The Supreme Court held today in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. that a secret sale does qualify as prior art under the AIA, affirming the judgment of the Federal Circuit.
Earlier today the United States Supreme Court issued its decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. The single question presented by Helsinn was whether under the America Invents Act (AIA) an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining patentability. In other words, does a so-called secret sale qualify as prior art under the AIA. The Supreme Court held today that secret sales do qualify as prior art under the AIA.
In a relatively short, unanimous decision authored by Justice Thomas, the Court begins by explaining that twenty-years ago in Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 67 (1998) the Court determined that an invention was on sale within the meaning of pre-AIA § 102 if it was subject to a commercial offer for sale and it was ready for patenting. Moreover, Thomas recognized that prior to passage of the AIA the Federal Circuit had clearly established that a secret sale could invalidate a patent. Therefore, given the settled precedent, Justice Thomas explained that there was a presumption “that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.” The Court also found the catch all phrase “or otherwise available to the public” was “simply not enough of a change… to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’”
The speed with which the Supreme Court decided Helsinn will surprise some given that oral arguments were held just 7 weeks ago today. The fact that the Supreme Court affirmed the judgment of the Federal Circuit will likely also surprise many.
Also, of interest to many will be the Supreme Court citing precedent and the well-established expectations. Indeed, at one-point Justice Thomas writes: “In light of this settled pre-AIA precedent on the meaning of ‘on sale,’ we presume that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.”
Where was this same concern for settled precedent when the Supreme Court overruled the primary holding in Diamond v. Chakrabarty and when the Supreme Court overruled the mandate in Diamond v. Diehr that one must not conflate novelty with patent eligibility? Both of those cases were over 30 years old when the Supreme Court unceremoniously chose to forge a different path with respect to patent eligibility; a path that now has the U.S. as one of the least favorable jurisdictions among developed nations for software, artificial intelligence, biotech, medical diagnostics and genetics.
The Supreme Court seems to have gotten Helsinn correct, and rather surprisingly affirmed the judgment of the Federal Circuit. The Supreme Court even provided a citation in the case explaining that the Federal Circuit has exclusive jurisdiction of patent matters. So, the question will be whether this signals a potential philosophical shift for the Court, or whether this is just the Supreme Court relying on precedent when it is convenient to achieve the end they prefer.
It is worth noting, however, that earlier this month the Supreme Court did issue a non-patent decision with great significance in the fight over patent eligibility. In a unanimous decision authored by Justice Kavanaugh in Henry Schein, Inc. v. Archer & White Sales, Inc., the Court explained there is no authority for the existence of judicial exceptions to the Federal Arbitration Act (FAA). “[W]e are not at liberty to rewrite the statute passed by Congress and signed by the President,” Kavanaugh wrote for the Court. See A New Court a New Fix for Alice.
Time will tell whether Helsinn and Schein are a blip on the radar, or whether they signal a Court that recognizes it has traveled too far from its Constitutional role. In the meantime, the language of both decision can and should be generously applied to the patent eligibility debate in briefs at the Patent Trial and Appeal Board (PTAB), in federal district court and at the Federal Circuit.
For more on Helsinn please see our prior coverage by viewing our Helsinn Archive.
Image Source: Photograph taken by Gene Quinn © 2009.
Join the Discussion
20 comments so far.
AnonJanuary 27, 2019 09:20 pm
Your point is not in accord with either patent law or my posts here.
My obsession is NOT “pro-patent” as much as it is “pro-innovation.”
This comes from multiple perspectives – as noted.
Well, we both know about that, now don’t we?
LazyCubicleMonkeyJanuary 27, 2019 04:36 pm
I think you don’t understand the point I was making.
The distinction that I want to point you do is that patents are not *VITAL* to innovation – even if they can be important in some cases (again, limiting my observations to software).
Given that, it’s your pro-patent obsession (although completely understandable due to your field) that can be considered unhealthy.
AnonJanuary 27, 2019 12:38 pm
You appear to not understand the link that you yourself presented.
Perhaps you thought that “wow, 30% don’t have patents, and this must mean that patents are not important,” of course, failing to realize that this statistic points in the opposite direction (70% do have patents).
The rest of the article goes into metrics of the data (a small set of data) that THAT company analyzed, and how they analyzed the data (not necessarily pertinent here).
