Listen Before Talk; File Before Sale

By Mu Yang // February 4th, 2019

“Listen-Before-Talk” is a well-known technique in the Wi-Fi world to prevent problems. Similarly, here are some of my thoughts on the importance of “File-Before-Sale” in the patent world.

First, I almost always advise my clients to get a patent application filed before doing anything outside the organization. Yes, anything— from submitting a paper to IEEE, contributing an idea to a standard setting organization, demoing a product at a tradeshow, to negotiating distribution agreements.

The Supreme Court’s recent decision in Helsinn reaffirmed my “better safe than sorry” approach.

As noted by my partner, Mike Bonella, in Helsinn Healthcare SA v. Teva Pharmaceuticals USA Inc, No. 17-1229, the Supreme Court held AIA did not change the long-standing rule that secret sales can be used to invalidate a patent. A commercial sale, even under the protection of confidentiality agreements, may place the invention “on sale” under §102(a).

Pre-AIA, it was clear that confidential sales may trigger the on-sale bar. In Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), the Supreme Court concluded that an on-sale bar applies when two conditions are satisfied more than a year before the effective filing date of a patent application:

1. the product was the subject of a commercial offer for sale, and
2. the invention was ready for patenting.

The question is whether AIA has changed these conditions for triggering the on-sale bar. That is, under AIA, does a secret sale, which keeps the invention confidential, constitute a bar?

The AIA bars a person from receiving a patent on an invention that was “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U. S. C. §102(a)(1) (emphasis added).

Helsinn’s case turned on the phrase “or otherwise available to the public” in the AIA. Helsinn argued that Congress added this new language to exclude secret sales from the prior art. According to Helsinn, “otherwise available to the public” limits the preceding terms (i.e., patented, described in a printed publication, in public use, and on sale) to disclosures that make the claimed invention available to the public. Further, legislative history and the PTO’s post-AIA guidelines support that a sale must make the patented subject matter “available to the public” to trigger the on-sale bar.

However, the Supreme Court disagreed and concluded that the AIA did not change the prior understanding of “on-sale.” There wasn’t “enough of a change” in the AIA to conclude that Congress intended to overturn long-standing rules about what it means to be “on sale.” Accordingly, the Court held that “a commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’ under AIA’s §102(a)(1).

In view of the Supreme Court’s explicit holding that confidential, secret sales can be used to invalidate a patent, I see several areas of practical impact:

• In-house IP attorneys should reiterate their need to be kept in loop of product development, testing, sales, distribution, and supplier agreement negotiations. Your business colleagues may still believe that confidentiality agreements would save the day, but that’s no longer the case. Keep in mind that the on-sale bar can be triggered well before the actual products become available to the public.

• Although secret sales are considered within the meaning of “on sale” under 35 U.S.C. § 102(a)(1), it is unclear whether the one-year grace period afforded by § 102(b)(1) is available for them. 35 U.S.C. § 102(b)(1) states that “[a] disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention…” AIA does not specify whether the term “disclosure” excludes secret and confidential activities, and facts in Helsinn did not require the Court to address whether a secret sale constitutes a disclosure under AIA §102(b) to trigger the grace period. Until this uncertainty is settled, assuming a secret sale may instantly destroy potential patent rights is the safest course of action.

• Finally, as a reminder, AIA no longer requires an invalidating sale to be in the United States – it can be anywhere. If you work in a multinational company, chances are your overseas colleagues may not even consider a private sale an issue, as private sales generally will not trigger a bar in most other countries. As such, you might want to caution your overseas colleagues that a private sale, even with a confidentiality agreement, may prevent patent enforcement in the United States.

Back to Blog