Patent Law | Expert Legal Commentary
October 11, 2012
In re Baxter Intl.: Federal Circuit Allows Patent Reexamination After a Final Court Judgment
In re Baxter Intl.
Tom Zuber and Jeff Zuber of Zuber Lawler & Del Duca
The Federal Circuit recently supported the PTO’s authority to overrule a judicial decision on patent claim validity. In In re Baxter Intl., Inc., 673 F.3d 1357 (Fed. Cir. 2012), the Court upheld a PTO reexamination decision to invalidate patent claims, even though the Court previously upheld a district court’s contrary holding in the same matter which sided with the patent owner.
Baxter owns the ‘434 patent, which describes a hemodialysis machine. The patent’s claims include control of temperature, concentration, and other parameters of a solution used during hemodialysis. Id. at 1358.
In 2003, Fresenius, a competitor, filed for a declaratory judgment in the district court against Baxter. Fresenius sought to declare the ‘434’s claims as invalid. Under a clear and convincing standard, a jury agreed with Fresenius and determined that the relevant claims would have been obvious at the time of invention. However, on Baxter’s motion, the court granted judgment as a matter of law, concluding that Fresenius did not prove by a clear and convincing standard that its evidence was prior art of the ‘434’s claims. Id. at 1360.
Fresenius appealed to the Federal Circuit, which upheld the district court’s JMOL on different grounds. Specifically, the Federal Circuit found that Fresenius did not present any evidence to show that a structure described in one of the ‘434’s claims existed in prior art. Id.
Meanwhile, the U.S. Patent and Trademark Office (“PTO”) reexamined the ‘434 patent. The PTO ultimately rejected the relevant claims as obvious in light of evidence previously unanalyzed by the district court during trial. Id.
Baxter appealed to the Board, citing the favorable holding from the district court trial which had just been decided. However, the Board affirmed the examiner’s rejection of the claims. This created a discrepancy between the holdings of the district court and the Board. In justifying its authority to come to its own conclusions, the Board spoke that “a lower standard of proof and the broadest reasonable interpretation standard of claim construction apply at the PTO and therefore the agency is not bound by the court’s determination.” Id. at 1361. The Board then rejected the relevant claims on the merits. Baxter ultimately appealed the Board’s decision to the Federal Circuit. Id.
Federal Circuit Allows PTO Reexamination Even After Final Judicial Decision
The main issue before the Federal Circuit was whether it would uphold the Board’s rejection of the ‘434 patent’s claims in light of the parallel judicial process, including the Court’s own holding, that sided with Baxter. Central to the court’s analysis was the distinction between issues and burdens of proof between the judicial process and the PTO. In judicial litigation, Fresenius failed to prove invalidity by clear and convincing evidence. In reexamination, however, the examiner was able to prove that the claims were not patentable by a preponderance of the evidence, citing prior art not fully addressed at trial. Id. at 1364. In the view of the Court, “because the two proceedings necessarily applied different burdens of proof and relied on different records, the PTO did not err in failing to provide the detailed explanation now sought by Baxter” as to why the PTO reached a different decision than the courts. Id. at 1365.
The Court warned that “the PTO ideally should not arrive at a different conclusion” than that of a completed trial and appeal in these circumstances. Id. However, the Court noted 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.” Id. Further, the Court buttressed the validity of the reexamination by noting that Fresenius raised a new question of patentability when it offered evidence to the PTO that was not analyzed by the district court, thus entitling the examiner to conduct the analysis. Id.
In the end, the Court affirmed the Board’s decision to deem the relevant claims as not patentable. Id. at 1366.
Dissent Finds No Support for PTO’s Authority to Overrule the Judicial Branch
Judge Newman strongly dissented, arguing that the case had been litigated to final judgment in the district court and appealed to the Federal Circuit, thus concluding the case and binding the hands of both the courts and the PTO to the judgment in favor of Baxter. She cited a number of constitutional and judicial doctrines, in sum declaring that “when a judicial decision is final as to the issue before the agency, the decision is binding on the agency. Finality is reflected in the law of the case doctrine.” Id. at 1367.
She also cited legislative and practitioner concerns, saying that Congress did not intend to “violate the constitutional strictures” when it enacted the reexamination statutes. Id. at 1368. Problematic to her was the possibility of harassment and abuse of the reexamination system, which commentators noted could be used against patent owners in order to gain leverage in patent litigation and settlement. Id. While she supported reexamination as an “efficient and economical alternative to litigation” in some cases, she clearly voiced that it was “not intended to undermine the finality of judicial process.” Id. at 1369.
In this case, Judge Newman rejected the court’s rationale that the different burdens of proof between the PTO and the courts supported the PTO’s authority to overrule a judicial decision. Id. at 1370. Instead, she noted that “obviousness is a question of law, and the PTO, like the court, is required to reach the correct conclusion on the correct law.” Id. Any diversion between the two, she noted, would not authorize the PTO to overrule a final judicial decision. Id. In the alternative, if the Federal Circuit believed it erred in a prior decision, the proper mechanism would be a judicial reopening, not “administrative disregard.” Id.
The Federal Circuit has opened the door for parties facing litigation threats from patent owners to push the PTO for reexamination, even if the matter has already been adjudicated up to the Federal Circuit. Parties involved in patent litigation should contact experienced patent counsel to see how Baxter may affect your case.
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