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Bold Move! Secretly Selling Yourself Out of a Patent

We all know that public disclosure of the details of an invention, generally more than a year prior to the filing of a patent, can stop an application cold. Disclosure includes a number of activities including, as one might imagine, putting a product on the market either to individual buyers or more broadly. One question that has been around for many years is, do “secret” sales qualify as activities that constitute a bar to an application?

The Court of Appeals for the Federal Circuit, the Washington D.C.-based federal appeals court which routinely handles patent related appeals, many of which are passed on to the U.S. Supreme Court, issued a ruling recently that helps clarify when and how secret sales can act as a bar to patentability. In the case of Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. two pharmaceutical companies pitted two patents against each other for a new chemotherapy-induced nausea remedy drug. The suing company, Helsinn Healthcare, sued for infringement on its earlier patent and the later patent holder asserted that the claims at issue in the earlier patent were invalid under what is called the “on-sale bar” under U.S.C. § 102.

The gravamen of the defending company’s, Teva Pharmaceuticals, counter was that the plaintiff company had entered into a licensing and supply and purchase agreement with a third party over 2 years prior to the filing date of the patent. The defending argument was that this agreement constituted a “sale”, which was moreover public, given the joint press release issued by the plaintiff company and its buyer and licensee.

The “on-sale bar” provision of 35 U.S.C. § 102(a)(1) reads in pertinent part, “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.”

The lower district court, where the suit was originally brought, ruled with respect to this argument that the on-sale bar included implicitly that that the invention itself was disclosed to the public in addition to its sale, or in other words that both the sale of the invention and details about the invention must both be made public for the bar to apply.

The Federal Circuit disagreed. Using various means of interpretation of the law, since the language itself is less than clear on this point, the appeals court held that only the sale of the invention need be disclosed publicly and this would operate as a bar to patentability, even if the actual invention remained a secret.

What about the case then where both the invention and the sale of same were kept entirely under wraps? In this case, there was a fairly unambiguously public release of knowledge via a press release but the Federal Circuit left open the question of whether an entirely secret sale could still constitute a bar to patentability—putting aside of course how an opposing party would (legally) obtain knowledge of a supposedly clandestine transaction.

Immediate takeaways from this decision are that it is best not to play with fire by entering into business deals and prospective agreements prior to having at least a provisional patent application filed, along with bulletproof nondisclosure agreements. Even “secret” deals can be made public even inadvertently, and indeed it may be possible that a future decision will hold that even entirely undisclosed sales can trigger the on-sale bar. One is behooved therefore to consider very carefully the timeline for disclosure, balancing business interests with the potentially game-breaking consequences of having a patent invalidated by one’s own furtive business activities.

Author: James French, Patent Attorney

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