En Banc Federal Circuit Rules 10-1 That PTO Can Nix Patent Despite Contrary Court Ruling(1)

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Concluding that a panel properly upheld a Patent and Trademark Office patent rejection after a contrary appeals court holding, a 10-1 U.S. Court of Appeals for the Federal Circuit denied an en banc rehearing petition Oct. 26 (In re Baxter International Inc., Fed. Cir., No. 2011-1073, en banc rehearing denied 10/26/12).

A split panel ruled May 17 that patent reexamination should take notice of a court decision but the PTO need not come to the same conclusion as the court. 678 F.3d 1357, 102 USPQ2d 1925 (Fed. Cir. 2012).

Judge Pauline Newman, who dissented to the panel majority opinion, was the only dissenter to the en banc rehearing denial. A three-judge opinion concurring with the denial rebutted the dissent.

BPAI Rejects Patentability Despite Court Ruling.

Baxter International Inc. owns a patent (5,247,434) related to hemodialysis machines. The patent claims an apparatus and methods using a computer interface to control the level of dialysates flowing through the machines. The patent issued in 1993.

Ten years later, Fresenius USA Inc. filed a declaratory judgment action in the U.S. District Court for the Northern District of California, seeking a finding of patent invalidity for obviousness.

The district court granted judgment as a matter of law in favor of Baxter. In 2009, the Federal Circuit affirmed as to the '434 patent, but for different reasons than cited by the lower court. Fresenius USA Inc. v. Baxter International Inc., 582 F.3d 1288, 92 USPQ2d 1163 (Fed. Cir. 2009). The Supreme Court denied Fresenius's petition for writ of certiorari.

However, Fresenius had also instigated a reexamination at the PTO in 2006, and an examiner rejected the claims. The BPAI had the benefit of the Federal Circuit's ruling when it handled Baxter's appeal. Nevertheless the board denied patentability for obviousness.

The board relied in part on some prior art references that had not been considered in the court's decision. It also said, “the agency is not bound by the court's determination.”

Baxter appealed.

The May 17 panel majority--Judge Alan D. Lourie wrote the opinion joined by Judge Kimberly A. Moore--affirmed a patent rejection for obviousness by the Board of Patent Appeals and Interferences. The court said, “the fact is 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.”

Baxter then filed the petition for rehearing by the panel or en banc. Ten of the 11 active judges agreed to the order denying the petition.

Newman: Cost, Delay, and Uncertainty for Inventors.

In her original panel dissent, Newman characterized the decision as a violation of the “constitution plan,” allowing an administrative body to nullify a final decision by the judiciary. She repeated her concerns and arguments in her dissent to the en banc rehearing denial.  

My concern is not with the principle of patent reexamination and the useful purposes for which it was designed; my concern is that reexamination is inappropriate for redetermination of issues that have been finally determined in judicial proceeding. Since only valuable patents on successful inventions are litigated, the court has created an additional burden and disincentive to inventors, for reexamination after a patent has been sustained in court is a multiplier of cost, delay, and uncertainty, in direct negation of the principles of res judicata.    



Concurrence: PTO Follow-On 'Unremarkable.'

Judge Kathleen M. O'Malley wrote a concurring opinion to the denial, essentially as a rebuttal to Newman's dissent.

“Nothing in [the panel] opinion, or in those on which it relies, alters the governing legal principles of res judicata or abandons the concept of finality those principles further,” O'Malley said.

In fact, she characterized as “unremarkable” the idea that the PTO could conclude that a patent was invalid “despite a final court judgment reaching a contrary conclusion as between the patent holder and one alleged infringer.” She quoted the PTO's response to the petition here that “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.”

In a footnote in the dissent, Newman criticized the concurrence for the “unremarkable” remark. “Such a weighty matter should not be so casually dismissed,” Newman said.

In any case, O'Malley concluded the concurrence as follows:  

The dissent's fears, and the premise of the petition for rehearing en banc are unfounded. Well-established principles of res judicata will govern the continuing relationship between the parties to any court proceeding and will dictate whether the PTO's reexamination ruling will have any impact on them going forward. Reassured by this fact, I concur in the denial of the request for rehearing en banc in this matter.  




Chief Judge Randall R. Rader and Judge Richard Linn joined the concurring opinion.

William F. Lee of Wilmer Cutler Pickering Hale and Dorr, Boston, represented Baxter. PTO Associate Solicitor Sydney O. Johnson Jr. represented the agency. Michael E. Florey of Fish & Richardson, Minneapolis, represented Fresenius.

By Tony Dutra  

Order at http://pub.bna.com/ptcj/111073rehgdeny12Oct26.pdf

Panel opinion at http://pub.bna.com/ptcj/111073May17.pdf

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