Avoid On-Sale Bar by Filing Early Both in the United States and China Post-Helsinn

AuthorJiaZhen (Ivon) Guo, Janice H. Logan, Weixian Zhu
Published in Landslide® magazine, Volume 12, Number 3, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2019 by the American Bar Association. Reproduced with permission. All rights reserved.
This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Avoid On-Sale Bar by
Filing Early Both in
the United States and
China Post-
By JiaZhen (Ivon) Guo, Janice H. Logan, and Weixian Zhu
nder 35 U.S.C. § 102(a) of the Leahy-Smith
America Invents Act (AIA), an inventor is pre-
cluded from obtaining a patent if the invention is
“on sale” before the effective ling date. In Hel-
sinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the
U.S. Supreme Court further claried that an invention is con-
sidered on sale even if the details of the invention have not
been made available to the public.1 This article examines the
“on-sale bar” standard in China and how U.S. businesses
should apply the Helsinn decision to direct their activities in
China, and why they are encouraged to le early patent appli-
cations in both the United States and China.
The Helsinn Decision
AIA 35 U.S.C. § 102(a) precludes an inventor from obtain-
ing a patent if the invention is “on sale” before the effective
ling date. Specically, the “on-sale bar” provision states:
“[a] person shall be entitled to a patent unless . . . the claimed
invention was patented, described in a printed publication,
or in public use, on sale, or otherwise available to the public
before the effective ling date of the claimed invention.2
The on-sale bar applies when the product is determined to
be “the subject of a commercial offer for sale” and when the
invention is “ready for patenting.” Ready for patenting could be
proved by evidence of “reduction to practice” or “drawings or
other descriptions of the invention that were sufciently specic to
enable a person skilled in the art to practice the invention,” regard-
less of whether the details of the invention had been disclosed.3 On
the other hand, if the subject matter is derived from the inventor or
a joint inventor, a one-year grace period is in play.4
Since the enactment of the AIA, however, it remained unclear
to many practitioners what the catchall phrase “otherwise
available to the public” encompassed. For example, could a con-
dential sale agreement between an inventor and a third party
trigger the on-sale bar provision and hence invalidate the patent?
On January 22, 2019, the U.S. Supreme Court addressed
this question head-on in a unanimous decision, declaring that
the addition of the catchall phrase “otherwise available to the
public” does not change the meaning of “on sale” as it was
used before the AIA, and that a condential sale agreement
between an inventor and a third party still triggers the on-sale
bar provision under the AIA.5
In September 2000, after Helsinn’s announcement that it
would begin clinical trials of a 0.25 mg and a 0.75 mg dose of
palonosetron product6 named Aloxi® and sought marketing part-
ners for this product, Helsinn entered into a license agreement
Image: GettyImages
Published in Landslide® magazine, Volume 12, Number 3, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2019 by the American Bar Association. Reproduced with permission. All rights reserved.
This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
have to wait until the patent expires to introduce their gener-
ics to the market, as competitors are entitled to mass produce
the generic drugs the following day after the Supreme Court’s
decision—on average, branded drugs are predicted to lose
their market share by up to 84 percent in the rst year after
the entry of generic drugs.13 Furthermore, after the Helsinn
decision, companies’ longtime practice of negotiating con-
dential sales covered by either condential or nondisclosure
agreements may nevertheless risk invalidating a granted pat-
ent or being prevented from obtaining a patent, essentially
affecting pharmaceutical companies’ early stage licensing
and acquisition deals, worth more than $157 billion over the
last decade.14 Naturally, inventors are advised to le an appli-
cation before engaging in the sale, as inventors who decide
to sell before ling a patent application now run a risk of not
being able to obtain a patent when the invention is “ready
for patenting.” And there is no need for the inventors to be
worried about the problems arising from early ling, for
applicant inventors can still request a suspension of action,
defer examination under 37 C.F.R. section 1.103, and/or
make amendments after ling. If a commercial agreement
is necessary before the ling, it is advisable that counsel be
involved to review whether the agreement constitutes a “sale”
or “offer for sale.” For a corporate applicant, it also means
that its sales team now must ensure that the invention they are
going to promote has been led in the patent ofce.
“On Sale” and “Offer for Sale” under China’s
Patent Law
On the other side of the world, post-Helsinn, U.S. enti-
ties doing business in China inevitably are confronted with
additional inquiries: Does the Helsinn decision affect U.S.
business practice in China, such as signing a sales agreement
with a Chinese entity before ling? Is there an on-sale bar in
China, and can a secret sale also invalidate a patent in China?
How does China apply Helsinn to its practices to comply with
Chinese laws? Before turning to these questions, we will rst
discuss the interpretation of “sale” under China’s Patent Law.
Under China’s Patent Law, there coexist two kinds of
“sale” behaviors, namely, “on sale” and “offering for sale.
