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When Is Telling Someone You Have A Secret Revealing Too Much?

Written by David Gorski on May 10, 2017

Of course, telling someone that you have a secret is not the same as telling them what the secret is. Still, someone now knows that you have a secret. This has turned out to be an important concept for the “on-sale bar rule” in patent law.

A patent is a deal with the US government. The inventor agrees to disclose its invention to the public (to “teach” the public) in exchange for a monopoly over the invention for a period of time. The inventor must file a patent application promptly after creating the invention. If the invention is sold or offered for sale more than one year before a patent application is filed, the application is time-barred by the “on-sale bar rule” and must be denied. This rule prevents a patent applicant from attempting to gain financial benefit from an invention, and then, after making inroads into developing a market, asking the government for a patent right that can exclude others from that market.

Before the American Invents Act (AIA) was implemented in 2013, the law provided that any sale or offer for sale, public or private, in the US more than one year before filing of a patent application would bar a patent from being granted. However, when the AIA was implemented, the wording regarding the on-sale patent bar (35 USC 102) changed. The pre-AIA version denied a patent if the invention was “described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of application for patent in the US.” Under the AIA, a patent may be denied if the invention is “described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.”

This change led some to question whether a private sale — or a private offer for sale — still triggered the on-sale bar. Many questioned whether “secret sales” might no longer trigger the “on-sale bar rule.”

The Federal Circuit has answered at least part of this question with its recent ruling in Helsinn v. Teva (May 1, 2017). Helsinn had successfully argued before the district court of New Jersey that an offer for sale of a patented invention was not barred, even though a Supply and Purchase Agreement involving the sale of the invention had been publicly announced in an 8-K filing with the SEC more than one year before the filing date. Helsinn reasoned that disclosing the existence of a Supply and Purchase Agreement involving the invention was not the same as revealing the details of the invention itself. The public was no wiser about the invention itself, reasoned Helsinn, and so the on-sale bar should not be triggered.

The Federal Circuit disagreed and reversed the district court, holding that while a truly secret sale is not being addressed in the present case, the disclosure of a sale or offer for sale does trigger the on-sale bar regardless of whether details of the invention were disclosed.  Publicly announcing the Supply and Purchase Agreement involving the sale of the invention more than one year before filing of the patent application was enough to invalidate the patent.

While the AIA changed patent law in many ways, the Federal Circuit’s ruling clarifies that the old rules remain for at least part of the on-sale bar.  While there are many business reasons to obtain patents, the on-sale bar is yet another reason why patent applications should be filed as soon as possible to avoid consequences of any actions on the part of the applicant that may trigger the on-sale bar.