Helsinn Healthcare S. A. v. Teva Pharmaceuticals USA, Inc. (2019)

By Kevin E. Noonan --

"Pigs fly!"  "Hell has frozen over!"  Or less dramatically, "Supreme Court affirms Federal Circuit decision!" all would be apt subtitles for any article discussing the Supreme Court's decision today in Helsinn v. Teva.  The question before the Court was whether Congress intended by passing the Smith-Leahy America Invents Act (AIA) to change the status of "secret" sales so as not to trigger the on-sale bar of revised Section 102 by adding the phrase "or otherwise known to the public" (the Federal Circuit held it had not done so, at least not effectively).  The Supreme Court agreed.

The decision is short (9 pages, with the legal basis of the Court's opinion starting at page 5), unanimous (9-0), handed down less than seven weeks after oral argument, and authored by Justice Thomas, who often writes patent law decisions that are not particularly contentious or for which one Justice does not have a particular interest.  By way of reminder regarding the factual predicate of the case, it arose over ANDA litigation regarding Teva's intention to market a generic version of Helsinn's intravenous formulations of palonosetron used to reduce chemotherapy-induced nausea and vomiting ("CINV").  There were four patents-in-suit:  U.S. Patent Nos. 7,947,724, 7,947,725, 7,960,424, and 8,598,219; only the '219 patent was allowed and granted under the AIA changes in U.S. patent law.

A prior art patent (U.S. Patent No. 5,202,333) taught that palonosetron was useful for treating CINV; the patents-in-suit were directed to novel formulations comprising "unexpectedly low concentrations of palonosetron."  Claim 2 of the '725 patent is representative of the pre-AIA patents-in-suit:

2.  A pharmaceutically stable solution for reducing emesis or reducing the likelihood of emesis comprising:
    a)  0.05 mg/mL palonosetron hydrochloride, based on the weight of the free base, in a sterile injectable aqueous carrier at a pH of from 4.5 to 5.5;
    b)  from 0.005 mg/mL to 1.0 mg/mL EDTA; and
    c)  mannitol in an amount sufficient to tonicify said solution, in a concentration of from about 10 mg/ml to about 80 mg/ml.

Claim 1 is representative of the '219 patent (post-AIA):

1.  A pharmaceutical single-use, unit-dose formulation for intravenous administration to a human to reduce the likelihood of cancer chemotherapy- induced nausea and vomiting, comprising a 5 mL sterile aqueous isotonic solution, said solution comprising:
    palonosetron hydrochloride in an amount of 0.25 mg based on the weight of its free base;
    from 0.005 mg/mL to 1.0 mg/mL EDTA; and
    from 10 mg/mL to about 80 mg/mL mannitol,
    wherein said formulation is stable at 24 months when stored at room temperature.

It is undisputed that each asserted claim covers the 0.25 mg dose of palonosetron.  Helsinn entered into a contract for supplying the claimed formulation prior to critical date, but contingent on FDA approval (which was not obtained until after the critical date).

The District Court found a sale or offer for sale prior to the critical date, but that the invention was not ready for patenting with regard to the pre-AIA patents, and that the AIA had changed the on-sale bar to require a public sale or offer for sale.  Although the existence of the agreement and its terms were publicly known, the parties had not disclosed the 0.25 mg palonosetron dose before the critical date.  The District Court thus rejected Teva's invalidity contentions based on the § 102(b) on-sale bar.

The Federal Circuit reversed, in an opinion by Judge Dyk joined by Judges Mayer and Moore.  Using the framework set forth by the Court in Medicines Co. v. Hospira, the panel found that the invention was "on sale" prior to the critical date by applying "the law of contracts as generally understood" and "those activities that would be understood to be commercial sales and offers for sale 'in the commercial community.'"  Under this analysis, the Court had little difficulty deciding that there had been a sale before the critical date.  The contingent nature of FDA approval did not refute this conclusion, the Court saying that commercial practice, exemplified by provisions of the Uniform Commercial Code, contemplate "purported present sale of future goods . . . [which] operates as a contract to sell," UCC § 2– 105(2), and that "[a] contract for sale that includes a condition precedent is a valid and enforceable contract," citing BG Grp., PLC v. Republic of Argentina, 134 S. Ct. 1198, 1207 (2014).  The opinion also cited the Court's own precedent regarding the existence of a sale despite the presence of conditions precedent to commercial transfer of goods, such as Enzo Biochem, Inc. v. Gen-Probe, Inc., 424 F.3d 1276 (Fed. Cir. 2005), and C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340 (Fed. Cir. 1998).

