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Helsinn Healthcare v. Teva Pharmaceuticals: Complicated Issues in Interpreting the "On-Sale Bar

On May 1, 2017, the Federal Circuit published its decision in Helsinn Healthcare v. Teva Pharmaceuticals, No. 3:11-cv-03962-MLC-DEA, (May. 1, 2017) concerning infringement of four patents:  U.S. Patent Nos. 7,947,724 ("'724 patent"); 7,947,725 ("'725 patent"); 7,960,424 ("'424 patent") and 8,598,219 ("'219 patent").  Teva defended that the patents were invalid under the "on-sale bar" provision of 35 USC §102.  The District Court held that Teva infringed all of the patents and that the patents were not invalid. Teva appealed. The Federal Circuit reversed the District Court's decision, holding that all four patents were invalid and thus not infringed.

District Court Decision:  Plaintiff Helsinn sued Teva, alleging that the filing of Teva's "Abbreviated New Drug Application" infringed various claims of their patents directed to intravenous formulations of palonosetron for reducing chemotherapy-induced nausea and vomiting (CINV).  All four of the patents claimed priority to a provisional patent application filed on January 30, 2003.  The critical date for the "on-sale bar" was one year earlier or January 30, 2002.  The significance of the critical date is that a sale of the invention before that date can be invalidating.  Teva defended, alleging that the patents were invalid under the "on-sale bar" provision of 35 USC §102.  The court applied the two-step framework of Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), which requires that 1) there was a sale or offer for sale prior to the critical date and 2) that the claimed invention be reduced to practice before the critical date.  As to three of the patents, the court found that there was a sale but that the claimed invention was not reduced to practice before the critical date.  As to the '219 patent, the District Court held that the AIA changed the meaning of the on-sale bar, alleging that it now requires a public sale, that there was no public sale and also the claimed invention was not reduced to practice before the critical date.  In conclusion, the District Court held that all four patents were valid and infringed.

Federal Circuit reversal:  On appeal, the Federal Circuit applied the same two-part Pfaff test and came to a different result, finding the patents invalid and thus not infringed. 

Pre AIA "Sale" as to the '724, '725 and '424 patents:  The court applied the law of contracts to determine whether there was a sale.  Helsinn argued that the "Supply and Purchase Agreement" was not invalidating because at the critical date it was uncertain whether the FDA would approve the claimed dosage and that FDA approval was a condition precedent to the sale.  However, the UCC expressly provides that a "purported present sale of future goods" operates as a contract to sell and that this is true regardless of whether those future goods have yet to receive necessary regulatory approval.  Helsinn also argued that the agreement was uncertain because it covered two different dosage options, however under established contract law, even if the agreement had given the purchaser two options, there would still be a binding agreement.  Thus the Federal Circuit agreed with the District Court that there was a sale for the purposes of the three pre-AIA patents. 

Post AIA "Sale" as to the '219 patent:  when enacting the AIA, Congress amended §102 to bar the patentability of an "invention that 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.   Helsinn argued that the on-sale bar post AIA 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.  Declining to decide the case more broadly than necessary, the court found that the existence of the sale - the "Supply and Purchase Agreement" between Helsinn and MGI - was not secret since it was publicly announced in MGIs 8-K filing with the SEC.   Taking a broad view, the court stated that a primary rationale of the "on-sale bar" is that publicly offering a product for sale that embodies the claimed invention places it in the public domain, regardless of when or whether actual delivery occurs.  Also, the court stated: "We have never required that a sale be consummated or an offer accepted for the invention to be in the public domain and the on-sale bar to apply, nor have we distinguished sales from mere offers for sale.  We have also not required that members of the public be aware that the product sold actually embodies the claimed invention."  Thus the Federal Circuit disagreed with the District Court, finding instead that there was a sale for the purposes of the post AIA patent.

"Reduction to Practice":  Part 2 of the Pfaff test requires that the invention be ready for patenting as of the crucial date.  Under Pfaff there are at least two ways in which an invention can be shown to be ready for patenting.  The court relied on the first method - proof of reduction to practice before the critical date.  An invention is reduced to practice when "the inventor (1) constructed an embodiment ... that met all the limitations and (2) determined that the invention would work for its intended purpose."  The only issue on appeal was the second clause, whether the invention would work for its intended purposes, here "reducing the likelihood" of CINV.  The District Court appeared to believe that Teva needed to meet the FDA standard, which requires finalized reports with fully analyzed results from successful Phase III trials.  The Federal Circuit held that the District Court erred by applying too demanding a standard, and that final FDA approval was not a prerequisite for the invention to be ready for patenting.  The Federal Circuit reasoned that such a high standard would preclude the filing of meritorious patent applications in a wide variety of circumstances.  In conclusion, the Federal Circuit held that all four patents met the second prong and that all were reduced to practice.

The Federal Circuit's opinion is a reminder that "on-sale bar" issues are very complicated.  Before you offer to sell your invention, consult with an attorney to make sure your intellectual property rights are protected. 

Susan L. Crockett, Esq. 

By Crockett & Crockett posted on Wednesday, June 7, 2017.

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