Invention on Sale: Threat to Patenting

Last week on January 22nd, the U.S. Supreme Court in the case "Helsinn versus Teva" interpreted the phrase "on sale", and cleared the air about patenting and making an invention available for sale prior to filing the patent application. It is an important development and will undoubtedly make the pharmaceutical companies take note of it while formulating business strategy, which needs to be in alignment with the legal strategy. It is, however, significant to state that the strategy needs to be tweaked according to the jurisdiction where business is to be done.

Helsinn is a Swiss pharmaceutical company. Around the turn of the century in the year 2000, it invented a drug for treating nausea and vomiting induced by chemotherapy by using the chemical palonosetron. About a year later, it entered into an agreement with MGI Pharma, a Minnesota based American pharmaceutical company, for marketing the drug in the United States in 0.25 mg and 0.75 mg doses. MGI promised confidentiality and exclusivity. In 2003, about two years later, Helsinn filed a patent application, and filed few more applications for different variations in the next ten years. In all the applications, the date of priority was claimed at that of 2003. It was granted a patent – U. S. Patent No. 8,598,219 – in December 2013 on an application filed in May the same year but claiming the priority date as January 2003 for the 0.25 mg dose drug.

How pharmaceutical companies, irrespective of their place of incorporation and primary geographical area of doing business, covet and crave to somehow seize a slice of the huge pie of the pharmaceutical business in the United States and how things can lead to so much litigation in the U.S., can well be understood from the fact that an Israeli pharmaceutical company, Teva along with its American affiliate, yearned to sell its 0.25 mg generic drug in the American market. But, that was under the contractual arrangement between Helsinn and MGI, with January 2003 as priority filing date.

To clarify at this juncture the importance of the priority date, it can be understood as the date when some preliminary filing is done, which is modified later, to give the benefit of early filing date. It is something like, not exactly, filing the income tax return within the stipulated date and later on filing the modified return, or when the legislature makes simply the basic framework of certain laws to be within the time limit according to any international treaty, and later on fleshing it out. Such a move is made to take the benefit of both early initiating date and also keeping things fluid till a later date when everything has to be crystallised.

Teva applied for permission from the American Food and Drug Administration (FDA) in 2011 for marketing its 0.25 mg drug. Helsinn opposed that it was already patented with priority date of 2003. Now, the law for patents clearly says that the invention must be "novel", that is, it should not have been known to anyone prior to filing the application for patent, and also it should not have been on sale. Helsinn argued that by entering into a confidentiality clause with MGI, it was not available to the public and was also not on sale. Matter was litigated with the U.S. Supreme Court finally deciding that the contractual arrangement of 2001, even if of confidentiality and exclusivity, would be covered under "on sale". Had the patent application been filed before that, the story would have been entirely different.

Implications for inventors, whether small or big, are very serious. Often it so happens that the moment an invention is made, there is a sense of urgency to commercialise it, or at least check its commercial viability in the market. From the business perspective, it is a good move, however, long term legal strategy demands that the inventors first file an application with all basic information for grant of a patent, howsoever preliminary it is, to protect the proprietary rights from that particular date. The same is true, to a large extent, in India also.

Indian pharmaceutical companies vying for even a small fraction of American market will definitely find this judgment useful and it may provide them greater hope to permeate the market. However, they need to be careful of litigation in American courts. It's a double-edged sword, and can drain them out completely.

The author is a professor at IIM-A, akagarwal@iima.ac.in