The U.S. Court of Appeals for the Federal Circuit ruled Monday that the on-sale bar provision of the America Invents Act (AIA) renders patents invalid if the invention was sold prior to patenting, even if the sale did not publicly disclose the invention. The on-sale bar (35 U.S.C. § 102) holds that sales of an invention more an one year prior to the filing date of the patent application are prior art that can be used to invalidate a patent. In Helsinn Healthcare SA v. Teva Pharmaceuticals USA Inc., Case No. 16-1284, the Court reversed a 2016 district court decision that had held that the on-sale bar is triggered only by a public sale, rejecting the argument of Helsinn Healthcare that amendments to the on-sale bar provision in the 2011 AIA meant that only sales publicly disclosing the invention can render a patent invalid.
Before the AIA, the on-sale bar provision stated that a person was entitled to a patent unless the invention was patented or “in public use or on sale in this country, more than one year prior to the date of application.” Courts have routinely held that even confidential sales triggered the bar under that provision. Congress amended the on-sale bar in the AIA, which applies to patents filed after March 2013, to allow patents unless the claimed invention was patented or “in public use, on sale or otherwise available to the public” before a patent application is filed.
In this case, Helsinn Healthcare S.A. (“Helsinn”) was the owner of four patents directed to intravenous formulations of palonosetron for reducing or reducing the likelihood of chemotherapy-induced nausea and vomiting (“CINV”). Helsinn sued Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries, Ltd. (collectively, “Teva”) alleging that the filing of Teva’s Abbreviated New Drug Application (“ANDA”) constituted patent infringement. The district court held that three of the patents were not invalid under the pre-AIA on-sale bar, concluding that there was a commercial offer for sale before the critical date, but that the invention was not ready for patenting before the critical date. For the fourth patent, governed by the AIA version of 35 U.S.C. § 102, the district court concluded that there was no commercial offer for sale because the AIA changed the relevant standard and that, in any event, the invention was not ready for patenting before the critical date.
By way of explanatory background, Helsinn licensed one of the patents in 1998, submitting safety and efficacy protocols for Phase III clinical trials to FDA in early 2000. By early 2001 the Phase III trials were ongoing but not yet completed.
On April 6, 2001, Helsinn and MGI Pharma, Inc. (“MGI”), an oncology-focused pharmaceutical company that markets and distributes in the United States, entered into two agreements: (1) a License Agreement and (2) a Supply and Purchase Agreement. The agreements were announced in a joint press release of the two corporations and in MGI’s Form 8-K filing with the Securities and Exchange Commission (“SEC”), which included partially-redacted copies of both agreements. The “products” covered by the License Agreement were 0.25 mg and 0.75 mg doses of palonosetron. Under the Supply and Purchase Agreement, MGI agreed to purchase exclusively from Helsinn, and Helsinn agreed to supply MGI’s requirements of the 0.25 mg and 0.75 mg palonosetron products, or whichever of the two dosages were approved for sale by FDA. The License Agreement referred to the ongoing clinical trials and stated that in the event that the results were unfavorable and FDA did not approve the sale of either dosage of the product, Helsinn could terminate the agreement. Except for price terms and specific dosage formulations covered, all of the foregoing information about the transaction was publicly disclosed.
After signing the agreements, and still before the critical date, Helsinn prepared preliminary statistical analysis of the earliest Phase III trial, showing that 81% of patients who received the 0.25 mg dose of palonosetron experienced relief from CINV for 24 hours. After the critical date (January 30, 2002), Helsinn submitted its preliminary Phase III data to the FDA. In September 2002, after the successful completion of all Phase III trials, Helsinn filed its New Drug Application for the 0.25 mg dose, but did not seek FDA approval of the 0.75 mg dose. On January 30, 2003, Helsinn filed a provisional patent application covering both doses. The FDA issued approval for the 0.25 dose on July 2003. From 2005 to 2006, Helsinn filed three patent applications, issuing as three of the suit patents. In May 2013, after the effective date of the AIA, Helsinn filed a fourth patent application which issued as the fourth suit patent (the ‘219 patent). All four patents cover the 0.25 mg dose, are listed in FDA’s “Orange Book,” and claim priority to the January 30, 2003 date of the provisional application.
In 2011, Teva filed an ANDA seeking FDA approval to market a generic 0.25 mg palonosetron product. Teva’s ANDA filing included a Paragraph IV certification that the claims of the patents-in-suit were invalid and/or not infringed. Helsinn then brought suit under the Hatch-Waxman Act, 35 U.S.C. § 271(e)(2)(A), alleging infringement of the patents-in-suit by the ANDA filing.