First promulgated in 1984, China’s Patent Law has under-
gone three amendments: in 1991, 2000, and 2008. None of the
amendments, however, denes the meaning of “on sale.” Nev-
ertheless, the traditional view is that China’s Contract Law
JiaZhen (Ivon) Guo is an associate at Morgan, Lewis & Bockius LLP
in Washington, D.C. He specializes in intellectual property litigation and
counseling, as well as international trade. He can be reached at ivon.
guo@morganlewis.com. Janice H. Logan is a partner at Morgan,
Lewis & Bockius LLP in Washington, D.C. She specializes in patent
prosecution and due diligence in the elds of materials, chemicals, and
biotechnology. She can be reached at janice.logan@morganlewis.com.
Weixian Zhu is a doctoral degree candidate at East China University
of Political Science and Law in Shanghai, China. He received his LLM in
intellectual property law from George Washington University and once
interned in Morgan, Lewis & Bockius’s D.C. ofce. As a former judge in
China, he specializes in intellectual property litigation and licensing. He
can be reached at jasonzhu2@hotmail.com.
and a supply and purchase agreement with its marketing part-
ner MGI Pharma Inc. The license agreement authorized MGI to
distribute, promote, market, and sell the 0.25 mg and 0.75 mg
doses of palonosetron in the United States. Under the supply and
purchase agreement, MGI agreed to exclusively purchase from
Helsinn any palonosetron product approved by the FDA. While
both agreements included dosage formulation information, nei-
ther the subsequent press release nor the 8-K ling disclosed
such information. On January 30, 2003, nearly two years after
the agreements, Helsinn led a provisional patent application
covering the 0.25 mg and 0.75 mg doses of palonosetron. Subse-
quently, in May 2013, Helsinn led its fourth patent application
under the AIA, claiming the priority date to the 2003 provisional
application. The patent was later issued and covered a xed dose
of 0.25 mg of palonosetron in a 5 ml solution.
In 2011, Teva Pharmaceutical Industries Ltd. and its Amer-
ican afliate, Teva Pharmaceuticals USA Inc. (collectively,
Teva), applied for approval from the FDA to market a generic
0.25 mg palonosetron product. Helsinn sued Teva for infringe-
ment. In its defense, Teva claimed that Helsinn’s patent was
invalid because the product was “on sale” more than one year
before Helsinn’s 2003 provisional application. Helsinn argued
that the patents in suit were valid because its agreements with
MGI did not disclose the actual formulation and hence could
not constitute “on sale” as a matter of fact.
The district court sided with Helsinn, holding that the
on-sale bar “requires that the sale or offer for sale make the
claimed invention available to the public.7 On appeal, the
Federal Circuit disagreed with the district court and held
that the on-sale bar was triggered even if the details of the
invention were not disclosed.8 In its view, to be consistent
with pre-AIA case law, Congress, in enacting the AIA, never
intended to add “a requirement that the details of the inven-
tion be disclosed in the terms of sale.”9 Helsinn subsequently
led, and the Supreme Court granted, a writ of certiorari.
In afrming the Federal Circuit’s decision, the Supreme
Court held that its pre-AIA interpretation of the on-sale bar con-
trolled, and that the AIA did not alter the meaning of “on sale” in
the on-sale bar. According to the Court, the Federal Circuit has
long held that the “on sale” provision has a well-settled meaning
that “‘secret sales’ can invalidate a patent.10 “A commercial sale
to a third party who is required to keep the invention condential
may place the invention ‘on sale’” under the AIA as under the
pre-AIA statute, and “[t]he addition of a broad catchall phrase
[‘otherwise available to the public’]” does not change the “well-
settled meaning when the AIA was enacted.11 Accordingly, “a
sale or offer of sale need not make an invention available to the
public. . . . [Our] cases focus on whether the invention had been
sold, not whether the details of the invention had been made
available to the public or whether the sale itself had been pub-
licly disclosed.”12 By saying this, the Court claried, for the rst
time, that a secret sale triggers the on-sale bar under the AIA.
Additionally, the Court conrmed that the on-sale bar is also
triggered by an “offer of sale.”
After almost eight years of litigation, Helsinn not only lost
its issued patent but also is faced with mounting attorney fees
and litigation costs. What’s worse is that it is doomed to lose
its future sales because those generic drug applicants do not
Published in Landslide® magazine, Volume 12, Number 3, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2019 by the American Bar Association. Reproduced with permission. All rights reserved.
This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
governs the interpretation of “on sale,” partly due to the fact
that “on sale” is considered to be a contractual behavior. Under
China’s Contract Law, “[a] sales contract is a contract whereby
the seller transfers the ownership of a subject matter to the
buyer, and the buyer pays the price for it.15 Two elements are
essential in a sales contract, namely, transfer of ownership
and payment. Since a sales contract can be performed either
promptly or in the future,16 a patented product is “on sale”
where a buyer expresses the intention to transfer the ownership
of a subject matter and a seller, in return, expresses the inten-
tion to pay for the price. Under this interpretation, the time of
the transfer of ownership and payment is irrelevant. Addition-
ally, the sale of a product using the patented product as the
component also makes the patented product “on sale.”17
“Offer for sale,” on the other hand, was added in the 2000
amendment,18 and it incorporates “offer” and “invitation
for offer” into contract law.19 Specically, it refers to “such
behaviors as display in a store or an exhibition in trade show,
being listed in a sales order or on an auction list, being listed
in a promotional advertisement, or, through oral, written, or
other means, expressly declaring an intention to sell certain
products to specic or non-specic persons.”20 Thus, a pat-
ented product is held to be offered for sale as long as any of
the enumerated behaviors or equivalent thereof has been man-
ifested. The question then arises: Does every “sale” or “offer
for sale” of the patented product render the invention prior
art? And more importantly, what standard is applied when
determining prior art under China’s Patent Law?