What I gather from your own provision is the type of unhealthy anti-patent bias that you seem to remain blissfully unaware of, and how that bias creates a type of confirmation bias for ANY additional discussion points that you come across. Even in a small study that shows a large majority of Software-Unicorns engaging in the patent system to some degree, you THINK this is “evidence” that patents are not important.
Your “logic” is in error.
AnonJanuary 27, 2019 12:31 pm
It is more than wishful thinking, but less than “hard evidence.”
As I have noted in another comment today (still in the buffer), my agenda is backed by a lifetime of work in this field from several different vectors: engineer doing the innovating, manager, managing those who do the innovating, and attorney, protecting the fruits of innovation.
We have noted in discussion past how your view is flavored from but one perspective, and that one is tainted by the Kool-Aid that you serve yourself.
LazyCubicleMonkeyJanuary 27, 2019 09:12 am
“…The current lead is due – in substantial part – to the past allowances and promotions as afforded by patenting in these areas.”
Do you have any evidence of that, one way or the other? Or just wishful thinking?
Your own info has 30% of billion dollar startups as having no patents: https://ipwatchdog.com/2015/11/03/the-naked-truth-30-of-us-unicorns-have-no-patents/id=62842/
AnonJanuary 27, 2019 08:47 am
The short answer is: “Nobody knows.”
The Court may see to its recent history and give an answer all of its own makings.
patent guyJanuary 26, 2019 02:54 pm
Do secret commercial offers no longer get one year? The old 102(b) explicitly included on sale activity for the one year, but the new 102(b)1 only includes “disclosures”, and Helsinn makes it clear that on sale includes on sale activities that are not disclosed, right?
AnonJanuary 26, 2019 09:54 am
The current lead is due – in substantial part – to the past allowances and promotions as afforded by patenting in these areas.
You advance an agenda here that is both misaligned and uninformed as to how we got here.
Your posts grow dull with your desire to advance your agenda when you do not take the time to understand the background of the topics that you want to speak of.
LazyCubicleMonkeyJanuary 25, 2019 11:14 pm
“…the U.S. as one of the least favorable jurisdictions among developed nations for software, artificial intelligence, biotech, medical diagnostics and genetics.”
And yet, US still leads the way in those fields. Perhaps it’s the result of something other than patent/intellectual property law? Or maybe even because of it?
Pro SayJanuary 23, 2019 07:02 pm
When is a secret not a secret?
Why; when SCOTUS say’s it isn’t, of course.
Is the sky blue? Water wet? Mt. Everest high?
Only SCOTUS knows for sure.
AnonJanuary 23, 2019 04:11 pm
CP in DC,
Sorry, but if you are viewing this as not having a policy aspect,then you will not understand just why this was a bad decision.
And efficacy is related to possession and is related to claimed utility. Yes, different government bodies vouch for different aspects, but those aspects very much are inter-related.
Toxic to humans is a rather serious drawback to claimed utility. Unless you think that “any old utility” will do….
CP in DCJanuary 23, 2019 04:01 pm
Factually nothing has changed other than the passage of time. It’s not a policy decision, it’s all based on the action that took place. A sale is a sale and this is an action. A sale is not policy.
A secret sale (one bound by non-disclosure agreements or confidentiality agreements) was a sale prior to the AIA.
Time passes and the AIA passes.
A secret sale (one bound by non-disclosure agreements or confidentiality agreements) is still a sale.
What in the statute changed that makes a sale a non-sale?
Just a small clarification. Safety and efficacy has to be clinically proven by submission of data in an IND, NDA or ANDA (these are the clinical trials) to the FDA, not PTO. PTO cares about utility, not safety and efficacy, they are not one and the same. Something can be useful and treat a disease, and so a patent issues. However, the same drug may be highly toxic when submitted to humans (side effects too), so it has utility, but won’t pass the FDA
Eric BerendJanuary 23, 2019 02:34 pm
Pure judicial activism, acting as de facto legislators, while sitting on the bench. Manifest contempt shown to the Legislative Branch.
That nose has been mashed so often and in so many directions. Extraordinary tensile strength, that wax has.
AnonJanuary 23, 2019 02:15 pm
CP in DC @ 5,
I have to disagree with you here – and vehemently so.
This is ONLY “expected” if you place yourself in an absolute vacuum as to what the major thrust of the AIA was for.
Your “shouldn’t work now” is a policy point that is just nor for you — or the Court — to decide.
Your post elevates a desired Ends over the “whatever” Means used to get there – something that is bothersome (and should be bothersome).
