Medicines Company v. Hospira, Inc. , 827 F.3d 1363 ( 2016 )

United States Court of Appeals
for the Federal Circuit
______________________
THE MEDICINES COMPANY,
Plaintiff-Appellant
v.
HOSPIRA, INC.,
Defendant-Cross-Appellant
______________________
2014-1469, 2014-1504
______________________
Appeals from the United States District Court for the
District of Delaware in No. 1:09-cv-00750-RGA, Judge
Richard G. Andrews.
______________________
Decided: July 11, 2016
______________________
EDGAR HAUG, Frommer Lawrence & Haug LLP, New
York, NY, argued for plaintiff-appellant. Also represent-
ed by PORTER F. FLEMING, ANGUS CHEN, JASON ARI
KANTER, LAURA KRAWCZYK, CATALIN SEBASTIAN ZONTE;
DAMON MARCUS LEWIS, Washington, DC.
BRADFORD PETER LYERLA, Jenner & Block LLP, Chi-
cago, IL, argued for defendant-cross-appellant. Also
represented by SARA TONNIES HORTON, AARON A. BARLOW;
JOSHUA SEGAL, Washington, DC.
2 THE MEDICINES COMPANY v. HOSPIRA, INC.
MEGAN BARBERO, Appellate Staff, Civil Division,
United States Department of Justice, Washington, DC,
argued for amicus curiae United States. Also represented
by MARK R. FREEMAN, BENJAMIN C. MIZER; THOMAS W.
KRAUSE, ROBERT MCBRIDE, JOSEPH GERARD PICCOLO,
KRISTI L. R. SAWERT, Office of the Solicitor, United States
Patent and Trademark Office, Alexandria, VA.
DORIS HINES, Finnegan, Henderson, Farabow, Garrett
& Dunner, LLP, Washington, DC, for amicus curiae
American Intellectual Property Law Association. Also
represented by DAVID MROZ, ERIN MCGEEHAN SOMMERS;
DENISE WHELTON DEFRANCO, American Intellectual
Property Law Association, Arlington, VA.
EMILY CURTIS JOHNSON, Akin, Gump, Strauss, Hauer
& Feld, LLP, Washington, DC, for amicus curiae Intellec-
tual Property Owners Association. Also represented by
JAMES EDWARD TYSSE; MICHAEL P. KAHN, New York, NY;
MARK W. LAUROESCH, Intellectual Property Owners
Association, Washington, DC; STEVEN W. MILLER, Procter
& Gamble Company, Cincinnati, OH; KEVIN H. RHODES,
3M Innovative Properties Company, St. Paul, MN.
ANTHONY MILLER, Miller, Patti, Pershern PLLC, Dal-
las, TX, for amicus curiae Miller, Patti, Pershern PLLC.
Also represented by JOHN JEFFERY PATTI, STEVEN SCOTT
PERSHERN.
TAMSEN VALOIR, Boulware & Valoir, Houston, TX, for
amicus curiae Houston Intellectual Property Law Associa-
tion. Also represented by MARK JOHN GATSCHET, Mark
John Gatschet, PLLC, Austin, TX.
ERIC J. MARANDETT, Choate, Hall & Stewart, LLP,
Boston, MA, for amicus curiae Biotechnology Innovation
Organization. Also represented by IRENE OBERMAN KHAGI.
THE MEDICINES COMPANY v. HOSPIRA, INC. 3
CRAIG E. COUNTRYMAN, Fish & Richardson, P.C., San
Diego, CA, for amicus curiae Gilead Sciences, Inc. Also
represented by JARED ALEXANDER SMITH; JONATHAN
ELLIOT SINGER, Minneapolis, MN.
ROBERTA JEAN MORRIS, Menlo Park, CA, for amicus
curiae Roberta Jean Morris.
BRUCE M. WEXLER, Paul Hastings LLP, New York,
NY, for amicus curiae Pharmaceutical Research and
Manufacturers of America. Also represented by ERIC
WILLIAM DITTMANN, JOSEPH M. O’MALLEY, JR., YOUNG JIN
PARK; STEPHEN BLAKE KINNAIRD, ANAND BIPIN PATEL,
Washington, DC; DAVID EVEN KORN, JAMES MILTON
SPEARS, Pharmaceutical Research and Manufacturers
Association of America, Washington, DC.
______________________
Before PROST, Chief Judge, NEWMAN, LOURIE, DYK,
MOORE, O’MALLEY, REYNA, WALLACH, TARANTO, CHEN,
HUGHES, and STOLL, Circuit Judges.
O’MALLEY, Circuit Judge.
Today, we consider the circumstances under which a
product produced pursuant to the claims of a product-by-
process patent is “on sale” under 35 U.S.C. § 102(b). This
is important because, if “on sale” more than one year
before the filing of an application for a patent on the
governing claims, any issued patent is invalid and the
right to exclude others from making, using, and selling
the resulting product is lost. We conclude that, to be “on
sale” under § 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
pursuant to Section 2-106 of the Uniform Commercial
Code. We conclude, moreover, that no such invalidating
commercial sale occurred in this case. We, therefore,
affirm the district court’s judgment that the transactions
4 THE MEDICINES COMPANY v. HOSPIRA, INC.
at issue did not render the asserted claims of U.S. Patent
Nos. 7,582,727 (“the ’727 patent”) and 7,598,343 (“the ’343
patent”), owned by Plaintiff-Appellant The Medicines
Company (“MedCo”), invalid under § 102(b).
I. BACKGROUND
A. The Patents and Transactions at Issue
This suit arises from the submission of two Abbrevi-
ated New Drug Applications (“ANDAs”), ANDA Nos. 90-
811 and 90-816, by Defendant-Cross-Appellant Hospira,
Inc. (“Hospira”). In these ANDAs, Hospira sought Food
and Drug Administration (“FDA”) approval to sell generic
bivalirudin drug products before the expiration of the
patents-in-suit: the ’727 patent and the ’343 patent. The
two patents-in-suit are listed in the FDA’s Orange Book
as covering Angiomax, the trade name of a form of bival-
irudin that MedCo markets in the United States.
The patents-at-suit have nearly identical specifica-
tions. They claim pH-adjusted pharmaceutical batches of
a drug product comprising bivalirudin, a synthetic peptide
comprised of twenty amino acid residues that is used as
an anticoagulant, and a pharmaceutically acceptable
carrier. Bivalirudin drug products are used to prevent
blood from clotting and are regarded as highly effective
anticoagulants for use during coronary surgery.
The bivalirudin active pharmaceutical ingredient
(“API”), without further processing, is too acidic for hu-
man injection. MedCo thus prepares Angiomax using a
compounding process in which it creates a bivalirudin
solution, adjusts the solution’s pH with a base, and then
freeze-dries the solution. A potential adverse consequence
of the compounding process used to make the product,
however, is the degradation of bivalirudin, which may
form impurities such as Asp9-bivalirudin (“Asp9”). The
bivalirudin may become unusable if high levels of Asp9
THE MEDICINES COMPANY v. HOSPIRA, INC. 5
form. The manufacture of batches with unacceptably high
Asp9 levels led to the creation of the patented solution.
MedCo is a specialty pharmaceutical company that
does not have its own manufacturing facilities and is not
capable of making its products in-house. Instead, since
1997, MedCo has contracted with Ben Venue Laboratories
(“Ben Venue”), a third-party provider, for Ben Venue to
manufacture commercial quantities of an original formula
of Angiomax, which is not covered under the patents-in-
suit. In June 2005, Ben Venue manufactured a batch of
bivalirudin drug product with an Asp9 level of 3.6%,
which exceeded the FDA’s approved maximum level of
1.5%. MedCo discarded that batch and shut down pro-
duction of Angiomax for six months to investigate the
problem and revise its process. In 2006, another batch
had an unacceptable Asp9 level, so MedCo again shut
down production of Angiomax and hired a peptide special-
ist to investigate and resolve the issue.
