Today, the Supreme Court issued its decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., No. 17-1229, holding that an inventor’s sale of an invention to a third party can qualify as invalidating prior art even if the third party is obligated to keep the invention confidential. The Court’s decision highlights the intellectual property risks that companies must consider in entering into joint ventures and other types of marketing arrangements.

Under the Leahy-Smith America Invents Act (the “AIA”), a person may not obtain a patent on an invention that was “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) (2012) The AIA added the catchall phrase – “or otherwise available to the public” – to the law in 2011.

Helsinn Healthcare S.A. (“Helsinn”) is a Swiss pharmaceutical company that makes Aloxi, a drug that minimizes side effects of chemotherapy. In 2001, while Phase III clinical trials for FDA approval of Aloxi were still ongoing, Helsinn entered into licensing and distribution agreements with MGI Pharma, Inc. (“MGI”). The agreements granted MGI the right to distribute, promote, market, and sell Aloxi in the United States. The companies announced the agreements in a joint press release, and MGI filed a Form 8-K with the SEC that included redacted copies of the agreements. Neither the joint press release nor the Form 8-K, however, discussed the details of the product (i.e., the actual invention). In addition, the agreements required MGI to keep confidential any proprietary information received under the agreements.

In January 2003, nearly two years after executing the agreements with MGI, Helsinn filed a provisional patent application. Ultimately, the FDA approved Aloxi, and the U.S. Patent and Trademark Office issued four patents to Helsinn related to Aloxi, with the latest patent issuing in May 2013.

In 2011, Teva Pharmaceutical Industries, Ltd. (“Teva”) sought FDA approval of a generic version of Aloxi. Helsinn filed suit in federal district court pursuant to the Hatch-Waxman Act, 35 U.S.C. § 271(e)(2)(A), accusing Teva of infringement. In defense, Teva argued that Helsinn’s patents were invalid as a result of Helsinn’s agreements with MGI. In particular, Teva argued that the invention was “on sale” more than one year before Helsinn filed its first patent application. The district court rejected Teva’s argument, holding that the “on sale” bar under the AIA is only triggered when the details of the invention become available to the public as a result of the sale. Here, because Helsinn’s agreements with MGI contained confidentiality provisions, there was no such public disclosure. The Federal Circuit reversed, holding that the “on sale” bar is triggered whenever the fact of a sale is known publicly, even if the details of the invention are not disclosed.

Helsinn appealed, and the Supreme Court granted the petition for writ of certiorari. The Supreme Court heard arguments on December 4, 2018. The Government submitted an amicus brief in support of Helsinn, and the Court permitted the Solicitor General to participate in oral argument. 

In a unanimous opinion written by Justice Thomas, the Supreme Court affirmed the Federal Circuit’s decision, holding that “a commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’ under the AIA.” Helsinn Healthcare S.A. v. Teva Pharm. USA, Inc., No. 17-1229, 2019 WL 271945, at *1 (Jan. 22, 2019). The Court noted that Congress has included the “on sale” bar in every patent statute since 1836, and the bar serves the important function of ensuring that an inventor cannot “remove existing knowledge from public use.” Id. at *4. The Court recognized that its precedents over the past century “suggest that a sale or offer of sale need not make an invention available to the public” to trigger the “on sale” bar. Id. at *5. The Court also noted that Federal Circuit precedent has “made explicit what was implicit in [Supreme Court] precedents” – that “secret sales” can invalidate a patent. Id. Against this backdrop, the Court held that Congress did not intend to modify the “on sale” bar by adding the catchall phrase –“or otherwise available to the public” – to the law in 2011. Id. The Court agreed that adding such a phrase “would be a fairly oblique way” of overturning a settled body of law. Id. (internal quotation marks omitted).

In practical terms, the Court’s decision highlights the importance of carefully evaluating the structure of technology-driven investments, joint ventures, joint development agreements, and other marketing arrangements to ensure that such transactions cannot be characterized as an offer to sell a later-patented invention. As the Supreme Court’s decision makes clear, merely adding confidential provisions to deal documents will not prevent application of the on-sale bar. These lessons are particularly applicable to companies seeking to invest in the development of emerging technologies (or pharmaceuticals) that are not yet the subject of patent applications.