The Court also rejected Helsinn's contention that the AIA changed the on-sale bar calculus to limit its application to public sales.  Noting that confidential sales did not per se prevent application of the on-sale bar prior to enactment of the AIA (citing, inter alia, In re Caveney, 761 F.2d 671, 673–74 (Fed. Cir. 1985)), the opinion rejected arguments by Helsinn and amici (including the U.S. government) that the AIA changed the law, which were based almost exclusively on statements from the Congressional record (which were directed not to on-sale activities but to public use).  It did not help Helsinn's argument in this regard that the panel identified Supreme Court precedent directly contrary to their position, i.e., Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 19 (1829).  Accordingly, the opinion states that "[w]e 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" and thus invalidity of the '219 patent was not properly determined by the District Court.

With regard to the question of whether the invention claimed in the patents in suit was "ready for patenting" prior to the critical date, the panel decided that it was, based on the invention having been reduced to practice before the critical date.  This decision depended, in part, on the parties' stipulation that "they would contest ready for patenting 'only with respect to the limitations and intended uses of "reducing emesis or reducing the likelihood of emesis" and '"to reduce the likelihood of cancer chemotherapy-induced nausea and vomiting" of the asserted claims' and not "'for any other reason.'"  The panel noted that its case law distinguished the standard needed to show reduction to practice with regard to whether a pharmaceutical invention would work for its intended purpose and the standard for FDA approval of a new drug, citing Scott v. Finney, 34 F.3d 1058, 1063–64 (Fed. Cir. 1994).  Specifically, the standard is that the invention "works for its intended purpose 'beyond a probability of failure' but not 'beyond a possibility of failure.'"  The Federal Circuit found the District Court erred by applying the FDA standard rather than the proper patent standard in making its (erroneous) determination that the invention was not "ready for patenting" before the critical date.  This conclusion was supported by Helsinn's own documents (including portions of the patents' prosecution histories), pre-litigation statements and testimony.  And the opinion noted that, if the standard applied by the District Court was correct, Helsinn could not have filed a valid application prior to the critical date, and "[s]uch a standard would preclude the filing of meritorious patent applications in a wide variety of circumstances."

The Supreme Court granted certiorari to consider the following Question Presented:

Whether, under the Leahy-Smith America Invents Act, an inventor's sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.

The Court recognized that it had "never addressed the precise question presented in this case," but voiced its opinion that "our precedents suggest that a sale or offer of sale need not make an invention available to the public."  The Court based its decision on the well-established principle that, under prior versions of Section 102, held that "secret sales" could trigger the on-sale bar.  These cases were as recent as Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 67 (1998) and as ancient as a trio of 19th Century cases (Consolidated Fruit-Jar Co. v. Wright, 94 U.S. 92, 94 (1877); Smith & Griggs Mfg. Co. v. Sprague, 123 U.S. 249, 257 (1887); Elizabeth v. Pavement Co., 97 U.S. 126, 136 (1878)) (although to be honest these cases stand for the proposition that a sale triggers the bar and not the issue of whether the sale was secret or public).  The opinion credits the Federal Circuit (saying without apparent irony that that Court has 'exclusive jurisdiction' over patent appeals, 28 U.S.C. §1295(a)") with making "explicit what was implicit in our precedent" with regard to the on-sale bar, citing Special Devices, Inc. v. OEA, Inc., 270 F. 3d 1353, 1357 (2001), and Woodland Trust v. Flowertree Nursery, Inc., 148 F. 3d 1368, 1370 (1998), in support of its conclusion.

