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09 September 2019
Application of the on-sale bar
US government not a 'person' under AIA
State ownership will not shield patents from inter partes review challenges
Article III standing needed to appeal USPTO decisions
Impact of Mayo: has the patentability of diagnostic methods been jeopardised?
Thus far, 2019 has been an eventful year for US patent law. Over the past seven months, the Supreme Court and the Court of Appeals for the Federal Circuit (the US appellate court tasked with reviewing all district court patent decisions) have issued several significant rulings that may affect the rights of patent owners. This article reviews the most important of these rulings.
The 'on-sale bar' is a legal doctrine that prevents an inventor from patenting an invention that was commercially sold or offered for sale before a patent application for the invention was filed. The policy rationale for the on-sale bar is that an inventor should not be able to commercially exploit their invention by offering it to others, only to later exclude others from the invention by obtaining a patent.
The US courts have long applied the on-sale bar to invalidate patents where the patented invention had been sold or offered for sale in secret. However, the 2011 America Invents Act (AIA) changed the language of the US statute governing the application of the on-sale bar (35 USC § 102). Under the AIA's version of Section 102, patents are prohibited for inventions that were "on sale, or otherwise available to the public before the effective filing date of the invention". The word 'otherwise' did not appear in the previous version of Section 102.
In Helsinn Healthcare SA v Teva Pharmaceuticals USA Inc,(1) the patent owner argued that this change to the statutory language of Section 102 meant that the on-sale bar could no longer be used to invalidate patents in circumstances where the sale of the patented invention had occurred before the patent application was filed, but the details of the patented invention were kept secret and were therefore unavailable to the public. On 22 January 2019 the Supreme Court rejected that argument, holding that the word 'otherwise' in the AIA was insufficient to overturn "settled pre-AIA precedent", in which the on-sale bar has been applied to secret sales.
The Supreme Court's ruling in Helsinn has extinguished the hope that the AIA would prevent the application of the on-sale bar to secret sales. Under Helsinn, inventors must continue to exercise caution when conducting transactions involving their patented inventions prior to filing patent applications for those inventions.
The 2011 passage of the AIA created three new types of administrative proceeding by which a person could challenge the validity of issued patent claims at the US Patent and Trademark Office (USPTO):
The question raised in Return Mail v US Postal Service(2) was whether a government agency (in this case, the Postal Service) was a 'person' that could use these AIA proceedings to challenge a patent owned by a private party.
On 10 June 2019, in a six-to-three decision, the Supreme Court answered that question in the negative. According to the court, a government agency cannot challenge patents using inter partes, post-grant or covered business method reviews because the word 'person' has long been presumed to exclude the government or an agency thereof and nothing in the AIA justifies displacing that presumption.
The Supreme Court's decision immunises issued patents from inter partes, post-grant or covered business method review proceedings brought by the government. Moreover, because patent infringement lawsuits against the government can be brought only in one specialised court – the Court of Federal Claims – it appears that, after Return Mail, the sole setting in which the government can unambiguously challenge the validity of an issued patent owned by a private party is in response to an infringement lawsuit brought by that party in the Court of Federal Claims.
In the United States, individual states and state organisations – including state universities – typically enjoy immunity from lawsuits brought by private parties under the doctrine of state sovereign immunity. In Regents of the Univ of Minn v LSI Corp,(3) the University of Minnesota argued that state sovereign immunity prevented its patents from being challenged in an inter partes review proceeding initiated by LSI Corp.
On 14 June 2019 the Federal Circuit rejected the University of Minnesota's argument and concluded that inter partes reviews, although they resemble private-party lawsuits in certain respects, are not ultimately lawsuits, but rather agency enforcement actions (ie, actions conducted by the USPTO) to which state sovereign immunity does not apply.
This decision harmonises the Federal Circuit's treatment of state sovereign immunity with its prior treatment of Native American tribal sovereign immunity in the inter partes review context. In 2018 the Federal Circuit in Saint Regis Mohawk Tribe v Mylan Pharms, Inc held that the transfer of patents to the Saint Regis Mohawk Tribe did not suffice to shield those patents from inter partes review challenges. Under Univ of Minn, it is apparent that state ownership will not shield patents from inter partes review challenges either.
