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A Distribution Agreement is an “Offer for Sale”

Distribution deal
is held an offer for sale;
case is remanded

The Federal Circuit ruled that a distribution agreement was an “offer for sale” under 35 U.S.C. § 102(b).

35 U.S.C. §102 deals with the conditions for patentability, and specifically with novelty.

A person is entitled to a patent unless:

  1. the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or
  2. the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.

Section (b) provides an exception if the disclosure was made one year or less before the effective filing date of the patent.

In the case of THE MEDICINES COMPANY v. HOSPIRA, INC., MedCo asserted two drug patents against Hospira, a generic drug maker.

The drug at issue had been available for decades, but MedCo had developed a new process for making it, and that method was the subject of the patents.

MedCo entered into a distribution agreement with Integrated Commercialization Solutions, Inc. (“ICS”) in February of 2007.

The court noted that:

A patent is invalid under the on-sale bar if, before the critical date, 1) the product is the subject of a commercial offer for sale, and 2) the invention is ready for patenting.

The court noted that the distribution agreement included statements that:

The Medicines Company “now desire[d] to sell the Product” to ICS and ICS “desire[d] to purchase and distribute the Product”…

The agreement also included price terms and provisions on transfer of title.

The court noted that

Where the supplier has title to the patented product or process, the supplier receives blanket authority to market the product or disclose the. process for manufacturing the product to others, or the transaction is a sale of product at full market value, even a transfer of product to the inventor may constitute a commercial sale under § 102(b). The focus must be on the commercial character of the transaction, not solely on the identity of the participants.

MedCo argued that the agreement wasn’t an offer for sale because it permitted MedCo to reject purchase orders from ICS. The court rejected that argument.

The court then remanded the case back to the district court to determine whether the offer to sell included the patented invention at issue.

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