Federal Circuit: AIA On-Sale Bar Applies Even if Details of Invention Are Not Publicly Disclosed

In reversing a previous U.S. District Court ruling, the Federal Circuit held on May 1, 2017 that entering into and publicizing a licensing and supply agreement may constitute an on-sale bar under the America Invents Act (AIA), even if the invention itself is not disclosed in the public agreement. Prior to passage of the AIA, decades of case law had confirmed that sales do not need to be public in order to trigger an on-sale bar under 35 U.S.C. § 102. The on-sale bar provision holds that sales, or offers for sale, of an invention more than twelve months prior to the effective filing date of a patent application constitute prior art against the application. The AIA, passed in 2011, revised 35 U.S.C. § 102, including the portion which defines the on-sale bar. The revised statute now 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…”

The phrase “or otherwise available to the public” did not exist in the pre-AIA version of the statute, leading some observers to suggest that the AIA established a new requirement to the on-sale bar.

That was the position of the U.S. District Court In the case Helsinn Healthcare SA et al. v. Teva Pharmaceuticals USA Inc. In that case, the U.S. District Court interpreted the new statute to limit the on-sale bar to public sales which rendered the invention available to the public. The published supply agreement in the present case did not make the formulation at issue (i.e., the details of the invention) public. Accordingly, the District Court held that it did not constitute an on-sale bar.

On appeal, the Federal Circuit disagreed with the District Court’s statutory interpretation, and held that:

“(A)fter the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of the sale.”

In reaching this finding, the Federal Circuit noted that requiring disclosure of the invention itself would alter a primary rationale, gleaned from precedential decisions on the issue, that underpin the on-sale bar requirement:

“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.”

The Federal Circuit also analyzed floor statements made by members of Congress during debate on the AIA and found those statements to be consistent with its reasoning.

It is important to note that the public nature of the sale itself was not in dispute in this case. Therefore, the Federal Circuit did not decide if a secret sale (i.e., in which the existence of the sale itself was not made public) would be treated differently under AIA.

In view of the importance of this issue, it is likely that this case will continue to be scrutinized by the courts, including possibly an en banc hearing by the full Federal Circuit and review by the U.S. Supreme Court.

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