“Helsinn didn’t confirm longstanding law. That longstanding law changed with the enactment of the AIA anyway, and it would be foolish to assume that old judicial doctrines about secret commercialization of inventions are going to operate in “long-established” ways when forced into a new statute that was not designed to accommodate them.”
To the casual observer, the Supreme Court’s January 23 decision in Helsinn v. Teva may seem like no big deal. In just a few pages of text, the Court informs us that Congress did not change the established meaning of “on sale” prior art when it rewrote Section 102 of the Patent Act in 2011. Move along, nothing to see here, right? More than a few commentators seem to assume that we’ll simply return to the pre-America Invents Act (AIA) status quo, and that sales of an invention, whether public or private, will just continue to trigger a familiar statutory one-year clock for filing a patent application.
But nothing could be further from the truth. In fact, the impact of private sales (and of non-public commercial uses) on the patentability of later-filed patent applications will be significant, and very different from pre-AIA law. Patent applicants and owners of patents that were issued under the AIA have every reason to worry about traps for the unwary.
Let’s start with the scope of the Helsinn opinion. The opinion makes clear that the AIA phrase “or otherwise available to the public” in the new 35 USC 102(a) is merely a catchall category that supplements, but does not modify, the preceding traditional enumerated categories of prior art: patented, printed publication, in public use, or on sale. Thus, to the extent these traditional categories had a settled judicial interpretation at the time of the AIA’s enactment, that old interpretation continues to apply just as it does for “on sale.” The settled patent-defeating effect of prior secret commercial uses immediately comes to mind. Not only is the Court’s reasoning directly applicable to commercial uses, the Court also more than hints that secret commercial sale and secret commercial use are to be treated similarly when it endorses dictum from the Federal Circuit’s 1998 Woodland Trust decision (“… an inventor’s own prior commercial use, albeit kept secret, may constitute public use or sale under 102(b), barring him from obtaining a patent.”).
It is safe to assume from this that the opinion reaches not just private sales, but also secret, business-internal “commercial” use of the invention—even if nothing was sold. Many readers may think that this still doesn’t make the decision a big deal. Prior to the AIA, it was well-understood that an inventor’s secret “commercialization” of an invention, through sale or use, could bar the inventor from later receiving a patent. It’s just going to be business as usual, right? Well, no. Helsinn created a host of problems that never were the law before or after the AIA. It’s not going to be business as usual for at least the following reasons.
Foreign Activities Now Count
Prior to the AIA, purely foreign use or sale of an invention did not count as prior art, regardless of whether it was public or secret. The AIA, however, eliminated all such geographic distinctions. If non-public commercialization through sale or use had a patent-barring effect if it occurred in the United States prior to the AIA, after the AIA it is now going to have that same effect even if it occurred outside the United States. This is an expansion that sets up traps for foreign and domestic patent applicants alike. Confidential transactions or activities in foreign countries that are perfectly acceptable under those countries’ patent laws, and that were always immaterial under U.S. patent law, can now have a patent-defeating effect in the United States. This was never the law before the AIA.
Don’t Assume There is Still a Grace Year (And if You Do Sell or Use Your Invention, Better Do So Publicly)
Prior to the AIA, an inventor who commercialized an invention—regardless of whether it was done publicly or confidentially—had up to one year to prepare and file a patent application. This was known as the “grace year;” a major feature of the pre-AIA system as discussed in the Supreme Court’s 1998 Pfaff opinion. But that grace year became history with the enactment of the AIA, a fact that may not have sunk in with more than a few commentators who have been saying that commercial sale or use of an invention after Helsinn merely continues to trigger the familiar one-year window for filing a patent application.
Instead of the old grace year, the AIA created certain “disclosure” exceptions under which the inventor’s own disclosures would be excluded from prior art for up to one year before the patent application filing date. Thus, in order to know whether a patent application can be filed at all after a confidential sale or trade secret commercial use, one would need to know whether such non-public activities would qualify as a “disclosure.” Arguably, a confidential sale might be deemed a disclosure from one party to another (albeit a confidential one), so maybe, just maybe, an inventor still has up to a year after such a transaction to file a patent application. But what if the invention wasn’t sold, but merely used commercially, under trade secrecy in the inventor’s own business? Most people would consider such use the antithesis of “disclosure,” however that word might be construed, and it is hard to see why the AIA’s “disclosures” exception would apply.
