Monday, May 01, 2017

CAFC in Helsinn v. Teva. AIA did NOT change meaning of "on sale." Invention can be ready for patenting before FDA approval.

The issue in Helsinn v. Teva [ 2017 U.S. App. LEXIS 7650 ] was the possible invalidating effect of
a sale before the critical date:

The patents-in-suit purport
to disclose novel intravenous formulations using
unexpectedly low concentrations of palonosetron that
were not taught by the prior art. All four of the patentsin-suit
claim priority to a provisional patent application
filed on January 30, 2003. The critical date for the on-sale
bar is one year earlier, January 30, 2002. The significance
of the critical date is that a sale of the invention before
that date can be invalidating.1

The outcome of Helsinn v. Teva was reversal of D. N.J.:

Helsinn brought suit against Teva Pharmaceuticals
USA, Inc. and Teva Pharmaceutical Industries, Ltd.
(collectively, “Teva”) alleging that the filing of Teva’s
Abbreviated New Drug Application (“ANDA”) constituted
an infringement of various claims of those patents. Teva
defended, inter alia, on the ground that the asserted
claims were invalid under the on-sale bar provision of 35
U.S.C. § 102. The district court found that the patents-insuit
were not invalid. With respect to three of the patents,
which are governed by the pre-Leahy-Smith America
Invents Act (“pre-AIA”) version of § 102, the district court
concluded that there was a commercial offer for sale
before the critical date, but that the invention was not
ready for patenting before the critical date. With respect
to the fourth patent, which is governed by the AIA version
of § 102, Pub. L. No. 112-29, § 3(b), 125 Stat. 284, 285–86
(2011), the district court concluded that there was no
commercial offer for sale because the AIA changed the
relevant standard and that, in any event, the invention
was not ready for patenting before the critical date.
We reverse. The asserted claims of the patents-in-suit
were subject to an invalidating contract for sale prior to
the critical date of January 30, 2002, and the AIA did not
change the statutory meaning of “on sale” in the circumstances
involved here. The asserted claims were also
ready for patenting prior to the critical date.

An issue:

The district court held a bench trial. The district court
held that Teva’s 0.25 mg dose infringed all of the patentsin-suit.
In addressing the on-sale issue, the court applied
the two-step framework of Pfaff v. Wells Electronics, Inc.,
525 U.S. 55 (1998), which requires that there was a sale
or offer for sale and that the claimed invention was ready
for patenting for the on-sale bar under 35 U.S.C. § 102 to
apply. As to the ’724, ’725, and ’424 patents, the court
found that pre-AIA law applied under § 102(b) and that
the MGI Supply and Purchase Agreement was a contract
for a future sale of a commercial product embodying the
0.25 mg dose and therefore constituted a sale under
§ 102(b). But, the court found that the claimed invention
was not reduced to practice before the critical date of
January 30, 2002, and therefore was not ready for patenting
under the second prong of Pfaff. The district court did
not address whether the invention was ready for patenting
on the alternative theory that Teva had shown that
the inventor had created enabling descriptions before the
critical date. See Pfaff, 525 U.S. at 67–68.

The Hospitals case is mentioned:

We recently had occasion to
address the pre-AIA on-sale bar en banc in Medicines Co.
v. Hospira, Inc., 827 F.3d 1363 (Fed. Cir. 2016). There we
established a framework for determining whether there is
an offer for sale. We explained that the question must be
“analyzed under the law of contracts as generally understood”
and “must focus on those activities that would be
understood to be commercial sales and offers for sale ‘in
the commercial community.’” Id. at 1373 (quoting Grp.
One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1047
(Fed. Cir. 2001)). (...)

