Judges: Newman (dissenting), Lourie (author),
[Appealed from Board]
In In re Baxter International, Inc., No. 11-1073 (Fed. Cir. May 17, 2012), the Federal Circuit affirmed the Board's decision that claims of U.S. Patent No. 5,247,434 ("the '434 patent") are invalid as obvious, despite the claims having been held valid in an earlier appeal from a district court.
The '434 patent is entitled "Method and Apparatus for Kidney Dialysis," and is owned by Baxter International, Inc. ("Baxter"). The '434 patent is directed to hemodialysis machines with touch screen user interfaces, and, according to the specification, permits dialysis machine operators to control the parameters of dialysis and deliver specified dialysate solutions.
In 2003, the '434 patent was subject to litigation when Fresenius Medical Care Holdings, Inc. ("Fresenius") sued Baxter for a declaration of patent invalidity. After a jury found the '434 patent claims invalid as obvious, the district judge granted Baxter's JMOL motion, finding that Fresenius failed to meet the clear and convincing evidentiary standard. Fresenius Med. Care Holdings, Inc. v. Baxter Int'l, Inc., No. C 03-1431 SBA, 2007 WL 518804, at *1 (N.D. Cal. Feb. 13, 2007). Fresenius appealed the district court's JMOL ruling to the Federal Circuit, but the Federal Circuit affirmed, explaining that "Fresenius failed to present any evidence—let alone substantial evidence—that the [disputed limitations], or an equivalent thereof, existed in the prior art." Slip op. at 5 (quoting Fresenius USA, Inc. v. Baxter Int'l, Inc., 582 F.3d 1288, 1299 (Fed. Cir. 2009)).
In 2006, in parallel with the Fresenius litigation, the PTO reexamined the '434 patent upon request by Fresenius and rejected the claims as obvious. Baxter appealed the rejection to the Board. Before the Board issued a decision, the Federal Circuit affirmed Baxter's JMOL motion and upheld the claims.
Upon petition by Baxter, the Director ordered the Board to consider the Federal Circuit's Fresenius decision when reviewing the examiner's rejections. The Board, however, affirmed the examiner's rejections of the '434 patent claims despite the contrary result by the Federal Circuit in affirming the district court's decision. The Board explained that "a lower standard of proof and the broadest reasonable interpretation standard of claim construction apply at the PTO," as compared to a district court, "and therefore the agency is not bound by the court's determination." Id. at 6-7 (quoting Ex parte Baxter Int'l, Inc., No. 2009-006493, 2010 WL 1048980, at *12 (B.P.A.I. Mar. 18, 2010)). Baxter appealed.
"[E]ven with a more lenient standard of proof, the
PTO ideally should not arrive at a different conclusion [than a
court]," but "the fact is that Congress has provided for
a reexamination system that permits challenges to patents by third
parties, even those who have lost in prior judicial
Slip op. at 15.
On appeal, the Federal Circuit held that substantial evidence supported the Board's finding that the prior art disclosed the "means for controlling" and "means for delivering" claim limitations. The Court rejected Baxter's argument that the Board erred by ignoring the Federal Circuit's decision and not giving serious consideration to the district court's decision. The Court noted that the Board expressly considered the Court's Fresenius decision, and further, that the PTO and the courts "take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions." Id. at 13-14 (quoting In re Swanson, 540 F.3d 1368, 1377 (Fed. Cir. 2008)). The Court held that "because the two proceedings necessarily applied different burdens of proof and relied on different records," the PTO did not err in reaching a different conclusion than the district court. Id. at 15. The Court noted that "even with a more lenient standard of proof, the PTO ideally should not arrive at a different conclusion [than a court]," but that "the fact is that Congress has provided for a reexamination system that permits challenges to patents by third parties, even those who have lost in prior judicial proceedings." Id. The Court stated that "[it] could not conclude that the PTO was barred from conducting the reexamination of the '434 patent because of the final judgment in Fresenius," and affirmed the Board's determination that the claims were not patentable. Id. at 16.
In dissent, Judge Newman stated that with its decision, "the court violate[d] not only the constitutional plan, but also violate[d] the rules of litigation repose as well as the rules of estoppel and preclusion . . . ." Newman Dissent at 1. Judge Newman further stated that "[a] patent that has been adjudicated to be valid cannot be invalidated by administrative action, any more than a patent adjudicated to be invalid can be restored to life by administrative action." Id. at 5. Judge Newman contended that the majority's reliance on the different standards of proof was flawed because "obviousness is a question of law, and the PTO, like the court, is required to reach the correct conclusion on correct law." Id. at 9. In Judge Newman's view, "[t]he court's final judgment cannot be overridden by administrative proceeding." Id. at 10.
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