The investigation led to the development of the new
compounding process claimed in the patents-in-suit.
MedCo incorporated the new process into a revised Mas-
ter Batch Record, and Ben Venue has made all batches
since October 2006 using the new process. According to
MedCo, the new compounding process produces an im-
proved Angiomax product that does not have randomly
high Asp9 levels, but instead has a maximum Asp9 level of
0.6%. The ’727 and ’343 patents contain product and
product-by-process claims, respectively, for pharmaceuti-
cal batches of the improved drug product with a maxi-
mum impurity level of Asp9 of 0.6%.
The patents, respectively, claim:
Pharmaceutical batches of a drug product com-
prising bivalirudin (SEQ ID NO: 1) and a phar-
maceutically acceptable carrier for use as an
anticoagulant in a subject in need thereof, where-
in the batches have a pH adjusted by a base, said
6 THE MEDICINES COMPANY v. HOSPIRA, INC.
pH is about 5-6 when reconstituted in an aqueous
solution for injection, and wherein the batches
have a maximum impurity level of Asp9-
bivalirudin that does not exceed about 0.6% as
measured by HPLC.
Claim 1 of the ’727 patent.
Pharmaceutical batches of a drug product com-
prising bivalirudin (SEQ ID NO: 1) and a phar-
maceutically acceptable carrier, for use as an
anticoagulant in a subject in need thereof, said
batches prepared by a compounding process com-
prising:
(i) dissolving bivalirudin in a solvent to form a
first solution;
(ii) efficiently mixing a pH-adjusting solution with
the first solution to form a second solution, where-
in the pH adjusting solution comprises a pH-
adjusting solution solvent; and
(iii) removing the solvent and pH-adjusting solu-
tion solvent from the second solution;
wherein the batches have a pH adjusted by a
base, said pH is about 5-6 when reconstituted in
an aqueous solution for injection, and wherein the
batches have a maximum impurity level of Asp9-
bivalirudin that does not exceed about 0.6% as
measured by HPLC.
Claim 1 of the ’343 patent.
The applications for the ’727 and ’343 patents were
filed on July 27, 2008. The critical date from which the
on-sale bar of § 102(b) must be measured is, therefore,
July 27, 2007.
In late 2006, MedCo paid Ben Venue $347,500 to
manufacture three batches of bivalirudin according to the
THE MEDICINES COMPANY v. HOSPIRA, INC. 7
patents-at-issue. Ben Venue completed the first such
batch on October 31, 2006 for $67,500. That batch con-
tained 5,746 vials of commercially saleable bivalirudin.
On November 21 and December 14, 2006, Ben Venue
completed two more batches of bivalirudin containing
27,594 and 26,918 vials, respectively, for $140,000 each.
Each full commercial-sized batch of 28,000 vials of Angi-
omax has a market value of approximately $10 million
when sold on the open market as anticoagulants. Thus,
collectively, the three batches had a market value of well
over $20 million. Specifically, Hospira represents that the
three batches were “worth between $23 million and $45
million.” Hospira’s En Banc Br. 7.
The manufacturing protocol between MedCo and Ben
Venue governing the three batches stated that “[t]he
solution will be filled for commercial use” and that the
three batches “will be placed on quality hold until all
testing has been successfully completed.” Joint Appendix
(“J.A.”) 14884. The invoice for each of the three batches
stated: “Charge to manufacture Bivalirudin lot,” and
indicated that the bivalirudin lot was or will be released
to MedCo. J.A. 17177-83. Each batch received a “Com-
mercial Product Code,” a customer lot number, and each
stated that the batch was “[r]eleased [to MedCo] for
commercial and clinical packaging.” J.A. 14959-60; J.A.
15210-11; J.A. 15452-53.
Once manufactured by Ben Venue, the batches were
placed in quarantine with MedCo’s distributor and logis-
tics coordinator, Integrated Commercialization Solutions
(“ICS”), pending FDA approval. MedCo and ICS entered
into a Distribution Agreement effective February 27,
2007. The Distribution Agreement made ICS the exclu-
sive authorized distributor of Angiomax in the United
States and stated that title and risk of loss would pass to
ICS following release from quarantine. Under the Distri-
bution Agreement, ICS would place individual purchase
orders with MedCo on a weekly basis, which MedCo could
8 THE MEDICINES COMPANY v. HOSPIRA, INC.
accept or reject. J.A. 14676. It was not until August
2007, after the July 27, 2007 critical date, that MedCo
released the three batches from quarantine and made
them available for sale.
B. The Procedural History
On August 19, 2010, MedCo sued Hospira in the
United States District Court for the District of Delaware,
alleging that Hospira’s two ANDA filings infringed claims
1-3, 7-10, and 17 of the ’727 patent and claims 1-3 and 7-
11 of the ’343 patent. The district court construed the
asserted claims, and, after a three-day bench trial in
September 2013, found the patents not invalid and not
infringed.
Hospira contended that MedCo failed to prove in-
fringement of three claim limitations: “efficient mixing,”
“pharmaceutical batches,” and “a maximum impurity
level of Asp9-bivalirudin that does not exceed about 0.6%.”
Meds. Co. v. Hospira, Inc., No. 1:09-cv-00750-RGA, 2014
U.S. Dist. LEXIS 43126, at *5 (D. Del. Mar. 31, 2014).
The district court found that Hospira’s generic product
met the “pharmaceutical batch” and “maximum impurity
level” limitations, but did not meet the “efficient mixing”
limitation either literally or under the doctrine of equiva-
lents. Id. at *15-26. Based on this conclusion, the district
court held that Hospira’s generic product did not infringe
the asserted claims.
Hospira also alleged several grounds of invalidity.
First, Hospira argued that the invention was sold or
offered for sale before the critical date under § 102(b)
based on two sets of transactions. Hospira contended that
the on-sale bar was triggered when MedCo paid Ben
Venue to manufacture Angiomax before the critical date.
Hospira also contended that the on-sale bar was triggered
because MedCo offered to sell the Angiomax produced
according to the patents to its distributor, ICS, before the
critical date. Hospira also contended that the asserted
THE MEDICINES COMPANY v. HOSPIRA, INC. 9
claims were obvious under § 103 and invalid under § 112
because they lack written description, are not enabled,
and are indefinite. Id.
Applying the two-step framework of Pfaff v. Wells
Electronics, Inc., 525 U.S. 55 (1998), the district court
found that the three batches Ben Venue manufactured for
MedCo did not trigger the on-sale bar. Pfaff’s two-step
framework requires that the claimed invention was (1)
the subject of a commercial offer for sale; and (2) ready for
patenting. 525 U.S. at 67-68. The court held that the
claimed invention was ready for patenting under the
second prong of Pfaff because MedCo had developed two
enabling disclosures prior to the critical date, or, alterna-
tively, reduced the invention to practice before the critical
date. Meds. Co., 2014 U.S. Dist. LEXIS 43126, at *33-34.
Specifically, the enabling disclosures were: (1) the Master
Batch Record, which was printed on October 25, 2006,
and which Ben Venue followed in order to manufacture a
batch on October 31, 2006; and (2) the validation study
protocol, which the inventors signed in November 2006.
In the alternative, the court concluded that the invention
was reduced to practice before the critical date because
Ben Venue produced batches according to the invention in
October 2006.
