Can a confidential agreement between a pharmaceutical company and a distributor constitute a patent-invalidating offer for sale of a pharmaceutical product, even if information about the product is never revealed to the public? Yes, it can, according to the Supreme Court’s January 22, 2019 decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., et al., No. 17-1229 (Helsinn). Provided here.
In the decision, the Supreme Court held that “an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under [35 U.S.C.] § 102(a)” and dispatched an industry argument that the 2011 America Invents Act changed the law on offers for sale.
Facts of the Case
In 2001, Helsinn Healthcare S.A. and MGI Pharma, Inc. entered into two agreements. In a license agreement, MGI agreed to distribute, promote, market, and sell Helsinn’s projected palonosetron pharmaceutical product, then in Phase III. See Helsinn Healthcare S.A. v. Teva Pharm. USA, Inc., 855 F.3d 1356, 1361 (Fed. Cir. 2017). In a supply and purchase agreement, “MGI agreed to purchase exclusively from Helsinn any palonosetron product approved by the FDA.” Helsinn, slip op. at 2. The agreements were the subject of press releases and Form 8-K filings, but none of the releases or filings “disclosed the specific dosage formulations covered by the agreements.” Two years after entering into the agreement with MGI, Helsinn filed provisional patent applications covering the product and ultimately obtained patent protection for the product formulation, including U.S. 8,598,219. Helsinn, slip op. at 2-3.
In 2011, Teva Pharmaceutical sought FDA approval to sell a generic palonosetron product. In subsequent Hatch-Waxman litigation, Teva argued that Helsinn’s patent was invalid, alleging that the invention was “on sale” through the Helsinn-MGI agreements. Helsinn, slip op. at 3.
The district court rejected Teva’s invalidity argument, holding that the post-AIA on-sale bar “requires that the sale or offer for sale make the claimed invention available to the public.” See Helsinn Healthcare S.A. v. Dr. Reddy’s Labs. Ltd., No. 11-3962, 2016 WL 832089, at *51 (D.N.J. Mar. 3, 2016). In the district court’s view, the invention was not on sale in the Helsinn-MGI agreements “because the sale or offer [f]or sale did not make Helsinn’s claimed invention available to the public.” Id. at *52. The Federal Circuit reversed. It held that pre-AIA case law “rejected a requirement that the details of the invention be disclosed in the terms of sale.” Helsinn Healthcare, 855 F.3d at 1370. The Federal Circuit further held that legislative history did not demonstrate that Congress intended to require public disclosure. Id. at 1370-71.
The Supreme Court affirmed the Federal Circuit, holding that “an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under § 102(a).” Helsinn, slip op. at 9 (emphasis added).
The Supreme Court rejected the argument that Congress limited the on-sale bar in the AIA, finding instead that “[t]he 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.’” Id., slip op. at 8. Additionally, the Supreme Court reaffirmed its 1998 decision in Pfaff v. Wells Electronics, Inc., which set forth two requirements for an invention to be on sale, specifically (1) “the product must be the subject of a commercial offer for sale” and (2) “the invention must be ready for patenting.” Id., slip op. at 6 (quoting Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998)).
Helsinn provides another reminder that it is essential to file patent applications early, before beginning activities that constitute an offer for sale—or may later be found by a court to constitute an offer for sale.
Helsinn offers little new guidance for pharmaceutical companies drafting other types of agreements; for example, agreements with contract manufacturing companies. However, the decision leaves in place existing Federal Circuit case law in this area, such as Medicines Co. v. Hospira, in which the Federal Circuit stated that “a contract manufacturer’s sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under § 102(b).” Medicines Co. v. Hospira, Inc., 827 F.3d 1363, 1381 (Fed. Cir. 2016). Indeed, the Federal Circuit Helsinn decision, now affirmed by the Supreme Court, relied in part on Medicines Co. See Helsinn Healthcare, 855 F.3d at 1366.