Guest Post by Dmitry Karshtedt, Professor at GW Law. Prof. Karshtedt attended the Supreme Court oral arguments in Helsinn v. Teva, and provides the following discussion. A transcript of the arguments is available here: Helsinn Transcript.
The oral argument in Helsinn Healthcare v. Teva Pharmaceuticals had a little bit of everything. First, the Court extensively aired the statutory interpretation question whether the phrase “otherwise available to the public” in the America Invents Act (AIA) expanded or contracted the universe of prior art or perhaps did a bit of both. More to the point of the question presented, the advocates argued extensively over whether the statutory revision modified the meaning of “on sale.” Second, the Justices explored weighty issues of patent policy, such as the role of Section 102 in preventing withdrawal of inventions from the public domain and effective extensions of patent term through pre-patent secret commercial exploitation. Third, undergirding these points were debates on the notion of “congressional ratification” and the role of various facets of legislative history in statutory interpretation—and even what an ordinary consumer would understand “on sale” to mean. As one would expect, there was no shortage of creative hypotheticals, one of which generated an extensive discussion of the meaning of “brownie.” All in all, the Court repeatedly praised the advocates for excellent briefing, and the Chief Justice promised that the Court will issue an excellent opinion—another thing to look forward to in 2019!
Petitioner’s counsel, Kannon Shanmugam, began the argument with the point that the AIA “clarified” the meaning of “on sale” with the phrase “otherwise available to the public.” He explained a that a private offer to his friend on the opposing side, William Jay, should not be a patent-barring event, but an offer to the courtroom audience to sell something to the highest bidder would be. This contention drew immediate, skeptical responses from the Chief Justice and Justice Kavanaugh. Isn’t the phrase “on sale” self-defining, and thus in no need of clarification? And, as relevant to this case, doesn’t a private offer still put something “on sale” under the plain meaning of this term—why should a public availability requirement be read in? Justice Breyer then entered the discussion with the policy argument that, since the time of Pennock v. Dialogue, the purpose of the on sale bar has been to prevent extensions of patent monopolies via initial commercial exploitation of the invention followed by patenting. Petitioner’s response here was that the precedent is better read as focusing on protection the public domain after the public has gained possession of the invention, which implies some level of public availability. In addition, in a point that the government later returned to, the counsel explained that the “extension” policy cannot be all that robust because the on sale bar clearly cannot reach certain pre-patent invention exploitation activities, such as using the invention to draw in venture funding.
Judge Kavanaugh then returned to the statute. If Congress sought to modify the meaning of “on sale,” then weren’t there clearer ways to do this, and didn’t early drafts of the AIA actually have some direct language abrogating the “secret prior art” case law? Further, Justice Ginsburg asked the petitioner to clarify whether or not he thought the AIA was actually a change in the law on the “secret prior art” point. Petitioner’s response here was that Congress wanted to keep the term “on sale” to retain much the underlying jurisprudence around it (such as the “ready for patenting” test) while abrogating certain outlier Federal Circuit cases like In re Caveney and Special Devices, which deemed secret sales to be patent-barring. That, in his view, was not inconsistent with adding an extra “catchall” category of publicly available art that didn’t formally fall into any of the preceding categories. He also maintained that the petitioner’s reading of the AIA was not inconsistent with Supreme Court case law, which has not endorsed the lower-court secret prior art decisions, so there was no clear rule for Congress to ratify in this area. Finally, he explained that the AIA’s first-to-file rule would discourage pre-patent commercial exploitation.
Judge Kavanaugh then referred to the Law Professors’ amicus brief, led by Mark Lemley, which maintained that the Court did indeed endorse the secret prior case law. Petitioner disagreed here, and reiterated that none of the Supreme Court on sale or public use rulings would be disturbed under Helsinn’s reading of the AIA. Justice Breyer countered with a discussion of Bonito Boats, which did address the notion of a “monopoly” going beyond the patent term, though in a different context. He also suggested that perhaps the petitioner’s real argument is that the transaction at issue in this case doesn’t really fit within the definition of the sale. Petitioner offered a variation on this theme, suggesting that a contract with a distributor subject to various contingencies was maybe not the kind of a sale meant to be covered by Section 102.
Malcom Stewart, representing the Solicitor’s office, then argued in support of Helsinn. He emphasized the point that MGI, Helsinn’s “buyer,” was only an intermediary, and there was no assurance of a passage of title to MGI—let alone to the end user of a drug at issue in this case. Indeed, the consumer might not see a transaction at issue in Helsinn as a sale at all. This situation contrasts with Pfaff, which the parties and the government seem to agree remains good law post-AIA, as Pfaff involved a firm offer to an end user. Justice Sotomayor retorted that, surely, commercial entities understand a sale to a distributor to still be a sale, as the product has left the hands of the inventor and begins to wind its way through the stream of commerce. Moreover, she maintained that there seemed to be no precedent, or even textual support, for the government’s definition.
