The Medicines Company v Hospira, Inc, decided on
July 11 2016, the Federal Circuit held that "to be 'on
sale’ under 35
USC § 102(b), a product must be the subject of a
commercial sale or offer for sale, and that a commercial sale
is one that bears the general hallmarks of a sale" under
Uniform Commercial Code.
A unanimous en banc court found that the sale of
contract manufacturing services relating to the drug Angiomax
did not invalidate The Medicine Company’s (MedCo)
Sale of manufacturing services not a commercial
MedCo does not have in-house manufacturing facilities and
contracted Ben Venue Laboratories to manufacture batches of
bivalirudin, the API in Angiomax, in late 2006. Once
manufactured, these batches were placed in quarantine pending
FDA approval of Angiomax. The batches were released from
quarantine and made available for sale in August 2007, after
the July 2007 critical date.
Hospira alleged that the sale of manufacturing services to
Ben Venue constituted an invalidating sale under § 102(b).
The Federal Circuit found that Ben Venue sold contract
manufacturing services to MedCo, not the patented invention.
The court found the absence of title transfer and the
confidential nature of the transactions to be factors
supporting its conclusion that the on sale bar had not been
Welcome news for brand-name pharmaceutical
This decision is good news for brand-name pharmaceutical
companies. The decision limits the reach of the on sale bar and
provides helpful insight to companies that seek to contract out
manufacturing services. Whenever appropriate, agreements and
invoices should be drafted to identify the services rendered as
a sale of manufacturing services.
Agreements should also state that title to the products does
not pass to the contract manufacturer. The court noted that Ben
Venue "was not free to use or sell the claimed products or to
deliver the patented products to anyone other than MedCo".The
Uniform Commercial Code describes a 'sale’ as 'the
passing of title from the seller to the buyer for a price'. The
court found the passage of title to be "a helpful indicator of
whether a product is 'on sale'".
- The court also addressed the issue of whether
stockpiling, or the building of an inventory, constitutes a
commercial sale under § 102(b). Hospira argued that use
of the contract manufacturing services would allow MedCo to
stockpile its invention, conferring a commercial benefit by
allowing MedCo to "restock its long depleted commercial
pipeline". The court stated that it is not a commercial
benefit that triggers § 102(b) – there must be
a commercial sale or an offer for sale. Thus, stockpiling
alone, without an actual sale or offer for sale, does not
trigger § 102(b).
- The court pointed out that the patents-in-suit were
directed to a product as opposed to a process or method. The
outcome may be different when a contract manufacturer
performs the steps of a patented process.
- The court noted that applying the on sale bar to the
transaction at issue would create different sets of rules for
those companies that contract out manufacturing services and
those that manufacture in-house. Such a result would be
arbitrary and would penalize a company for relying on the
services of a contract manufacturer.
- Although MedCo focuses on pre-AIA patents, it is likely
that the outcome would be the same for post-AIA patents since
the language of pre-AIA 35 USC § 102(b) is similar to
AIA 35 USC § 102(a)(1). The
Patently-O blog agrees and notes that it seems clear that
"the limits here are equally applicable to post-AIA