PTO Overrules Federal Circuit


Baxter International is the owner of U.S. Patent No. 5,247,434, which relates to a hemodialysis machine.  In 2003, a Baxter competitor, Frenesius, filed a declaratory judgment action arguing that the patent’s claims were invalid.  The case was tried to a jury, which agreed that the claims were obvious at the time of the invention.  The district court disagreed, granting Baxter’s motion for judgment as a matter of law.  Several means-plus-function limitations were held to be absent from the cited prior art. 

In 2009, the Federal Circuit affirmed the district cout’s judgment, holding that there was not sufficient, much less clear and convincing, evidence that the claim limitation “means for delivering dialysate” was found in the cited prior art.  Interestingly, Judge Dyk filed a concurring opinion where he advocated a stay of the litigation pending the reexamination proceeding.  He seemed to foreshadow this case.

It is entirely possible that the U.S. Patent and Trademark Office will finally conclude that [the] claims . . . of the ’434 patent are also invalid.

Judge Newman also filed a concurring opinion where she argued that stays of litigation are within the court’s discretion.  Given that reexamination proceedings are now taking over 3 years to be finally resolved by the PTO, if litigation stays were mandatory, they could be used as a delay tactic by infringers.  She did respond to Judge Dyk’s assertion in a footnote.

Our colleague in concurrence appears to believe that a PTO decision on reexamination will override a judicial decision reached after trial and appeal. That is incorrect. All that can be accomplished is delay.

Little did she know . . .


Simultaneously with the litigation, the PTO began reexamination proceedings on the ’434 patent in 2006.  The examiner rejected the claims as obvious based on the same primary prior art reference combined with some secondary references.  While the reexamination was pending at the Board of Appeals, the Federal Circuit issued its 2009 opinion affirming the validity of the claims in the Frenesius litigation. 

The BPAI affirmed the examiner’s rejection.  Specifically, the Board held that due to the lower standard of proof required to prove invalidity in a reexamination proceeding than in litigation, and that the PTO must use the broadest reasonable claim interpretation, the Board was not board by the Federal Circuit’s decision.  Baxter appealed the Board’s reexamination decision to the Federal Circuit.

Federal Circuit, Part II

The Federal Circuit affirmed the Board’s rejection of the claims, specifically agreeing with the Board’s analysis of the different burdens of proof.

More fundamentally, 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.”

Thus, because the two proceedings necessarily applied different burdens of proof and relied on different records, the PTO did not err in failing to provide the detailed explanation now sought by Baxter as to why the PTO came to a different determination than the court system in the Fresenius litigation.

One wonders what was the point of the first litigation if it can simply be overruled by the PTO in a proceeding that largely relies on the same evidence presented to a district court whose decision was affirmed by the Federal Circuit.  It seems like a waste of judicial and PTO resources to be able to relitigate the same or nearly the same issue again at the PTO.  Due to res judicata (law of the case, claim preclusion, issue preclusion, etc.), this cannot be done in successive court proceedings.  The Federal Circuit blames Congress.

[T]he 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.

Only Judge Newman returned to the panel from the litigation appeal.  In the reexamination appeal, she provides a vigorous dissent.  She seems incredulous that the court should permit an administrative agency to nullify a decision of a federal court.  She is not aware of any counterpart in other areas of the law where an agency can override a court decision.  She supports reexamination as an efficient and economical alternative to litigation, but does not believe it was intended to negate the results of litigation.

Even the differences in burdens of proof should not permit an agency to disregard or overturn a court’s final decision.  Obviousness is a question of law.  If the court erred in its earlier decision, the remedy is judicial reopening, not agency disregard.

America Invents Act Implications

This issue is going to arise more often in the future due to the America Invents Act.  Inter Partes Review and Post Grant Review proceedings may lead to more determinations of validity by the PTO.  When these are filed after or in conjunction with litigation, there may be more disparate validity determinations. 

In this really what Congress intended?  Infringers and competitors can get multiple attempts to invalidate patents?  If they lose in one venue, they can simply re-file the case in another venue?  What a waste of judicial and PTO resources.

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6 Responses to “PTO Overrules Federal Circuit”

  1. Terry Cole Says:

    Would it really be so bad, having multiple opportunities to invalidate patents? Since the things are a limitation on the rights of the many in favour of the rights of the few, I’d regard that as a good thing. But Newman is right to be flabbergasted. On its face this is the executive branch exercising a judicial function. Certiorari, here we come.

    • Matt Osenga Says:

      Not so bad if you never want a final disposition of any patent case. This would significantly weaken patent protection. Perhaps inventors will simply keep their inventions secret rather than risk multiple opportunities of invalidation.

  2. Pete Austin Says:

    The competitor in this case did not lose in one venue and then refile. As you say, proceedings were proceeding simultaneously. The problem was that the court was more efficient than the PTO and finished first, only to be overruled.

  3. castelli romani Says:

    castelli romani…

    [...]PTO Overrules Federal Circuit « INVENTIVE STEP[...]…

  4. silver price Says:

    Still, I can’t help but believe ruling of the Southern District of Georgia is at least a little bizarre, although admittedly, I am projecting a bit here since my view tends to be more in line with those district court judges that refuse to grant a stay of litigation. While it is true that the USPTO will grant the overwhelming majority of requests for reexamination, and while it is true that the overwhelming majority of those cases result in either the loss or modification of claims, the Patent Office takes several years to conclude many, if not most, reexamination proceedings. Allowing the status quo to continue in the meantime seems fundamentally unfair, particularly given that a patent is a wasting, time limited asset.

  5. The PTO’s Authority to Overrule Court Decisions | INVENTIVE STEP Says:

    […] The saga of this case is entering its second decade.  Fresenius originally sued Baxter for a declaratory judgment that U.S. Patent No. 5,247,434 was invalid.  The district court held otherwise and the Federal Circuit affirmed that decision. […]

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