply, secret use is not prior art for post-AIA applications.
Public use and secret use
Publication or prior public use of an invention that precedes the filing of a patent application to that invention, will, in the absence of being able to rely on a grace period (if available), invalidate the claims of that application.
In addition to so-called “public use”, both Australia and the United States preclude patentability of a claimed invention where it has been “secretly used” prior to filing a patent application.
The situation in Australia
According to case law in Australia, assessment of secret use is a practical test as to whether what ‘has occurred amounted to a de facto extension of the patent term. The answer to this will usually depend upon whether the patentee reaped commercial benefit from what was done before the priority date’ (Azuko Pty Ltd v Old Digger Pty Ltd  FCA 1079). The premise behind the secret use provision is that a patent Applicant should not be able to exploit the invention for commercial gain and thus derive a de facto extension of the patent term without first disclosing the invention to the public. With the introduction of the Raising the Bar Act 2012 in April 2013, the 12-month grace period applicable in Australia extends to secret commercial use with the proviso that the secret use occurs in Australia and a complete application is made within 12 months after first use.
The situation in the USA
In the United States, a secret sale or offer for sale of a claimed invention precludes patentability under the “on-sale” bar. This legal principle--that a claimed invention given or sold to one individual or entity in secrecy can constitute public use--dates back to the late 1880s where it was held that an improved corset worn by a woman underneath her dress (and hence not observable to the general public) was invalidating public use. This is codified in s102 of the U.S. Code. Like Australia, the US also provides 12-month grace period exception.
Changes to s102 under the America Invents Act (AIA) modified the original paragraph to include the phrase “on sale or otherwise available to the public before the effective filing date of the claimed invention” (to include the text in bold).
Since its introduction, the term has been the subject of conjecture in the United States as to whether it was intended to be a catch all to cover all public disclosures or intended to read in conjunction with the words “on sale”. Some clarification is now provided in a decision of 3 March 2016 in Helsinn Healthcare SA v Dr Reddy’s Laboratories and Teva Civil Action No. 11-3962.
The patent at issue (to Helsinn) was directed to Aloxi® (Palonosetron) which is a serotonin antagonist used to treat nausea and vomiting (particularly in cancer patients). Helsinn carried out clinical trials of the drug through third parties which included selling the drug (although the sales were subject to confidentiality restrictions). It was up to the Judge Cooper to decide whether the provisions of s102 require a sale or offer for sale of a claimed invention to be “available to the public before the effective filing date” of the claimed invention in order for the on-sale bar to apply and invalidate the patent.
She held that it did. Because the sales were secret (under fetter of confidentiality) they were not considered sales under post-AIA and therefore did not trigger on-sale bar.
Accordingly, in both Australia and the United States, the grace period can be relied upon to protect against invalidating commercial secret use before the priority date. In Australia, any commercial use not protected by grace period will be invalidating however in contrast, the United States has, at least for the time being, adopted a broader stance in so far as confidential commercial sale even outside the grace period will not trigger the on-sale bar provisions under the AIA. The implication is that the Patent Applicant could obtain a de facto extension of the patent term provided the sales are kept confidential.
Not surprisingly, the decision has been appealed. While it has been suggested that construction of the term could go either way on appeal, our personal feeling is that the decision will be overturned on Appeal as it seems to go against the premise of allowing a patentee to obtain a commercial benefit without having first disclosed the invention through filing a patent application.