Patent Owner’s Particular Fax Qualified as Invalidating Offer for Sale of Drug Despite Omission of Safety and Liability Terms

In Merck & Cie v. Watson Laboratories, Inc., Nos. 15-2063, -2064 (Fed. Cir. May 13, 2016), the Federal Circuit found Merck’s patent invalid under the on-sale bar of 35 U.S.C. § 102(b) because Merck sent a particular fax to a vendor constituting a commercial offer for sale.

Applying traditional contract law principles, the Federal Circuit noted that the particular fax from Merck to a potential strategic partner, Weider, was a directed response to Weider’s request to purchase (not an unsolicited price quote); contained “all the required elements [including price, delivery, and payment terms] to qualify as a commercial offer for sale”; and was notably unqualified with the sender’s assurance to “arrange everything.” Merck’s failure to deliver was not dispositive because, according to the Court, Merck’s offer for sale, even if unconsummated, was sufficient to raise the on-sale bar.

The Court disagreed that the fax was indefinite for lacking important safety and liability terms. The record failed to show that the product is a “dangerous new drug”; the expert’s testimony failed to establish that including such safety and liability terms in an offer to sell was standard industry practice; and the conclusory testimony was contradicted by the unambiguous documentary record. Accordingly, the Court held the particular fax qualified as an invalidating offer for sale and reversed the district court’s validity holding.