Helsinn Healthcare S.A., Petitioner, v. Teva Pharmaceuticals USA, Inc., et al., Respondents.
On Writ of Certiorari to the United States Court of Appeals for the Federal Circuit

BRIEF OF THE R STREET INSTITUTE AND ENGINE ADVOCACY AS AMICI CURIAE IN SUPPORT OF RESPONDENTS

INTEREST OF AMICI CURIAE

The R Street Institute is a non-profit, non-partisan public-policy research organization. R Street’s mission is to engage in policy research and educational outreach that promotes free markets as well as limited yet effective government, including properly calibrated legal and regulatory frameworks that support economic growth
and individual liberty. Engine Advocacy is a non-profit technology policy, research, and advocacy organization that bridges the gap between policymakers and startups, working with government and a community of high-technology, growth-oriented startups across the nation to support the development of technology entrepreneurship. Engine conducts research, organizes events, and spearheads campaigns to educate elected officials, the entrepreneur community, and the general public on issues vital to fostering technological innovation. Part of amplifying startup concerns includes highlighting the unique challenges small startups face when confronted with abusive, and typically opaque, patent litigation.

SUMMARY OF ARGUMENT

Under 35 U.S.C. § 102, an inventor may not obtain a patent on an invention that has been “on sale” for more than a year. The question is whether, from this so-called on-sale bar, certain classes of sales should be exempted—sales under a confidentiality agreement, in Petitioner’s view; and sales to those other than the ultimate customers, according to the government.

Neither class of sales should be exempted from the scope of § 102. To do so would open up an easily exploitable loophole in the on-sale bar that would undermine both patent law and the public welfare. Additionally, § 102 is best interpreted as consistent with basic property ownership principles, which dictate that all sales should be treated alike in view of the right to resell. For at least these reasons, the Court of Appeals should be affirmed.

1. Petitioner’s theory that “secret sales” are outside the scope of § 102 is flawed because it would enable any inventor to circumvent the on-sale bar. The theory rests
solely on a standard nondisclosure agreement between Petitioner and its buyer. Other inventors could attach the same sort of nondisclosure agreement to every sale of their inventions to avoid triggering the on-sale bar, allowing at least some inventors to delay filing their patent applications, potentially for years. Petitioner and some amici are incorrect in believing that the first-inventorto-file system will mitigate this incentive for delay at least because, as this brief presents, there is a cheap and effective strategy for delaying filing as long as possible while still ensuring a position of being first to file. There are at least two negative ramifications of widespread use of nondisclosure agreements to delay patent filings. First, that strategy frustrates several basic premises of the patent system, in particular the time-limited patent term and the disclosure function of patents. Second, overuse of nondisclosure agreements ought not to be encouraged because it can impair other societally important work, such as research to discover safety or security concerns in consumer products. Interpreting § 102 so that it cannot be circumvented with nondisclosure agreements would avoid both of these problems.

2. Petitioner’s and the government’s theories of the case are also incorrect because they conflict with the principle against restraints on alienation. Because property may be resold freely, the act of placing an invention on sale inherently makes the invention available to the public: The inventor must accept that the invented product has entered the stream of commerce and now may reach any willing buyer. The inventor may contractually discourage resale and recover damages for breach, but has no power to prevent resale.

Neither Petitioner’s nor the government’s theory of the case is reconcilable with the inherently public nature of property sales. Both assume that an inventor can put an invention on sale and yet be unwilling to let some parties buy it—those outside the confidentiality agreement in Petitioner’s view, and “ultimate customers” according to the government. As a result, neither theory is consistent with the notion that the buyer of a chattel is free to alienate it at will to any member of the public.

There are at least two reasons why it would be unwise to interpret § 102 as inconsistent with this traditional view of property rights. First, it is difficult to believe that a patent-specific understanding of sale is superior to common law property rules tested over centuries, especially given that the on-sale bar has long been consistent with the freedom to alienate property. Second, as this Court reasoned in Impression Products, Inc. v. Lexmark International, Inc., 137 S. Ct. 1523 (2017), statutory patent law ought to yield to property rights, especially at the point of sales. To conclude otherwise would wrongly allow for the Patent Act to intrude upon the statutory domain of property and commercial law.

The above considerations militate in favor of affirmance, but they also point to the larger significance of this case, which might otherwise appear to be no more than a squabble over the textual interpretation of a few words in § 102. Questions of whether inventors should enjoy an end-run around patent term limits and the disclosure requirement and whether intellectual property should displace physical property—these are questions that strike at the heart of the patent laws. This is an important case meriting scrutiny of all its implications, myriad and perhaps unexpected.