We agree with the district court that there was a sale
for purposes of pre-AIA § 102(b) prior to the critical date
because there was a sale of the invention under the law of
contracts as generally understood.
There can be no real dispute that an agreement contracting
for the sale of the claimed invention contingent
on regulatory approval is still a commercial sale as the
commercial community would understand that term. The
UCC expressly provides that a “purported present sale of
future goods . . . operates as a contract to sell.” UCC § 2–
105(2) (defining “future goods” as “[g]oods which are not
both existing and identified”). This is true irrespective of
whether those future goods have yet to receive necessary
regulatory approval. A contract for sale that includes a
condition precedent is a valid and enforceable contract.
See BG Grp., PLC v. Republic of Argentina, 134 S. Ct.
1198, 1207 (2014). Indeed, conditions precedent such as
regulatory approval are a basic feature of contract law.5
See, e.g., 25 Williston on Contracts § 67:73, at 462 (4th ed.
2013) (“Particular construction or development projects
may also require specific governmental or regulatory
approvals as conditions precedent to the consummation of
the project.”); 8 Corbin on Contracts § 31.11, at 99–101
(1999) (“In many contracts it is expressly provided that
some act of a third person shall be a condition of a promisor’s
duty . . . [such as a duty] to buy property contingent
on a zoning board’s approval . . . .”).
Our en banc decision in Medicines also made clear
that the offer or contract for sale must unambiguously
place the invention on sale, as defined by the patent’s
claims. 827 F.3d at 1374.
At oral argument for the first time, Helsinn contended
that applying the on-sale bar would be unfair because it
would distinguish between vertically-integrated manufacturers
that have in-house distribution capacity and smaller
entities like Helsinn that must contract for distribution
services from a third party. Helsinn asserts that Medicines
stands for the proposition that we should not allow
commercial activities to be invalidating if those same
activities could be performed in-house without triggering
the on-sale bar. Such a broad principle would largely
eviscerate the on-sale bar provision except as to sales to
end users; that was not the holding of Medicines. There
we concluded that “stockpiling,” including purchases from
a supplier, “does not trigger the on-sale bar.” 827 F.3d at

Headnote 5 of the LEXIS annotation relates to the

It has been implicit in our prior opinions that the absence of FDA or other regulatory approval before the critical date does not prevent a sale or offer for sale from triggering the on-sale bar. For instance, in Enzo, we applied the on-sale bar even though the contract for sale covered the buyer's reasonable requirements for "per-form[ing] all preclinical and clinical studies," by definition before FDA approval, because the "claimed invention, the polynucleotide probe, is a tangible item or product that can be sold or offered for sale." 424 F.3d at 1279, 1282 (emphasis added). Similarly, in C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340 (Fed. Cir. 1998), we affirmed a jury verdict of invalidity based on a sale even though the product sold was subject to regulatory approval. There was no majority opinion, but through two separate individual opinions a majority of the panel held that the on-sale bar applied. Id. at 1354 n.4. One opinion explicitly addressed the patentee's argument that the offer to sell did not trigger the statutory bar because "FDA approval had not been obtained" before the critical date, concluding that "FDA approval is not required before a sale can bar patent rights." Id. at 1376 (Mayer, C.J.). The dissent recognized that [*18] the majority was rejecting the argument that the product was not on sale because at the time of the sale it was "still being developed [and] tested" for FDA approval. Id. at 1357 (Newman, J.). Thus, while the absence of FDA approval may be a relevant consideration depending upon the other circumstances surrounding a transaction relating to a pharmaceutical formulation, the fact that a transaction was subject to regulatory approval would not, absent more, prevent it from being a sale for purposes of the on-sale bar. We do not find that it does so here. This is not a case like Elan Corp., PLC v. Andrx Pharms., Inc., 366 F.3d 1336 (Fed. Cir. 2004), where the purported offer concerned a product when and if it had been developed, and there was no price or quantity term. Id. at 1341.

[This reasoning indirectly impacts on a PTAB decision relating to a petition of Kyle Bass.]

