May 19, 2014
UPDATE TWO: The U.S. Supreme Court denied certiorari today in Fresenius USA, Inc. v. Baxter International, Inc. Accordingly, the Federal Circuit's decision as reported below remains undisturbed.
UPDATE: On November 5, 2013, the Court of Appeals for the Federal Circuit denied en banc review of the decision in Fresenius USA, Inc. v. Baxter International, Inc. There were several dissenting opinions. Copies of the order and dissenting opinions can be found here.
The previous IP Alert on this case from July 15, 2013, follows:
On July 2, 2013, in Fresenius USA, Inc. v. Baxter International, Inc., a panel of the Court of Appeals for the Federal Circuit held, in a split decision with Judge Newman dissenting, that a reexamination proceeding in the U.S. Patent and Trademark Office (USPTO) rendered moot a claim for patent infringement. The Federal Circuit found the infringement claim moot even though the district court’s previous finding of no invalidity had been upheld on appeal and even though the Supreme Court had denied certiorari from the earlier appeal.
The Fresenius case began in 2003 when Fresenius filed a declaratory judgment action against the patentee, Baxter International. Fresenius alleged in its filing that certain claims of Baxter’s ’434 patent were not infringed and were invalid. Baxter counterclaimed for infringement. In 2005, and while the district court case was pending, Fresenius requested ex parte reexamination of the asserted claims. The district court refused to stay the litigation pending reexamination. Fresenius eventually stipulated to infringement of the claims as construed, and in 2006, a jury found the asserted claims of Baxter’s ’434 patent invalid as obvious. The district court subsequently granted Baxter’s request for judgment as a matter of law that Fresenius failed to provide sufficient evidence of obviousness.
In November of 2007, the district court entered final judgment of infringement in favor of Baxter, including an award of damages. Shortly thereafter, in December of 2007, the USPTO examiner issued a final rejection finding the asserted claims to be obvious. In April of 2008, the district court granted and stayed a permanent injunction and awarded Baxter post-verdict royalties. Both parties appealed.
On appeal, in September of 2009, the Federal Circuit affirmed the judgment because as a matter of law, Fresenius failed to present sufficient evidence showing that the ’434 patent claims would have been obvious. The Federal Circuit remanded the case to the district court to “revise or reconsider the injunction . . . [and] to consider whether the previous royalty award was proper.”
On remand the district court awarded Baxter post-verdict damages at a reduced royalty rate and entered another final judgment in March of 2012. Two months later, the Federal Circuit affirmed the USPTO’s rejection in reexamination of the ’434 patent claims. Fresenius then appealed the district court’s March 2012 judgment, arguing that in view of the USPTO’s cancellation of the ’434 patent claims, “Baxter no longer has a cause of action.”
On appeal, the Federal Circuit reversed. In a decision authored by Judge Dyk, the court held that because a “sufficiently” final judgment was not entered before the ’434 patent was cancelled by the USPTO, the cancellation of the patent rendered Baxter’s infringement claim moot. The court reached this conclusion even though it had previously affirmed the district court’s final judgment that Fresenius had failed to prove invalidity, reasoning that its earlier determination was not final in light of the remand. Because the district court had to make further determinations on remand, it could not be said that the district court was left with “nothing for the court to do but execute the judgment,” thus rendering the judgment “not sufficiently final.”
The court rejected Baxter’s argument that allowing the USPTO’s cancellation of the ‘434 patent claims to trump the judgment was an unconstitutional violation of the separation of powers doctrine. In rejecting the argument, the majority likened a reexamination cancellation of an issued patent to a “change in law,” and reasoned that because the case was not final, the court must “apply the law in effect [i.e., the invalidity of the ’434 patent] at the time it renders its decision.”
Judge Newman dissented, stating that under the court’s decision “the entirety of these judicial proceedings can be ignored and superseded by an executive agency’s later ruling.” She reasoned that under the majority’s logic, “the prior final adjudication by this court of validity and infringement is irrelevant, and that the later decision by the PTO overrides and displaces our prior adjudication, depriving the parties to that adjudication of their binding judgments.” Judge Newman further asserted that the panel’s holding was unconstitutional because the Federal Circuit’s previous affirmation of no invalidity had finally resolved that issue.
The Fresenius case may lead to certain strategic considerations for parties faced with, or contemplating, concurrent infringement litigation and patent reexamination proceedings. Fitch Even attorneys are continuing to monitor the case and will report on any en banc or Supreme Court review of this decision.
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