By Doug Kim – On January 22, 2019, a unanimous decision by the U.S. Supreme Court held that under the Leahy–Smith America Invents Act (AIA), a “secret sale” of an invention can cause the inventor to lose patent rights. The AIA includes a section that prohibits patent protection for inventions that were “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” Before this case, the question was whether the addition of the phrase “or otherwise available to the public” means only public activity prohibits patent protection. The Supreme Court clarified this holding that this section extends to private sales, even when the invention itself is not disclosed.
In 2001, Helsinn Healthcare S. A. (Helsinn), a Swiss company, entered into a license agreement and a supply and distribution agreement with a marketing partner, MGIPharma, Inc. (MGI) to assist with marketing and distributing the drugs in the United States. Both agreements included dosage information and required the marketing partner to keep confidential any proprietary information received from Helsinn under the agreements. In a joint press release, the two companies announced the existence of the agreement, but did not disclose the details of the invention (e.g. dosage information). MGI also reported the agreements in its Form 8–K filing with the Securities and Exchange Commission. Neither the press release nor the 8-K included specific details of the invention so that the invention itself remained undisclosed. Helsinn filed a provisional patent application two years later. Ultimately, a patent was issued based from the provisional application and Helsinn sued Teva Pharmaceutical Industries, Ltd., and Teva Pharmaceuticals USA, Inc. (Teva) for patent infringement under this patent.
At the trial level, the District Court determined that the “on sale” provision did not apply and stated that under the AIA, an invention is not “on sale” unless the sale or offer in question made the claimed invention available to the public. Because the companies’ public disclosure of the agreements between Helsinn and MGI did not disclose the details of the invention, the invention was not “on sale” before the critical date. The Federal Circuit reversed. It concluded that disclosing the existence of the sale, even when the details of the invention were not disclosed, falls within the AIA’s on-sale bar. Because the sale between Helsinn and MGI was publicly disclosed, it held that the on-sale bar applied.
The Supreme Court agreed with the Federal Circuit and held that an inventor’s sale of an invention to a third-party who is obligated to keep the invention confidential can prohibit patent protection and invalidate any issued patent not based on an untimely filed patent application.
This case supports one of the public policies of the AIA in that it certainly encourages the early filing of patent applications. This case should encourage inventors to work closely with patent counsel to avoid any potential loss of rights down the road. If patent rights are of interest, filing a timely patent application is a must.
Doug Kim is the founder of Douglas Kim Law Firm, LLC, an intellectual property focused law firm that works with clients to understand their needs and customize legal solutions that best achieve their goals and budgets. We treat our clients’ challenges as our own, making their business our business. Doug can be reached at 864-616-9095 and firstname.lastname@example.org.
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