No supplier exception to the on-sale bar

Summary

The time between conception of a product and marketing of that product has many landmines that can destroy an inventor’s ability to obtain patent protection.  In The Medicines Company v. Hospira, Inc. (Fed. Cir. 2015), The Medicines Company’s patent was invalidated for being on sale for more than one year even though no product was sold to a customer.  The Medicines Company ordered the patented products from its supplier more than a year before filing for its patent.  Because there is no supplier exception to the on-sale bar, it was this sale from the supplier to the inventor more than one year prior to the filing of the patent application that invalidated the patent.   The Federal Circuit is currently reconsidering this opinion “en banc” by the full panel of all 13 judges.

On-sale bar

Under current U.S. patent law, public activities of the inventor within one year of filing a patent application cannot be used against the inventor to reject the inventor’s application for patent. One of the public activities is an offer for sale of the patented product made to the public.  This is known as the on-sale bar with a one year grace period.  The reason The Medicines Company’s patent was invalidated had to do with the definition of when an item is on-sale and that there is no supplier exception to the on sale bar.

Trigger that starts the one year time period

One might reasonably think that the one-year, on-sale bar starts when the inventor offers to sell the patented product to its first customer.  For example, when the inventor approaches a company’s buyer representative, a distributor, builds a website with links to sell the product.  These are clear examples of offers to sell and starts the one year time period for the on-sale bar.

But here the offer for sale was not from the inventor to a customer.  The offer for sale was from the inventor’s vendor (Ben Venue Laboratories) to the inventor and his company.  The inventor ordered three production-size run of $10 million each, of the patented product from the vendor.  The product was prepared for commercial exploitation and clinical testing, not for any secret personal use.  The patent owner attempted to claim that this situation fit within the experimental use exception which prevents the start of the one year time period.  However, the court made clear that the experimental use exception does not apply after a reduction to practice of the invention.  There is no supplier exception to the on sale bar.

Policy of the on-sale bar

The on-sale bar is designed to prevent the inventor from receiving a financial benefit for a period of time greater than a normal term of a patent.  Here, the inventor obtained no direct financial benefit in terms of its bottom line on a financial statement.  The court nonetheless justified the start of the on sale bar.  The patent owner used the production run of the sample to prove to the Food and Drug Administration that its process of producing the patented drug actually produced a drug having a certain active ingredient below a certain level.  In this sense, the patent owner obtained a benefit from the sale of the drug from the vendor because it could start clinical testing earlier and start commercial sales earlier and the quantities ordered and received were commercial quantities labeled for commercial use.

For these reasons there is no supplier exception to the on sale bar.  Otherwise, this policy would be thwarted.

No supplier exception to on sale bar

The court went to great lengths to reiterate its stance that there is no supplier exception to the on sale bar.  Based on this case, ordering a production run of the patented product, packaged for sale to customers may start the one year time bar – especially after a reduction to practice.  This case warns us that the on sale bar may start one or more steps before a first offer for sale by the inventor to buyers, distributors and potential customers.

Addressing potential issues during research and development

As such, the on sale bar may not reach all the way back to the research and development stage.  The time period between prototyping and production run is still a gray area and one that needs to be tread very carefully so that the inventor does not inadvertently start the one year time period and potentially file the patent application more than one year later.

One way to possibly resolve this case is to require confidentiality from vendors.  Under current patent laws, secret offers for sale may not start the clock on the one year time period for the on-sale bar.  The courts have yet to interpret the current patent laws on this issue but it may be good practice to require confidentiality from vendors.

I invite you to contact me with your patent questions at (949) 433-0900. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.