And trust me – I am NO FAN of the tactics of Big Pharma when it comes to patenting — especially as I have noted in the past vis a vis having actual possession in line with the claims at the time of filing, which would necessarily mean that your efficacy is already possessed – and instead of as now, a mere “study plan” with a “hope” that you pass the FDA efficacy hurdle. FAR too many items do not pass that efficacy hurdle. No pass means no actual possessed utility, which is a requirement at the filing date.
No other art unit anywhere gets the “pass” on actual possession like Big Pharma.
Robert IsacksonJanuary 23, 2019 10:57 am
At least SCOTUS was clear in its holding, rather than just muddying the waters, so if Congress wants to change this result, it knows it needs to act and how. That said, I think the real significance of the Helsinn decision, apart from unfairly penalizing individuals and small companies, is if what you have created is significant enough to make a deal with a third party to commercialize, file your patent applications before you make that deal. This result is neither efficient nor consistent with the policy underlying the statutory grace period, but apparently it’s where we are.
CP in DCJanuary 23, 2019 10:46 am
Keeping the discussion on Helsinn and Helsinn alone, this outcome was expected. As noted in the article, “for sale” included “secret sales.” Secret sales is the way pharma gets manufacturers, formulators, or others to scale up production of their product prior to selling. They know it works, otherwise why scale up?
The reason to get non-disclosure agreements (confidentiality agreements) in place to keep everything secret is merely to delay the application filing date. That never worked in the past and shouldn’t work now.
Pharma always had this problem of trying to keep things secret given that the business needs outsourcing. You outsource clinical trials, you outsource production (Active Pharmaceutical Ingredient), and you outsource manufacturing (formulations). So if you could keep all that “secret” you could file patent applications the prior to selling it to the public, which generally is years (think nearly 10) after knowing the API works for its intended purpose. You game the system.
There is patent term extension (PTE) to compensate for FDA approval. The delay only allows pharma to maximize patent term by contract, which was never possible.
KenFJanuary 23, 2019 10:30 am
What a bunch of BS. Appalling. Relying on fact that the same term was used pre-AIA, without one whiff of meaningful consideration of the fact that the structure of the phrase in which that term is used HAS CHANGED! And to pass off the “or otherwise” language as insufficient to show that the meaning of the term changed vis-a-vis pre-AIA law when the whole AIA was a tectonic shift in the U.S. patent system is just absolutely ludicrous! Leave it to Clarence Thomas….. Alice and Oil States, anyone? Perhaps he has Rudy Giuliani clerking for him and explaining patent law to him……
DaveRJanuary 23, 2019 09:40 am
Gene, You summed up the overall situation, not just in the SCOTUS but the federal government overall with these two statements which I have copied from your article:
1. So, the question will be whether this signals a potential philosophical shift for the Court, or whether this is just the Supreme Court relying on precedent when it is convenient to achieve the end they prefer.
2. “[W]e are not at liberty to rewrite the statute passed by Congress and signed by the President,” Kavanaugh wrote for the Court.
Try applying those statements to the SCOTUS decisions modifying or adding to the express wording of the Obamacare legislation and many other decisions of the SCOTUS in the Roberts era.
EGJanuary 23, 2019 08:58 am
I agree. The amicus brief by Congressman Lamar Smith, co-sponsor of the AIA, makes clear why the holding/reasoning by SCOTUS in Helsinn is contrary to the legislative intent of what “new” AIA 102 means. Unfortunately, this isn’t the first time that SCOTUS has ignored what sponsors of the very patent statute have said it means. In Eli Lilly v. Medtronic, the co-sponsors of Hatch-Waxman pointed out that “patented invention” meant only drug patents, not patents on all subject matter, including medical devices, subject to FDA regulation. But Scalia, notoriously deaf to any aspect of legislative intent, ignored them as well to hold that “patented invention” meant any subject matter regulated by the FDA. Admittedly, Congress could do a better job drafting such legislation, and the true legislative intent can be a tricky thing to divine, but SCOTUS might do better to listen more closely when it’s the sponsor of the very act that says what it means.
AnonJanuary 22, 2019 05:02 pm
I am not celebrating this Helsinn decision as anything remotely close to being correct.
All this was, was the Court (once again) staking out a policy position that treats patentees harshly.
The decision does not do justice to ALL of the considerations that were in play with the America Invents Act.
Not even close.