Court Denies Second Request to Revisit Controversial Case

The CAFC first considered the validity of Baxter International’s U.S. Patent 5,247,434 (the ‘434 patent) on appeal from a patent infringement litigation with Fresenius. In that first appeal (now commonly referred to as Fresenius I), the Court found the patent not invalid over certain prior art in 2009. After Fresenius I, the litigation dispute went back to the district court on a damages related remand.

Meanwhile, in May 2012 a patent reexamination that was filed by Fresenius USA Inc. in 2007 made its way to the CAFC. The reexamination was based on much the same prior art as previously considered in Fresenius I. This time, the CAFC affirmed the determination of the BPAI that the claims were obvious over the applied prior art applying the more liberal standards for USPTO challenges. En banc review was then sought, but declined in the Baxter reexamination appeal.

Thereafter, Fresenius II made it’s way to the CAFC to determine whether the outstanding damage award was enforceable in light of the CAFC’s decision in In re Baxter. The CAFC held that as the damage award was not yet final, it was essentially erased by the cancellation of the patent in reexamination, and once again, en banc review was sought last summer.

The holding in Fresenius II was a bit more controversial than In re Baxter (given recent cases like In re Construction Equipment). That is, the ability to effectively wipe out a damage award was big news, at least to those that had never heard of Translogic Tech v. Hitachi. Even so, Fresenius II was arguably distinguishable from Translogic as being the first case that: 1) wiped out both a previous damage award via a parallel USPTO attack on the patent, and 2) related to a patent previously considered by the CAFC and found not invalid on the very same art.

Today, the CAFC declined en banc review in Fresenius II (here), but provided quite a bit of commentary on the issues.

The dissent cautions:

The panel majority’s decision in this case goes a long way toward rendering district courts meaningless in the resolution of patent infringement disputes. It does so by creating a new regime wherein a district court’s final adjudication can be undone by later decisions of the Patent and Trademark Office (“PTO”).

Later concluding,

And, when trial courts come to understand the fragility of their judgments, stays in the face of reexaminations—which the PTO grants over 92% of the time—will become inevitable

The crux of the debate expressed in the majority and dissent is one of finality (note Judge Newman filed a separate dissent sticking to the Constitutional arguments she has expressed previously). The O’Malley dissent finds that the issue of validity was finally determined in Fresenius I, and,  therefore the damage award cannot be dislodged as to Baxter. On the other hand, the concurrence explains finality as the end of the litigation.

Next, up for the CAFC is SAP v. Versata, which presents largely the same procedural fact pattern, this time via the far speedier Covered Business Method (CBM) procedure of the America Invents Act (AIA). Next up for Baxter is a likely petition for certiorari….which Versata will almost certainly use to seek a stay of their CAFC appeal long enough to reach finality.