Supreme Court Update: Helsinn Healthcare v. Teva Pharmaceuticals USA

January 25, 2019 Supreme Court Update

Greetings, Court Fans!

The Supreme Court’s “shadow docket” was at the forefront this week, as it issued a consequential stay of the order enjoining the Trump Administration’s transgender service ban (over the dissents of the four more liberal justices), but did not issue any order on the Government’s cert petition the DACA appeal, meaning that the Ninth Circuit’s ruling requiring the Administration to keep protections for “Dreamers” in place will remain in effect until at least next year (there being no time left for the Court to grant and decide the case this term). The Court also took no action in several other hot-button cases concerning abortion, LGBTQ rights, and religious land use. But it did grant cert in the first gun rights case to reach One First Street since McDonald v. City of Chicago (2010). In New York State Rifle & Pistol Ass’n v. City of New York (No. 18-280), the Court will consider whether New York City’s ban on transporting a licensed, locked, and unloaded handgun to a home or shooting range outside city limits is consistent with the Second Amendment, the commerce clause, and the constitutional right to travel.

Compared to all that news, the Court’s lone decision of the week comes in below the fold, but opinion summaries are our stock-in-trade, so here goes. In Helsinn Healthcare v. Teva Pharmaceuticals USA, a unanimous Court affirmed a Federal Circuit decision invalidating the patent for Helsinn’s nausea drug Aloxi based on U.S. patent law’s “on sale” bar. While Helsinn was developing this drug, which uses the active ingredient palonosetron to treat chemotherapy-induced nausea and vomiting, it entered into a license agreement and a supply and purchase agreement with another pharmaceutical company, MGI Pharma, in which MGI agreed to distribute the drug if it were ultimately approved by the FDA. These agreements included dosage information for Helsinn’s invention, but they required MGI to keep is information confidential. Helsinn and MGI announced their deal publicly, but the press releases and other announcements did not disclose the specific dosage formulations covered by the agreements. Two years later Helsinn filed a patent application covering two doses of palonosetron, which led to further patents for other doses down the road. Years later, Teva Pharmaceuticals sought FDA approval to market a generic palonosetron product at one of Helsinn’s dosages. Helsinn sued, alleging that this product infringed its patent.

Since 1836, U.S. patent laws have provided that an invention cannot be patented if it was “on sale” before the effective date of the patent application. Teva argued that this rule made Helsinn’s patent invalid, because it had sold confidential information about the drug to MGI two years before it filed for its patent. Helsinn countered that the drug was not “on sale,” because this was a “secret” sale to MGI not a sale of the product to the general public. Teva had the much better argument, because the Federal Circuit has long held that patents can be invalidated based on pre-application secret sales like this one. But Helsinn convinced a district court that the most recent iteration of the U.S. patent laws, the Leahy-Smith America Invents Act (AIA) changed this rule, by amending on-sale bar statute to preclude the granting of a patent for an invention that was “in public use, on sale, or otherwise available to the public” before the effective filing date of the application. Those six italicized words, the district court held, required that any sale be a public one in order for the on-sale bar to apply. To be sure, the district court’s decision was not without some support: Since 2011, practitioners have wondered whether this new language modified the scope of the rule. But the Federal Circuit disagreed with the district court, upholding its prior decisions that the on-sale bar applies even to secret sales. The Supreme Court granted certiorari.

Writing for a unanimous Court, Justice Thomas affirmed. Although the Supreme Court had never expressly addressed secret sales like the one in this case, Federal Circuit decisions running back long before the 2011 AIA had made “explicit what was implicit” in the Supreme Court’s own precedent: that secret sales too make an invention unpatentable. Read on its own, the language of the AIA could, perhaps, be interpreted as inconsistent with that holding. But it is well established that Congress enacts legislation against the backdrop of clearly established precedent. Prior to 2011, “on sale” had a settled meaning, one that included secret sales and not just sales to the general public. Retaining the same “on sale” language in the AIA and adding the phrase “or otherwise available to the public” was not “enough of a change” to conclude that Congress intended to repudiate this precedent by limiting the on sale bar to public sales. Thus, if Congress wants to change the law, it will have to be more explicit the next time around.

There you have it. We’ll be back next week with the latest. Have a great weekend!

Tadhg and Dave