Mary Siceloff

Prior to the Leahy-Smith America Invents Act (“AIA”), the patent statute (35 U.S.C. § 102(b)) prohibited patenting an invention that was “on sale in this country, more than one year prior to the date of the application for patent in the United States.”  This limitation on patentability is often referred to as the “on-sale” bar because it prohibits, or bars, an inventor from obtaining a patent when the invention was on sale more than one year before the patent application was filed.  In fact, all patent statutes since 1836 have included an “on-sale” bar provision.  The motivation behind the bar comes from the U.S. Constitution, which authorizes Congress “[t]o promote the Progress of Science and useful Arts.”  Long ago, the Supreme Court determined it would impede “the Progress of Science and useful Arts” to permit an inventor to sell his or her invention while keeping the secrets of his or her invention from the public and then later get a patent when faced with the danger of a competitor.  This would improperly offer a premium, such as longer protection than the standard patent term, “to those who should be least prompt to communicate their discoveries.”  See Pennock & Sellers v. Dialogue, 27 U.S. 2 Pet. 1 1 (1829).

But what does it mean for an invention to be “on sale”?  Does the sale have to make the invention available to the public?  Does the invention have to actually be sold? Does merely offering the invention for sale trigger the on-sale bar provision?  Interpreting the pre-AIA, “on-sale” bar, the Supreme Court determined that an invention was “on sale” when two conditions are met.  First, the invention is “the subject of a commercial offer for sale,” and second, the invention is “ready for patenting.”  In other words, a mere offer for sale triggers the “on-sale” bar whether or not the sale is made.  Further, the sale or offer for sale does not have to make invention available to the public for the invention to be “on sale” and thus subject to the “on-sale” bar provision.

The AIA, however, modified the language for the “on-sale” bar provision.  Under the AIA’s 35 U.S.C. § 102(a)(1), a person shall be entitled to a patent unless the claimed invention was “… on sale, or otherwise available to the public before the effective filing date of the claimed invention.”  This change raised a question as to whether, under the AIA, a sale has to make the invention available to the public to trigger the AIA version of the “on-sale” bar.  In other words, does the phrase “otherwise available to the public” limit the types of sales that trigger the bar or can “secret sales,” such as sales under a non-disclosure or confidential agreement, still trigger the bar as they did under the pre-AIA, “on-sale” bar.

On January 22, 2019, the Supreme Court answered these questions in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc.  Specifically, in Helsinn, the Court addressed “whether the sale of an invention to a third party who is contractually obligated to keep the invention confidential places the invention ‘on sale’ within the meaning of § 102(a).”  The Court unanimously held that a confidential sale to a third party triggers the “on-sale” bar provision.  Thus the AIA did not alter the meaning of “on sale.”

Looking at the facts in Helsinn and the Court’s reasoning provides further insight.  Specifically, Helsinn owns four patents, which all claim priority to a provisional patent filed in 2003, related to the drug palonosetron used to treat chemotherapy-induced nausea.  One of the patents, the ‘219 patent, is governed by the AIA and the other three are governed by pre-AIA law.  Nearly two years before filing the provisional patent application, Helsinn entered into two agreements with MGI Pharma, Inc. (“MGI”) whereby MGI would purchase the drug from Helsinn and keep all proprietary information received under the agreements confidential.  Helsinn and MGI announced the agreements in a joint press release, and MGI reported the agreements in its Form 8-K filing with the SEC.  However, they did not disclose specific dosage formulations covered by the agreements.

Teva Pharmaceuticals USA, Inc. (“TEVA”) sought FDA approval to market a generic version of the anti-nausea drug.  In response, Helsinn sued TEVA for patent infringement.  TEVA argued the ‘219 patent was invalid because the invention was on sale more than one year before Helsinn filed its provisional patent application.  The District Court agreed with TEVA concluding that “an invention is not ‘on sale’ unless the sale or offer in question made the claimed invention available to the public.”  On appeal, the Federal Circuit reversed finding that “’if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale’ to fall within the AIA’s on-sale bar.”  Therefore, “[b]ecause the sale between Helsinn and MGI was publicly disclosed, it held that the on-sale bar applied.”