“On-Sale Bar” Standard in China:
Available to the Public
According to China’s Patent Law, prior art refers to the tech-
nology that is available to the public before the effective ling
date of the claimed invention.21 Unlike 35 U.S.C. § 102(a),
under which the term “on sale” is disjunctively listed, such
term is not separately listed anywhere in China’s Patent Law.
Hence, “available to the public” becomes the sole standard for
determining whether an invention constitutes prior art.
Then what is “available to the public” under China’s Patent
Law? When deciding whether an invented technology is “avail-
able to the public,” at least three factors are considered: (1)
“what” exactly does the public disclosure encompass; (2) what
constitutes “public”; and (3) what constitutes “available”?
As for disclosure, China’s Guidelines for Patent Exami-
nation state that to constitute prior art, “substantive technical
knowledge” of the invented technology must be available to
the public.22 Therefore, merely touching upon the technical
characteristics or general introduction, without more, such as
disclosing substantive technical details, is not considered as
prior art disclosure under the Guidelines.
As for making available to the “public,” an earlier case
relating to a stereoscopic compass23 at China’s Patent Re-
Examination Board (PREB),24 the Chinese counterpart of
the U.S. Patent Trial and Appeal Board, sheds some light on
how to interpret the phrase. In that case, the patent owner
commissioned a manufacturer to build the prototype stereo-
scopic compass. The scope of the work is covered by a joint
promotional agreement entered between the patent owner
and the manufacturer. The manufacturer tried, but failed, to
claim itself as a coinventor, largely due to its involvement in
the production process. Not deterred, the manufacturer sub-
sequently led a petition to invalidate the patent because,
as it rightfully claimed, the utility at issue had been avail-
able to the manufacturer and other persons and hence the
whole invention had been made “available to the public.
The PREB disagreed. Specically, the PREB stated that the
owner and the manufacturer had a “particular partnership”
which rendered the manufacturer a specic person, contrary
to a nonspecic person25 in the public. The PREB con-
cluded that “the public” refers to “nonspecic persons.” In
other words, if an invention is disclosed to multiple persons
who are expressly or impliedly obliged to keep the inven-
tion condential, it is only considered as available to multiple
“specic persons”26 rather than “available to the public.” And
if a product is sold to only one person who has no obligation
to keep the invented technical details condential, this per-
son constitutes a nonspecic person and hence the invention
is “available to the public.” Similarly, the Guidelines further
regulate that if the technical content is disclosed in either
an express or an implied condential relationship, then it
remains secret and does not constitute prior art. However, and
not surprisingly, the technical content becomes prior art if the
obligor publicized the technical content in breach of con-
dential duty and made it available to the public.27
Lastly, as for availability, the general rule is that if, after dis-
closure, any nonspecic person in the public can obtain the
technical details as long as he or she is willing to do so, then
the disclosure becomes “available” to the public. The availabil-
ity inquiry is further complicated by the fact that there are three
types of patents that can be issued in China: design, invention,
and utility model.28 Design patents protect the ornamental design
of conguration, i.e., how a product looks.29 And upon disclo-
sure and regardless of the manifestation, an ornamental design
becomes “available” to the public since it is seen by the public
anyway. Both invention patents30 and utility model patents31 are
comprised of technical solutions and thus are not as apparent as
ornamental designs. Therefore, a display of a product without
giving away any technical specications so that people of ordi-
nary skill in the art can determine its structure, function, and/or
material composition32 does not satisfy the “availability” inquiry.
Practitioners in China also need to note that even if the structure
or function of a product or device can be obtained only through
deconstructing the product or device (e.g., reverse engineering),
the invention is now considered as made “available.33
In addition to the aforementioned factors, the Guidelines fur-
ther illustrate three ways for a technology to become “available
to the public,” namely, description in a printed publication, pub-
lic use, or otherwise available to the public.34 Here, “otherwise
available to the public” modies “description in a printed pub-
lication” and “public use,” and thus serves as a catchall phrase.
The Guidelines further dene “public use” to encompass “manu-
facturing, use, on sale, import, exchange, gifting, demonstration,
exhibition and other ways”; as long as the invented technical
details are publicly available through those ways, the inven-
tion is publicly used regardless of whether it is actually known
by the public.35 It is worth mentioning that, similar to China’s

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