Medicines Co. v. Hospira, Inc., Case No. 2014-1469 (Fed. Cir. February 6, 2018)

In Medicines Co. v. Hospira, Inc. ("Medicines II"), the Federal Circuit held that a distribution agreement entered by Medicines Company ("MedCo") with a distributor may trigger the "on sale" bar under 102(b), pre-AIA, because the agreement was an offer for sale as demonstrated by the terms of the agreement.

In reaching its conclusion, the Federal Circuit relied upon their standard established by Medicines I. See Medicines Co. v. Hospira, Inc., Nos. 2014-1469, -1504 (Fed. Cir. July 11, 2016) (en banc). In Medicines I, the en banc Federal Circuit held that a "commercial sale or offer for sale" must have the "general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code." Further, in Medicines I, the Federal Circuit determined that a manufacturing contract between MedCo and a manufacturer was not a sale or offer for sale of the invention based on three factors: (1) only manufacturing services were sold to MedCo as shown by the terms of the contract; (2) MedCo maintained control of the invention; and (3) the transaction was confidential. The Federal Circuit noted "control" was maintained over the invention because MedCo retained title to the embodiments of the invention and the manufacturer was not authorized to sell or market the invention to others.

In contrast to the manufacturing contract in Medicines I, the Federal Circuit held that the distribution agreement in Medicines II was an "offer for sale" because it was an agreement to sell and purchase the product that was allegedly the invention. In reaching this determination, the Federal Circuit relied upon the distribution agreement stating that MedCo "now desire[d] to sell the Product" and the distributor "desire[d] to purchase and distribute the Product," the agreement stating the purchase price, and title of the product being passed to the distributor upon receipt at a distribution center.

Although MedCo argued that there was no offer for sale because the distribution agreement allegedly permitted MedCo to reject all purchase orders, the Federal Circuit was not persuaded. That is, as the Federal Circuit noted, the terms of the agreement established an offer for sale. Further, the contract required "commercially reasonable efforts" by MedCo to fill purchase orders, and because the contract was an exclusive distribution agreement, the Uniform Commercial Code similarly imposed a "best efforts" requirement by MedCo. Lastly, the course of dealings between MedCo and the distributor established that MedCo would unlikely reject an order. Thus, according to the Federal Circuit, MedCo "entered into an exclusive distribution agreement that provided all of the necessary terms and conditions to constitute a commercial offer for sale," and not an optional sale arrangement that may not qualify as an offer for sale.

Following the determination that the distribution agreement was an offer for sale, the Federal Circuit remanded to the district court to determine whether the offer for sale covered the patented invention such that the on-sale bar under pre-AIA 102(b) would be triggered.