Merck & CIE et al. v. Watson Laboratories, Inc.


Docket No. 2015-2063, -2064

DYK, MAYER, HUGHES
May 13, 2016

Brief Summary: DC decision that there was no § 102(b) on-sale bar reversed due to fax including “all the required elements to qualify as a commercial offer for sale” (“essential price, delivery and payment terms”).

Summary: Watson appealed DC judgment holding claim 4 of Merck’s US 6,441,168 relating to a crystalline calcium salt of a tetrahydrofolic acid (MTHF) (a dietary supplement) not invalid under the § 102(b) (pre-AIA because the ‘168 patent was filed in 2000) on-sale bar. Watson was accused of infringing the ‘168 patent by filing ANDAs seeking to market generics of the oral contraceptives Safyral® and Beyaz®. The DC concluded that “[a]lthough…MTHF was ready for patenting by September 1998…it concluded there had been no invalidating commercial offer for sale or sale of the product”. The on-sale bar question turned on whether a fax sent by Merck to a potential partner (Weider) on September 9, 1998 informing Weider, among other things, that “[t]he price is 25,000 US$ per kg [of MTHF] free delivered to your R&D center…Payment terms 60 days net…If you need more, we have no problem for an immediate[] delivery” was an offer for sale. The DC concluded the fax “was not sufficiently definite to qualify as a commercial sale because it did not include ‘important safety and liability terms’” (“a potentially dangerous new drug”) and there was a Confidentiality Agreement (CA) requiring that “any ‘definitive agreement’ between Merck and Weider had to be signed by both parties” which did not happen (therefore, “no legally binding sale”). The FC opinion explained that “[s]ection 102(b)’s on-sale bar is triggered when a claimed invention is: (1) ready for patenting; and (2) the subject of a commercial offer for sale prior to the critical date” (Pfaff, US 1998; “The date exactly one year prior to the date of application for patent is known as the critical date.” (Scaltech, FC 2001)). And “[o]nly an offer which rises to the level of a commercial offer for sale, one which the other party could make into a binding contract by simple acceptance (assuming consideration), constitutes an offer for sale under § 102(b).” The FC panel explained that Merck’s “fax was not an unsolicited price quote sent to numerous potential customers” (not “mere advertising”) but “was sent in direct response to Weider’s request to purchase” the product and “contained all the required elements to qualify as a commercial offer for sale” (“essential price, delivery and payment terms”) (Cargill, FC 2007). And the parties activities following that fax were considered as confirming this conclusion, even though ultimately there was no actual sale (Hamilton Beach, FC 2013; Cargill, FC 2007). The CA was explained to have been executed during a time when the parties were contemplating a joint venture and Merck did not show it “was intended to have any applicability to a stand-alone product purchase” and, furthermore, “[n]othing in the [CA] suggests that an offer is valid only if it is signed by both parties” (noting in fn4 that The Medicines Co. case on whether an agreement to manufacture is enough is being reviewed en banc). Thus, the DC decision was reversed.

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