The Supreme Court then “granted certiorari to determine whether, under the AIA, an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential” triggers the on-sale bar provision.  The Court pointed out that the AIA “retained the on-sale bar and added the catchall phrase ‘or otherwise available to the public.”  Therefore, the question was whether the altered language changed the meaning of the “on sale” bar.  The Court pointed to the well-settled, pre-AIA precedent that sales and offers for sale did not have to be public to trigger the on-sale bar provision.  In fact, the Court acknowledged that the Federal Circuit had explicitly recognized the implicit precedents of the Supreme Court that secret sales can invalidate a patent under the pre-AIA “on sale” bar.  “In light of this settled pre-AIA precedent on the meaning of ‘on sale,’” the Supreme Court presumed “that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.”  “The new § 102 retained the exact language used in its predecessor statute (‘on sale’) and, as relevant here, added only a new catchall clause (‘or otherwise available to the public’).”  The Court determined that merely adding “or otherwise available to the public” was “simply not enough of a change” to “conclude that Congress intended to alter the meaning of the reenacted term “on sale.”  Therefore, the Court held that “an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential” can bar patentability under the AIA “on sale” bar provision.

When a new invention is created (if it is worth anything), everyone wants to take credit. Figuring out whose “baby” it is, is a difficult question.

What is an inventor? Who is the inventor? One would think these questions have straightforward answers. They do not. Inventorship is one of the most difficult and gray areas of patent law.

It is easy to say what (or who) an inventor is not. An inventor is not the research technician who carries out the instructions of the lead investigator developing a new drug. An inventor is not the computer programmer who writes the code for software developed by someone else. An inventor is not the machinist who fabricates a device under the direction of the engineer. An inventor is not the CEO of the company, the most important shareholder, the leading investor, or the supportive colleague. An inventor is not a corporation or other business entity.

The inventor is the person (a natural person) who “invents” the invention. Inventing consists of three phases: conception of the invention; steps taken toward reducing the invention to practice; and reduction to practice of the invention. The person, or persons, who perform the first phase, conception, are the inventors. The person(s) who perform the second and third phases can be the inventor(s) or those acting at the direction of the inventor(s).

Conception is the formation of the definite and permanent idea of the complete and operative invention. This means that the structure and function of the invention have been fully thought out. If the inventor can describe how to make and use the invention, such that a person with ordinary skill in the art could make and use it, then there is conception. The inventor may have others help actually make the invention, but this does not make them inventors.

Any person who makes a contribution to the conception of the invention is an inventor. Multiple inventors are called joint inventors. The determination of whether a person is a joint inventor is very fact-specific. Joint inventors must be working together in some sense, although they need not work together physically or at the same time. Joint inventors cannot be working completely independently; if so, they are not joint inventors, but sole inventors of the same invention. The contributions of the joint inventors need not be of the same size or significance. The contribution of a small, minor aspect of the invention is enough to make a person a joint inventor as long as that aspect is contained in at least one claim of the patent.

If there is more than one inventor of an invention, each inventor owns an equal, undivided interest in the invention and in any patent on the invention. This is true regardless of the amount of the inventor’s contribution. Each inventor can make, use, offer to sell, or sell the invention in the United States, or import the invention into the United States, without the consent of the other joint inventors. In order to transfer all the rights to an invention, all of the joint inventors must sign an assignment.

All of the inventors must jointly file a patent application. Each inventor must sign the oath or declaration. All of the true inventors must be named as inventors, and the application cannot name a person who is not an inventor. For example, an inventor cannot be excluded because he or she is no longer employed by the company filing the patent application. Nor can a person who is not an inventor be named as an inventor simply as an acknowledgment or reward for working on the project. Errors in inventorship can be corrected by amending the patent application, or the issued patent, as long as the error was unintentional.

