In affirming a finding by the U.S. Patent and Trademark Office (PTO) Board of Patent Appeals and Interferences (the Board) of invalidity after previously affirming a district court’s holding of validity of the same claims, the U.S. Court of Appeals for the Federal Circuit explained that while the Board should give serious consideration to a court decision, it is permissible for the Board to reach a different conclusion.  In re Baxter Int’l, Inc., Case No. 11-1073 (Fed. Cir., May 17, 2012) (Lourie, J.) (Newman, J., dissenting).

Baxter International owns a patent directed to hemodialysis machines.  In 2003, Baxter’s competitor Fresenius filed a declaratory judgment action alleging invalidity of certain claims of the patent.  After a jury found Fresenius proved certain claims of the patent were obvious, Baxter moved for judgment as a matter of law.  In 2007 the district court granted Baxter’s motion.  The district court concluded Fresenius failed as a matter of law to show by clear and convincing evidence that the prior art disclosed the “means for controlling” and “means for delivering” limitations recited in the independent claim.  Fresenius appealed, and the Federal Circuit affirmed, albeit on the “somewhat different” grounds, concluding that Fresenius failed to present evidence that a structure corresponding to the means for delivering, or an equivalent thereof, existed in the prior art.

Meanwhile, in 2006, Fresenius initiated a reexamination proceeding in the PTO, in which the examiner found those same claims were rendered obvious by a combination of references, some of which were at issue in the declaratory judgment proceeding and others that were not cited by Fresenius in the court proceeding.  After the Board affirmed the examiner’s rejections, Baxter appealed to the Federal Circuit.

The Federal Circuit affirmed, concluding that the Board’s findings were supported by substantial evidence.  The Federal Circuit, quoting In re Swanson, explained that “the PTO in reexamination proceedings and the court system in patent infringement actions ‘take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions.’”  The difference is that a challenger attacking the validity of patent claims in civil litigation has the burden of proving invalidity by clear and convincing evidence.  If this challenge fails to meet that burden, the court will not find the patent claims valid, but instead will hold only that the challenger did not meet its burden.  In contrast, the standard of proof in a PTO reexamination is simply a preponderance of the evidence, i.e., a substantially lower evidentiary burden.

The Federal Circuit went on to explain that if “a party who has lost in a court proceeding is 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.  However, the fact is that the Congress has provided for a reexamination system that permits challenges to patents by third parties, even those who have lost in prior judicial proceedings.”  In this case, the PTO found a substantial new question of patentability was raised by Fresenius’ reexamination request, the examiner relied on new prior art not introduced in the district court proceeding and the examiner properly conducted the reexamination.  Thus, the Federal Circuit concluded that “this case is not about the relative primacy of the courts and the PTO, about which there can be no dispute.”  Further, the Federal Circuit could not bar the PTO from conducting a reexamination proceeding of the patent because of the final judgment in the district court proceeding without overruling its own prior precedent, including Swanson and Ethicon.

The Court thus affirmed the Board’s decision.

Judge Newman dissented, contending the majority’s decision “permits administrative nullification of a final judicial decision.”  She stated that the majority was simply deferring to the PTO and opined that “the nature of the burden of proof does not overcome the strictures of judicial finality.”  Judge Newman further argued that the principle of preclusion should apply to reexamination of the same issues of fact and law and concluded that the reexamination rejection was based “solely” on the same references Fresenius relied on in the district court proceeding—a factual conclusion that is directly at odds with the majority opinion.