Docket No. 2014-1469, -1504
En banc opinion
July 11, 2016
Brief Summary: En banc opinion concluded “a product produced pursuant to the claims of a product-by-process patent is ‘on sale’ under 35 U.S.C. § 102(b)…must be the subject of a commercial sale or offer for sale…that bears the general hallmarks of a sale pursuant to” the UCC (in this case, e.g., the alleged sales were only “contract manufacturing services in which title always resided with MedCo”).
Summary: This opinion considers the circumstances under which a product produced pursuant to the claims of a product-by-process pursuant patent is ‘on sale’ under 35 U.S.C. § 102(b).” As summarized below, the product “must be the subject of a commercial sale or offer for sale…that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code”. The DC found that the product encompassed by MedCo’s patents (US 7,582,727 and 7,598,343; pH-adjusted pharmaceutical batches of bivalirudin for preventing blood clotting marketed as AngioMax) are not invalid under § 102(b) and the FC agreed here (but not in its 2015 panel decision). The critical date for the patents is July 27, 2007. The patents require that “the batches have…a maximum impurity level of Asp9-bivalirudin [an impurity] that does not exceed about 0.6%”. Since 1997, MedCo had contracted with Ben Venue Laboratories to manufacture commercial quantities of bivalirudin, but those batches had higher Asp9 levels. In October 2006, MedCo had Ben Venue produce batches covered by the patents and having “a market value of well over $20 million.” The batches were shipped to MedCo’s distributor (Integrated Commercialization Solutions (“ICS”)), placed under quarantine and released for commercial sale in August 2007 (i.e., after the critical date). It was only after release from quarantine that “title and risk of loss would pass to ICS”. Hospira argued “the on-sale bar was triggered when MedCo paid Ben Venue to manufacture Angiomax before the critical date”. The DC found the manufacture by Ben Venue did not trigger the on-sale bar under Pfaff’s two-step test (US 1998) ((1) subject of a commercial offer for sale (not met (“contract manufacturing services in which title always resided with MedCo”, “batches were for ‘validations purposes’…not made for commercial profit”); and (2) ready for patenting (met)). It also found the ICS contract was not invalidating as it “was merely ‘a contract to enter into a contract’ for future sales”. Unlike the 2015 FC panel, the en banc court affirmed the DC decision on this point because: “(1) only manufacturing services were sold to the inventor-the invention [the claimed product] was not; (2) the inventor maintained control of the invention, as shown by the retention of title to the embodiments and the absence of any authorization to Ben Venue to sell the product to others; and (3) ‘stockpiling,’ standing alone, does not trigger the on-sale bar”. The opinion also states that “the confidential nature of the transactions” weighed against finding “that the transactions were commercial in nature”, although that “factor is not disqualifying in all instances” (e.g., a sale “kept secret from the trade”, “a secret military contract”). It also explained that “commercial benefit generally is not what triggers § 102(b); there must be a commercial sale or offer for sale” (e.g., “[s]tockpiling-or building inventory-is, when not accompanied by an actual sale or offer for sale on the invention, mere pre-commercial activity in preparation for future sale…regardless of who the stockpiled material is packaged…[it is] not more improper than is stockpiling by an inventor in-house.”) It also reviewed earlier cases (e.g., Special Devices (FC 2001) and Hamilton Beach (FC 2013) and found “the precise holdings in those cases are not inconsistent with the analysis we employ or conclusions we reach here”, noting however that the court “do[es] not recognize a blanket ‘supplier exception’…it alone is not determinative” (e.g., where “supplier receives blanket authority to market the product or disclose the process for manufacturing the product to others”). The court did “not reach the question of experimental use” or “the second prong of Pfaff”. It therefore affirmed the DC holding that the transactions did not trigger the on-sale bar.