The Federal Circuit Further Defines the Scope of the On-Sale Bar to PatentabilityJuly 11, 2016

In The Medicines Co. v. Hospira, Inc., the full Federal Circuit recently elaborated what exactly constitutes a “sale”for the purposes of the “on sale”bar under Pre-America Invents Act (AIA) 35 U.S.C. § 102(b). Pre-AIA § 102(b) and AIA § 102(a)(1) forbid the granting of a patent where the claimed invention was “on sale”prior to an application for a patent. InThe Medicines Co. v. Hospira, Inc., the Federal Circuit addressed whether an agreement between a pharmaceutical company and a manufacturer where the manufacturer agrees to produce a commercially viable but stockpiled (i.e. in quarantine and not available for sale) product constitutes a commercial sale and thus triggers the “on sale”bar of §102(b)/ §102(a)(1).

In a unanimous en banc hearing, the Federal Circuit held that such a transaction does not constitute a commercial sale. A commercial sale must be a sale in a commercial sense, such that it is a “contract between parties for consideration which the buyer pays or promises to pay the seller for the thing bought or sold.”The transaction in this case did not rise to the level of a commercial sale because it was only a sale of manufacturing services where the manufacturer agreed to create embodiments of a patented product for the inventor; the transaction was not a commercial sale of the invention itself. In addition to considering the nature of the transaction, the Federal Circuit also determined that “stockpiling”is also not a commercial sale under §102(b)/ §102(a)(1). Thus, on the whole, commercial benefit-even commercial benefit to both parties-is not enough to trigger the “on sale”bar. Rather, the transaction must be one in which the product is “on sale”in the sense that it is “commercially marketed.”It was important in the Court’s rationale that only manufacturing services were sold, and the invention itself was not the subject of a commercial transaction. Additionally, it was significant that the inventor maintained control of the invention, as indicated by the fact that the inventor did not transfer title of the embodiments, and had not authorized the manufacturer to sell the product to others.

Finally, the Court also considered its previous determinations that there is no “supplier exception”to the “on sale”bar of §102(b)/ §102(a)(1). The court was careful to distinguish between the precedent ofBrasseler, Special Devices and Hamilton Beach Brands, which had consistently held no “supplier exception”exists.See Brasseler, U.S.A. L.P. v. Stryker Sales Corp., 182 F.3d 888, 891 (Fed. Cir. 1999;Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001); Hamilton Beach Brands, Inc. v. Sunbeam Products, 726 F.3d 1370, 1375 (Fed. Cir. 2013). The court specifically noted that the holding in the present case is not inconsistent with precedent, as the court still does not recognize a “blanket ‚¬Ëœsupplier exception’ to what would otherwise constitute a commercial sale.”Although a transaction between a supplier and inventor can be an indication of a commercial sale, the mere occurrence of such a transaction is not determinative; the emphasis is placed on the “commercial character of the transaction”rather than exclusively on the “identity of the participants.‚¬

The decision in The Medicines Co. sheds a little more clarity on the murky “on sale”statutory bar. This precedential holding makes clear that a transaction lacking transfer of title, authorization to re-sell, and involving stockpiling does not constitute a commercial sale for purposes of §102(b)/ §102(a)(1). However, with the continued refusal to create a “supplier exception,”transactions where the supplier has title to the patented product, the supplier receives authority to market or disclose the patent product, or the transaction is a sale at full market value, even a transfer of product to the inventor may constitute a commercial sale under §102(b)/ §102(a)(1).