Justice Kagan then picked up on a particularly important point in this case. Was there really settled law in this area, and did it include secret sales as prior art? The government responded that there was no such settled law, and what Congress was doing in the AIA is clarifying and modifying some prior decisions, rather than ratifying any secret prior art rule. Assuming such a rule was in fact settled, the government conceded that the “otherwise available to the public” phrase would be an oblique way to overturn it. Justice Kavanaugh amplified this point, again noting that more direct efforts to overturn the secret prior art case law have failed (which, incidentally, also suggests that such case law was at least somewhat settled). Here, the government responded by contending that the early proposals have failed because they were going so far as to take non-informing sales to the public out of the universe of the prior art, an unpalatable proposal. Instead, Congress reached a happy medium by overturning some outlier secret prior art case law, but not non-informing public sale case law.
William Jay argued for respondent. He started with the plain language argument that the phrase “on sale” just means “sold” or “subject to an offer for sale”—no public availability is required. The “otherwise available to the public” art is an entirely different category. Here, justice Alito zeroed in on the meaning of “otherwise available to the public.” That phrase would seem incompatible with the notion that “on sale” means “on sale publicly or on sale privately.” Indeed, the string “on sale publicly, on sale privately, or otherwise available to the public” seems incoherent. The response was that some “on sale” events are surely public, and if the “otherwise available to the public” does refer back to “on sale,” it concerns only those the public sales (of course, a possible response here is that a sale, any sale, is simply deemed in the eyes of the law to make the invention “available to the public”). Petitioner further contended that the new Section 102 is better read as mainly adding an extra category of prior art, such as oral presentations, with the “otherwise available to the public” language—and it would be odd to have a category broadening the definition of prior art that at the same time narrowed it by eliminating secret sales from the definition.
After noting that other countries do not seem to recognize secret art as patent-barring, Justice Sotomayor returned Mr. Jay to Justice Alito’s “otherwise” question. He responded that the role of “otherwise” is, in part, to avoid the potential for interpreting terms like “printed publications” so as to include non-public documents and, more generally, to prevent unsettling the other categories by making clear that “otherwise available to the public” is a residual category of its own. Justice Breyer continued with an inquiry into the phrase by noting that a hypothetical string of “basketball, running, swimming, or otherwise - or games that otherwise involve a ball” as being incoherent. Respondent explained that, while awkward, this phrase doesn’t change the meaning of “swimming” into something like water polo. Justice Kagan added a particularly insightful hypothetical: “suppose I say don’t buy peanut butter cookies, pecan pie—this is the key one, ready—brownies, or any dessert that otherwise contains nuts. Do I—do I violate the injunction if I buy nutless brownies?” The implication, of course, is that nutless brownies are ok to buy, and maybe by analogy then non-public sales (like nutless brownies) are not a danger from the inventor’s perspective. The response here was that, while brownies might have nuts or be nutless, a notion of sale encompasses both public and private sales, though Justice Kagan retorted than maybe the meaning sale is not so clear. Justice Kavanaugh returned to point that maybe “otherwise available to the public” is there to summarize the preceding terms, but Mr. Jay’s response that “on sale” has a definitive meaning—”make available to a willing purchaser”—that this phrase could not unsettle.
Justice Gorsuch asked whether, assuming “on sale” is at all ambiguous, the PTO is entitled to some deference to its interpretation, which excludes secret prior art. The respondent countered that, as a plain language matter, that interpretation is just not persuasive. He then maintained that there is no dispute that the transaction at issue in Helsinn was a sale, and that the industry would so understand it. Indeed, he noted that most drugs are sold to distributors, and rule that such a transaction is not a sale will be unduly lenient to the pharmaceutical industry. Justice Kagan then finally brought up the point of third-party secret sales (the fact that Section 102 is party-neutral always seemed important to me), and Mr. Jay responded that they are patent barring. This is correct—the holding in Caveney supports this point. But the implication of this law for the “inventor forfeiture” view was unfortunately not further explored.
In rebuttal, petitioner emphasized the context of the phrase “on sale” and maintained that respondent’s reading would read the word “otherwise” out of the statute. The next “otherwise” string was from a case called United States v. Standard Brewery, which concluded that the phrase “beer, wine, and other intoxicating liquor” excluded alcohol-free beer. After presenting this example, Mr. Shanmugam maintained that there is no legislative history support for respondent’s interpretation. Perhaps more importantly for making the Court comfortable with its position, he reiterated that Pfaff would not be overruled under Helsinn’s interpretation of the AIA. Thus, the parties and the government all agree at least on that. As a patent law Professor, I took this to heart because, whatever happens in Helsinn, my Section 102 notes will not be completely upended by whatever the Supreme Court decides.