Docket No. 2012-1334, -1335
NEWMAN(D), DYK, PROST
July 2, 2013
Brief Summary: Cancellation of claims by the PTO must be given effect in a pending infringement litigation.
Summary: Fresenius brought an invalidity DJ action against Baxter and Baxter counterclaimed for infringement. The disputed patent (US 5,247,434) relates to hemodialysis machines. The DC found the claims infringed and not invalid, which was affirmed by the FC but remanded regarding the injunction and post-verdict damages. While on remand, the PTO determined all the claims were invalid for obviousness during reexamination, which the FC affirmed. Nonetheless, the DC entered judgment against Fresenius and the parties appealed. Fresenius argued that Baxter no longer has a cause of action due to the reexamination outcome. The issue in this appeal was whether the cancellation of claims by the PTO must be given effect in a pending infringement litigation. 35 USC 307(b) (reexamination statute) “provides that reexamined claims ‘have the same effect [in pending litigation] as that specified in 252 of this title for reissued patents'” (“same effect…as if the same had been originally granted in such amended form, but in so far as the claims of the original and reissued patents are substantially identical, such surrender shall not affect any action there pending nor abate any cause of action then existing” (e.g., “original claims that are not reissued in identical form became unenforceable” (Kaufman, FC 1986)). After reviewing the history of reissue and reexamination statutes and precedent, the FC concluded that “if the PTO confirms an original claim in identical form, a suit based on that claim may continue, but if the original claim is cancelled or amended to cure invalidity, the patentee’s cause of action is extinguished and the suit fails.” Baxter argued that the validity of the ‘434 patent and Fresenius’ liability for infringement was conclusively decided in 2007 because that decision has “res judicata effect”. However, the FC panel explained that that decision was not “sufficiently final” as it had been remanded (even if, for instance, infringement had been decided but unfair competition claims had not (citing Simmons, US 1922)). Thus, in the absence of finality, “the district court must apply intervening legal developments affecting the asserted patent’s validity, even if the court of appeals already decided the validity issue the other way.” Baxter also argued that under Plaut (US 1995), “allowing a PTO determination to control the outcome of pending litigation is unconstitutional, because it offends the separation of powers” but the panel disagreed, writing that its “decisions giving effect to the PTO’s cancellation of claims asserted in pending suits are fully consistent with our duty to ‘apply the law in effect at the time [we] render[ a] decision'”. In addressing the dissent which argues that the DC decision was final, the panel also explained that “‘[t]he doctrine of collateral estoppel does not prevent the PTO from completing the reexamination,’ if a district court finds the patent not invalid”. Thus, the DC decision was vacated and remanded.