On the impact of the AIA on the on-sale bar [see Headnote 7 of the LEXIS annotation]:

We next address whether the AIA changed the meaning
of the on-sale bar under 35 U.S.C. § 102 so that there
was no qualifying sale as to the ’219 patent. The parties
agree that the ’219 patent is governed by the AIA. See 35
U.S.C. § 102(a)(1); AIA, Pub. L. No. 112-29, § 3(n), 125
Stat. 284, 293 (2011).
Teva and various amici assert that by reenacting the
existing statutory term, “on sale,” Congress did not
change the meaning of the on-sale bar or disturb settled
law. Helsinn, the government, and other amici argue that
the AIA changed the law by adding the “otherwise available
to the public” phrase. They argue that the on-sale bar
now does not encompass secret sales and requires that a
sale make the invention available to the public in order to
trigger application of the on-sale bar. Apart from the
additional statutory language, this argument primarily
relies on floor statements made by individual members of
Congress. While recognizing that such floor statements
are typically not reliable as indicators of congressional
intent, see, e.g., Exxon Mobil Corp. v. Allapattah Servs.,
Inc., 545 U.S. 546, 568 (2005), they argue that here we
should look to the floor statements to determine the
meaning of the provision. These floor statements include
material such as the following:
[S]ubsection 102(a) was drafted in part to do away
with precedent under current law that private offers
for sale or private uses or secret processes
practiced in the United States that result in a
product or service that is then made public may be
deemed patent-defeating prior art. That will no
longer be the case.
157 Cong. Rec. 3415 (2011) (remarks of Sen. Leahy)
(emphasis added)

We decline the invitation by the parties to decide this
case more broadly than necessary. At most the floor
statements show an intent “to do away with precedent
under current [§ 102] law,” 157 Cong. Rec. 3415 (2011)
(remarks of Sen. Leahy). Such precedent had held certain
secret uses to be invalidating under the “public use” prong
of § 102(b). Senator Kyl explicitly referenced cases such as
Egbert v. Lippman, 104 U.S. 333 (1881), Beachcombers
International, Inc. v. Wildewood Creative Products, Inc.,
31 F.3d 1154 (Fed. Cir. 1994), and JumpSport, Inc. v.
Jumpking, Inc., Nos. 05–1182, 05–1196, 05–1197, 2006
WL 2034498 (Fed. Cir. July 21, 2006), and stated that
“new section 102(a) precludes extreme results such as
these.” 157 Cong. Rec. 3424 (2011) (remarks of Sen. Kyl).
Each of those cases involved a public use where the invention
was not, as a result of the use, disclosed to the public.
This public use issue is not before us, and we decline to
address it.

Helsinn argues that on-sale invalidation requires public knowledge:

Helsinn argues that the AIA did more than overrule
the “secret sale” cases, and relies on the “otherwise available
to the public” language in the statute and the floor
statements. Helsinn argues that those statements suggest
that the on-sale bar does not apply unless the sale “disclose[s]
the invention to the public” before the critical
date. 157 Cong. Rec. 3424 (2011) (remarks of Sen. Kyl). It
urges that since the 0.25 mg dose was not disclosed, the
invention was not disclosed and the on-sale bar does not
apply. The suggestion is that Congress required that the
details of the claimed invention be publicly disclosed
before the on-sale bar is triggered.


We conclude that, after the AIA, if the existence of the
sale is public, the details of the invention need not be
publicly disclosed in the terms of sale. For the reasons
already stated, the Supply and Purchase Agreement
between Helsinn and MGI constituted a sale of the
claimed invention—the 0.25 mg dose—before the critical
date, and therefore both the pre-AIA and AIA on-sale bars
apply. We do not find that distribution agreements will
always be invalidating under § 102(b). We simply find
that this particular Supply and Purchase Agreement is.

As to "ready for patenting":

We finally address whether the invention was ready
for patenting as of the critical date of January 30, 2002.
Under Pfaff, there are at least two ways in which an
invention can be shown to be ready for patenting: “by
proof of reduction to practice before the critical date; or by
proof that prior to the critical date the inventor had
prepared drawings or other descriptions of the invention
that were sufficiently specific to enable a person skilled in
the art to practice the invention.” Pfaff, 525 U.S. at 67–68.
We conclude that the invention here was ready for patenting
because it was reduced to practice before the critical
date, and we need not address the alternative enablement
approach, not addressed by the district court.15


Our cases distinguish between the standard required
to show that a particular invention would work for its
intended purpose and the standard that governs FDA
approval of new drugs, including the various stages of
clinical trials. See, e.g., Scott v. Finney, 34 F.3d 1058,
1063–64 (Fed. Cir. 1994) (addressing reduction to practice
in the priority context). In patent law, the requisite testing,
if any, for showing that an invention will “work for its
intended purpose” varies depending on “the character of
the invention,” including the claim language and the
“nature and complexity of the problem” the invention
seeks to solve. Id. at 1061–62; see also Slip Track Sys.,
Inc. v. Metal-Lite, Inc., 304 F.3d 1256, 1265 (Fed. Cir.
2002). Generally there must be some “demonstration of
the workability or utility of the claimed invention.” Honeywell
Int’l Inc. v. Universal Avionics Sys. Corp., 488 F.3d
982, 997 (Fed. Cir. 2007). This must show that the invention
works for its intended purpose “beyond a probability
of failure” but not “beyond a possibility of failure.” Scott,
34 F.3d at 1062. “[L]ater refinements do not preclude
reduction to practice, [and] it is improper to conclude that
an invention is not reduced to practice merely because
further testing is being conducted.” Atlanta Attachment
Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1367 (Fed. Cir.

The error of D.N.J.:

Here, the district court based its finding that the invention
was not reduced to practice before the critical
date on insufficient testing for Helsinn to have “determined
that the invention would work for its intended
purpose.” J.A. 159. The district court appeared to believe
that Teva needed to meet the FDA standard, which
requires finalized reports with fully analyzed results from
successful Phase III trials. This is clear from the district
court’s reliance on the testimony of Helsinn’s expert who
“referred to FDA standards in forming his opinions in this
case” and stated that FDA “articulated a statistical
framework for being able to really know from the [clinical
trial] data . . . that a drug is working.” J.A. 148. Throughout
its opinion the district court found lack of reduction to
practice for failure to establish “efficacy” under FDA
standards, and the lack of fully analyzed Phase III studies
as required by FDA. J.A. 159. The district court was
influenced particularly by the fact that FDA found the socalled
Study 2330 insufficient to demonstrate efficacy.17
See, e.g., J.A. 34, 48–50, 56, 147, 151, 154–55.
The district court clearly erred by applying too demanding
a standard. The completion of Phase III studies
and final FDA approval are not pre-requisites for the
invention here to be ready for patenting. T

As to evidence:

There is simply no
tenable argument that, before the critical date, Helsinn
was unable to file a patent application that met the
requirements of 35 U.S.C. § 112.20

Footnote 20: See Space Sys./Loral, Inc. v. Lockheed Martin
Corp., 271 F.3d 1076, 1080 (Fed. Cir. 2001) (“To be ‘ready
for patenting’ the inventor must be able to prepare a
patent application, that is, to provide an enabling disclosure
as required by 35 U.S.C. § 112. . . . [W]hen development
and verification are needed in order to prepare a
patent application that complies with § 112, the invention
is not yet ready for patenting.”); Clock Spring, L.P. v.
Wrapmaster, Inc., 560 F.3d 1317, 1328 (Fed. Cir. 2009)
(“By filing the 1992 [patent] application, the inventors
represented that the invention was then ready for patenting
. . . .”); see also In re Brana, 51 F.3d 1560, 1568 (Fed.
Cir. 1995) (“FDA approval, however, is not a prerequisite
for finding a compound useful within the meaning of the
patent laws.”).

The outcome of the CAFC decision:

We hold that the asserted claims, claims 2 and 9 of the '724 patent, claim 2 of the '725 patent, claim 6 of the '424 patent, and claims 1, 2, and 6 of the '219 patent, are invalid under the on-sale bar.


An earlier decision of Judge Mary L. Cooper:
Helsinn Healthcare S.A. v. Reddy's Labs., Ltd., 2015 U.S. Dist. LEXIS 167048 (D.N.J., Nov. 13, 2015)


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