Does a License Agreement Trigger the On-Sale Bar – a Revisit to Helsinn

Much attention has been focused on the recent Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., in which the Supreme Court decided that the “On-Sale Bar” of 35 U.S.C. § 102 remains the same under the America Invents Act (AIA). Thus, a “secret” sale still triggers the “On-Sale Bar” under the AIA version of the 35 U.S.C. § 102. We previously wrote about this landmark decision here.

In Helsinn, Helsinn and MGI entered into two agreements: (1) a license agreement and (2) a supply and purchase agreement. The license agreement granted MGI the right to distribute, promote, market, and sell palonosetron in the United States. Under the supply and purchase agreement, MGI agreed to purchase exclusively from Helsinn any palonosetron product approved by the FDA. An interesting question is that, absent the supply and purchase agreement, would the license agreement alone (regardless of being secret or not), have triggered the “On-Sale Bar” in Helsinn. After all, the act of licensing a product would appear to differ from the act of selling a product because they convey different rights.

Judicial guidance on this question can be found in several cases from the Federal Circuit from the early 2000s. For example, in Minton v. NASDAQ Inc. 336 F.3d 1473 (Fed.Cir.2003), Minton leased his computer program to a brokerage firm. Minton then filed his patent application after the “On-Sale Bar” date had passed. During the litigation of his patent, Minton argued that the licensing of his product was not a commercial offer for sale, and thus did not trigger the “On-Sale Bar”. However, the Federal Circuit in Minton, citing Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041 (Fed.Cir.2001), found that a “commercial transaction arranged as a ‘license’ or a ‘lease’ of a product or a device may be tantamount to a sale,” and that 35 U.S.C. § 102 would be triggered because “the product is just as immediately transferred to the buyer as if it were sold.”

The Federal Circuit distinguished its holding in Minton from a prior decision that the Court made, In re Kollar, 286 F.3d 1326 (Fed.Cir.2002), in which the Court did find that the granting of a license did not trigger an “On-Sale Bar”. The distinction is based on the fact that the agreement in Kollar contained only “a transfer of technical information about the claimed process” and “a license under any future patents to practice the process and sell the resulting products”. The Federal Circuit’s rationale in Kollar is that, because the mere transfer of technical information requires the transferee to develop a product using the technical information before commercialization, such a transfer is not sale. Further, the Federal Circuit in Kollar also relied on Group One to state that a licensing of a patent is not the same as licensing a product that is protected by the patent, and that the licensing of a patent does not trigger the “On-Sale Bar.”