The district court concluded that the first prong of
Pfaff was not met, however, because the claimed inven-
tion was not commercially offered for sale prior to the
critical date. The court agreed with MedCo that the
transactions between MedCo and Ben Venue were sales of
contract manufacturing services in which title to the
Angiomax always resided with MedCo. It found that “this
does not end the inquiry,” however. Id. at *35. The
district court identified the purpose of § 102(b) as preclud-
ing attempts by an inventor or its assignee to profit from
the commercial use of an invention for more than a year
before filing for a patent. Because the batches were for
“validation purposes,” the court held—sua sponte—that
10 THE MEDICINES COMPANY v. HOSPIRA, INC.
the batches were not made for commercial profit, but were
for experimental purposes, thereby avoiding the on-sale
bar.
Next, the court held that MedCo’s distribution agree-
ment with ICS also did not constitute an invalidating
sale. It held that the agreement was merely “an agree-
ment for ICS to be the sole U.S. distributor of Angiomax.”
Id. at *38. The court concluded that the contract was
merely “a contract to enter into a contract” for future
sales of the Angiomax product. Id. See In re Kollar, 286
F.3d 1326, 1330-1331 (Fed. Cir. 2002) (“We have held that
merely granting a license to an invention, without more,
does not trigger the on-sale bar of § 102(b).”).
As to Hospira’s other alleged grounds of invalidity,
the district court held that the asserted claims were not
obvious under § 103(a). The court also held that the
asserted claims satisfied the written description and
enablement requirements of, and were not indefinite
under, § 112.
MedCo appealed two of the district court’s claim con-
struction rulings and the district court’s non-infringement
ruling. Hospira cross-appealed the district court’s deci-
sions regarding the on-sale bar, obviousness, and indefi-
niteness. Because the district court found the invention
was “ready for patenting,” Hospira focused only on the
first prong of Pfaff on appeal: whether the invention was
the subject of a commercial offer for sale. Among other
things, Hospira criticized the district court’s conclusion
that the batches of Angiomax were for experimental
purposes, pointing out that MedCo had not relied upon
the experimental use exception to § 102(b) and that
Hospira, accordingly, had no incentive or opportunity to
address the issue. Hospira contended that, had the
question of experimental use been debated before the
district court, Hospira would have pointed to the fact that
there were eight additional batches of Angiomax manu-
THE MEDICINES COMPANY v. HOSPIRA, INC. 11
factured by Ben Venue after the original three, all of
which Hospira says occurred after MedCo was satisfied
that the inventive process would result in a product that
did not exceed the desired Asp9 level of 0.6%. Hospira’s
En Banc Br. 38, 41.
Hospira also disagreed with the district court’s con-
clusion that no commercial sale or offer for sale occurred.
Hospira contended that any transaction that provides a
commercial benefit to the inventor is enough to trigger the
on-sale bar. Because MedCo was able to stockpile its
product for future sale, and, thus, replenish the pipeline
that had been depleted when it had to cease use of its
previous manufacturing methods, Hospira argued that
MedCo received a commercial benefit from the transac-
tions with Ben Venue. According to Hospira, the fact that
title did not transfer—a point the district court found
important—was irrelevant because the immediate finan-
cial benefit to MedCo of having a ready supply of product
for sale constituted “commercialization” or “commercial
exploitation,” which is enough to trigger the on-sale bar.
Hospira’s Opening Br. 30-31 (citing D.L. Auld Co. v.
Chroma Graphics Corp., 714 F.2d 1144, 1147 (Fed. Cir.
1983)).
A merits panel of this court agreed with Hospira and
reversed the district court’s ruling regarding the applica-
bility of the on-sale bar. Meds. Co. v. Hospira, Inc., 791
F.3d 1368 (Fed. Cir. 2015). The panel acknowledged that
“Ben Venue invoiced the sale as manufacturing services
and title to the pharmaceutical batches did not change
hands,” but disagreed with the district court’s conclusion
that Ben Venue’s sale of services did not constitute a
commercial sale of the claimed product. The panel ex-
plained that, “where the evidence clearly demonstrated
that the inventor commercially exploited the invention
before the critical date, even if the inventor did not trans-
fer title to the commercial embodiment of the invention,”
the on-sale bar applies. Id. at 1370-71 (emphasis added).
12 THE MEDICINES COMPANY v. HOSPIRA, INC.
The panel found no distinction between the offer to
sell products prepared by a patented method in D.L. Auld,
714 F.2d at 1147, and the commercial sale of services that
result in a patented product-by-process. Id. at 1371. The
panel reasoned that, because MedCo paid Ben Venue for
services that resulted in the patented product, the trans-
actions were commercial sales. Id. According to the
panel, to hold otherwise would conflict with the “no ‘sup-
plier’ exception” under Special Devices, Inc. v. OEA, Inc.,
270 F.3d 1353, 1355 (Fed. Cir. 2001). The panel also
found that the transactions between MedCo and Ben
Venue were “not the type of ‘secret, personal use’” de-
scribed in Trading Technologies International, Inc. v.
eSpeed, Inc., 595 F.3d 1340, 1362 (Fed. Cir. 2010), but
rather were “batches prepared for commercial exploita-
tion.” Meds. Co., 791 F.3d at 1371.
The panel also found that the district court erred in
applying the experimental use exception to Ben Venue’s
batches. Id. at 1372. Because the invention had been
reduced to practice, the panel concluded that the inventor
could not have been experimenting to determine whether
the process by which the product was formulated achieved
the desired results. Id.
Finally, the panel affirmed the district court’s deter-
mination that the claimed invention was ready for patent-
ing prior to the critical date “because the invention was
sold.” Id. at 1372. Because it found that the invention
was both commercially exploited and ready for patenting,
the panel held the asserted claims invalid under § 102(b).
The panel neither reached the district court’s claim con-
struction and non-infringement rulings that MedCo had
appealed nor addressed the other grounds of invalidity
raised in Hospira’s cross-appeal.
MedCo petitioned for panel rehearing or rehearing en
banc. On November 13, 2015, we granted rehearing en
THE MEDICINES COMPANY v. HOSPIRA, INC. 13
banc, vacated the panel’s decision, reinstated the appeal,
and ordered new briefing on the following issues:
(a) Do the circumstances presented here consti-
tute a commercial sale under the on-sale bar of 35
U.S.C. § 102(b)?
(i) Was there a sale for the purposes of
§ 102(b) despite the absence of a transfer
of title?
(ii) Was the sale commercial in nature for
the purposes of § 102(b) or an experi-
mental use?
(b) Should this court overrule or revise the prin-
ciple in Special Devices, Inc. v. OEA, Inc., 270
F.3d 1353 (Fed. Cir. 2001), that there is no “sup-
plier exception” to the on-sale bar of 35 U.S.C.
§ 102(b)?
Order Granting En Banc Rehearing at 2, Meds. Co., 791
F.3d 1368 (No. 2014-1469, -1504), ECF No. 68. MedCo
asks that we hold en banc “that the on sale bar is not
triggered by an inventor’s retention of a third party to
develop or manufacture the claimed invention confiden-
tially and under the inventor’s direction and control.”
MedCo’s En Banc Br. 3. MedCo contends that stockpiling
does not constitute commercial activity under § 102(b)
and that § 102(b) should not apply because no products
were placed in the public domain prior to the critical date,
which it says is the overriding concern of § 102(b).
For its part, Hospira argues that MedCo’s transac-
tions with Ben Venue constitute a commercial sale under
§ 102(b) because “this arrangement constituted commer-
cial exploitation from the standpoint of both companies.”
Hospira’s En Banc Br. 29. Hospira points to the fact that
MedCo requested that the batches be “filled for commer-
cial use,” were given a “commercial product code” and
were “[r]eleased for commercial and clinical packaging.”
