Confidential sales before filing patent application can waive patent rights

U.S. patent law states that any invention that was “on sale in this country, more than one year prior to the date of the application for patent” is not eligible for patent protection.

The Supreme Court recently confirmed that a confidential sale — such as a sale under a nondisclosure agreement — is still a “sale” that can trigger loss of patent rights. In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the Court considered agreements by which the patent holder (Helsinn) agreed to license and sell palonosetron, which is the active ingredient a drug that treats chemotherapy-induced nausea. The agreements required the licensee/buyer to keep dosage and other product information confidential. Two years later, Helsinn applied to patent a method of treatment using the dosage.

In its decision, the Court held that “an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under §102(a)” of the Patent Act. The Court also noted that its ruling is consistent with long-standing precedent on the subject, and that the changes that Congress made to §102(a) in the America Invents Act of 2011 did not alter this premise.

Notably, the facts that led to the Court’s decision involved a sale from the patent holder to a third party. In 2016, the Federal Circuit held that a sale from a contract manufactuer to the patent holder would not trigger the on-sale bar because it was a sale of manufacturing services, and not a sale of the invention. (See The Medicines Co. v. Hospira, Inc.) The Supreme Court’s decision in Helsinn did not address a sale in the contract manufacturing context. However, in its holding the Court specifically mentioned that it was considering “an inventor’s sale of an invention to a third party,” So, it does not appear that the Court’s decision will affect contract manufacturing arrangements.

However, the Court’s decision highlights the importance of filing for patent protection before any offer to sell the invention – even if the offer is made under a nondisclosure agreement. Also, even though U.S. patent law provides a one-year window for filing, most other countries’ patent laws provide no such grace period.