The Federal Circuit has denied a petition for rehearing en banc on the question of whether the PTO has the authority to overrule district court and Federal Circuit decisions. Fresenius USA, Inc. v. Baxter Int’l, Inc.
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.
During the pendency of the litigation, the PTO reexamined the patent and found it to be invalid as obvious based on substantially the same prior art used in the litigation. On appeal, the Federal Circuit relied on the differing burdens of proof between the two proceedings to affirm the PTO’s finding of invalidity. Judge Newman wrote a vigorous dissent from the panel decision.
The Federal Circuit has now denied a petition to rehear the case en banc by a narrow vote of 6-4 (with Judges Chen and Hughes not participating in the decision). Judge Dyk, joined by Judge Prost, wrote an opinion concurring in the denial to rehear the case. His position seems to be that infringement damage awards can be erased upon a finding of invalidity, even years after final court decisions have been affirmed on appeal.
Judge O’Malley, joined by Chief Judge Rader and Judge Wallach, wrote a dissent where they argued that the invalidity determination by the PTO would preclude infringement damage awards going forward, but the finality of the earlier court decisions means that those damage awards cannot be erased by a PTO determination. That is, the PTO is free to re-judge a patent’s invalidity, even over the same prior art reviewed by the courts, but the PTO is not permitted to overrule a final judicial determination of infringement and damages.
Finally, Judge Newman, who wrote a vigorous panel dissent, wrote another dissent on this issue. She argued that the PTO is not permitted to overrule court decisions. That is, she argued that once the courts have finally ruled on an issue such as invalidity over a particular piece of prior art, the PTO is not permitted to second guess the court and issue a different ruling. Executive agencies are not permitted to overrule Article III court decisions.
This case creates a serious litigation mess. Accused infringers are encouraged to seek multiple avenues of relief in the hope of winning at the PTO if things aren’t going well in litigation. This decision seems to suggest that district courts should stay proceedings where there is a parallel PTO proceeding in the case.