14 THE MEDICINES COMPANY v. HOSPIRA, INC.
Id. at 28-29. Hospira contends that the fact that title to
the patented product and/or invention did not transfer is
of no moment because the on-sale bar is triggered by “any
commercialization” that confers a commercial benefit. Id.
at 26. Finally, Hospira contends that the confidential
nature of the relationship between Ben Venue and MedCo
does not remove the transactions between them from the
purview of § 102(b) because this court has never held that
only public sales can trigger the on-sale bar. Hospira’s En
Banc Reply Br. 22.
II. DISCUSSION
A. Legal Standard
Whether the on-sale bar applies is a question of law
based on underlying factual findings. See Grp. One, Ltd.
v. Hallmark Cards, Inc., 254 F.3d 1041, 1045-46 (Fed. Cir.
2001). We review the district court’s factual findings with
deference, but examine the ultimate question of validity
de novo. See Leader Techs., Inc. v. Facebook, Inc., 678
F.3d 1300, 1305 (Fed. Cir. 2012) (“Whether a patent is
invalid for a public use or sale is a question of law, re-
viewed de novo, based on underlying facts, reviewed for
substantial evidence following a jury verdict.”); Electromo-
tive Div. of GMC v. Transp. Sys. Div. of GE, 417 F.3d
1203, 1209-10 (Fed. Cir. 2005) (“Whether an invention
was on sale within the meaning of § 102(b) is a question of
law that we review de novo based upon underlying facts,
which we review for clear error.”).
We provide a brief overview of the development of the
on-sale bar for context. Section 1 of the Patent Act of
1793 required that an invention for which a patent was
sought be “not known or used before the application.” Act
of Feb. 21, 1793, ch. 11, § 1, 1 Stat. 318. The Supreme
Court interpreted this statute in Pennock v. Dialogue, 27
U.S. (2 Pet.) 1 (1829), holding that an inventor loses his
right to a patent “if he suffers the thing invented to go
into public use, or to be publicly sold for use, before he
THE MEDICINES COMPANY v. HOSPIRA, INC. 15
makes application for a patent. His voluntary act or
acquiescence in the public sale and use is an abandon-
ment of his right.” Id. at 23-24 (emphases added). The
Court noted “that under the common law of England,
letters patent were unavailable for the protection of
articles in public commerce at the time of the application,
and that this same doctrine was immediately embodied in
the first patent laws passed in this country.” Bonito
Boats v. Thunder Craft Boats, 489 U.S. 141, 149 (1989)
(describing Pennock, 27 U.S. at 20-22); see also Shaw v.
Cooper, 32 U.S. 292, 320-21 (1833) (third-party sale
invalidating where statute required invention not be
“known or used before the [patent] application”).
Against this backdrop, Congress first codified the on-
sale bar in Section 6 of the Patent Act of 1836, prohibiting
the patenting of any invention that, at the time the appli-
cation was filed, was “in public use or on sale, with [the
inventor’s] consent or allowance.” Act of July 4, 1836, ch.
357, § 6, 5 Stat. 117, 119. See Brief for the United States
as Amicus Curiae 9-11. As a leading 19th century com-
mentator explained, the early public-use and on-sale
statutory restrictions were premised on the principle that
“no invention, which has already passed from the control
of the inventor into the possession of the public is entitled
to protection.” 1 William C. Robinson, The Law of Patents
for Useful Inventions § 71, 109 (1890). Congress retained
the public-use and on-sale bars in subsequent amend-
ments to the patent laws, although it soon softened the
effect of those bars “by enacting a 2-year grace period”
after the public use or sale “in which the inventor could
file an application.” Pfaff, 525 U.S. at 65; see Act of Mar.
3, 1839, ch. 88, 5 Stat. 353, 354 (“1839 Act”). Congress
also eliminated the “consent or allowance requirement” in
1839. See 1839 Act, 5 Stat. at 354; see also Andrews v.
Hovey, 123 U.S. 267, 274 (1887).
In 1939, Congress reduced the grace period from two
years to one. See Act of Aug. 5, 1939, ch. 450, 53 Stat.
16 THE MEDICINES COMPANY v. HOSPIRA, INC.
1212. And when Congress reenacted and recodified the
patent laws in the Patent Act of 1952, it again provided
that “[a] person shall be entitled to a patent unless,” inter
alia, “the invention was . . . in public use or on sale in this
country, more than one year prior to the date of the
application for patent.” 35 U.S.C. 102(b). 1
For many years this court applied a “totality of cir-
cumstances” standard in applying the on-sale bar. Lacks
Indus. v. McKechnie Vehicle Components USA, Inc., 322
F.3d 1335, 1347 (Fed. Cir. 2003) (citing Envirotech Corp.
v. Westech Eng’g Inc., 904 F.2d 1571, 1574 (Fed. Cir.
1990)). “Under that test ‘no single finding or conclusion of
law [was] a sine qua non’ to a holding that the statutory
bar arose.” Id. We considered all the facts and circum-
stances surrounding any particular transaction and
considered those in light of the policies underlying section
§ 102(b), finding an on-sale bar in circumstances where
the policies were furthered. See, e.g., Micro Chem., Inc. v.
Great Plains Chem. Co., 103 F.3d 1538, 1544 (Fed. Cir.
1997) (“all of the circumstances surrounding the sale or
offer to sell, including the stage of development of the
invention and the nature of the invention, must be con-
sidered and weighed against the policies underly-
ing section 102(b)”); Ferag AG v. Quipp Inc., 45 F.3d 1562,
1566 (Fed. Cir. 1995) (“While a wide variety of factors
may influence the on sale determination, no single one
controls the application of section 102(b), for the ultimate
conclusion depends on the totality of the circumstances.”);
1 Congress amended 35 U.S.C. § 102 in 2011 as part
of the America Invents Act (“AIA”). See Leahy-Smith
America Invents Act, Pub. L. No. 112-29, § 35, 125 Stat.
84, 341 (2011). References to § 102 and other sections of
Title 35 of the United States Code in this opinion refer to
the pre-AIA version of the statute, the version that ap-
plies here.
THE MEDICINES COMPANY v. HOSPIRA, INC. 17
UMC Elecs. Co. v. United States, 816 F.2d 647, 656 (Fed.
Cir. 1987) (stating that the on-sale bar “does not lend
itself to formulation into a set of precise requirements”).
We identified several policies underlying § 102(b): to
promote the early filing of patent applications—i.e., to
foster disclosure of patented inventions to the public; to
prevent an inventor from profiting from the commercial
use of an invention for a prolonged period before filing a
patent application claiming that invention; to discourage
the removal of inventions from the public domain; and to
give inventors a reasonable time to discern the potential
value of an invention. See, e.g., Ferag AG, 45 F.3d at
1566; Envirotech, 904 F.2d at 1574; King Instrument
Corp. v. Otari Corp., 767 F.2d 853, 860 (Fed. Cir. 1985);
Gould Inc. v. United States, 579 F.2d 571, 580 (Ct. Cl.
1978).
Although, applying this test, we held that a “definite
offer for sale” was required, we found that this did not
necessarily require commercial activity that rose to the
level of a formal “offer” under contract law principles.
Lacks Indus., 322 F.3d at 1347 (citing RCA Corp. v. Data
Gen. Corp., 887 F.2d 1056, 1062 (Fed. Cir. 1989)). And,
we reviewed transactions and their impact without strict
regard to whether they qualified as commercial activity
under any definable standard. See id.; Ferag AG, 45 F.3d
at 1566.
This changed with Pfaff, in which the Supreme Court
replaced the “totality of the circumstances” test—which
the Court noted had been criticized as “unnecessarily
vague”—with a two-pronged test. 525 U.S. at 66 n.11. As
discussed above, Pfaff clarified that the on-sale bar under
35 U.S.C. § 102(b) applies when, before the critical date,
the claimed invention (1) was the subject of a commercial
offer for sale; and (2) was ready for patenting. Id. at 67-
68. Pfaff itself focused on the second prong of its newly
articulated test—ready for patenting. Id. at 57. It held
that the “ready for patenting” requirement can be met in
18 THE MEDICINES COMPANY v. HOSPIRA, INC.
at least two ways: (1) proof of a reduction to practice; or
(2) drawings or other descriptions sufficiently specific to
enable a person of ordinary skill to practice the invention.