The AIA states that a party that is dissatisfied with the USPTO's decision in an inter partes review proceeding may appeal to the Federal Circuit. However, the right to appeal is not guaranteed. Because the Federal Circuit – unlike the USPTO – is a federal court established under Article III of the Constitution, it has held that in order to appeal an inter partes review decision, a party must have Article III standing. To demonstrate Article III standing, a party must show that it has suffered some form of non-speculative harm.
Under the doctrine of competitor standing, a party may generally demonstrate Article III standing by alleging that the government has undertaken some action that results in economic injury to that party. For example, Article III standing based on economic injury has been found where the government takes an action that has a natural price-lowering or sales-limiting effect on the party's sales. However, in AVX Corp v Presidio Components Inc,(4) the Federal Circuit rejected the argument that the doctrine of competitor standing applied to unsuccessful inter partes review petitioners. According to the Federal Circuit, the fact that the USPTO has upheld the validity of certain patent claims in an inter partes review proceeding "does not, by the operation of ordinary economic forces, naturally harm a firm just because it is a competitor in the same market as the beneficiary of the government action (the patentee)".
AVX is just one of several decisions that hold that a party that is dissatisfied with the USPTO's decision in an inter partes review must first demonstrate Article III standing to appeal the decision. In the even more recent case of General Electric Co (GE) v United Technologies Corp, decided on 10 July 2019, the Federal Circuit held that GE had failed to meet its burden to show Article III standing, despite the fact that it had submitted declarations by its counsel alleging that the patent claims that were upheld by the USPTO in the inter partes review had forced GE to limit the scope of its airplane engine designs with regard to its competitors. According to the Federal Circuit, "GE's purported competitive injuries are too speculative to support constitutional standing". Thus, companies planning to file an inter partes review against a competitor's patent should consider whether a competitive injury can be shown and any additional options for challenging the validity of a patent, in the event of an unsuccessful inter partes review.
In 2012 the Supreme Court in Mayo Collective Servs v Prometheus Labs, Inc invalidated patent claims reciting a "method of optimizing therapeutic efficacy" of a drug treatment regimen based on the correlation between the administration of a drug to a patient and the concentration of the drug's metabolites in the patient's blood. According to the Supreme Court, those claims were directed to a law of nature, which are patent ineligible under 35 USC § 101 of the US patent statute.
Since 2012, the Federal Circuit has repeatedly relied on Mayo to invalidate patent claims directed to methods of diagnosing disease that involve routine or conventional technology – even if the correlation permitting the diagnosis has been newly discovered.
One of the latest examples of this trend is the Federal Circuit's 6 February 2019 decision in Athena Diagnostics, Inc v Mayo Collaborative Servs.(5) In this case, the Federal Circuit invalidated Athena's patent claims under Section 101 for detecting antibodies in mammals using labelled epitopes of MuSK, a protein associated with the neurological disorder myasthenia gravis. The Federal Circuit acknowledged that, "prior to the [inventors'] discovery, no disease had been associated with MuSK", but concluded that "the claimed advance was only in the discovery of a natural law, and  the additional recited steps only apply conventional techniques to detect that natural law".
However, the most remarkable development in this case arose after the 6 February decision. On 3 July 2019 the Federal Circuit issued an order denying Athena's request to have the case reheard by all Federal Circuit judges. Accompanying the 3 July order were more than 80 pages of commentary by individual Federal Circuit judges criticising both the Supreme Court's 2012 Mayo decision and the Federal Circuit's application of it. Several Federal Circuit judges expressed the view that Mayo had jeopardised the patentability of diagnostic methods in the United States and had harmed incentives for the US biotechnology sector to develop new diagnostic tools. Several others indicated that legislative reform of Section 101 would be necessary to address those problems. Pharmaceutical and medical device companies should continue to monitor developments in the law relating to 35 USC § 101, as both the USPTO and the US Congress are also undertaking efforts to clarify the law in this area.
For further information on this topic please contact Christopher Loh at Venable LLP by telephone (+1 410 244 7400) or email (email@example.com). The Venable LLP website can be accessed at www.venable.com.
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