Pre-Patent Sales Law Weighs on Appeals Court in Pharma Case

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By Peter Leung

Oct. 4 — It may be difficult to write a clear rule on what triggers a ban on patenting an invention that’s been on sale for more than a year before a patent application is filed, appellate judges said Oct. 4.

The comments came during oral arguments in Helsinn Healthcare SA v. Teva Pharmaceuticals USA Inc., a patent infringement action involving Helsinn Healthcare SA’s Aloxi, a drug for treating nausea stemming from chemotherapy ( Helsinn Healthcare SA v. Teva Pharmaceuticals USA, Inc. , Fed. Cir., No. 16-1284, argued 10/4/16 ).

The question of whether the 2011 America Invents Act (AIA) changed the scope of the “on-sale bar” could have big repercussions for pharmaceutical companies, especially smaller ones, that rely on outside companies to help with aspects of drug development.

In July, the full Federal Circuit in Meds. Co. v. Hospira, Inc., 2016 BL 221119 (Fed. Cir. 2016), ruled that a patent holder who paid a supplier to make a batch of drugs for testing did not trigger the on-sale bar (133 PTD, 7/12/16). However, that case applied only pre-AIA law, because the patent was granted before the law's passage.

New Language

Helsinn had sued Teva Pharmaceuticals USA Inc. under the Hatch-Waxman Act, claiming that Teva's actions to bring a generic version of Aloxi to market infringed several of its patents. Teva argued that the patents were invalid because more than a year prior to filing, Helsinn entered into a supply and purchase agreement and a licensing agreement with MGI Pharmaceuticals. Those deals were sales that triggered the on-sale bar, making the patents invalid, Teva argued.

The trial court rejected that argument, finding that Teva infringed the patents. According to the court, the AIA changed the law so that only public sales would trigger the on-sale bar, and the sale in question was not public. As for the patents granted pre-AIA, the Helsinn-MGI agreements did not constitute a sale, the court said.

The AIA added the phrase “otherwise available to the public” to 35 USC § 102(a), which states in part that a person shall be entitled to a patent unless “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” According to the district court, the added language modified the “on sale” language, so that only public sales can act as a bar to a patent.

Not a Modifier

On appeal, Teva's lawyer, George C. Lombardi of Winston & Strawn LLP, argued that reading is incorrect. The “otherwise available to the public” language does not modify the earlier items, such as printed publications, described in Section 102(a). Instead, it is supposed to create a separate catch-all category of items or events that did not exist when the law was written.

“For instance, back when this was section was first drafted in the ‘50s, we didn't have social media, we didn't have computers, we didn't have tweets, we didn't have video tapes,” Lombardi said. This clause, he argued, is supposed to reach items to expand the categories of prior art, including forms of prior art that may exist in the future.

What's more, if Congress had intended to modify the on-sale bar, it could have added a “to the public” modifier directly to that particular phrase, rather than tacking new language onto existing language, he argued.

Digging Through the History

The U.S. government also appeared to argue that Congress intended for the AIA to add a public sale requirement to the on-sale bar. William Ernest Havemann of the Department of Justice, arguing for the U.S., said the legislative history supports this position. The language was introduced in the Senate Judiciary Committee, he said, and the committee's report said the language would emphasize that the prior art in Section 102(a), including sales, must be public. The House later adopted that language, and a committee report also had language saying the purpose was to require that prior art be publicly available.

Looking for “Workability.”

Judge Kathleen M. O'Malley said her problem with that approach is that there does not seem to be a clear rule that can be applied. What would happen, she asked, if Helsinn made a sale to a patient on chemotherapy but had a confidentiality agreement attached to the sale? Would that constitute a sale to an interested member of the public, triggering the on-sale bar?

Confidentiality agreements and resale restrictions are relevant to the analysis, said Havemann. He argued that courts have long-distinguished between publicly and privately available prior art, such as printed publications, although such inquiries would prove fact-intensive.

Havemann's argument, which weighs several factors rather than laying down a bright line rule, sounds similar to the Federal Circuit's approach in Meds. Co.. There, the court discussed several important factors, such as whether the patent holder kept title to the product and whether confidentiality agreements were involved.

Judge Timothy B. Dyk sounded skeptical of that approach.

“It leaves us with a completely unworkable standard,” he said. “People who are trying to make important decisions as to when to file their patent applications, when to enter into these agreements, are asked to consider a multiplicity of factors.”

“If I were a lawyer advising them, I would say ‘I don't know what to tell you',” and that the answer can only be found in litigation, he said.

However, Havemann said district courts have long applied a similar analysis to whether things such as a publication or an invention's use can be considered public, and the changes brought by the AIA would be similar and just as workable.

Joseph M. O'Malley, Jr. of Paul Hastings LLP appeared for Helsinn. He argued that finding no distinction between public and private sales would disadvantage smaller companies such as his client that do not have the resources to do all their development in-house. He also argued that the contract between Helsinn and MGI did not constitute a sale that would trigger the on-sale bar.

In addition to Dyk and O'Malley, Judge Haldane Robert Mayer also heard the case.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

For More Information

Appellant's brief available at: http://src.bna.com/i9q.

Opposition brief available at: http://src.bna.com/i9r.

U.S. amicus brief available at: http://src.bna.com/i9s.

Reply brief available at: http://src.bna.com/i9t.

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