Id. at 67-68. Pfaff itself said little about the first prong of
the two-prong test—what constitutes a patent-defeating
“commercial offer for sale”—however. The Court did
emphasize that “[a]n inventor can both understand and
control the timing of the first commercial marketing of his
invention,” and that a transaction that is “experimental in
character” is distinct from one that is for purposes of such
commercial marketing. Id. at 67 (emphasis added).
Since Pfaff, this court has applied the Supreme
Court’s “two-part test ‘without balancing various policies
[of the bar] according to the totality of the circumstanc-
es.’” Electromotive Div. of GMC, 417 F.3d at 1209 (cita-
tion omitted); see also Dana Corp. v. American Axle &
Mfg., Inc., 279 F.3d 1372, 1377 (Fed. Cir. 2002) (district
court “erroneously invoked the ‘totality of the circum-
stances’ test that was disavowed by Pfaff.”); EZ Dock, Inc.
v. Schafer Systems, Inc., 276 F.3d 1347, 1351 (Fed. Cir.
2002) (“Before the Supreme Court’s decision in Pfaff, this
court used a multifactor, ‘totality of the circumstances’
test to enforce the on-sale bar. . . . [This court] now
follows the Supreme Court’s two-part test.”) (internal
quotation marks and citations omitted).
Unlike Pfaff itself, the focus of this en banc appeal is
on the first prong of the Pfaff test: whether the invention
was the subject of a commercial sale or offer for sale. We
have held that “the question of whether an invention is
the subject of a commercial offer for sale is a matter of
Federal Circuit law, to be analyzed under the law of
contracts as generally understood.” Group One, Ltd. v.
Hallmark Cards, Inc., 254 F.3d 1041, 1047 (Fed. Cir.
2001). We also have held that, to be true to Pfaff when
assessing prong one of § 102(b), we must focus on those
activities that would be understood to be commercial sales
and offers for sale “in the commercial community.” Id.
THE MEDICINES COMPANY v. HOSPIRA, INC. 19
We have also indicated that, “[a]s a general proposition,
we will look to the Uniform Commercial Code (‘UCC’) to
define whether . . . a communication or series of commu-
nications rises to the level of a commercial offer for sale.”
Id. And we have made clear that, post-Pfaff, “[t]he trans-
action at issue must be a ‘sale’ in a commercial law
sense,” and that “[a] sale is a contract between parties to
give and to pass rights of property for consideration which
the buyer pays or promises to pay the seller for the thing
bought or sold.” Trading Techs., 595 F.3d at 1361 (quota-
tion marks omitted).
Applying § 102(b) in light of Pfaff, we conclude that
the transactions between MedCo and Ben Venue in 2006
and 2007 did not constitute commercial sales of the pa-
tented product. We, thus, affirm the district court’s
conclusion that those transactions were not invalidating
under § 102(b). In the discussion that follows, we first
clarify that the mere sale of manufacturing services by a
contract manufacturer to an inventor to create embodi-
ments of a patented product for the inventor does not
constitute a “commercial sale” of the invention. We then
address the issue of “stockpiling” by an inventor and
clarify that “stockpiling” by the purchaser of manufactur-
ing services is not improper commercialization under
§ 102(b). We explain that commercial benefit—even to
both parties in a transaction—is not enough to trigger the
on-sale bar of § 102(b); the transaction must be one in
which the product is “on sale” in the sense that it is
“commercially marketed.” There are, broadly speaking,
three reasons for our judgment in this case: (1) only
manufacturing services were sold to the inventor—the
invention was not; (2) the inventor maintained control of
the invention, as shown by the retention of title to the
embodiments and the absence of any authorization to Ben
Venue to sell the product to others; and (3) “stockpiling,”
standing alone, does not trigger the on-sale bar.
20 THE MEDICINES COMPANY v. HOSPIRA, INC.
B. No Commercial Sale of the Invention
We begin with the language of § 102(b), which re-
quires that “the invention” be “on sale.” The “invention”
is defined by the patent’s claims. See 35 U.S.C. § 112, ¶ 2
(“The specification shall conclude with one or more claims
particularly pointing out and distinctly claiming the
subject matter which the applicant regards as his inven-
tion.”). In this case, all of the asserted claims cover
products. The asserted claims of the ’727 patent cover
“pharmaceutical batches,” while the asserted claims of the
’343 patent “claim[ ] the same subject matter as that of
claim 1 of the ’727 patent, but as a product-by-process,”
viz. “pharmaceutical batches . . . prepared by a compound-
ing process comprising” the claimed steps. Meds. Co.,
2014 U.S. Dist. LEXIS 43126, at *3-4. For validity pur-
poses, the “invention” in a product-by-process claim is the
product. See Amgen Inc. v. F. Hoffman-La Roche Ltd.,
580 F.3d 1340, 1369 (Fed. Cir. 2009) (“In determining
validity of a product-by-process claim, the focus is on the
product and not on the process of making it.”); SmithKline
Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1317 (Fed.
Cir. 2006) (“Regardless of how broadly or narrowly one
construes a product-by-process claim, it is clear that such
claims are always to a product, not a process.”); In re
Lyons, 364 F.2d 1005, 1016 (C.C.P.A. 1966) (“a product-
by-process claim is a product, not a process.”).
Hospira argues that, by manufacturing embodiments
of the patented product for MedCo, Ben Venue put the
invention “on sale.” But we have never espoused the
notion that, where the patent is to a product, the perfor-
mance of the unclaimed process of creating the product,
without an accompanying “commercial sale” of the prod-
uct itself, triggers the on-sale bar. The cases on which
Hospira relies uniformly involve process or method pa-
tents in which the (1) inventors sought compensation (2)
from the buying public for (3) performing the claimed
processes or methods. In Metallizing Engineering Co. v.
THE MEDICINES COMPANY v. HOSPIRA, INC. 21
Kenyon Bearing & Auto Parts Co., the patentee used a
secret process to recondition worn metal parts for its
customers, for compensation, before the critical date. 153
F.2d 516, 517-18 (2d Cir. 1946). In D.L. Auld, the patent-
ee offered to sell a product made by the claimed method to
prospective customers, i.e., it offered to practice the
method in return for compensation. 714 F.2d at 1148.
Similarly, in both Plumtree and Scaltech, we found that
offering to perform the steps of the patented methods for
customers in exchange for payment triggers the on-sale
bar. Plumtree Software, Inc. v. Datamize, LLC, 473 F.3d
1152, 1163 (Fed. Cir. 2006); Scaltech, Inc. v. Retec/Tetra,
LLC, 269 F.3d 1321, 1328-29 (Fed. Cir. 2001).
Though those cases are distinguishable on multiple
grounds, we find particularly significant the fact that the
inventions-at-issue there were processes or methods.
Hospira even acknowledges as much. Hospira’s En Banc
Br. 31 (“To be sure, the above-cited cases involve patented
processes or methods.”). While “a process is a series of
acts, and the concept of sale as applied to those acts is
ambiguous,” “[t]he sale of a tangible item is[, by contrast,]
usually a straightforward event; the item is transferred
from the seller to the buyer, who normally owns it out-
right.” Minton v. Nat’l Ass’n of Sec. Dealers, Inc., 336
F.3d 1373, 1378 (Fed. Cir. 2003). Similarly, in In re
Kollar, we vacated a decision that “fail[ed] to recognize
the distinction between a claim to a product, device, or
apparatus, all of which are tangible items, and a claim to
a process, which consists of a series of acts or steps” in
applying the on-sale bar. 286 F.3d at 1332. We stated
that, while “[a] tangible item is on sale when . . . the
transaction ‘rises to the level of a commercial offer for
sale’ under the Uniform Commercial Code,” “[a] process,
however, is a different kind of invention . . . [and] thus [is]
not sold in the same sense as is a tangible item.” Id.
