May 21, 2012
On May 17, 2012, the Court of Appeals for the Federal Circuit issued a significant decision touching on the interplay between reexamination proceedings and district court litigation. In In re Baxter International, Inc., the Federal Circuit affirmed the decision of the U.S. Patent and Trademark Office (USPTO) in a reexamination proceeding that the patent claims at issue were obvious over the prior art. The reexamination proceedings were provoked by a challenger, Fresenius. Notably, in 2009, the Federal Circuit had previously affirmed a district court’s judgment that Fresenius had failed to prove those same claims invalid. In holding the patent invalid, the USPTO relied upon some of the same prior art that Fresenius used in its earlier unsuccessful validity challenge.
Baxter, the patent owner, argued that the USPTO’s obviousness analysis contradicted the findings of the district court and the prior decision of the Federal Circuit. The USPTO responded that the district court’s decision and the Federal Circuit’s prior decision did not control the reexamination proceeding because the USPTO and the courts apply different approaches to determine patentability and invalidity.
The Federal Circuit sided with the USPTO, and held that the USPTO was empowered to invalidate the patent despite the prior lawsuit between Fresenius and Baxter. The court cited case law recognizing that the different approaches in determining validity used by the courts and USPTO could result in different conclusions on the same evidence. In particular, the Federal Circuit reiterated its prior case law that the standard of proof for invalidity in civil litigation is by clear and convincing evidence, while in contrast the standard of proof in USPTO reexaminations is the lower standard of proof by preponderance of the evidence. Moreover, the patent examiner relied on new prior art that had not been raised in the prior district court proceeding, thus resulting in a different record before the USPTO than before the court in the earlier lawsuit.
The Federal Circuit recognized that, ideally, the USPTO should not arrive at a different conclusion in a reexamination provoked by a party who has lost in a court proceeding challenging validity, even under the more lenient standard of proof. Nonetheless, because “the two proceedings necessarily applied different burdens of proof and relied on different records,” the court agreed that it was not improper for the USPTO to find the patent invalid.
In a dissenting opinion, Judge Newman argued the Federal Circuit’s prior decision was the “law of the case,” and should have barred the challenger from raising invalidity. She observed that the reexamination request presented to the USPTO the same references that Fresenius had presented in litigation, that judgment in the district court was adverse to Fresenius, and that the Federal Circuit’s final judgment in the prior case issued before the reexamination decision of the Board. She opined that “the court violates not only the constitutional plan, but also violates the rules of litigation repose as well as the rules of estoppel and preclusion—for the issue of validity, the evidence, and the parties in interest are the same in this agency reexamination as in the finally resolved litigation.”
The Baxter decision is significant for both patent owners and patent challengers who are faced with concurrent reexamination and district court litigation. For more information on this decision, please contact Fitch Even partner Jon A. Birmingham, the author of this alert.