How the on-sale bar can threaten a patent
It’s easy to understand an inventor’s urge to get a new product to market. But that urge can backfire if a patent application hasn’t yet been filed. Under the on-sale bar, the inventor could lose patent protection altogether. A pharmaceutical company learned this the hard way.
In 2008, The Medicines Company obtained two patents covering an improved process for manufacturing an anticoagulant it had marketed for almost 20 years as Angiomax. The anticoagulant’s sales represent more than 90% of the company’s revenues. In February 2007, the company had entered into a distribution agreement with Integrated Commercialization Solutions, Inc. (ICS), to distribute the new formulation.
The Medicines Company sued Hospira, Inc., alleging infringement of its patents. Hospira argued that the patents were invalid. The trial court disagreed, and Hospira appealed.
The heart of the matter
Hospira contended that the patents were invalid under the on-sale bar. The bar applies if, before the date the patent application is filed (“the critical date”):
- The invention is the subject of a commercial offer for sale, and
- The invention is ready for patenting.
The Federal Court of Appeals easily found that the invention was ready for patenting and focused on the first element.
An offer for sale occurs if the other party’s acceptance would make the offer a binding contract. The court found that the terms of The Medicines Company’s distribution agreement with ICS made clear that the parties had entered into an agreement to sell and purchase the product. The relevant terms included:
A statement that The Medicines Company “now desire[d] to sell the Product” to ICS and ICS “desire[d] to purchase and distribute the Product,”
- The price of the product,
- The purchase schedule, and
- The passage of title from The Medicines Company to ICS.
However, The Medicines Company asserted that the agreement didn’t constitute an offer for sale because it allowed the company to reject all purchase orders submitted by ICS. The Federal Circuit dismissed this argument on two grounds.
First, the cases cited by The Medicines Company in support of its arguments did not have facts analogous to those here. Here, The Medicines Company agreed to sell Angiomax to ICS, and ICS agreed to buy it. Further, the parties explicitly and intentionally changed their previous distribution relationship to let ICS take title on receipt of the product at the distribution center. The passage of title, the court said, was a “helpful indicator” that Angiomax was subject to an offer for sale.
Further, the agreement required The Medicines Company to use “commercially reasonable efforts” to fill the purchase orders, contrary to the company’s claim that it could reject all purchase orders. Regardless, The Medicines Company was simply unlikely to reject an order because Angiomax sales provided most of its revenues, and the agreement gave ICS the exclusive right to purchase Angiomax in the United States for its three-year period. And, under the Uniform Commercial Code, an exclusive distribution agreement imposes an obligation on the seller to use its best efforts to supply the goods, unless otherwise agreed.
Not dead yet
Although the Federal Circuit found that the distribution agreement was a commercial offer for sale, it nonetheless remains to be seen whether the on-sale bar applies. The case was sent back to the trial court to determine whether the offer for sale covered the Angiomax created by the newly patented process. •
The Medicines Co. v. Hospira, Inc., No. 14-1469, Feb. 6, 2018, Fed. Cir.