The most natural conclusion to draw from all of the
evidence presented in this case is that Ben Venue sold
22 THE MEDICINES COMPANY v. HOSPIRA, INC.
contract manufacturing services—not the patented inven-
tion—to MedCo. Under MedCo’s instructions and using
an API supplied by MedCo, Ben Venue acted as a pair of
“laboratory hands” to reduce MedCo’s invention to prac-
tice. The invoices for the manufacturing service stated,
“Charge to manufacture Bivalirudin lot.” J.A. 17177-83
(emphasis added). In addition, MedCo paid Ben Venue
only about 1% of the ultimate market value of the product
Ben Venue manufactured. As described above, MedCo
paid Ben Venue a total of $347,500 to make the three
batches, even though these batches were commercially
valued at well over $20 million. Unsurprisingly, there-
fore, the district court chose MedCo’s description of the
transaction as one in which “Ben Venue was paid to
manufacture Angiomax for [MedCo],” over Hospira’s
description of the transaction as a “sale of the validation
batches.” Meds. Co., 2014 U.S. Dist. LEXIS 43126, at *35.
As the original panel of this court stated, “the district
court is correct that Ben Venue invoiced the sale as manu-
facturing services and title to the pharmaceutical batches
did not change hands.” Meds. Co., 791 F.3d at 1370.
Thus, under the plain text of § 102(b), there was no sale of
the “invention.”
The absence of title transfer further underscores that
the sale was only of Ben Venue’s manufacturing services.
Because Ben Venue lacked title, it was not free to use or
sell the claimed products or to deliver the patented prod-
ucts to anyone other than MedCo, nor did it do so. Section
2-106(1) of the Uniform Commercial Code describes a
“sale” as “the passing of title from the seller to the buyer
for a price.” U.C.C. § 2-106(1). The passage of title is a
helpful indicator of whether a product is “on sale,” as it
suggests when the inventor gives up its interest and
control over the product. A “sale” under § 102(b) “occurs
when the parties . . . give and pass rights of property for
consideration.” Special Devices, 270 F.3d at 1355 (quoting
Zacharin v. United States, 213 F.3d 1366, 1370 (Fed. Cir.
THE MEDICINES COMPANY v. HOSPIRA, INC. 23
2000)); see also Trading Techs., 595 F.3d at 1361 (“The
transaction at issue must be a ‘sale’ in a commercial law
sense.”).
As noted, since Pfaff, we have generally looked to the
UCC for the definition of a “sale.” In Group One, an early
post-Pfaff case reversing the district court’s grant of
summary judgment based on the on-sale bar, we stated
that:
As a general proposition, we will look to the
Uniform Commercial Code (“UCC”) to define
whether, as in this case, a communication or se-
ries of communications rises to the level of a
commercial offer for sale. As this court has previ-
ously pointed out, “[t]he UCC has been recognized
as the general law governing the sale of goods and
is another useful, though not authoritative, source
in determining the ordinary commercial meaning
of” terms used by the parties.
254 F.3d at 1047-48 (quoting Enercon GmbH v. Int’l
Trade Comm’n, 151 F.3d 1376, 1382 (Fed. Cir. 1998)). We
have since reaffirmed the usefulness of the UCC in ana-
lyzing the on-sale bar. See In re Kollar, 286 F.3d at 1332;
Linear Tech. Corp. v. Micrel, Inc., 275 F.3d 1040, 1048
(Fed. Cir. 2001) (stating that “Group One further in-
structs that the Uniform Commercial Code (‘UCC’) should
inform the analysis of the contractual issues” in connec-
tion to the on-sale bar).
While we agree with Hospira that the UCC does not
have “talismanic significance” with respect to the on-sale
bar, and we decline to draw a bright line rule making the
passage of title dispositive, we find the absence of title
transfer significant because, in most instances, that fact
indicates an absence of commercial marketing of the
product by the inventor. As Hospira points out, an inven-
tor could commercially exploit a newly invented machine
by charging others a fee to use it without transferring
24 THE MEDICINES COMPANY v. HOSPIRA, INC.
title to it. Hospira’s En Banc Reply Br. 8. In such a case,
the “invention” would still likely be considered “on-sale”
because use of the invention is on-sale for a price. That is
not what occurred here, however.
It is with vigilance that we have held that the sale of
products made using patented methods triggers the on-
sale bar, even though title to the claimed method itself did
not pass. See, e.g., D.L. Auld, 714 F.2d at 1147; Plumtree,
473 F.3d at 1163. In such cases, the literal subject matter
of the claims is incapable of being sold. Similarly, we held
that sales of software licenses to end-users can trigger the
on-sale bar. See Group One, 254 F.3d at 1049 n.2 (stating
that “[couching] a sale of an interest that entitles the
purchaser to possession and use of the machine, unrelated
to any patent present or future, . . . as a ‘license’[ ] would
not prevent the transaction from triggering the on-sale
bar”); In re Kollar, 286 F.3d at 1330 n.3 (stating that
certain transactions framed as a “license” but that are to
an embodiment of the claimed invention “may be tanta-
mount to a sale (e.g., a standard computer software
license)”).
Like the absence of title transfer, the confidential na-
ture of the transactions is a factor which weighs against
the conclusion that the transactions were commercial in
nature. Again, this factor is not disqualifying in all
instances—it too is not of talismanic significance. Indeed,
we, and our predecessors, have found confidential trans-
actions to be patent invalidating sales under § 102(b). See
In re Caveney, 761 F.2d at 676 (“It is well established . . .
that a single sale or offer to sell is enough to bar patenta-
bility” even if kept secret from the trade) (citing Gen. Elec.
Co. v. United States, 654 F.2d 55, 60 (1981); Mfg. Re-
search Corp. v. Graybar Elec. Corp., 679 F.2d 1355, 1362
(11th Cir. 1982)); Gould, 579 F.2d at 580 (“[A] sale . . .
pursuant to a secret military contract . . . was still held to
be a sale proscribed by 35 U.S.C. § 102(b).”) (citing Piet v.
United States, 176 F. Supp. 576 (S.D. Cal. 1959), aff’d,
THE MEDICINES COMPANY v. HOSPIRA, INC. 25
283 F.2d 693 (9th Cir. 1960)); Hobbs v. U.S. Atomic Ener-
gy Comm’n, 451 F.2d 849, 860 (5th Cir. 1971) (stating
that the court “cannot attach any relevance to any condi-
tions of secrecy which may have existed at the time the
[invention] was placed ‘on sale.’”). In this case, however,
we find that the scope and nature of the confidentiality
imposed on Ben Venue supports the view that the sale
was not for commercial marketing purposes.
