Secret Sales of a Product Embodying Your Invention Are Prior Art

Before the America Invents Act (AIA) went into effect in 2013, 35 U.S.C. §102 barred the patentability of an invention that was “patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent.” This law had been interpreted expansively to include any offer for sale, even those that were made under confidentiality agreements, and potentiallythose that were made by a supplier to deliver invention prototypes to the inventor.

The AIA amended §102 to bar the patentability of an “invention [that] 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 (emphasis added).”Note that “otherwise available to the public” was added, and the limitation “in this country” was removed.

At issue in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., was the effect of the “otherwise available to the public” language in the post-AIA version of §102. Did this additional language modify the entirety of this provision of §102so that non-public or secret sales no longer qualify as prior art? Helsinn, as well as the government, had argued that this phrase means that a sale now must make the invention’s details available to the public to trigger the “on-sale bar.”

But the US Supreme Court sided with the Federal Circuit’s interpretation of the “on sale bar” holding that “Congress did notalter the meaning of ‘on sale’ when it enacted the AIA.” Justice Clarence Thomas, writing for a unanimous Court, held: “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).”The speed with which the unanimous Supreme Court decision was issued, merely seven weeks after oral arguments, indicates it was not a close call.

Before Helsinn, the Supreme Court had never expressly addressed the question of whether or to what extent that an offer or sale must be public to qualify as prior art. Justice Thomas noted that the Court’s pre-AIA “precedents suggest that a sale or offer of sale need not make an invention available to the public”, and identified examples in prior precedent that implicitly found secret sales to be prior art.As such,“[T]he addition of ‘or otherwise available to the public’ is simply not enough of a change for us to conclude that Congress intended to alter the meaning of the reenacted term ‘on sale.’”

Pat’s Insight for Inventors:

Taking Helsinn in conjunction with the Federal Circuit’s en banc 2016 decision in The Medicines Co. v. Hospira, Inc., independent inventors and small companies with limited resources should be very careful when structuring arrangements with third parties to help them manufacture a product embodying their invention. Best practice is to file a patent application before contracting with others to make the prototype product. But if you cannot file a patent application before you need help making prototypes, do not issue a purchase order or accept a sales contract to buy the prototype products from an outside manufacturer. Instead, outsource your manufacturing needs expressly with a manufacturing services contract, and include confidentiality obligations in that contract or in a separate nondisclosure agreement. You (the inventor) will maintain control of the invention and will not authorize the manufacturer to sell to anyone else but only to deliver the prototypes to you (the inventor). Such manufacturing services contract, as opposed to a purchasing contract, involves purchase of services, not purchase of the invention, and will not trigger the on sale bar.