Make This For Me! Retaining Contractor to Manufacture Patented Product Does Not Trigger On-Sale Bar

Last week, the Federal Circuit (en banc) unanimously held that mere sale of services by a contract supplier to manufacture a patent product for the inventor—without transfer of title to the patented embodiments or the right to market the same—does not constitute a “commercial sale” of the invention to trigger the 35 U.S.C. § 102(b) on-sale bar. The Medicines Co. v. Hospira, Inc., Nos. 2014-1469, -1504, slip op. (Fed. Cir. July 11, 2016) (en banc).

Under the on-sale bar, an issued patent is invalid if its embodied “invention” was “on sale” by anyone more than one year before filing an application for the patent (the “critical date”). According to the Supreme Court’s two-prong Pfaff framework, the claimed invention was “on sale” if, before the critical date, it was (i) the subject of a commercial sale or offer for sale; and (ii) ready for patenting. The sole issue of the en banc appeal was the first prong.

Here, The Medicines Company (“MedCo”), a specialty pharmaceutical company without in-house manufacturing facilities, contracted with a third-party supplier, Ben Venue Laboratories (“Ben Venue”), to manufacture its branded anti-coagulant Angiomax according to a new compounding process that reduced impurities in drug products. More than one year after three batches of the drug were produced as contracted, MedCo filed two patent applications directed to the new process, claiming product and product-by-process for pharmaceutical drugs of improved purity.

Reversing the Federal Circuit panel decision and affirming the district court on modified grounds, the en banc Court held that the transaction between MedCo and Ben Venue did not constitute commercial sales of the patented invention bearing “the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.” First, there was no commercial sale of the “invention,” as defined by the patent’s claims. While all of the asserted claims covered products, Ben Venue sold to MedCo contract manufacturing services, not the patented products, acting as “a pair of laboratory hands” to reduce MedCo’s invention to practice. Thus, the performance of the unclaimed process of creating the product, without an accompanying “commercial sale” of the product itself, did not trigger the on-sale bar.

Second, the Court held that the inventor maintained control over the invention—shown by the retaining title to the embodiments and not authorizing Ben Venue to sell the product—which was a significant indication that the sale was only of Ben Venue’s manufacturing services, rather than for commercial marketing of the product. The scope and nature of the confidentiality imposed on Ben Venue further supported this conclusion.

Third, the Court clarified that “stockpiling” or building inventory, standing alone without an actual sale or offer for sale of the invention, is mere pre-commercial activity in preparation for future sales, which does not trigger the on-sale bar. Notably, mere commercial benefit, even to both parties in a transaction, was not enough to trigger the on-sale bar. Notably, the Court rejected a blanket “supplier exception” to what would otherwise constitute a commercial sale because it found that the focus is on the commercial character of the transaction, not the identity of the participants.