On July 2, 2013 in Fresenius USA, Inc. v. Baxter International, Inc., the US Court of Appeals for the Federal Circuit held that, under the reexamination statute, the post-grant cancellation of asserted claims by the USPTO in parallel proceedings must be given effect during a pending infringement litigation. The court found that honoring a USPTO determination where there is no final judgment binding the parties or the court does not upset principles of either res judicata or separation of powers.

Fresenius USA and Fresenius Medical Care Holdings, Inc (Fresenius) initially brought a declaratory judgment action against Baxter International, Inc. and Baxter Healthcare Corporation (Baxter) alleging that claims 26-31 of Baxter's US Patent No. 5,247,434 were invalid and not infringed by Fresenius.

After Baxter counterclaimed for infringement, the district court found that the specified claims were infringing and valid. On appeal to the Federal Circuit, the parties did not contest infringement. The Federal Circuit upheld the district court's determination on validity, but remanded for reconsideration as to the court's injunction and post-verdict damages.

While the case was on remand, the US Patent and Trademark Office (USPTO) completed an ex parte reexamination of the patent requested by Fresenius in parallel proceedings. The patent examiner and Board of Patent Appeals and Interferences found the relevant clams to be invalid in light of prior art that was not raised during the initial examination or the infringement proceedings. The Federal Circuit affirmed the USPTO determination in the reexamination proceeding. Meanwhile, the district court repeatedly declined to stay the infringement litigation in light of the reexamination.

After the district court entered judgment in the infringement proceedings against Fresenius, both parties appealed to the Federal Circuit. Fresenius argued that, given the USPTO's invalidity determination, the infringement proceedings were moot.

In a split decision, the Federal Circuit agreed with Fresenius that the USPTO's determination was binding on the district court and Baxter no longer had a viable cause of action.

The majority opinion first examined the scope of the reexamination statute, situating the USPTO's authority to review granted patents through reissues, ex parte reexaminations and, more recently, inter partes examination and inter partes review. The court noted that the reexamination statute prohibits a patentee from enforcing any claims that do not survive a reexamination.

Baxter conceded that a patentee may not seek a cause of action based on a canceled claim. However, it argued that in the present case, the cancellation could not be given effect, because validity and infringement were already determined as part of the litigation. In its view, the final and binding decision of the district court as upheld by the Federal Circuit must be honored under the principle of res judicata.

However, the majority rejected this argument, finding that there was no final judgment entered. It noted that several aspects remained pending, including royalties and injunctive relief. Because the scope of relief remained open, the court found there to be no final judgment. It therefore concluded that Baxter's claim was moot, despite the interim appellate determination on invalidity.

The majority also found that honoring the USPTO determination did not upset the separation of powers as between the executive and judicial branches. Because the suit remained pending, the court reasoned it was only seeking to apply the law in effect at the time of its decision. It reasoned that Congress contemplated the post-reexamination termination of pending suits by acknowledging that canceled claims during a reexamination are to be treated as void from their onset.

In her dissent, Judge Newman: