Editor: Paul Stewart

Federal Circuit Summaries

Before Dyk, Wallach, and Hughes.  Appeal from the United States District Court for the District of Delaware.

Summary:  A distribution agreement qualifies as an invalidating “offer for sale” under 35 U.S.C. § 102(b) when the terms of the agreement demonstrate the commercial character of an offer to sell the patented product.

The Medicines Company (“MedCo”) asserted two patents covering its Angiomax drug product against Hospira, a generic drug maker and ANDA filer.  Although Angiomax has been available for decades, MedCo developed a new method of formulating Angiomax to reduce impurities.  This formulation was the subject of the asserted patents, which issued on July 27, 2008.  Prior to filing the patents, MedCo entered into a distribution agreement on February 27, 2007 with Integrated Commercialization Solutions, Inc. (“ICS”) to distribute the new Angiomax formulation.  The agreement stated that MedCo “desire[d] to sell the Product” to ICS and ICS “desire[d] to purchase and distribute the Product.”  Under the agreement, title passed to ICS upon receipt of the Product at the distribution center.  The district court found that the invention was ready for patenting at the time of the agreement, but found that the patents were not invalid under 102(b)’s on-sale bar because the distribution agreement between MedCo and ICS did not constitute an offer to sell.

The Federal Circuit reversed and remanded, finding that the terms of the distribution agreement show that the agreement was an offer for sale.  In particular, the terms included a statement that MedCo desired to sell the product and that ICS desired to purchase the product.  The agreement also included the commercial price of the product and the transfer of title to ICS.  MedCo argued the agreement was not an offer for sale because it was permitted to reject all purchase orders.  The Federal Circuit noted, however, that the agreement required MedCo to use “commercially reasonable efforts” to fill the purchase orders, and MedCo would be unlikely to reject an order because ICS had exclusive distribution rights under the agreement and Angiomax constituted the majority of MedCo’s revenues.  Therefore, the Federal Circuit held that the distribution agreement did not constitute an optional sales arrangement, and instead provided all of the necessary terms and conditions to constitute a commercial offer for sale.  The Federal Circuit remanded for the district court to determine whether the offer to sell covered the patented invention.

This case is: THE MEDICINES COMPANY v. HOSPIRA, INC.