29 April 2019

US Supreme Court considers novelty with a worrying outcome for patentees

In the recent case of Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., et al, the US Supreme Court had the opportunity to consider the issue of novelty under the America Invents Act (AIA) and, in particular, the question of the consequence of sales made under a confidentiality agreement. The decision means that the patentability of an invention is thrown into doubt in the US where a confidential sale of the invention to a third party is made public, even though the invention itself was not made public by said disclosure.

The Case

In 2000, Helsinn submitted protocols for Phase III clinical trials to the Food and Drug Administration (FDA), proposing to study a 0.25 mg and a 0.75 mg dose of palonosetron for treating chemotherapy-induced nausea and vomiting. Shortly thereafter, Helsinn entered into two agreements with a marketing partner, MGI Pharma, Inc., granting that company the right to distribute, promote, market, and sell a 0.25 mg dose of palonosetron in the United States. Both agreements included a confidentiality clause, under which MGI was required to keep confidential any proprietary information received under the agreements.

Almost two years later, in 2003, Helsinn filed a provisional patent application claiming a specific dosage of palonosetron. Eventually, in 2013, US Patent No. 8,598,219 was granted.

In 2011, Teva sought approval from the FDA to market a generic 0.25 mg palonosetron product. Helsinn sued Teva for patent infringement, and Teva counterclaimed that US Patent No. 8,598,219 was invalid since the invention had been “on sale” for more than a year before the priority date (the 2003 provisional patent application), as a result of the agreements between Helsinn and MGI Pharma.  

The so-called “on-sale bar” is an established limitation on patentability under US patent law, specifying that an invention cannot be patented if it has been for sale for over one year prior to the patent filing.  

In 2016, the Federal District Court of New Jersey ruled in Helsinn Healthcare S. A. v. Dr. Reddy’s Labs. Ltd., (2016 WL 832089, *45, *51) that the “on sale” provision would only be applicable if the sale or offer to sell made the invention “available to the public”. Since the information exchanged under the agreement was protected under a confidentiality clause, it was held that Helsinn’s invention was not “on sale”.

However, in 2017, the Federal Circuit (855 F. 3d 1356, 1360 (2017)) reversed this result, concluding that “if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale” in order to fall under the AIA “on sale bar”. Taking into consideration that the co-operation between Helsinn and MGI was publicly disclosed, the on-sale bar was applicable, despite there having been no public disclosure of the invention itself.

On appeal, the Supreme Court affirmed this result, pointing to the importance of the novelty of the invention as a requirement for patentability. The Supreme Court referred to precedents and concluded that the sale or offer for sale need not make an invention available to the public in order for it to be novelty-destroying.  In the specific case, it was not contested that the invention had been “on sale” as a result of the collaboration between Helsinn and MGI Pharma for a longer period of time than one year prior to the filing of the provisional application. Thus, the novelty of the invention was destroyed and the patent was found invalid.

The Consequences

The US Supreme Court decision will be of concern to many who have taken measures to maintain the confidentiality of details of their invention, but have publicised the commercial arrangements surrounding the development and launch of an eventual product. It has now been confirmed that the mere disclosure of a commercial co-operation between two commercial entities can invalidate a patent, even where the disclosure relates to the purpose of the co-operation but does not include disclosure of the technical details of the invention.

It is important to understand that, under the AIA, the on-sale bar extends to “sales” outside the United States, and so this decision could have consequences for collaborations anywhere in the world. Indeed, collaborations, including the outsourcing of any R&D-related services, should be carefully considered and, wherever possible, agreements should seek to avoid any transaction that could constitute a “sale” of the invention between the parties.

With the constant pressure many companies are under to demonstrate to shareholders and investors that progress is being made towards the launch of a product, press releases announcing collaborations are frequent, particularly in the life sciences area. Following this Supreme Court decision, it is now clear that such press releases may actually be detrimental to the validity of US patent rights and companies should think long and hard about what they publically disclose about agreements with third parties.

If you require advice relating to this decision, please contact any of our patent attorneys. Our legal team will be happy to advise you on drafting agreements to minimise the risks following this decision.