Based on this various precedent, the Court was able to reach the conclusion that Congress did not change what activities raised the on-sale bar which includes secret sales, because there was insufficient evident of that intent, citing Shapiro v. United States, 335 U.S. 1, 16 (1948).  The Court relied expressly on the Solicitor General's argument that "if 'on sale' had a settled meaning before the AIA was adopted, then adding the phrase 'or otherwise available to the public' to the statute 'would be a fairly oblique way of attempting to overturn' that 'settled body of law.'"  In reaching this conclusion the Court rejected Helsinn's argument, based on the "associated-words canon" of legislative intent and Federal Maritime Comm'n v. Seatrain Lines, Inc., 411 U.S. 726 (1973), and Paroline v. United States, 572 U.S. 434 (2014), that the effect of construing the statute as Teva advanced (and the Court accepted) would read the amended words out of the statute.  The opinion points out that the catch-all phrase "otherwise available to the public" is better interpreted to capture "material that does not fit neatly into the statute's enumerated categories but is nevertheless meant to be covered"; "on-sale" having a defined meaning the Court declines to encompass its proscriptions into what constitutes being on-sale.

The Court also, as is its wont, waxed somewhat philosophical regarding the limitations on Congressional authority for patenting (reproduced here as a sage reminder of the underpinnings of much of the Court's patent jurisprudence):

The United States Constitution authorizes Congress "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."  Art. 1, §8, cl. 8.  Under this grant of authority, Congress has crafted a federal patent system that encourages "the creation and disclosure of new, useful, and nonobvious advances in technology and design" by granting inventors "the exclusive right to practice the invention for a period of years."  Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151 (1989).

To further the goal of "motivating innovation and enlightenment" while also "avoiding monopolies that unnecessarily stifle competition," Pfaff, 525 U.S., at 63, Congress has imposed several conditions on the "limited opportunity to obtain a property right in an idea," Bonito Boats, supra, at 149.  One such condition is the on-sale bar, which reflects Congress' "reluctance to allow an inventor to remove existing knowledge from public use" by obtaining a patent covering that knowledge. Pfaff, supra, at 64; see also Pennock v. Dialogue, 2 Pet. 1, 19 (1829) (explaining that "it would materially retard the progress of science and the useful arts" to allow an inventor to "sell his invention publicly" and later "take out a patent" and "exclude the public from any farther use than what should be derived under it").

Congressman Lamar Smith, the Chairman of the Committee on the Judiciary of the U.S. House of Representatives during the pendency of the AIA, and the lead sponsor of the bill in the House, filed an amicus brief to the Court explaining Congressional intent, which was unpersuasive to the Court.

The Court's language left the door slightly ajar for a future litigant to distinguish this decision on different facts (for example, where there was no disclosure that the agreement existed, for example); the Court was uncharacteristically cautious in its language ("a commercial sale to a third party who is required to keep the invention confidential may place the invention 'on sale' under the AIA" (emphasis added)).  Congress, if sufficiently aggrieved by the Court's dismissal of Congressman Smith's amicus brief explaining Congressional intent, could decide to include an express provision into the statute overturning this decision.  But it is clear that only something that express will be enough to convince the Court that their own and the Federal Circuit's extensive jurisprudence has in fact been discarded by the changes to U.S. patent law occasioned by passage of the AIA.

Helsinn Healthcare S. A. v. Teva Pharmaceuticals USA, Inc. (2019)
Opinion by Justice Thomas

Comments

[Skeptical]

Best write-up across the blogosphere.

[Some Random Guy]

And Justice Thomas writes another, terrible patent law opinion.

[Skeptical]

...and let's not get too excited by the affirmance.

The affirmance is in a matter detrimental to patentees.

All this does is confirm that the simian training is proceeding along the lines of the psychological thought experiment.

[Greg DeLassus]

"[T]he Court was uncharacteristically cautious in its language..."