At trial, the district court held that Teva’s 0.25 mg dose infringed all of the suit patents. With respect to the on-sale issue, the court found that pre-AIA law applied under § 102(b) with respect to three of the patents, and that the MGI Supply and Purchase Agreement was a contract for a future sale of a commercial product embodying the 0.25 mg dose and therefore constituted a sale under § 102(b). However, the court found that the claimed invention was not reduced to practice before the critical date and therefore was not ready for patenting. As to the ’219 patent governed by the AIA, the district court held that the AIA changed the meaning of the on-sale bar and § 102(a)(1) now “requires a public sale or offer for sale of the claimed invention.” (emphasis added). The court concluded that, to be “public” under the AIA, a sale must publicly disclose the details of the invention. The court found that the MGI Supply and Purchase Agreement did not constitute a public sale or commercial offer for sale because it failed to publicly disclose the 0.25 mg dose. The court also held that the ’219 patent also was not ready for patenting before the critical date.
1. Pre-AIA Patents
On appeal, the Federal Circuit agreed with the district court that the invention of the three pre-AIA patents was subject to a sale or offer for sale prior to the critical date, because there was a sale of the invention under the law of contracts as generally understood. Helsinn argued that the Supply and Purchase Agreement was not invalidating because at the critical date it was uncertain whether FDA would approve the 0.25 mg dose, and FDA approval was a condition precedent to the sale. The Federal Circuit disagreed, recognizing that an agreement contracting for the sale of the claimed invention contingent on regulatory approval is still a commercial sale under generally accepted contract law principles.
The Court also rejected Helsinn’s argument that, even if the agreement of sale for the 0.25 mg dose could be an invalidating sale, the agreement was uncertain because it covered the 0.25 mg dose, the 0.75 mg dose, and both doses. The Court noted that separate agreements for the two dosages, each contingent on FDA approval, each of which would trigger the on-sale bar for the respective dose. Per the Court, it cannot be that combining them into a single agreement somehow thwarts application of the on-sale bar.
The Court also held that the agreements at issue here unambiguously placed the invention on sale, noting that the Supply and Purchase Agreement described the palonosetron formulation in detail and that the 0.25 mg dose described in that Agreement embodied the asserted claims of the patents-in-suit. The Court concluded that “[i]t is clear that the Supply and Purchase Agreement constituted a commercial sale or offer for sale for purposes of § 102(b) as to the asserted claims of” the three pre-AIA patents.
2. AIA Patent
With respect to the fourth patent (‘219 patent) governed by the AIA, the Court noted that, under the pre-AIA version of § 102(b), although confidentiality weighed against application of the on-sale bar, that fact alone was not determinative. The Court rejected Helsinn’s argument that the “otherwise available to the public” language included in the AIA version of § 102 changed the statute so that the on-sale bar now does not encompass secret sales and requires that a sale make the invention available to the public in order to trigger application of the on-sale bar. The Court noted that the existence of the sale—the Supply and Purchase Agreement—was publicly announced in MGI’s 8-K filing with the SEC, which included a partially redacted copy of the contract for sale as an attachment. “Detailed information about palonosetron, its benefits and uses in treating CINV were also disclosed. The statements disclosed the chemical structure of palonosetron and specified that the covered products were ‘pharmaceutical preparations for human use in [intravenous] dosage form, containing [palonosetron] as an active ingredient.’”
The Court also rejected Helsinn’s argument that the AIA version of the on-sale bar does not apply unless the details of the claimed invention were publicly-disclosed before the critical date, saying, “Requiring such disclosure as a condition of the on-sale bar would work a foundational change in the theory of the statutory on-sale bar.” The Court noted its own precedent that an invention is made available to the public when there is a commercial offer or contract to sell a product embodying the invention and that sale is made public, explicitly rejecting a requirement that the details of the invention be disclosed in the terms of sale.
The Court concluded that, after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale. Since the Supply and Purchase Agreement constituted a sale of the claimed invention—the 0.25 mg dose—before the critical date, both the pre-AIA and AIA on-sale bars applied.
3. Ready for Patenting
Finally, the Court concluded that the invention here was ready for patenting because it was reduced to practice before the critical date. The sole issue was whether Helsinn had determined that the invention would work for its intended purpose, i.e., “reducing the likelihood” of emesis and CINV. The Federal Circuit found that the district court based its finding that the invention was not reduced to practice before the critical date on insufficient testing for Helsinn to have “determined that the invention would work for its intended Purpose,” apparently believing that Teva needed to meet the FDA standard, which requires finalized reports with fully analyzed results from successful Phase III trials. Per the Court, this was clear error:
The completion of Phase III studies and final FDA approval are not pre-requisites for the invention here to be ready for patenting. The evidence is overwhelming that before the critical date of January 30, 2002, it was established that the patented invention would work for its intended purpose of reducing the likelihood of emesis.
The Court found that, under the district court’s “unduly restrictive” standard, Helsinn could not have filed a valid patent application before the critical date of January 30, 2002. “Such a standard would preclude the filing of meritorious patent applications in a wide variety of circumstances.” The Court said:
But there is no general rule that Phase III trials must be completed before a product is ready for patenting, just as there is no general rule that Phase III trials are irrelevant. Each case must be decided based on its own facts.
(distinguishing In re Omeprazole Patent Litig., 536 F.3d 1361, 1373 (Fed. Cir. 2008)).