By Scott A. McKeown
| May 21, 2012
CAFC Forced to Disturb Earlier Ruling Based on More Liberal Patent Reexamination Standards

CAFC Forced to Disturb Earlier Ruling Based on More Liberal Patent Reexamination Standards


Patent reexamination is often initiated in parallel with an ongoing infringement litigation. In some cases, an infringer that fails to prove invalidity in the courts can effectively “undo” the effect of the earlier court judgement via an ex parte patent reexamination (EXP) filing.


Back in December, the CAFC considered this "do over" tactic in the case of In re Construction Equipment. Last week, the very same procedural fact pattern presented itself to the CAFC. Once again, Judge Newman decried the potential undermining of previously settled court rulings via ex parte patent reexamination.   


As a reminder, when initiating a parallel inter partes proceeding (IPX) parallel to a district court litigation, the first of the proceedings to conclude (litigation or IPX) controls the outcome of the other by operation of statutory estoppel. As such, a final holding in the parallel court proceeding will end an ongoing IPX. Moreover, the losing party would be precluded from seeking IPX at a later date. As such, an infringer that fails to prove invalidity in the district court cannot hope to be saved by a parallel IPX; not so with EXP.


EXP has no such statutory “shut off valve.” Thus, even a party that was bound by IPX estoppel could file a request for EXP in an attempt to “undo” the effect of an the earlier court judgement, as was the case a few months back in the case of In re Construction Equipment, and again last week in the case of In re Baxter International Inc. (here)


In Baxter, the CAFC considered an appeal from the Board of Patent Appeals & Interferences (BPAI) that found certain claims of U.S. Patent 5,247,434 unpatentable as a result of EXP. The Court affirmed the BPAI despite the fact that in 2009, the CAFC affirmed a district court ruling finding the very same claims not invalid. The majority (Lourie, Moore) explained:



Lest it be feared that we are erroneously elevating a decision by the PTO over a decision by a federal district court, which decision has been affirmed by this court, the following additional comments must be made. When a party who has lost in a court proceeding challenging a patent, from which no additional appeal is possible, provokes a reexamination in the PTO, using the same presentations and arguments, even with a more lenient standard of proof, the PTO ideally should not arrive at a different conclusion.

However, the fact is that Congress has provided for a reexamination system that permits challenges to patents by third parties, even those who have lost in prior judicial proceedings. Usually one would expect that any such reexamination, such as the one before us, would raise new issues. In this case, the patent examiner relied on new prior art that had not been raised in the prior district court proceeding. Why Fresenius did not present that prior art before the district court we do not know. But the Director apparently found that a substantial new question of patentability had been raised and the examiner was then entitled to conduct a reexamination on the basis of the new art presented and her search of the prior art. Thus, this case is not about the relative primacy of the courts and the PTO, about which there can be no dispute. Finally, we could not conclude that the PTO was barred from conducting the reexamination of the ’434 patent because of the final judgment in Fresenius without over-ruling Ethicon and Swanson, which we cannot do.

Consistent with her earlier dissent in In re Construction Equipment, Judge Newman argued:
Administrative agency override of judicial final decisions has no counterpart in any other field of subject matter. From the inception of judicial process in the nation, it was established that decisions of Article III courts are not subject to negation by proceedings in the other branches. The validity of the Baxter patent was resolved upon litigation in the district court and on appeal to the Federal Circuit. This judgment cannot be “revised, overturned or refused full faith and credit by another Department of Government.” Chi. & S. Airlines, 333 U.S. at 114. Nonetheless, the court again departs from this principle, trivializes our prior final judgment, and simply defers to the conflicting agency ruling. This is improper.

I support the concept of reexamination as an efficient and economical alternative to litigation in appropriate cases. My concern is with the distortion of this purpose, which was designed to provide a path to relief not available through the existing examination process. It was not intended to undermine the finality of judicial process; it was not intended to negate the repose provided by adjudication.

The only patents that are reexamined, like the only patents that are litigated, are patents on inventions that are of value. Most reexamination requests are granted by the PTO. Reexamination of the Baxter patent was requested by Fresenius in 2005, two years into the litigation of Fresenius’ declaratory judgment action against Baxter. The reexamination request presented to the PTO the same references that Fresenius had presented in the litigation. Judgment in the district court was adverse to Fresenius, and the Federal Circuit’s final judgment was issued in 2009, a year before the reexamination decision of the PTO Board. The Board stated that “the agency is not bound by the court’s determination.” BPAI Op. at 26. However, when there has been full litigation and final adjudication under Article III, the judicial resolution controls. Instead, my colleagues ignore this court’s prior decision, which is the law of this case, and simply defers to the PTO, stating that its reexamination ruling is “supported by substantial evidence.” Op. at 11–13 & 16. The nature of the burden of proof does not overcome the strictures of judicial finality.

The ability to file an ex parte patent reexamination as a "do over" relative to an adverse ruling of the courts remains a viable option even after the America Invents Act (save for those filers subject to the estoppel effect of Inter Partes Review or Post Grant Review) For a more in depth discussion of the majority position in In re Construction Equipment and the preclusive interplay between the new proceedings of the AIA, patent interferences and district court rulings, See Gholz and Gardella, Cancellation of Patent Claims in an Interference After Those Claims Have Been Held Not Invalid in an Infringement Action, 19 Intellectual Property Today No. 4 at page 21 (2012)

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