Hm, I cannot agree that there is anything "uncharacteristic" in this. Remember Justice Thomas' straining in Myriad to emphasize how (allegedly) narrow was the holding in each case (Myriad: "We merely hold that genes and the information they encode are not patent eligible under § 101 simply because they have been isolated from the surrounding genetic material"). The emphasis on the narrowness of the holding did not stop the CAFC from implementing the holding (as the SCotUS really intended) to broadly reach all sorts of other issues (cloned animals in Roslin, cffDNA in Ariosa, PCR primers in Roche, etc). The SCotUS in general and Justice Thomas in particular like to pretend coyly to narrowness, with a wink and smile at the lower courts to tip them that they are supposed to press farther.

[EG]

Hey Kevin,

Yeah, getting SCOTUS to affirm the Federal Circuit other than when it disfavors the patentee is like discovering a unicorn. Ignoring the amicus brief of a co-sponsor of the AIA is also par for the course. The amicus brief by Congressman Lamar Smith, co-sponsor of the AIA, makes clear why the holding/reasoning by SCOTUS in Helsinn is contrary to the legislative intent of what “new” AIA 102 means.

As suggested, this isn’t the first time that SCOTUS has ignored what sponsors of the very patent statute have said it means. In Eli Lilly v. Medtronic, the co-sponsors of Hatch-Waxman pointed out that “patented invention” meant only drug patents, not patents on all subject matter, including medical devices, subject to FDA regulation. But Scalia, notoriously deaf to any aspect of legislative intent, ignored them as well to hold that “patented invention” meant any subject matter regulated by the FDA. Admittedly, Congress could do a better job drafting such legislation, and the true legislative intent can be a tricky thing to divine, but SCOTUS might do better to listen more closely when it’s the sponsor of the very act that says what it means.

[Kevin E Noonan]

Dear Greg: I don't mind an attempt by the Court, however ill-informed or poorly done, to be narrow or parsimonious; after all, much of the Bilski opinion was focused on the Court not wanting to make a rule for today's technology that somehow harmed innovation in future.'

What I meant was using "may" as Justice Thomas did; he could have said "under these circumstances, where the existence of a contract is public, we see no need for the details of the contract to be disclosed in order for the on-sale bar to be raised." After all, Justice Kagan gave just such a warning at the end of the Bowman v Monsanto opinion:

"We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article's self-replication might occur outside the purchaser's control. Or it might be a necessary but incidental step in using the item for another purpose. . . . We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances."

So they can do it; funny that they decided not to do so in this case.

Thanks for the comment

[Atari Man]

Thanks Kevin. "Supreme Court affirms Federal Circuit decision!" certainly describes a rarer event than does "Supreme Court Screws Up Decision in Patent Case", which would have been an equally accurate title for this write-up.

Ron Katznelson pointed out in a different forum that there are two good things about this decision: first, it means that the existing exceptions to the on-sale bar, carved out in the case law, still apply; and second, no further proof is needed to show Congress that it eviscerated the grace period when it enacted the AIA.

[Bill Eshelman]

The term “disclosure” in AIA 102(b)(1) is not defined in the AIA. One could argue that “disclosure” is broad enough to include a “private” disclosure (such as a secret sale) and, so, as long as the item being secretly sold “originated” with the inventor, then the one year grace period of AIA 102(b)(1) applies to such a secret sale.

[Skeptical]

AM,

Which forum is that that Ron has shared his insights?

[Atari Man]

It was on Carl Oppedahl's EFS listserv ([email protected]).

[Skeptical]

Thanks AM

[Skeptical]

AM,

To your point about the evisceration, it should be noted that Ron's view centers about the NEW WORDS that Congress used in resetting just what is protected under the one year safety zone.

However, I have to disagree with Ron's thinking.

Not that I disagree DIRECTLY with what Ron offers, mind you, as he attempts to offer a straight forward view based on the actual words of Congress.

Where I disagree is that Ron's straight forward view presumes that the Court will likewise take a straight forward view.

If anything, this decision in Helsinn shows that the Court will NOT take such a straight forward view. They will treat patent law -- and most any aspect of patent law -- as a wax nose to twist to whatever (p-olicy) view that they want to have.

In doing so, they simply will not be constrained by ANY straight-forward views.

So my disagreement is not with Ron PER SE. It is that Ron attempts to project rationality where the evidence does not support the application of rationality.