Early Sales May Kill Your Patents

Patent applicants may, for a variety of reasons, feel the need to sell their technologies prior to filing patent applications. Sometimes, however, such early sales can have seriously negative effects on the patentability of their inventions. This is because such sales, or even offers for sale, can be invalidating public uses or disclosures. This blawg explores the pitfalls of prior sales and how to avoid them.

In a recent decision by the Court of Appeals for the Federal Circuit, the Court reaffirmed that some sales and offers for sales can negate U.S. patentability under certain circumstances. Those circumstances include:

1. A bone fide sale or offer for sale,
2. The fact of the sale (or offer) was made public, and
3. The invention was “ready for patenting” by the “critical date,”
i.e. the day that is one year before the filing date.

See Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc., 855 F.3d 1356 (Fed.Cir. 2017). The Court was faced with the question of whether the America Invents Act of 2011 (“AIA”) changed the sales activities that trigger the “on-sale bar.” Without diving too deeply into “inside baseball,” the Court found that the AIA did not disturb the three-part analysis described above.

Helsinn Healthcare S.A. ("Helsinn") is the owner of four patents directed to intravenous formulations of palonosetron for reducing chemotherapy-induced nausea and vomiting ("CINV"). Helsinn entered into two agreements with MGI Pharma, Inc. ("MGI"), an oncology-focused pharmaceutical company. The agreements were (1) a License, and (2) a Supply and Purchase Agreement. These agreements were announced in a joint press release and in MGI's Form 8-K filing with the Securities and Exchange Commission. Helsinn’s U.S. Patent No. 8,598,219 ("the '219 patent") expressly covered a .25 mg dose and was one of the patents subject to those agreements. The agreements were consummated about 2 years before the ‘219 patent filing date (and thus before the critical date). Notably, the parties did not disclose the .25 mg dosage in the press release and Form 8-K filing.

Helsinn Court found that there was a bone fide sale of the .25 mg dose and that it was “ready for patenting” prior to the critical date. Notably, the Court found that, under the AIA, it did not matter that the parties did not describe the claimed .25 mg dose of palonosetron in the press release or Form 8-K filing. The take home message is that the invention, sale, and public disclosure of that sale before the critical date bars patentability. It does not matter whether the actual invention is described or enabled by the disclosure. Furthermore, the Court declined to decide whether secret sales can fulfill the second prong.

Companies and inventors that are highly motivated to sell their inventions should not be deterred from their commercial activities. They should, however, file at least provisional patent applications covering those inventions before a license or sales agreement is consummated. While the AIA continues to provide a one year grace period for a patent applicant’s sales, other countries around the world do not have the grace period. Thus, filing applications as soon as is practicable may significantly strengthen global patent portfolios. Furthermore, one should be careful about what technical information is disclosed to potential customers and partners during the negotiation stage. Where practicable, have an attorney-approved non-disclosure agreement in place.

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A Walk Down Memory Lane

It happens to the best of them. In 2007, Steve Jobs wowed us with Apple’s new device, the iPhone. On September 26, 2013, a German Court was wowed by the same video. Mr. Jobs was one of the inventors on European Patent No. EP2059868. Prior to the earliest priority date on which the German Court could rely, Mr. Jobs introduced a claimed feature of the patent -- the rubber banding effect. For instance, in the 37the minute, he showed the rubber banding effect:

Based on this disclosure, the Court invalidated the patent within the German borders. This is a good example of why inventors and patent assignees should be careful about the disclosures they make about important technologies prior to filing for patent applications.

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