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EXCEPTIONAL AND ACCESSIBLE LEGAL REPRESENTATION ACROSS KENTUCKY AND NATIONWIDE

On-sale bar to patent registration applies to even secret agreements to sell inventions

On Behalf of | Oct 14, 2021 | Business contracts, Intellectual Property, Patents |

Don’t let the cart get before the horse, and don’t sell your invention before you have filed a patent application. Inventors, entrepreneurs and businesses are understandably eager to secure licensing or sales arrangements for their newly invented processes, technology, machines or ornamental designs for manufactured goods. However, they must be careful not to move ahead with these agreements too quickly if they are considering applying for patents on the newly invented items or processes.

Any party in this situation must understand and remain cognizant of the “on-sale bar” to patent registration approval from the U.S. Patent and Trademark Office (USPTO). This is especially important if the potential patent is a key component of future commercial success.

What is the on-sale bar?

The 2011 federal Leahy-Smith America Invents Act (AIA) provides that “[a] person shall be entitled to a patent unless … the claimed invention was … on sale … before the effective filing date of the claimed invention.” (This is one of several reasons the USPTO may reject a patent application for the existence of “prior art.”) Before the AIA, the courts enforced and interpreted the on-sale bar in the predecessor statute, and the reasoning of those decisions still applies to on-sale-bar cases under the AIA.

U.S. Supreme Court and “secret sales”

In 2019, the Supreme Court clarified the scope of the on-sale bar in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., a unanimous decision. Helsinn developed a drug treatment for chemotherapy symptoms. While the medication was still in development, Helsinn penned two agreements with MGI Pharma, Inc. (MGI) – one for licensing of the drug and another for supply and purchase. The agreements contained confidentiality clauses requiring MGI to keep Helsinn’s proprietary information private. Then, they publicly announced their contractual arrangement, but not the dosage amounts involved in the medication.

Later, Helsinn filed multiple patent applications and sued Teva for infringement when Teva tried to introduce a generic form of the treatment to the market. Teva responded that Helsinn had hit the on-sale bar when it contracted for licensing and purchase with a third party before the patent application filing date, so its patent was invalid.

The Supreme Court said that despite the invented pharmaceutical formula details being subject to confidentiality requirements, the sale to MGI before filing the patent applications qualified the formula as being “on sale.” A secret sales agreement triggers the on-sale bar to patentability just as much as a public sale or public offer for sale would be.

The court explained that on-sale-bar cases have “focus[ed] on whether the invention had been sold, not whether the details of the invention had been made available to the public or whether the sale itself had been publicly disclosed.” 

Key takeaway: Proceed with caution when bringing your invention to market

In essence, it is probably more important in most circumstances to focus first on filing the patent application before signing contracts – even private ones or those that may require confidentiality – that the examiner could interpret as a sale or offer for sale, triggering the on-sale bar to patentability of the invention. This is a complex legal and factual question, so the advice and guidance of an experienced lawyer as early as possible is important.