A Return to Normal: The Helsinn Decision and the Rejection of Secret Sales

Eric M. Pecci is a J.D. candidate, 2021 at NYU School of Law.

On January 22, 2019, the Supreme Court decided a case that, despite confirming law that had been in practice for several years, nonetheless shook up the patent industry. The inclusion of secret sales into the “on-sale” bar to patentability had been well established law in the United States since 1945, but the Patent and Trademark Office (PTO) believed the Leahy-Smith America Invents Act (AIA) had changed that. The Supreme Court rejected this belief in Helsinn Healthcare S.A. v. Teva Pharm. USA, Inc., 139 S. Ct. 628 (2019) ruling that secret sales of patented goods more than a year before the patent filing date were considered “on sale” under the AIA and therefore prevented patentability.

The words “on sale” have appeared in U.S. law as a bar to patentability since 1839.^[1] Once an invention is on sale, then it becomes part of the prior art and therefore not patentable. The pre-AIA wording of 35 U.S.C. §102(b) read: “A person shall be entitled to a patent unless —[…] (b) the invention was patented or described […] or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States”(emphasis added).^[2] First developed by Judge Learned Hand in Metallizing Eng’g Co. v. B. Simon, Inc., 64 F. Supp. 848 (W.D.N.Y. 1945) and later adopted and formalized by the Supreme Court in Pfaff v. Wells Elecs., 525 U.S. 55 (1998) the “on-sale” doctrine taught that §102(b) included sales protected by confidentiality agreement and a reasonable expectation of privacy, or, in other words, secret sales.^[3] In order for a sale to be invalidating, two requirements needed to have been met. First, there must be a commercial offer or sale and second, the invention must be ready for patenting. Notably absent, any requirement that the sale be made public knowledge or available to the general public in anyway.

In 2011, Congress passed the AIA, a broad update to the patent laws of the United States. The largest effect of the AIA was changing the American patent system from “first to invent” to “first to file” but other, smaller, changes were made as well. One of these changes was to §102. The new §102(a) reads “A person shall be entitled to a patent unless — (1) 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”(emphasis added).^[4] The phrase “on sale” remained in the new statute, and the rest of the statute is very similar to the pre-AIA language, with one key difference. The AIA added the phrase “or otherwise available to the public” at the end of the statute. Some commentators believed that the new language overruled the “on-sale” doctrine laid out in Pfaff.^[5] These commentators believed that the phrase “otherwise available to the public” should be read to mean that secret sales or uses were not included in §102(a) as a bar to patentability. The commentators also believed that the lack of geographic or temporal limitations in §102(a) supported their interpretation, as otherwise any act undertaken even one day before filing for patent protection, anywhere in the world, by anyone, would invalidate the patent. Persuaded by these arguments, the Patent and Trademark Office passed guidelines in 2013 that explicitly rejected the notion that secret sales of an invention prevented patentability under 102(a).^[6] The PTO believed that the primary inquiry under §102(a) was whether or not the invention had been made available to the public, not to proscribe behavior that inventors can take before filing a patent.

The Supreme Court delivered an emphatic rejection of the PTO’s interpretation in Helsinn.^[7] The case involved a company, Helsinn, who had developed an anti-nausea drug called palonosetron. During development, Helsinn entered into a confidential licensing agreement with a company called MGI for MGI to sell palonosetron in the United States. This licensing agreement contained chemical information about palonosetron and dosage requirements. However, Helsinn did not file for a patent on palonosetron until two years after they had signed their agreement with MGI. The Supreme Court ruled that the licensing agreement violated the on-sale bar of the new §102, rendering the patent invalid and upholding the former “on sale” regime. The Court reasoned that Congress reused the “on sale” language from the pre-AIA statute, and therefore intended to maintain the developed case law regarding that phrase. The Court did not believe that Congress would overturn years of precedent indirectly through a catchall phrase, and also stated that catchall phrases such as “otherwise available to the public” are typically used to describe behavior beyond the foregoing categories, rather than limit those categories. The Supreme Court treated the case as an issue of unambiguous statutory interpretation, without delving into policy rationales or giving deference to the PTO’s interpretation.

The Supreme Court may not have given a policy rationale for their decision, but the decision was still good policy. First, secret sales do not lose all legal protection under Helsinn. Inventors can engage in secret sales and receive protection both through confidentiality agreements and trade secret laws and doctrines. Inventors cannot make use of those protections for a period of longer than a year and then apply for patent protection. The end result would be that an inventor could sell his product secretly for years, and then apply for a patent and receive another further 20 years of exclusive patent protection.^[8] One of the driving factors of patent law generally, and the AIA specifically, is to encourage disclosure from the inventor to the public. By reading §102 to disallow secret sales, the Supreme Court has construed the patent law so as to encourage disclosure and benefit the public. However, the decision may prove to be problematic regarding pharmaceuticals. Pharmaceutical companies often need to make licensing agreements prior to patenting their drugs in order to obtain the financing they need to complete the research required to have a valid patent.^[9] It remains to be seen how pharmaceutical companies will respond.

^[1]See Raja Chatterjee, The Patent On-Sale Bar Post-Helsinn and its Effect on the Pharmaceutical Industry, 18 Chi.-Kent J. Intell. Prop. 207, 212 (2019).

^[2]35 U.S.C. § 102(b) (1972).

^[3]See Pfaff v. Wells Elecs., 525 U.S. 55 (1998).

^[4]America Invents Act 35 U.S.C.S. § 102 (2012).

^[5]Robert A. Armitage, Understanding the America Invents Act and Its Implications for Patenting, 40 AIPLA Q.J. 1, 43 (2012).

^[6]“Examination Guidelines,” Docket No.: PTO–P–2012–0024, 77 Fed. Reg. 43,759 (July 26, 2012) (draft); 78 Fed. Reg. 11,061 (Feb. 14, 2013) (final).

^[7] Helsinn Healthcare S.A. v. Teva Pharm. USA, Inc., 139 S. Ct. 628 (2019).

^[8] See Mark A. Lemley, Does “Public Use” Mean the Same Thing It Did Last Year?, 93 Tex. L. Rev. 1119, 1135-41 (2015).

^[9] See generally, Chatterjee, supra note 1.