Rather than rest our decision on formalities, our focus
is on what makes our on-sale bar jurisprudence coherent:
preventing inventors from filing for patents a year or
more after the invention has been commercially market-
ed, whether marketed by the inventor himself or a third
party. 2 Pfaff itself quoted two seminal cases reciting this
principle: “[a]ny attempt to use it for a profit, and not by
way of experiment, for a longer period than two years
before the application, would deprive the inventor of his
right to a patent,” 525 U.S. at 65 (quoting Elizabeth, 97
U.S. at 137) (emphasis added), and “it is a condition upon
an inventor’s right to a patent that he shall not exploit his
discovery competitively after it is ready for patenting,” id.
at 68 (quoting Metallizing, 153 F.2d at 520) (emphasis
added). See also Atlanta Attachment Co. v. Leggett &
Platt, Inc., 516 F.3d 1361, 1365 (Fed. Cir. 2008) (“The
overriding concern of the on-sale bar is an inventor’s
attempt to commercialize his invention beyond the statu-
tory term.”) (citing Netscape Commc’ns. Corp. v. Konrad,
295 F.3d 1315, 1323 (Fed. Cir. 2002)); Plumtree, 473 F.3d
2 We have held that sales by third parties can be
invalidating sales under § 102(b) in certain circumstanc-
es. See, e.g., J.A. La Porte, Inc. v. Norfolk Dredging Co.,
787 F.2d 1577, 1581 (Fed. Cir. 1986); see also Zacharin v.
United States, 213 F.3d 1366, 1371 (Fed. Cir. 2000);
Evans Cooling Sys., Inc. v. Gen. Motors Corp., 125 F.3d
1448, 1453 (Fed. Cir. 1997).
26 THE MEDICINES COMPANY v. HOSPIRA, INC.
at 1163 (“the intent of [§ 102(b)] is to preclude attempts
by the inventor or his assignee to profit from commercial
use of an invention for more than a year before an appli-
cation for patent is filed”) (emphasis added) (quoting D.L.
Auld, 714 F.2d at 1147) (internal quotation marks omit-
ted).
Despite this fairly constant refrain in the case law,
Hospira argues that finding the bar inapplicable here
“would improperly permit an inventor to commercially
stockpile his invention,” in order to “restock its long-
depleted commercial pipeline.” Hospira’s En Banc Br. 19,
47. But commercial benefit generally is not what triggers
§ 102(b); there must be a commercial sale or offer for sale.
The statute itself says the invention must be “on sale,” or
that there must be an offer for sale of the invention. Pfaff
made this distinction clear and explained that we are not
to look to broad policy rationales in assessing whether the
on-sale bar applies; we are to apply a straightforward
two-step process—one which permits an inventor to “both
understand and control the first commercial marketing of
his invention.” 525 U.S. at 67. For this reason, we find
that the mere stockpiling of a patented invention by the
purchaser of manufacturing services does not constitute a
“commercial sale” under § 102(b). Stockpiling—or build-
ing inventory—is, when not accompanied by an actual
sale or offer for sale of the invention, mere pre-commercial
activity in preparation for future sale. This is true re-
gardless of how the stockpiled material is packaged. The
on-sale bar is triggered by actual commercial marketing
of the invention, not preparation for potential or eventual
marketing. Contrary to Hospira’s assertions, not every
activity that inures some commercial benefit to the inven-
tor can be considered a commercial sale. Instead, stock-
piling by an inventor with the assistance of a contract
manufacturer is no more improper than is stockpiling by
an inventor in-house.
THE MEDICINES COMPANY v. HOSPIRA, INC. 27
It is well-settled that mere preparations for commer-
cial sales are not themselves “commercial sales” or “com-
mercial offers for sale” under the on-sale bar. See, e.g., In
re Kollar, 286 F.3d at 1334 (holding that “[t]he pre-
commercialization process aimed at making the invention
commercial” does not implicate the on-sale bar); Intel
Corp. v. Int’l Trade Comm’n, 946 F.2d 821, 830 (Fed. Cir.
1991) (“It is not a violation of the on-sale bar to make
preparations for the sale of a claimed invention—an
actual sale or offer to sell must be proved.”). Instead,
when no actual sale is present, “[o]nly an offer which rises
to the level of a commercial offer for sale, one which the
other party could make into a binding contract by simple
acceptance (assuming consideration)” triggers the on-sale
bar. Group One, 254 F.3d at 1048.
Indeed, we have held that an inventor that has publi-
cized that a product will soon be placed on sale has not
created an offer that another party could make binding by
simple acceptance. See, e.g., Linear Tech. Corp. v. Micrel,
Inc., 275 F.3d 1040, 1050 (Fed. Cir. 2001) (holding that
promotional activity was insufficient to create an on-sale
event: “[p]reparation alone cannot give rise to an on-sale
bar under Group One”). To the contrary, such an inventor
has told buyers that it cannot have access to the invention
yet, regardless of a customer’s interest in buying.
And, we have never held that stockpiling by an inven-
tor in-house triggers the on-sale bar. See Leah C. Fletch-
er, Equal Treatment Under Patent Law: A Proposed
Exception To The On-Sale Bar, 13 TEX. INTELL. PROP. L.J.
209, 235-36 (2005) (“The unchallenged ability of the in-
house manufacturer to stockpile strongly suggests that, in
fact, the on-sale bar is not really intended to deter stock-
piling.”); Christopher G. Darrow, Recent Developments:
Recent Developments in Patent Law, 10 TEX. INTELL.
PROP. L.J. 379, 388 (2002) (“Inventors having manufactur-
ing capacity can begin the sometimes long manufacturing
process, and even stockpile commercial embodiments of
28 THE MEDICINES COMPANY v. HOSPIRA, INC.
the invention, before filing a patent application.”). Stock-
piling is merely a type of preparation for future commer-
cial sales. If Congress wanted to prevent stockpiling or
any form of commercial benefit, it could have added “or
stockpiled” or “engaged in a transaction conferring com-
mercial benefit” to the list of statutory bars in § 102(b), in
addition to “public use or on sale.” It did not. Stockpiling
by the purchaser of manufacturing services is not a trig-
ger to the on-sale bar; discouraging it is not even an
identifiable goal of the on-sale bar.
Expanding the on-sale bar to encompass stockpiling
by inventors that outsource manufacturing might encour-
age earlier filing of patents. But we cannot endorse any
blunt instrument that rewards earlier patent applications
when so doing ignores the wording Congress chose when
enacting the on-sale bar. See Gould, 579 F.2d at 580 (“It
appears certain that the purpose of the on sale bar and
the 1-year grace period is an attempt by Congress to
balance the interests of the inventor with the interests of
the public.”). Unlike those in cases to which Hospira
cites, such as D.L. Auld, in which we applied the on-sale
bar to the performance of patented methods for commer-
cial gain, MedCo’s transactions with Ben Venue did not
involve invalidating sales or offers for sale of the inven-
tion. MedCo did not market or release its invention to
any purchasers by contracting with Ben Venue, nor did it
give Ben Venue approval to do so. Rather, MedCo made a
pre-commercial investment—an outlay of $347,500—
when it paid Ben Venue for the service of reducing its
invention to practice. We see no reason to treat MedCo
differently than we would a company with in-house manu-
facturing capabilities.
Hospira itself concedes that “[w]hether the on-sale bar
applies should not depend on differences that do not alter
a transaction’s basic economics.” Hospira’s En Banc Br.
32, 35. Yet, penalizing a company for relying, by choice or
by necessity, on the confidential services of a contract
THE MEDICINES COMPANY v. HOSPIRA, INC. 29
manufacturer, does exactly that. Applying the on-sale bar
to the transaction-at-issue would be: (1) arbitrary, as it
treats companies making the same pre-commercial prepa-
rations differently; (2) ineffective to discourage stockpil-
ing, as it does not penalize or prevent companies with in-
house manufacturing capabilities from stockpiling; (3)
and unnecessary, as stockpiling by the purchaser of
manufacturing services is not the type of commercial
activity with which the on-sale bar is concerned. See
Brief for Roberta J. Morris as Amicus Curiae 6-7. There
is no room in the statute and no principled reason raised
by the parties or any of the amici to apply a different set
of on-sale bar rules to inventors depending on whether
their business model is to outsource manufacturing or to
manufacture in-house. In fact, the amici uniformly argue
that applying the on-sale bar to the type of transaction
that occurred here would only make the drug develop-
ment process more costly, punish efficient use of re-
sources, and deter future investments in innovation. See
e.g., Brief for Biotechnology Innovation Organization as
Amicus Curiae 11; Brief for American Intellectual Proper-
ty Law Association as Amicus Curiae 3, 19; Brief for
Gilead Sciences, Inc. as Amicus Curiae 17-18; Brief of
Pharmaceutical Research and Manufacturers of America
as Amicus Curiae 4, 6.