Bottom line, there is a high chance that, after Helsinn and under the AIA, commercialization of an invention through secret sale or use would instantly destroy the patentability of that invention—no more grace year for you. Not even a grace day. What’s more, if such a sale or use were instead conducted publicly, it would surely fall into the new “inventor disclosure” exception and would still be patentable for up to one year. Such irrational results, where the patentability of an invention would be preserved by public use but destroyed by secret use, were never the law before the AIA.
Your Patent May Now be Invalid Because of Someone Else’s Secret Activities
This is perhaps the most troubling implication of the Helsinn decision—not just because it is such a big departure from pre-AIA law, but also because at least one Justice understood what the Court was doing. Consider this short exchange from the Helsinn oral argument:
JUSTICE KAGAN: Mr. Jay, would the prior secret sale of an invention by somebody other than the patentholder invalidate the patentholder’s patent?
MR. JAY: I think the answer is yes, but I — I’ve not seen cases like that because I think it would be exceptionally difficult to discover.
Let this sink in for a moment. Before the AIA, it was well-understood that secret commercialization of an invention through sale or use by the inventor can operate like prior art against that inventor’s subsequent patent application. If you made a secret sale or commercial use of an invention, that sale barred YOU from getting a patent after a year, but not other inventors. This was well-established in the law; the Federal Circuit’s 1983 W.L. Gore case provides a good example. Roughly speaking, pre-AIA law treated secret commercialization as a form of self-inflicted harm that did not extend to innocent third-party patent applicants if the invention really wasn’t publicly available. The old Patent Act was full of such personal forfeiture provisions that ruined a patent applicant’s chance of getting a valid patent even if the invention, if it had been made by another, would have met all requirements for novelty and non-obviousness. Examples include abandonment under old section 102(c); premature foreign patenting under old 102(d); obviousness under section 103/old 102(f); suppression or concealment under old 102(g)—all of which were abolished in the AIA.
Squint as one might, the new section 102 simply does not contain one rule of novelty that applies only to one patent applicant and another rule of novelty that applies to all other patent applicants. If an instance of secret commercialization is prior art against one patent applicant (as Helsinn tells us it is), it must now also be prior art against all other patent applicants. And the new “inventor disclosure” exceptions at 102(b) do not help because they don’t shield innocent third-party applicants from the prior art effect of someone else’s secret sale.
To illustrate: Under the AIA after Helsinn, if inventor A makes a secret commercial sale of his invention, he creates prior art under 102(a)(1). That is now the default rule. The only way under which that secret sale would not constitute prior art would be through application of the new “inventor disclosures” exceptions at new 102(b). It is questionable whether that would work even for inventor A, because the answer depends on whether A “disclosed” his invention by selling it in secret. But whether or not A is shielded from the consequences of his secret sale is not the point here. The real concern is about inventor B, who had no connection to A, could not have known of A’s secret sale, and didn’t sell, use, or disclose her invention to anyone before diligently filing her patent application. B, arguably the more responsible actor, can’t invoke any of the new prior art exceptions (she did not “disclose”), and likely will find herself with an invalid patent because of A’s secret prior sale. That was never the law.
One final observation on this point: does it matter? Wouldn’t it be highly unlikely that such instances of secret, prior, third-party commercialization would ever be discovered in later patent infringement litigation? Who knows? Historic experience is nothing to go by, because in the past this question simply didn’t matter. Going forward, is it really that difficult to imagine well-heeled defendants in infringement litigation going out to a patentee’s competitors in the same technology to ferret out possible instances of non-public commercialization that would antedate the patent’s filing date?
A Chinese and a Korean company conduct confidential negotiations in Hong Kong. An undisclosed transaction takes place under which custom-designed machine control modules are sold for trade secret use in the purchaser’s manufacturing plant in Vietnam. One week after that secret sale and 8,000 miles away, a U.S. patent applicant who independently invented, and has no connection to these events, files a patent application in the USPTO. An invalid patent issues in due course, because neither the applicant nor the examiner could have known of the secret Hong Kong transaction between these unrelated parties. Sound absurd or unfair? That may depend on one’s perspective. The point is only this: Helsinn didn’t confirm longstanding law. That longstanding law changed with the enactment of the AIA anyway, and it would be foolish to assume that old judicial doctrines about secret commercialization of inventions are going to operate in “long-established” ways when forced into a new statute that was not designed to accommodate them. Instead of needed clarity, businesses and patent owners are only left with uncertainty that is greater than it ever was under pre-AIA law.
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