Inventorship problems occur frequently in companies where several employees work together on a project that results in an invention. The existence of joint inventors raises two problems. First, because each joint inventor owns, and has full rights to exploit, the invention, all of the inventors need to sign an assignment to the company if the company is to obtain clear title to the invention. It is easiest to do this before the employees are hired or, if not, before they leave the company. It is often not done until after the employee has left the company, however, and the company decides to file a patent application. Second, a patent that issues with incorrect inventorship (either omitting an inventor or including a non-inventor) is at risk of being invalidated, unless a correction is made. In other words, years after the invention was invented, when the company is in litigation to enforce its patent, the issue of inventorship can be raised as a basis for invalidating the patent. Thus, inventorship issues should be resolved as early as possible, hopefully before the patent application is filed.

The Federal Circuit Court of Appeals has affirmed a jury verdict of $140 million in a patent infringement case.  The damages were based on a reasonable royalty.  The case is Sprint Communications Co., L.P. v. Time Warner Cable, Inc., 2018 U.S. App. LEXIS 33594 (Fed. Cir.  2018).

Sprint sued Time Warner in the District of Kansas for infringement for several of Sprints patents for a telephone communications network.  Sprint alleged that Time Warner’s voice over internet protocol (VoIP) service infringed Sprints telecommunications patents.  The case was tried to a jury.  At trial, the district court admitted Sprints evidence of another jury verdict Sprint had obtained in a different case over the same patents against Vonage Holdings Corporation.  The court found that the evidence was relevant to the jury’s determination of reasonable royalty damages using the hypothetical negotiation theory of determining the royalty.  The jury awarded Sprint reasonable royalty damages of $140 million, calculated as $1.37 for each of Time Warner’s subscribers to its VoIP service.

On appeal, Time Warner argued that the district court should not have admitted evidence of Sprint’s verdict against Vonage because that royalty was based on the total amount of Vonage’s revenues, rather than the amount apportioned to the patented aspects of the product.

The Federal Circuit affirmed the jury’s verdict.  The court held that the district court had properly admitted the evidence of the Vonage verdict.  The court found that an apportionment between the patented and unpatented aspects of a product is not required if the Georgia-Pacific factors are used to determine the royalty.  The Georgia-Pacific case sets for a long list of factors, which the Federal Circuit has approved, that are relevant in determining a reasonable royalty.  Under Georgia-Pacific, the royalty rates for comparable licenses are relevant even if the royalty rate is based on total sales rather than sales of the patented component.

Here, the court found that the jury had considered two other comparable licenses Sprint had granted for the same technology.  Both of those licenses had utilized the same royalty rate as was used in the Vonage verdict.

The court explained the damage theory as follows:  “[T]he hypothetical negotiation seeks to determine ‘what it would have been worth to the defendant, as it saw things at the time, to obtain the authority to use the patented technology, considering the benefits it would expect to receive from using the technology and the alternatives it might have pursued.’”  Id. at *15, quoting Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 807 F.3d 1283, 1304 (Fed. Cir. 2005).

Based on the jury’s application of this theory, the court held, at *15, that “[I]n light of all the evidence bearing on the damages award, we conclude that the jury’s verdict was supported by sufficient evidence and did not contravene the principles of apportionment set forth by this court.”

On December 28, 2018, the Court in The California Institute of Technology v. Broadcom Limited et al., Case No. 2:16-cv-03714-GW-(AGRx), issued a Final Ruling on Plaintiff’s Motion for Partial Summary Judgment of Validity under 35 U.S.C. § 103 based on IPR Estoppel under 35 U.S.C. § 315(e)(2).  In the case, Plaintiff The California Institute of Technology alleges patent infringement against Defendants Broadcom Limited, Broadcom Corporation, Avago Technologies Limited, and Apple Inc. based on infringement from fifteen claims from three of its patents: (1) U.S. Patent No. 7,116,710 (“the ’710 Patent”); (2) U.S. Patent No. 7,421,032 (“the ’032 Patent”); and (3) U.S. Patent No. 7,916,781 (“the ’781 Patent”) (collectively, the “Asserted Patents”).

