Federal Circuit

Federal Circuit Distributes Update to On-Sale Bar

On February 6, 2018, in The Medicines Company v. Hospira, Inc., the plaintiff-appellant in the case, The Medicines Company (Med Co), was appealing the U.S. District Court for the District of Delaware’s finding that Hospira, the defendant-cross appellant, had not infringed Med Co’s patents. Hospira was simultaneously appealing the District Court’s finding that Med Co’s distribution agreement did not constitute an invalidating “offer for sale” under 35 U.S.C. §102(b).

The distribution agreement in question was entered into by Med Co and Integrated Commercialization Solutions, Inc. (ICS) on February 27, 2007, and it stated that would purchase and distribute Med Co’s product, Angiomax. The distribution agreement further stipulated that title to the product would pass to ICS once the product arrived at ICS’s distribution center. The distribution agreement also precluded Med Co from selling its product to any other party within the United States for a period of three years. ICS had distribution rights for Med Co’s product under a previous distribution agreement, but ICS did not take title to Med Co’s product under the previous distribution agreement.

Med Co owns two U.S. patents which were the subject of this case: U.S. Patent No. 7,598,343 (‘343 patent) and U.S. Patent No. 7,582,727 (‘727 patent), both of which were filed on July 7, 2008. Both patents cover an improved mixing process for manufacturing a substance called bivalirudin; Med Co had been using bivalirudin for nearly twenty years to manufacture Angiomax.

The Court held that Hospira had not infringed Med Co’s patents because Hospira’s manufacturing process did not perform the “efficient mixing” process taught by Med Co’s patents. Hospira’s mixing process introduced the bivalirudin in three separate portions instead of at a controlled, constant rate, and Hospira did not use a homogenizer in the mixing process.

The Court also held that Med Co’s distribution agreement was a “commercial offer for sale” and that Med Co’s inventions in the ‘343 patent and the ‘727 patent were both ready for patenting at the time the distribution agreement was entered into. Med Co attempted to argue that the distribution agreement was not an offer for sale because under the terms of the agreement Med Co could reject all purchase orders submitted by ICS; the Court disagreed because under the distribution agreement Med Co and ICS purposefully changed their previous distribution services relationship to let ICS take title to the product, and the distribution agreement required Med Co to take “commercially reasonable efforts” to fill purchase orders from ICS. The Court determined that the inventions in the ‘727 patent and the ‘343 patent was ready for patenting before the agreement was entered into because Ben Venue Laboratory had already manufactured bivalirudin according to the patented process on October 25, 2006, which was prior to the date the agreement was entered into (July 7, 2008).

This decision is important because it means that manufacturers should file for patent protection for new manufacturing processes before entering into agreements to sell their products, and that a distribution agreement will trigger the on-sale bar unless manufacturers retain title to their product(s). However, the first sale of the product by the distributor will also trigger the on-sale bar.

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