On 11 July 2016, the US Court of Appeals for the Federal Circuit issued a unanimous en banc ruling in The Medicines Company v. Hospira Inc. that a sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not trigger the on-sale bar of 35 U.S.C. § 102.

In US patent law, the on-sale bar is a limitation on patentability providing that an invention cannot be patented if it has been sold or offered for sale more than one year before the effective filing date of the patent application. At issue in Hospira was an old version of § 102, which stated 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.”

The Federal Circuit concluded that “to be ‘on sale’ under § 102(b), a product must be the subject of a commercial sale […] that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.” In the case at hand, however, only contract manufacturing services were sold to the inventor. Thus, the inventor maintained control over the patented product. The seller of manufacturing services was not free to use or sell the claimed products or to deliver the patented products to anyone other than the buyer. The court agreed with amici who argued that applying the on-sale bar to the type of manufacturing services presented in this case “would only make the drug development process more costly, punish efficient use of resources, and deter future investments in innovation.” Additionally, doing so would result in “penalizing a company for relying, by choice or by necessity, on the confidential services of a contract manufacturer” instead of manufacturing in-house.

This article was originally published on AllAboutIP – Mayer Brown’s  blog on relevant developments in the fields of intellectual property and unfair competition law. For intellectual property-themed videos, Mayer Brown has launched a dedicated channel available here.