Does the ‘On-Sale’ Bar Still Cover ‘Secret’ Sales? United States Supreme Court to Decide

By Sam Frost and Justin Philpott

To recap, the Helsinn Healthcare v. Teva Pharma case concerns the changes to Section § 102, implemented by the Leahy-Smith America Invents Act (AIA), and in particular whether or not the ‘on sale’ provision still includes ‘secret’ actions. The Federal Circuit, reversing the District Court, held that the ‘on sale’ bar still encompasses secret or confidential sales, at least, as here, if the existence of the sale is public. 

After a petition for rehearing en banc was refused, Helsinn petitioned the United States Supreme Court. The Supreme Court recently granted certiorari on Helsinn’s petition, recognizing that this is important question in patent law.

The U.S. has been incrementally harmonizing its patent law with its major trading partners. The included the significant step of changing from a “first to invent” system to a “first inventor to file” system. In the key novelty Section § 102, rather than rewrite it entirely, the AIA amended the definition of novelty to add to the existing provisions the requirement that an invention not be “otherwise available to the public”.

This approach is problematic and raises the fundamental question: to what extent does the new provision of “otherwise available to the public” modify the other provisions?

Other countries, that have made similar changes, have taken the approach of completely rewriting the novelty sections in their patent laws. This has the attraction of clarity, but, to a large extent, requires a new body of case law to be developed, to interpret the new provision. For example, in the United Kingdom, the Patents Act 1977, removed a provision governing “secret use” and replaced it with a novelty standard based on “available to the public”^[1], to harmonize with the European Patent Convention (EPC). Canada, in 1993, may be the only country that has jettisoned a specific “on sale” provision in favour of a novelty standard based on disclosure to the public.^[2]

A fundamental problem with the AIA amendment to § 102 is that it attempts to combine a list of “activities” that may destroy novelty, carried over from the old law, with a new provision “otherwise available to the public”, that is a general “principle”. Apart from considerations of harmonization, this general principle does have the advantage of covering up activities that may have been missing from those recited in the old provision, e.g. oral disclosure. Moreover, as a general principle, it does have the advantage that it can capture public disclosures resulting from technological developments; see, e.g. the expansive definition now required for “printed publication” to cover newer types of publication. But, by introducing a broad general principle, the key question that has to be addressed is: is this a separate stand-alone provision, or does it, in any sense, serve to modify the scope of the other provisions?

Proponents of the position that the AIA did effect a significant change in the scope of the “on sale” bar are in good company. Many IP organizations and leading patent practitioners support this position. They make a variety of arguments in support of this position. Given that at least eight of the ten amicus briefs support this position, if this was simply a popular vote, there would be a clear win for the interpretation that the “on sale” bar no longer covers secret activities and is modified by the “available to the public” test.

For proponents of the position that the “on sale” bar remains unchanged, or little changed, by the AIA, there appear to be a number of arguments. In his concurring opinion in the recent decision on the request for en banc review, Judge O’Malley provided a good enumeration of the arguments as to why the AIA does not modify the “on sale” bar, including:

1. finding that the “series-modifier doctrine” is inapplicable, and preferring instead to apply the “last antecedent” doctrine, holding that a terminal phrase should be read to modify only an immediately preceding noun phrase;
2. finding that Congress chose not to modify the term “on sale”, suggesting that Congress intended for that term to take on the meaning the courts had attributed to it for well over a century;
3. Helsinn’s reading would render the “on sale” provision superfluous, because it will equate “on sale” with “public use”;
4. post-AIA 102 (B) (1) introducing the term “publicly disclosed”, and the term “publicly” would be redundant if all “disclosures” in 102(a) were already public disclosures, suggesting that not all prior art events in 102(a) are public events; and
5. Congress several times considered, but rejected the changes to the on-sale bar Helsinn urged the court to conclude were actually made.

