Troutman Sanders LLP: Litigation and Reexamination Lead to Different Results in Patent Case

Troutman Sanders LLP: Litigation and Reexamination Lead to Different Results in Patent Case

By Dabney Carr

In a precedential decision on May 17, the Federal Circuit affirmed the PTO's rejection in reexamination of patent claims on the grounds of obviousness even though the Court had previously affirmed a district court's judgment as a matter of law that the same claims were not obviousIn re Baxter International, Inc., No. 2011-1073 (Fed. Cir. May 17, 2012) (found here). The apparently contradictory rulings produced a lengthy dissent from Judge Newman - the only judge who served on the panel for both appeals.

Baxter owns U.S. Patent No. 5,247,434, which claims a hemodialysis machine integrated with a touch screen user interface that allows an operator to monitor and control a number of parameters. In 2003, one of Baxter's competitors, Fresenius filed a declaratory judgment action asserting that the '434 patent was invalid. The jury agreed with Fresenius that the claims were obvious, but the district court granted judgment as a matter of law reversing the jury's verdict. 

The Federal Circuit affirmed, holding

(1) that Fresenius had failed to identify the structure in the specification that corresponded to the means plus function claims at issue; and

(2) failed to compare the identified structure to the prior art. Fresenius USA, Inc. v. Baxter, Int'l, Inc., 582 F.3d 1288 (Fed. Cir. 2009) [enhanced version available to lexis.com subscribers].

Judge Gajarsa wrote that opinion, with concurring opinions by Judge Dyk and Judge Newman.

In parallel with its declaratory judgment action, Fresenius also filed a re-examination of the '434 patent. The examiner concluded that the claims were obvious in light of the combined teachings of several references, and the Board of Patent Appeals and Interferences affirmed, notwithstanding the Federal Circuit's holding in Fresenius.

The Federal Circuit affirmed the Board, despite its earlier holding affirming that the '434 patent was not invalid. Judge Lourie, writing for himself and Judge Moore, cited In re Swanson, 540 F.3d 1368, 1377 (Fed. Cir. 2008) [enhanced version available to lexis.com subscribers] in holding that the PTO in reexaminations and the court system in patent infringement litigation "take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions." 

The differences between the two proceedings cited by the Court included:

  • Standards of Proof - a party challenging a patent in litigation must meet a clear and convincing burden of proof, while in a PTO reexamination, the challenger must only establish invalidity by a preponderance of the evidence.
  • Records on Appeal - In Fresenius, the challenger failed to identify a corresponding structure in the specification for the means plus function claims and failed to show that such a structure existed in the prior art. In the reexamination, the examiner corrected those errors by reciting a corresponding structure and demonstrating that such a structure existed in the prior art.
  • Additional Prior Art -- The examiner not only corrected Fresenius' errors by properly identifying a corresponding structure, he also considered additional prior art references "that were not squarely at issue during the trial."

Judge Lourie then went out of his way to make some clarifying comments which are more interesting than the legal analysis of invalidity: 

"When a party who has lost in a court proceeding challenging a patent, from which no additional appeal is possible, provokes a reexamination in the PTO, using the same presentations and arguments, even with a more lenient standard of proof, the PTO ideally should not arrive at a different conclusion. ... Usually one would expect that any such reexamination, such as the one before us, would raise new issues. In this case, the patent examiner relied on new prior art that had not been raised in the prior district court proceeding. ... Thus, this case is not about the relative primacy of the courts and the PTO, about which there can be no dispute.

In a lengthy dissent, Judge Newman excoriated the majority for violating "not only the constitutional plan, but also violates the rules of litigation repose as well as the rules of estoppels and preclusion ..." and referred to the majority decision as "administrative nullification of a final judicial decision." According to Judge Newman, "when there has been full litigation and final adjudication under Article III, the judicial resolution controls." 

Judge Newman's claims of administrative nullification and judicial finality fall short for precisely the reasons that Judge Lourie states - litigation and reexamination involve different burdens of proof and different factual records. A court's decision applying a stricter standard of proof and based on the evidence and argument a particular litigant chooses to present and is able to introduce into evidence should not control a patent examiner's analysis under a different standard of proof and more relaxed rules of evidence

In re Baxter is a reminder that litigation and reexamination are not really "parallel" proceedings. District judges routinely refuse to recognize examiners' decisions in reexamination until those decisions are final and unappealable. Conversely, patent examiners reach their own conclusions in reexamination without regard to a court or jury's decisions. The seemingly irreconcilable results are simply a reflection of the different purposes and goals of the two types of actions. As Judge Lourie notes, while the two proceedings should usually reach the same conclusion, but that will not always be the case.

Copyright © 2012, Troutman Sanders LLP

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