By Dennis Crouch
A substantial number of patents being enforced today are involved in parallel proceedings. Most often, these proceedings include an infringement lawsuit in federal court and a post-grant administrative proceeding before the US Patent Office. The law gives both entities power to rule on the validity of the patents in question. However, the Patent Act does not provide guidance for situations where the two political bodies conflict in judgment. An additional complicating factor stems from our Constitutionally mandated national government structure that separates power between the Administration, Congress, and the Courts. In a case decided today, the Federal Circuit says that the PTO’s invalidity decisions trump prior Court Decisions.
In Fresenius USA v. Baxter Int’l. (Fed. Cir. 2013), the Federal District Court granted “Summary Judgment of Validity” of a number of Baxter’s claims found in its U.S. Patent No. 5,247,434. (A kidney dialysis apparatus with a touch screen). In a 2009 decision, the Federal Circuit affirmed a portion of the validity decision – leaving Baxter with a handful of judicially proclaimed valid claims. In a parallel proceeding, the US Patent Office completed its reexamination of the patent and found the identical claims invalid and that decision was affirmed on appeal. The timing is somewhat important and so here is the chronological order:
- Court holds patent claims valid on summary judgment and proceeds toward Final Judgment.
- PTO finds patent claims invalid in reexamination.
- Court issues final judgment enforcing patent claims.
- Federal Circuit affirms PTO invalidity finding.
Although the district court did not stay its proceedings, the court was slow enough so that the PTO’s invalidity finding came before the court issued a final judgment in the case. That delay was key, according to the Federal Circuit decision here, since it divested the court of subject matter jurisdiction over the dispute. The Court explained, because of the USPTO decision, “Baxter no longer has a cause of action.”
The Federal Circuit went on to explain that the 2007 validity decision does not count as a final decision for res judicata purposes because it did not conclude the case as a whole.
The majority opinion was written by Judge Dyk and joined by Judge Prost.
In a 30 page dissent, Judge Newman argues that the majority ruling is an unconstitutional violation of separation of powers:
The court today authorizes the Patent and Trademark Office, an administrative agency within the Department of Commerce, to override and void the final judgment of a federal Article III Court of Appeals. The panel majority holds that the entirety of these judicial proceedings can be ignored and superseded by an executive agency’s later ruling.
This holding violates the constitutional plan, for “Judgments, within the powers vested in courts by the Judiciary Article of the Constitution, may not lawfully be revised, overturned or refused faith and credit by another Department of Government.” Chi. & S. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103 (1948).
It is likely that Baxter will file a petition for writ of certiorari.