The ABCs of Selling Could Hurt Your Chances of Protecting Your Tech 🎧
On the topic of selling, I have just one question- have you seen Glengerry Glenn Ross? This movie is a story about the salesman, and is a classic, slow-burn depiction of the consequences of greed. I love this movie because the story is a great example of the choices humans make in order to turn a buck, and the consequences of those choices.
Many sci-tech startups are run by the scienctist-CEO who leads research, development, marketing, HR, and yes, even sales. When leaders wear too many hats, they’re bound to get tripped up along the way and make a mistake or two, especially if they’re driving hard to do it all. But in patent law, some mistakes are irreversible when it comes to over-zealous, and ill-timed commercialization actions.
Last month, the U.S. Supreme court decided a patent case related to the ability to protect technology in the midst of commercialization activities. The case is Helsinn Heathcare v. Tevea Pharmaceuticals. The facts are these:
Helsinn Healthcare invented and made several forms of a new chemical compound.
Helsinn entered into a secret collaboration agreement with a company to license, distribute, promote, and sell the chemical compounds. Helsinn received up-front payments and negotiated future royalty payments.
Three years later, Helsinn filed the first in a family of patent applications.
Helsinn made successful drug products from these chemical compounds, but the patents were later challenged by a competitor, Teva Pharmaceuticals. Teva challenged the patents on the grounds that the patent(s) were invalid because Helsinn commercialized the invention over a year before a patent was filed.
“An invention [is] “on sale” … when it [is] “the subject of a commercial offer for sale” and [the invention] is “ready for patenting.”
-Justice Clarence Thomas, U.S. Supreme Court, Helsinn Healthcare v. Teva Pharmaceuticals
Commercialization Activities Can Jeopardize Patent Eligibility
The rule of law is this. As an inventor or owner of an invention, the law will not allow you to extend your patent rights beyond what you are entitled to have. Once you have put your invention into the public domain for more than a year, you will not be entitled to a patent in the U.S. (and if you somehow manage to obtain a patent, the patent is subject to being invalid on these grounds). For research and development activities that are secret and subject to nondisclosure requirements, such R&D activities may not be considered “public.” However as to commercialization activities, such as offering or selling the invention through purchase agreements, distribution agreements, supply agreements, etc. that’s another matter entirely. When commercialization activities occur more than a year before an invention is filed, such activities may bar patent eligibility, whether the transaction was secret or not.
The focus of this case is whether it makes a difference if the commercialization activity was secret or public- i.e., whether the parties had to sign a confidentiality agreement, and even whether or not a contracting party knew the full details of the the invention. The court answered this question, and simply held it doesn’t matter. Secret sales or not, when you sell or offer the invention for sale more than a year before you file a patent, and the invention is ready for patenting at the time of the sale, such activities can act as a bar to patent eligibility (…drop the mic).
Adopt A Best Practice
Tell Before You Sell. The best approach is to consider telling the USPTO of your invention before selling. Filing a patent application before offering up the invention for distribution, purchase, or supply is probably the best practice to adopt.
If you can’t do that, you should consider working with a skilled patent attorney on the right IP strategy for commercializing the technology and coordinating the right sequence of events.
Remember, the goal is to not only get the patent, but to KEEP the patent, so you must plan ahead and orchestrate your research, development, and commercialization activities accordingly.
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Angela Grayson, CIPP/US, CLP is an author, speaker, and lawyer. She is the Principal and Founder of Precipice IP, PLLC. Angela is a patent, trademark, copyright, and technology law attorney with almost 20 years of experience helping science and technology companies protect products, brands, designs, and data from idea to launch.
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