What Type of Sale Constitutes an On-Sale Bar?

An invention cannot be patented if it was ready for patenting and was subject to a commercial offer for sale more than one year before the application was filed. This so-called “on-sale bar” can also be used to invalidate a patent. On July 11, 2016, the Federal Circuit in The Medicines Co. v. Hospira Inc. addressed what types of sales constitute an on-sale bar and ruled specifically that a barring sale must include a transaction that “bears the general hallmarks of a sale.”

The Court found that The Medicines Co.’s patent covering methods of making a drug, Angiomax, was not invalid due to The Medicines Co.’s transactions with a supplier, Ben Venue Laboratories, more than a year before filing for the patent. The transactions included The Medicines Co. hiring Ben Venue Laboratories more than one year before it filed its patent applications to prepare three batches of Angiomax using the patented method to ensure it met requirements set by the FDA. The Medicines Co. did not actually sell Angiomax to the public until some time later.

The Federal Circuit sitting en banc unanimously remanded the appeal to the merits panel of the Court, which had decided last year that The Medicines Co.’s transactions with Ben Venue did in fact constitute an on-sale bar and thus rendered two of Medicines Co.’s patents invalid. In its opinion issued on Monday, the Court stated that to be on-sale for constituting an on-sale bar, the product “must be the subject of a commercial sale or offer for sale, and that a commercial sale is one that bears the general hallmarks of a sale under the Uniform Commercial Code.” The Court added that “the mere sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not constitute a ‘commercial sale’ of the invention.” In addition, the Court noted that any commercial benefit, even to both parties, is not enough to trigger the on-sale bar and that the transaction must be one in which “the product is ‘on sale’ in the sense that it is 'commercially marketed.”

Here, even though The Medicines Co. contracted with Ben Venue to make batches of the drug because it did not have the manufacturing resources to do so itself, the Court still noted that even if a company outsourced and did have the resources to manufacture in-house, the same on-sale bar rules apply. According to the Court, what makes a sale “commercial” in “the most well-understood sense of that term” is an important consideration in determining whether a sale is barring and “distinct from merely obtaining some commercial benefit from a transaction.”

While this case provides guidance as to what constitutes an on-sale bar, it is still best to err on the side of caution and file an application covering the invention before allowing a year to pass from a first transaction involving the invention to ensure patentability.

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