C. Post-Pfaff Cases Applying § 102(b) to
Supplier/Inventor Transactions
Hospira argues that a number of our post-Pfaff cases
are inconsistent with the district court’s failure to find
§ 102(b) to have been triggered by MedCo’s transactions
with Ben Venue and, by extension, would be inconsistent
with the conclusion we reach here. Specifically, Hospira
points to Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp.,
182 F.3d 888, 891 (Fed. Cir. 1999), Special Devices, Inc. v.
OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001), and Hamilton
Beach Brands, Inc. v. Sunbeam Products, 726 F.3d 1370,
1375 (Fed. Cir. 2013). In each, according to Hospira, we
30 THE MEDICINES COMPANY v. HOSPIRA, INC.
invalidated patent claims under § 102(b) based on trans-
fers of product by a supplier to an inventor. Indeed, as
Hospira emphasizes, in Special Devices, we expressly held
that there is no “supplier exception” to the on-sale bar,
Special Devices, 270 F.3d at 1357, a point we reiterated in
Hamilton Beach.
In none of those cases were the precise facts and ar-
guments we consider today presented by the parties. In
Brasseler, we noted that the transaction was indisputably
one in which the rights in the patented invention passed
between the parties for consideration. Brasseler, 182 F.3d
at 890 (“The transaction at issue undisputedly was a ‘sale’
in a commercial law sense.”). In Brasseler, we found that
“[t]he transaction was invoiced as a sale of product, and
the parties understood the transaction to be such,” id. at
891, and that the transaction was for purposes of market-
ing by Brasseler. Id. Brasseler argued that it and the
supplier from whom the purchase was made were not
truly separate entities, that we should apply a joint
development exception to the on-sale bar because Bras-
seler and its supplier each employed co-inventors, and
that the fact that Brasseler retained equitable, though not
legal, title to the patented product was meaningful. We
rejected each of those specific contentions, but did not say
transactions with suppliers should always be deemed
commercial sales.
Similarly, in Special Devices, while we declined to
adopt a “supplier exception” to the on-sale bar, we did so
in the face of a concession by the inventor that the trans-
action between it and its supplier was a commercial sale.
Thus, the import of Special Devices is simply that the fact
that a sale is made by a supplier is not, standing alone,
sufficient grounds upon which to characterize a transac-
tion having all of the hallmarks of a commercial sale
under the UCC as something other than a commercial
sale.
THE MEDICINES COMPANY v. HOSPIRA, INC. 31
So, too, in Hamilton Beach. The inventor made only
two arguments against the application of § 102(b): (1) that
the offer for sale was insufficiently firm under contract
law and the UCC to constitute a commercial offer for sale;
and (2) that the invention was not yet ready for patenting
under the second prong of Pfaff. The inventor did not
even urge a supplier exception to § 102(b) or argue that no
commercial sale of the patented product would occur if the
inventor purchased it from its supplier.
Thus, examining the arguments made by the parties
and the facts not in dispute in those cases, the precise
holdings in those cases are not inconsistent with the
analysis we employ or conclusions we reach here. Lest
there be any doubt, however, to the extent language in
those cases might be viewed as dictating a different result
here, they are overruled with one important caveat. We
still do not recognize a blanket “supplier exception” to
what would otherwise constitute a commercial sale as we
have characterized it today. While the fact that a trans-
action is between a supplier and inventor is an important
indicator that the transaction is not a commercial sale,
understood as such in the commercial marketplace, it is
not alone determinative. 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.
We believe our focus on those characteristics that
make a sale “commercial” in the most well-understood
sense of that term and on what constitutes commercial
marketing of a product, as distinct from merely obtaining
some commercial benefit from a transaction, best adheres
to the language of § 102(b), the Supreme Court’s guidance
32 THE MEDICINES COMPANY v. HOSPIRA, INC.
in Pfaff, and the policy and jurisprudential concerns,
respectively, underlying both. 3
D. Experimental Use
MedCo argues that because its transactions with Ben
Venue were for purposes of validating whether its pro-
cesses (1) would continue to work as claimed and (2)
generate consistently acceptable product, those transac-
tions were for experimental purposes. Specifically, it
asserts that, even if ready for patenting, the transactions
with Ben Venue were not for commercial purposes, only
experimental ones. Hospira counters that MedCo never
asserted an experimental use exception below and cannot
do so now, especially when Hospira was never given an
opportunity to present evidence regarding the other eight
batches of product prepared for MedCo by Ben Venue.
Hospira also argues that validation of a manufacturing
process for purposes of satisfying FDA requirements is
not experimental within the meaning of § 102(b).
While the parties spend significant time addressing
the question, most amici, including the government, urge
that, if we conclude the transactions between Ben Venue
and MedCo were not commercial sales for other reasons,
we refrain from reaching the district court’s experimental
use finding. The only exception to this fairly unanimous
view is an oft-repeated request that we make clear that
the panel’s statement that there can be no experimental
use after a reduction to practice is inaccurate. See, e.g.,
Brief for the United States as Amicus Curiae 25-26; Brief
3 The government argues that recent amendments
to § 102 in the AIA reflects Congress’s view that the
public use bar and the on-sale bar both turn on the “pub-
lic” nature of the activity at issue. We do not address here
whether or to what extent § 102(b) may differ post-AIA
from the pre-AIA description we now employ.
THE MEDICINES COMPANY v. HOSPIRA, INC. 33
for the Houston Intellectual Property Law Association 9-
12; Brief for Gilead Sciences, Inc. as Amicus Curiae 10-11.
Given our conclusion that there was no “commercial
sale” of the inventions in the ’727 and ’343 patents, we
agree that we need not reach the question of experimental
use. Since the panel opinion has been vacated, we also
decline to parse individual statements therein that are
not determinative of the question presented. For the
same reason, we do not reach the second prong of Pfaff—
whether the invention was ready for patenting—despite
the fact that MedCo argued at the district court that it
was not and challenges the district court’s finding to the
contrary on appeal.
Ultimately, we reach the same conclusion the district
court did regarding the inapplicability of the on-sale bar
to MedCo’s transactions with Ben Venue, but do so on
modified grounds. All other issues are remanded to the
merits panel for consideration in the first instance.
CONCLUSION
We hold today that a contract manufacturer’s sale to
the inventor of manufacturing services where neither title
to the embodiments nor the right to market the same
passes to the supplier does not constitute an invalidating
sale under § 102(b). We, therefore, affirm the district
court’s holding that the transactions between Ben Venue
and MedCo did not trigger the on-sale bar. Because the
original panel held that the ’727 patent and the ’343
patent were invalid under the on-sale bar as a result of
MedCo’s transactions with Ben Venue, it did not reach
the other issues raised on appeal. Specifically, the origi-
nal panel did not reach the issue of whether the invention
was ready for patenting at the time of the 2006 and 2007
transactions, or whether the Distribution Agreement
between MedCo and ICS triggered the on-sale bar. It also
did not reach either MedCo’s appeal of the district court’s
claim construction and non-infringement rulings or Hos-
34 THE MEDICINES COMPANY v. HOSPIRA, INC.
pira’s cross-appeal of the district court’s obviousness and
indefiniteness rulings. We, therefore, remand the appeal
to the original panel for further proceedings consistent
with this opinion.
AFFIRMED-IN-PART AND REMANDED TO THE
MERITS PANEL