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En Banc Federal Circuit Addresses On-Sale Bar

May 5, 2016

Today, the en banc U.S. Court of Appeals for the Federal Circuit heard oral arguments in The Medicines Company v. Hospira, Inc. The parties were asked to address two questions: (1) whether there was a “commercial offer for sale” pursuant to 35 U.S.C. § 102(b) under the facts of the case; and (2) whether the Court should overrule or clarify Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001), which held that there is no “supplier exception” to the on-sale bar.

The facts of the case are largely undisputed. Between 2006 and 2007, the Medicines Company (MedCo) paid its contract manufacturer, Ben Venue Laboratories (Ben Venue), approximately $347,000 to manufacture several batches of bivalirudin drug product. MedCo later cited these same batches in examples of the patents-in-suit, which were not filed until more than a year after the 2006/2007 transactions between MedCo and Ben Venue. The district court found that these pre-critical date activities did not constitute invalidating offers for sale, explaining that “the batches were not for commercial purposes, but experimental batches made in order to verify that the invention worked for its intended purpose.” Medicines Company v. Hospira, Inc., No 09-cv-750, 2014 WL 1292802, at *11 (D. Del. Mar. 31, 2014). On appeal, a panel of the Federal Circuit reversed, finding that “the district court clearly erred in finding that the bivalirudin batches prepared by Ben Venue Laboratories before the critical date were not sold to The Medicines Company and were prepared primarily for an experimental purpose.” Medicines Company v. Hospira, Inc., 791 F.3d 1368 (Fed. Cir. 2015). On November 13, 2015, the Federal Circuit vacated the panel opinion and granted en banc review.

During oral argument, the Judges spent significant time probing the first en banc question. In particular, the Judges asked whether a contract for services could qualify as an invalidating “sale” of a product-by-process claim. To the extent the Court ultimately decided the case on this basis, Judge Dyk questioned whether this would provide parties a loophole to structure what would otherwise be sales contracts as “services” contracts. The Court also focused on the distinction between secret and public sales, and asked whether that distinction made a difference. On that point, the Government suggested that, to qualify for purposes of the on-sale bar, the invention must be available to members of the interested public. Judge Taranto questioned whether that would require the Court to view the on-sale bar through a broader lens than just the parties at issue in a particular case, and Judges O’Malley and Hughes probed the number of participants required for a sale to qualify as a “public” sale. The Judges also discussed the interplay between the on-sale bar and the public use bar, and whether including a “public” requirement for the on-sale bar subsumed the public use bar.

The Court and parties also spent significant time discussing the policy considerations at play in assessing whether a sale is commercial. Hospira suggested that there would be a significant public policy concern in allowing inventors to essentially sit on their inventions for a prolonged period prior to filing. Judge Dyk suggested that one of the primary concerns frequently cited in favor of applying the on-sale bar—that inventors should not be able to profit from their inventions prior the critical date—was not present here given that MedCo was the purchaser and not the seller.

The second en banc question addressed the continuing vitality of the Special Devices “no supplier exception” to the on-sale bar. In Special Devices, the Federal Circuit explained that “Congress indicated that it does not matter who places the invention ‘on sale’; it only matters that someone—inventor, supplier or other third party—placed it on sale.” Special Devices, 270 F.3d at 1355. During oral argument, there appeared to be uniform agreement between the parties and the government that a third party could trigger the on-sale bar, but substantial disagreement about whether that third party sale must be public. MedCo suggested that the Court need not necessarily overrule Special Devices, but may want to clarify certain statements. Judge O’Malley suggested that Special Devices may be distinguishable because it was undisputed in Special Devices that there was a qualifying commercial offer for sale. Based on the oral argument, it appears possible that the Court may clarify or distinguish Special Devices, but may not overrule it outright.  

This case will likely have a substantial impact on the pharmaceutical industry, and is one that Wiley Rein will continue to monitor closely.