Helsinn’s petition for a writ of certiorari provides a strong rebuttal to these various arguments, including:

1. the decision of the Federal Circuit is inconsistent with the statutory text, and that the “series-modifier doctrine” does indeed apply;
2. Congress’ choice of the word “otherwise” confirms that reading of the statute, making it clear that Congress intended the prior art to be limited to that which is “available to the public”;
3. the redundancy argument overlooks that, before the AIA, the phrase “public use” had been interpreted to include types of secret use;
4. there is no redundancy in the phrase “publicly disclose” in 102(b)(1)(B), as this defines inventors disclosures or activities that trigger the provision, not disclosures subject to the exemption; and
5. in construing 102(a)(1) the Federal Circuit made numerous errors, including misapplying traditional tools of statutory interpretation and ignoring the AIA’s definition of the term “claimed invention”, and overlooking the fact that committee reports and floor statements unambiguously support Helsinn’s interpretation.

The argument that the phrase “otherwise available to the public” does modify the preceding elements, taken to its logical conclusion, would mean that 35 U.S.C. 102(a)(1) reduces down to: the claimed invention was available to the public before the effective filing date of the claimed invention.

Therefore, the argument that this reading creates redundancy appears to have some merit.

Unsurprisingly, there are also completely opposing arguments on policy issues.

As determined by the Federal Circuit, traditional policy rationales for the “on sale” bar to cover secret or non-disclosing sales still apply. This ensures that an inventor cannot commercially exploit the invention for an extended period of time, so as to provide a de facto extension of the patent term. Such a provision also generally promotes early filing of applications for all inventions.

Helsinn argued that such a provision is only necessary in a first inventor system, as a first inventor may exploit an invention for some time, safe in the knowledge that the actual invention date could be used to establish patent rights, even if another makes the same invention and files first. In a first inventor to file system, as only filing dates determine priority, there is sufficient incentive for inventors to file early, and it is no longer necessary for the “on sale” bar to encompass secret or non-disclosing activities.

Considered more broadly in the context of the whole of § 102, a single, unified test of  “available to the public” has a superficial simplicity, and one would think that a single test would treat all inventions equally so as to create a level playing field; however, in many ways it has the exact opposite effect. Analyzed in terms of ‘public disclosure’, all inventions will indeed have to be first filed before a critical date (within one year of the first public disclosure), and thus are treated equally.

However, a novelty standard based solely on an ‘available to the public’ test, even if by omission or default, effectively permits or approves of prior ‘secret’ commercial exploitation of the invention, without time limit; the only constraints are the risks the invention may be accidentally disclosed or another, independent inventor files an application first.

The public policy objection to this effective permission is that it does not treat all inventions equally. Analyzed in terms of permitted commercialization, or offering for sale, prior to the critical date, it is clear that different types of inventions are, as a practical matter, treated differently. For many inventions, e.g. most mechanical inventions, such as a RUBIK’S CUBE™, a first sale inevitably results in making the invention “available to the public”. On the other hand, there are also many inventions that can be extensively commercially exploited without any public disclosure, e.g. many industrial processes, where the product of the process is sold. There are also inventions where, whether there is public disclosure or not, will depend upon how the invention is commercially exploited. Consider a new machine for making pasta: if the machine is sold, then the invention is made available to the public, but, if the machine is kept secret and only pasta made by the machine is sold, then the invention will not have been made “available to the public”.

Somewhat surprisingly therefore, a two-part provision, combining an “available to the public” novelty standard AND a requirement that there be no prior commercial exploitation would create a more level playing field. It would require prompt filing of all inventions before a relevant critical date, with respect to both first disclosure AND first commercial exploitation. Finally, it can be noted that a prohibition against prior commercial exploitation is not incompatible with a novelty standard based on ‘available to the public’. In South African patent law, the novelty standard includes: “all matter which has been made available to the public…” and “secret use on a commercial scale in South Africa before the priority date”.^[3]