When a Sale in Not a Sale: How a Recent Federal Circuit Decision Allows Pharmaceutical Companies to Outsource Manufacturing of a New Drug Without Jeopardizing Patent Protection
Patent protection just got stronger for pharmaceutical companies thanks to a recent decision by the U.S. Court of Appeals for the Federal Circuit, which ruled that pharmaceutical companies can outsource manufacturing of a new product without triggering patent law’s “on-sale bar.” This en banc decision by the Court unanimously overruled a three-judge panel that had strictly applied the rule, which says patents are invalid when the invention was “on sale” for more than one year before the filing date. Eric Dittman, the attorney who filed the amicus curiae brief on behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA), said that this ruling was critical for smaller pharmaceutical companies that focus on research and development while outsourcing manufacturing and distribution. Dittman stated that smaller companies might have “a great idea and a great product for development, but lack large-scale manufacturing capability or warehouse facilities.”
The court’s decision arose out of a dispute between The Medicines Co. and Hospira over a coagulant for heart surgery that was marketed under the name Angiomax. Hospira contended that Medicines’ patent on the drug was invalid under Section 102(b) because Medicines had paid manufacturer Ben Venue to manufacture three batches of the drug in 2006. A three-judge panel agreed with Hospira that this manufacturing sale by Medicines made the patent invalid under Section 102(b).
In overturning the prior decision, Judge Kathleen O’Malley wrote, “The mere sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not constitute a ‘commercial sale’ of the invention.” Specifically speaking, the court stated that the practice of “stockpiling products via the purchase of manufacturing services foes not automatically start the Patent Act’s one-year clock on filing a patent application.” O’Malley wrote that the on-sale bar is meant to discourage companies from patenting products that have already been made available to the general public. Contrasting the Medicines’ sale with Section 102(b), O’Malley stated that Ben Venue sold its manufacturing services to Medicines, but Medicines did not sell a patented product to Ben Venue. Hospira argued that this rationale would allow for commercial stockpiling, but O’Malley disagreed stating, “Stockpiling by an inventor with the assistance of a contract manufacturer is no more improper than is stockpiling by an inventor in-house.”
For more information on this topic, please visit our Patent Protection service page, which is part of our Patent practice.
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