Tuesday, November 17, 2015

The Medicines Company v. Hospira: Federal Circuit Will Reconsider "Suppliers Exception" to 102(b) On-Sale Bar


In a previous post I reported on the Federal Circuit’s July 2, 2015, decision in the The Medicines Company v. Hospira, wherein a panel of the Federal Circuit held that a patent owner’s use of a contract manufacturer to prepare three “validation batches” of a drug formulation embodying the claimed invention created an invalidating on-sale bar, even though the contract was for manufacturing service, not for the sale of product, and title to the drug always resided with the patent owner, and even though the batches were produced for the purpose of demonstrating to FDA that the invention resulted in a formulation that satisfied FDA specifications.  In the post I pointed out that the decision illustrates the risk of using a contract manufacturer prior to filing a patent application, particularly now that the AIA has called into question the availability of the one year grace period previously available under pre-AIA 102(b).

On November 13, 2015, the Federal Circuit granted The Medicine Company’s petition for rehearing en banc and vacated the panel’s decision.  The court requested that the parties file new briefs addressing the following issues:

(a)    Do the circumstances presented here constitute a commercial sale under the on-sale bar of 35 USC 102(b)?

(i)                 Was the resale for the purpose of 102(b) despite the absence of a transfer of title?

(ii)               Was the sale commercial in nature for the purpose of 102(b) or an experiment to use?

(b)   Should this court overrule or revise the principle in Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001), that there is no “supplier exception” to the on-sale bar of 35 USC 102(b)?

In Special Devices the court rejected the patent owner’s policy-based argument urging the Federal Circuit to create a “supplier exception” to the 102(b) on-sale bar, concluding that the text of section 102(b) itself “makes no room for” such an exception.
Of course, for that matter the experimental use exception likewise finds no support in the language of the statute, and there is nothing to prevent the court from creating another judge-made exception to the 102(b) on-sale bar. Such an exception would seem to be justified on policy grounds, given that without a "supplier exception" an inventor, faces a loss of patent rights based solely on a decision to contract out manufacturing rather than manufacture in-house. This could be particularly problematic for a small or underfunded inventor lacking the resources to manufacture its invention itself.