Supreme Court Grapples With Patent Law's On-Sale Bar
Hearing his first patent case, Brett Kavanaugh says legislators tried and failed to exclude private sales from a list of disqualifying prior art. Other justices sounded less sure.
December 04, 2018 at 06:18 PM
5 minute read
The U.S. Supreme Court sounded as if it could be getting a case of buyer's remorse over patent law's on-sale bar.
The justices granted cert in Helsinn Healthcare v. Teva Pharmaceuticals last summer after the pharmaceutical industry argued that legislators clearly intended to change the definition of what is “on sale”—and therefore faces a one-year ticking clock to be patented—in the America Invents Act.
But Justice Brett Kavanaugh, who joined the court after the cert vote, sounded skeptical at Tuesday's oral argument that Congress intended any change. “If that was a clarification, it was a terrible clarification,” he told Williams & Connolly partner Kannon Shanmugam, arguing for Switzerland-based Helsinn Healthcare. “There were a lot of efforts, as you well know, to actually change the 'on sale' language, and those all failed.”
Several other justices echoed Kavanaugh's concerns, though Justices Samuel Alito and Elena Kagan suggested that the actual language of the 2011 law did reflect a change. “I think the most serious argument you have to deal with is … the fairly plain meaning of the new statutory language,” Alito told Goodwin Procter partner William Jay, representing generic drug maker Teva Pharmaceuticals USA.
The case prompted an outpouring of briefs from pharmaceutical and biotech interests on one side and the tech industry and law professors supporting their outlook on the other. A running joke throughout Tuesday's arguments was the high quality of briefs on both sides.
The question posed by the case is whether private sales—such as between drug manufacturers and distributors—trigger the on-sale bar, meaning the manufacturer would have only one year from that date to apply for a patent. Pharma companies say “on sale” means on sale to the public, such as when a drug becomes available to consumers. Otherwise, manufacturers can effectively lose a chunk of the 20-year period of exclusivity that a patent confers, they argue.
Teva, tech companies and a group of law professors led by Stanford's Mark Lemley argue that for nearly 200 years the Supreme Court has held that any commercial exploitation of an invention—public or private—triggers the on-sale bar. Inventors shouldn't be able to use patents to pull their inventions out of the stream of commerce, they argue.
In Helsinn's case, the family-owned Swiss company entered into a licensing and distribution agreement with Minnesota-based MGI Pharma Inc. in 2001 for formulations of palonosetron, the active ingredient in Helsinn's drug for treating chemotherapy-induced nausea and vomiting. The deal was contingent on Food and Drug Administration approval, which Helsinn eventually obtained. Only then did Helsinn patent its 0.25 milligram formulation, more than a year after its deal with MGI.
Helsinn argues that the America Invents Act clarified that the on-sale bar applies only to public sales. It points to language that says an invention can be patented unless it's been “described in a printed publication, or in public use, on sale, or otherwise available to the public.”
Shanmagum argued Tuesday that it's no coincidence the on-sale bar is surrounded in the statute by public examples of prior art. “The on-sale bar, like the other bars in the definition, reaches only a disclosure that makes the claimed invention available to the public,” he told the court. “That interpretation is consistent with the plain text of the definition and its legislative history.”
Chief Justice John Roberts suggested it doesn't square with the ordinary definition of sale. “If something's on sale, it doesn't have to be on sale to everybody,” he said. “It could be just I'm going to sell something to you.”
Shanmugam argued that while that might be true of the “sale” of an item, the phrase “on sale” implies availability to the public. And in case there was any doubt, Congress included the catch-all phrase “or otherwise available to the public.”
“You don't think it would have been easier to just change it directly, as many members of Congress tried to do repeatedly and failed?” Kavanaugh replied.
Congress could have said “on sale to the public,” Justice Sonia Sotomayor told Deputy Solicitor General Malcolm Stewart, who mostly backed Helsinn's interpretation. “And then we might have to grapple with this.”
Teva counsel Jay argued that “on sale” has an established meaning, and rather than change it, Congress merely added a new category of invalidating prior art, such as oral presentations made at conferences.
But Alito said repeatedly it would be “nonsense” for Congress to include “on sale” in a list of public items, and follow it with the “otherwise available” catch-all, if it meant to include private sales.
Jay argued that “otherwise” isn't a talismanic word that's understood to unsettle the meaning of statutory language. But Kagan suggested it might be enough to do so in this case. She compared it to an injunction that bars the consumption of peanut-butter cookies, pecan pie, brownies “or any dessert that otherwise contains nuts.”
“Do I violate the injunction if I buy nutless brownies?” she asked Jay.
Yes, said Jay, because brownies could be read to include or exclude nuts.
“Given your position, you have the wrong answer to the brownies hypothetical, I think,” Kavanaugh said.
“Maybe I'm misunderstanding the hypothetical,” Jay said. “Or at least maybe we're having a disagreement about what it means to be a brownie.”
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