No Sale Required for 102(b) On-Sale Bar

In Merck & CIE v. Watson Laboratories, Inc., No. 2015-2063, 2016 U.S. App. LEXIS 8782 (Fed. Cir. May 13, 2016), the Federal Circuit reversed a District of Delaware Paragraph IV decision, and held that the patent-in-suit was invalid under the on-sale bar of pre-AIA Section 102(b).  The sole asserted claim was directed to crystalline calcium salt of a tetrahydrofolic acid (“MTHF”), which is used in Merck’s Safyral® and Beyaz® oral contraceptive products.

In 1997, Merck and third-party Weider Nutrition (“Weider”) explored a joint partnership to market and distribute MTHF in the United States.  The next year Weider notified Merck that it was no longer interested in a joint venture.  Weider did, however, state that it wanted to purchase two kilograms (roughly equivalent to 62,500,000 doses) of MTHF.  In response, Merck quoted a price of $25,000 per kg, offered free shipping, and required payment within sixty days (“Terms of Offer”).  Merck then sent Weider a specification and analytical data sheet, outlining the physical, analytical, and microbial characteristics of MTHF.  A sale of MTHF was never consummated, and on January 9, 1999, Weider sent Merck an email stating that the parties had made a “mutual decision” to cancel Weider’s “existing order.”

Section 102(b)’s on-sale bar is triggered when a claimed invention (1) is ready for patenting, and (2) is the subject of a commercial offer for sale prior to the critical date of the patent-in-suit.  Here, Merck did not contest the former; and instead, argued that the parties never reached a binding offer of sale. The Federal Circuit disagreed, explaining that Merck sent a signed fax that included the Terms of Offer and noted that Merck would “arrange everything.” The Federal Circuit noted that Merck neither made an unsolicited offer, nor conditionally qualified its offer.  The Federal Circuit rejected the district court’s reasoning that the on-sale bar was inapplicable because the parties’ agreement for the sale of MTHF was never reduced to writing and signed by both parties.  In sum, the Federal Circuit made clear that “[a]n offer to sell is sufficient to raise the on-sale bar, regardless of whether that sale is ever consummated.”

In light of the Federal Circuit’s decision, and in order to fully capitalize on available defenses, ANDA filers in pre-AIA cases would be wise to consider propounding discovery regarding unconsummated third-party development agreements.  This is especially the case given that an en banc Federal Circuit is currently considering whether an inventor’s agreement with another party to manufacture the inventor’s product is sufficient to trigger the on-sale bar.  See The Medicines Co. v. Hospira, Inc., 805 F.3d 1357, 1358 (Fed. Cir. 2015) (order granting en banc review).