Federal Circuit Affirms USPTO Nullification of Federal Circuit's Prior Validity Ruling

Practical Law Legal Update 4-519-5175 (Approx. 4 pages)

Federal Circuit Affirms USPTO Nullification of Federal Circuit's Prior Validity Ruling

by PLC Intellectual Property & Technology

Key Litigated Issue

In In re Baxter International, Inc., the key litigated issue before the US Court of Appeals for the Federal Circuit was whether the Board of Patent Appeals and Interferences (BPAI) properly rejected Baxter's patent claims as obvious despite the Federal Circuit's previous ruling that those claims were not proven to be invalid in civil patent infringement litigation.

Background

Baxter International Inc. owns US Patent 5,247,434 ('434 Patent), which concerns hemodialysis machines that function in place of a patient's kidney.

In 2003, Fresenius Medical Care Holdings, Inc., one of Baxter's competitors, filed suit against Baxter, seeking a declaration that the '434 Patent claims were invalid. Although a jury found that Fresenius had proven by clear and convincing evidence that the claims of the '434 Patent would have been obvious when the invention was made, the district court:

Concluded that Fresenius failed to show by clear and convincing evidence that the proffered prior art invalidated the '434 Patent claims.
Granted Baxter's motion for judgment as a matter of law that the claims were not invalid.

The Federal Circuit affirmed the district court's ruling because Fresenius failed to present any evidence showing that the structures corresponding to the '434 Patent claims existed in the prior art.

While the Fresenius litigation was ongoing, Fresenius filed a request for reexamination of the '434 Patent with the USPTO. During the reexamination, the examiner:

Relied on the same prior art references introduced in the Fresenius litigation.
Determined that the '434 Patent claims were obvious in light of the prior art and therefore were not patentable.

Baxter appealed to the BPAI, which affirmed the examiner's rejections of Baxter's claims. When the BPAI denied Baxter's request for a rehearing, Baxter appealed to the Federal Circuit.

Outcome

In a split decision, the Federal Circuit affirmed the BPAI decision.

Majority Opinion

The majority, Circuit Judges Lourie and Moore, noted that:

In USPTO reexaminations, the standard of proof is a preponderance of the evidence.
Substantial evidence supported the BPAI's findings that the '434 Patent claims were obvious in view of the prior art because the examiner sufficiently identified the relevant elements in the '434 Patent and the prior art.

The majority also explained that:

It affirmed the district court's patent validity decision in the Fresenius litigation because Fresenius failed to prove by clear and convincing evidence that the '434 Patent claims were invalid.
The BPAI considered the Federal Circuit's prior decision.
The USPTO in reexamination proceedings takes a different approach than district courts in determining validity and on the same evidence could come to different conclusions. Specifically, the majority noted that:
- a patent challenger in patent infringement litigation has the burden to prove invalidity by clear and convincing evidence;
- there is no presumption of validity in reexamination proceedings; and
- the preponderance of evidence standard of proof in reexamination proceedings is substantially lower than in a civil case.

The majority did, however, acknowledge that when a losing patent challenger subsequently instigates a reexamination in the USPTO, ideally, the USPTO should not arrive at a different conclusion than the court.

Dissenting Opinion

Circuit Judge Newman dissented noting that:

Judicial rulings are obligatory and the USPTO should not be permitted to nullify a final judicial decision.
There is nothing in the reexamination statutes that suggests that reexamination of patentability is intended to override judicial resolution of that question.

Circuit Judge Newman also argued that:

In this case, the reexamination was based solely on the same references on which Fresenius relied in the litigation.
The question of obviousness is a question of law and the USPTO and district court must reach the correct conclusion on the correct law.

Practical Implications

Alleged patent infringers in federal patent litigation should always consider requesting reexamination of the asserted patent. This decision, unless it is overturned by an en banc or Supreme Court decision, should provide additional incentive for a patent challenger to file a request for reexamination in the USPTO. Even if the district court determines that the alleged patent infringer has not proven that the asserted patent is invalid, the alleged patent infringer may be able to obtain a different ruling from the USPTO because of the lower burden of proof in USPTO proceedings. This possibility may:

Affect the patent owner's ability to assert the patent in future litigation.
Provide leverage to the alleged infringer in negotiating a potential settlement with the patent owner.

Court Documents

In re Baxter International, Inc., No. 2011-1073 (Fed. Cir. May 17, 2012)

Federal Circuit Affirms USPTO Nullification of Federal Circuit's Prior Validity Ruling | Practical Law