By Scott A. McKeown
| November 1, 2012
CAFC Denies En Banc Review of In Re Baxter Decision
Earlier this year, the CAFC decided In re Baxter International Inc. (here). As a reminder, 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 in an ex parte patent reexamination.
The request for patent reexamination was filed by Fresenius USA Inc. in 2007 during a patent infringement litigation with Baxter. Interestingly, the Court first considered the validity of the '434 patent on appeal from that litigation. In that first appeal, based on some of the very same art applied in the reexamination, the Court found the patent not invalid in 2009. In the second appeal, decided in May of 2012, the same art was presented to the Court. Viewing the same art in 2012, on appeal from the BPAI, the Court affirmed the determination of the BPAI that the claims were obvious over the applied prior art.
Judge Newman issued a strong dissent to the second outcome, explaining that "[t]he 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. . . .. Nonetheless, the court again departs from this principle, trivializes our prior final judgment, and simply defers to the conflicting agency ruling. This is improper."
Not surprisingly, Baxter petitioned for rehearing and en banc review of the earlier decision.
This week, the Court denied the petition. The concurring opinion noted the philosophy of the majority as follows:
. . .In a court proceeding, a patent is not found “valid.” A judgment in favor of a patent holder in the face of an invalidity defense or counterclaim merely means that the patent challenger has failed to carry its burden of establishing invalidity by clear and convincing evidence in that particular case—premised on the evidence presented there. . . . If the PTO later considers the validity of that same patent, it does so based on the evidence before it and under the lesser burden of proof that applies in reexamination proceedings. As the majority notes, Congress granted the PTO the right to act within the realm of its authority. . . ..
These conclusions do not mean, however, that, when the PTO does act in the context of a reexamination proceeding, its conclusions can alter the binding effect of a prior judgment in a judicial proceeding. They cannot, and the PTO concedes as much in its response to the petition for rehearing en banc when it states that “[i]f a federal court awards relief to a patent holder against an infringer, a subsequent reexamination decision that the patent is invalid does not disturb the judgment of the court or alter its binding effect on the parties.” . . .
As the patent reexamination was ex parte, Fresenius could not participate in the appeal. Here, the court seems to reason that yes, the patent can fall in reexamination, but Fresenus will still be bound to the first result. Arguably, this line of reasoning does not comport with the earlier decisions of the Court in the Translogic or Standard Havens cases.
Judge Newman was quick to point out this inconsistency, noting:
It is time for this court to confront its conflicting precedent, founded in Standard Havens Products, Inc. v Gencor Industries, Inc., 996 F.2d 1236, 1993 WL 172432 (Fed. Cir. May 21, 1993), where this court held that "contrary to the assumption of the trial court, the reexamination proceeding 'would control' the infringement suit." Id. See also In re Translogic Tech., Inc., 504 F.3d 1249 (Fed. Cir. 2007); Translogic Tech., Inc. v. Hitachi,Ltd., 250 Fed. Appx. 988 (Fed. Cir. 2007).
In Standard Havens, the Court explained that a patent lost in patent reexamination is void ab initio; perhaps the majority can distinguish this discussion as dicta. As to Translogic, the BPAI and district court appeals arrived at the CAFC at the same time, so, it could be reasoned that res judicata was not an issue.
One issue that I found confusing in the Order was the repeated reference to USPTO proceedings as examining "patent validity." The USPTO does not assess patent validity at all....the agency assesses patentability. The reasoning of the majority would have been easier to digest had the Order made this distinction. As to Fresenius....although the reexamination killed the patent, the Court seems to reason that the earlier judgment still stands.