Plaintiff moved for partial summary judgment of no invalidity as to Claims 13 and 22 of the ’781 Patent and Claims 11 and 18 of the ’032 Patent, arguing that IPR estoppel precluded Defendants from raising each invalidity ground that was identified in Defendants’ invalidity contentions as to each of those claims in prior filed IPRs.  Section 315(e)(2) of the Patent Act states: “The petitioner in an inter partes review [IPR] of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  Here, the Court had to consider whether the statutory IPR estoppel provision reaches to invalidity grounds that a petitioner was aware of at the time it filed its IPR petition, but chose not to bring in the IPR proceeding.

The Defendants argued that if a prior art reference is included in an IPR petition and IPR is not instituted as to that prior art reference, the reference could not have been reasonably raised during IPR.  However, the Court reasoned that the “during IPR” language also should not be read in a vacuum.  The full phrase of § 315(e)(2) is whether the ground is one “that the petitioner raised or reasonably could have raised during that inter partes review.”  There is no reasonable basis by which a petitioner could raise a ground that has been explicitly rejected by the PTAB in making an IPR institution determination.  But in the context of non-petitioned grounds, the issue goes back to the choices made by the petitioner itself.  In other words, prior art references that a petitioner reasonably could have raised, but chose not to raise, in an IPR petition are also prior art references that reasonably could have been raised during actual IPR had the PTAB been given the opportunity (based on the petitioner’s raising them) to consider those references.

The choices of the petitioner – and the petitioner alone – in its initial decision regarding what grounds to bring before the PTAB dictate what grounds are raised (or reasonably could have been raised) “during IPR” and thus could result in estoppel if IPR results in a final written decision.  Thus, the Court found that statutory IPR estoppel applies to invalidity grounds that a petitioner “reasonably could have raised” in its IPR petition, which includes prior art that a “‘skilled searcher conducting a diligent search reasonably could have been expected to discover.’”

Next, and aside from their arguments regarding the scope of § 315(e)(2) estoppel, Defendants argue that they are now bringing certain prior art under pre-AIA § 102(a), i.e., not as “patents or printed publications,” but as information that was “known or used by others” before the patented invention.  As Defendants note, in IPR proceedings, the PTAB will only consider patents or printed publications as grounds for invalidity due to anticipation or obviousness.  Because, Defendants argue, they are relying on the “known or used” prong of pre-AIA § 102(a) for all but one of their prior art grounds (i.e., not on prior art patents or printed publications), the prior art could not have been raised during IPR proceedings and IPR estoppel does not apply.

Under pre-AIA, the juxtaposition between § 102(a) and § 102(b) effectively created a one-year grace period for a patent applicant to file a patent application even after the inventor disclosed information about an invention to the public as long as it was not done via a printed publication.  For example, the “known or used” prong of § 102(a) can come into play in the instance where a scientist gives a public presentation and shows slides, but does not distribute his/her slides or immediately publish a copy of them. The presentation itself (as, for instance, recollected through the scientist’s testimony) could still be considered prior art even if the presentation slides were not made “publicly available” at the same time as the presentation.

The Defendants also emphasized an analogy to a circumstance where a petitioner submits a product manual as printed publication prior art before the PTAB, but is not estopped from submitting a prior art product itself in district court litigation.  However, the Court reasoned that whether brought as a “printed publication” or under the “known or used” prong, the core element that forms the basis of Defendants’ prior art includes the same documents.  Although Defendants assert that there will be a “meaningful difference” in the invalidity presentation under the “known or used” prong, Defendants have not presented sufficient evidence to back that assertion.

Thus, after considering the unique facts of this case, including the specific prior art grounds Defendants seek to characterize, the Court was not persuaded by Defendants’ argument that it is shielded from statutory IPR estoppel by its references to the “known or used” prong of § 102(a). Accordingly, the Court found that statutory IPR estoppel applies to most of the obviousness combinations Defendants has raised, and granted Plaintiff’s motion.

This case is a strong reminder to carefully consider whether or not to file an IPR in defense of a patent infringement action, and if so, what the consequences can be if the IPR fails.  In addition, it is a strong reminder to carefully consider which arguments and prior to raise in any IPR.