In Helsinn Healthcare v. Teva Pharmaceuticals USA, the
Court affirmed a Federal Circuit decision invalidating the patent for Helsinn=s nausea drug Aloxi, based on patent
law=s Aon
sale@
bar. In short, the Court found that the
sale of an invention to a third party who is obligated to keep the invention
confidential by agreement may place the invention “on sale” for purposes of the
Leahy‑Smith America Invents Act (AAIA@), which bars a person from obtaining a
patent on an invention that was Ain
public use, on sale, or otherwise available to the public before the effective
filing date of the claimed invention.@
An exception to the on sale bar is made if a sale or offer to sell is
made 1 year or less before the effective filing date of a claimed invention,
and certain other conditions are met.
The facts of the case are as follows. While Helsinn was in development of a drug,
which uses the active ingredient palonosetron to treat chemotherapy‑induced
nausea and vomiting, it entered into two agreements with a third party, MGI
Pharma, Inc., a license and supply and purchase agreement. These agreements gave MGI the right to
distribute, promote, market and sell two specific dosages of the palonosetron
in the United States. In exchange, MGI
made up-front payments to Helsinn and agreed to future royalties on
distribution. Most importantly, the agreements
required MGI to keep confidential any proprietary information regarding
palonosetron. The agreements were
disclosed to the public in a joint press release and related filings with the
SEC, but the specific dosage formulations covered by the agreements were not included
in the disclosure.
On January 30, 2003, nearly two years later, Helsinn filed a
patent application covering the two doses of palonosetron. Over the next 10 years, it filed additional
patent applications, all claiming priority to the January 30, 2003 date. Years later, Teva Pharmaceuticals sought FDA
approval to market a generic palonosetron at one of Helsinn=s dosages. Helsinn brought suit claiming the product
infringed its patent. Teva argued that
the fourth patent was invalid because the specific dose was Aon sale@
more than one year before Helsinn filed its initial patent application in
2003. The District Court held that the “on
sale” provision did not apply because the public disclosure of the agreements
did not disclose the specific dosages.
The Federal Circuit court, however, reversed, and concluded that the
sale was publicly disclosed, regardless of whether the details of the invention
were publicly disclosed in the terms of the agreements.
In a unanimous ruling, SCOTUS found
that an inventor=s commercial
sale of an invention to a third party invalidates the patent, even if the third
party is obligated to keep the invention confidential due to the “on sale”
bar. The Court recognized that the
pre-AIA statute included the “on sale” bar and noted the precedent that secret
sales could invalidate a parent. It then
applied the presumption that Congress intended the same with the AIA, which
includes the same “on sale” language.
Further, the Court found that the addition of the catchall phrase “or
otherwise available to the public” is not enough of a change from the pre-AIA
statute to conclude that Congress intended to alter the meaning of “on sale.”
The practical application and effect of this ruling is
interesting to note. On the one hand, a
modest inventor can argue that upholding the Federal Circuit=s decision would discourage innovation
in the biotech sector, particularly among small or start-up companies who lack
resources to have their drugs developed and distributed in-house, as they
frequently rely on third party investment and partnerships which can help with costs
of further research and development. Third party investments and partnerships,
however, subjects them to the “on sale” bar and can discourage them from engaging
in time-consuming and costly research, because it causes them to lose the
ability to receive patent protection. Also,
being forced to file costly patent applications for the sole purpose of
avoiding future patentability issues will further discourage small businesses
from entering the industry, especially when their invention has not been tested
to be commercially viable.
On the other side, competitors can argue that the Aon sale@
bar is triggered only when the invention is at a stage when it is ready for
patenting and sale, or when the inventor is ready to start making profits
before patenting it, and thus, the Aon
sale@
restriction is appropriate. Further, a
one-year grace period provided in the AIA is sufficient in which to assess commercial
viability.
In any event, all inventors
should be aware of the fact that this decision has vast implications for
patent-holders in the United States as well as for investors intending to sell
their invention pre-patent application.
Authored by:
Jennifer T. Poochigian
