Judicial Determination of “Validity” Does Not Preclude Subsequent Reexamination in USPTO

By Charles Gorenstein

The Court of Appeals for the Federal Circuit has ruled that a judicial determination and final order that an accused party has failed to prove a patent invalid does not preclude the same party from seeking reexamination of the same patent in the U.S. Patent and Trademark Office and, perhaps, thus obtaining a ruling of invalidity.  In re Baxter International, Inc., Appeal No. 2011-1073 (October 26, 2012, denial of rehearing and denial of rehearing en banc). 

Baxter International had asserted a patent against Fresenius USA, Inc.  After a jury determination of obviousness, the trial judge granted a motion by Baxter for judgment as a matter of law that Fresenius had failed to show that the patent was invalid.  Damages were awarded against Fresenius.  The Federal Circuit affirmed that ruling in 2009.

Fresenius had also initiated a reexamination of the patent in the U.S. Patent and Trademark Office.  The Examiner rejected the claims as obvious in view of some of the same prior art references considered in the district court.  Subsequent to the Federal Circuit’s affirmation of the district court verdict, the USPTO Board of Patent Appeals and Interferences affirmed the rejection of the patent in the reexamination proceeding.  Baxter appealed from the decision of the USPTO Board. The Board decision of invalidity was also affirmed by the CAFC.

In the denial of rehearing of the later affirmance of the Board decision, the Federal Circuit explained that a district court never rules that a patent is “valid,” only that the patent has not been proven to be invalid.  Additionally, while invalidity must be proven in a district court by clear and convincing evidence, the U.S. Patent and Trademark office properly relies upon a substantially lower preponderance of the evidence standard when considering patent validity.  The CAFC was not troubled by the successive proceedings, involving the same parties, or by the fact that the proceedings arrived at different conclusions concerning patent validity.  Indeed, the court of appeals went so far as to note that, because the respective proceedings applied different burdens of proof and relied on different records, the U.S. Patent and Trademark Office was not even obliged to provide an explanation of  why it came to a different determination than the district court.

It is important to note, however, that the subsequent determination of invalidity by the U.S. Patent and Trademark Office, while rendering the patent invalid, cannot otherwise impact upon or alter the result of the adjudication between the parties in the district court.  In a concurring opinion from Circuit Judge O’Malley denying rehearing, it was explained that the contrary result on validity in the U.S. Patent and Trademark Office does not amount to administration nullification of the prior final judicial decision.  Other than to obtain a determination of invalidity that it failed to obtain in the district court proceeding, the reexamination proceeding initiated by Fresenius did not and could not alter any determinations or orders of the district court.  The CAFC stated “[i]f a Federal Court awards relief to a patent holder against an infringer, 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 re Baxter International, Inc., Appeal No. 2011-1073, October 26, 2012, concurring opinion at 2.)  The court went on to state that well established principles of res judicata will govern the continuing relationship between the parties to the earlier litigation and will dictate whether to PTO’s re-examination ruling will have any impact on them going forward.

Thus, even after failing to invalidate an asserted patent in litigation, an accused party might still seek reexamination of the patent in the U.S. Patent and Trademark Office, possibly obtaining a ruling of invalidity.  Such a later ruling of invalidity by the U.S. Patent and Trademark Office will not amount to a reversal or nullification of any order of the district court.  Nevertheless, it may still serve some other purpose to obtain ruling of invalidity of the patent, even at that late juncture in the relationship between the parties.