Court Opinion

ID: 810897
Source: CourtListenerOpinion
Date Created: 2012-10-26 15:10:45+00
Date Added: 2024-06-11T15:10:44.720531
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                __________________________

       IN RE BAXTER INTERNATIONAL, INC.
              __________________________

                        2011-1073
                __________________________

    Appeal from the United States Patent and Trademark
Office, Board of Patent Appeals and Interferences in
Reexamination No. 90/007,751.
              __________________________

     ON PETITION FOR PANEL REHEARING AND
             REHEARING EN BANC
            __________________________

    WILLIAM F. LEE, Wilmer Cutler Pickering Hale and
Dorr, LLP, of Boston, Massachusetts, filed a combined
petition for panel rehearing and rehearing en banc for the
appellant. With him on the petition were WILLIAM G.
MCELWAIN, DAVID L. CAVANAUGH, TODD C. ZUBLER,
THOMAS G. SAUNDERS and HEATHER M. PETRUZZI, of
Washington, DC.
    RAYMOND T. CHEN, Solicitor, Office of the Solicitor,
United States Patent and Trademark Office, of Alexan-
dria, Virginia, filed a response to the petition for appellee.
With him on the response were SYDNEY O. JOHNSON, JR.
and SCOTT C. WEIDENFELLER, Associate Solicitors. Of
counsel was JANET A. GONGOLA, Associate Solicitor.
                __________________________
IN RE BAXTER INTL                                         2

 Before RADER, Chief Judge, NEWMAN, LOURIE, BRYSON,
   LINN, DYK, PROST, MOORE, O’MALLEY, REYNA, and
              WALLACH, Circuit Judges.
O’MALLEY, Circuit Judge, with whom RADER, Chief Judge,
 and LINN, Circuit Judge, joins, concurs in the denial of
          the petition for rehearing en banc.
     NEWMAN, Circuit Judge, dissents from the denial of
         the petition for rehearing en banc.
PER CURIAM.
                       ORDER
     A combined petition for panel rehearing and rehear-
ing en banc was filed by Appellant, and a response thereto
was invited by the court and filed by Appellee. The peti-
tion for rehearing was considered by the panel that heard
the appeal, and thereafter the petition for rehearing en
banc and the response were referred to the circuit judges
who are authorized to request a poll of whether to rehear
the appeal en banc. A poll was requested, taken, and
failed.
   Upon consideration thereof,
   IT IS ORDERED THAT:
    (1) The petition of Appellant for panel rehearing is
denied.
    (2) The petition of Appellant for rehearing en banc is
denied.
    (3) The mandate of the court will issue on November
2, 2012.
3                            IN RE BAXTER INTL

                       FOR THE COURT

    October 26, 2012   /s/ Jan Horbaly
         Date          Jan Horbaly
                       Clerk
  United States Court of Appeals
      for the Federal Circuit
               __________________________

      IN RE BAXTER INTERNATIONAL, INC.,
             __________________________

                       2011-1073
               __________________________

    Appeal from the United States Patent and Trademark
Office, Board of Patent Appeals and Interferences in
Reexamination No. 90/007,751.
              __________________________

O’MALLEY, Circuit Judge, concurring, with whom RADER,
Chief Judge, and LINN, Circuit Judge join.

    I concur in the denial of the request for rehearing en
banc. I do so, however, premised on my understanding
that the panel opinion does not, as the dissent claims and
the petition for rehearing en banc assumes, endorse
“administrative nullification of a final judicial decision.”
In re Baxter, Int’l Inc., 678 F.3d 1357, 1366 (Fed. Cir.
2012) (Newman, J., dissenting). Nothing in this opinion,
or in those on which it relies, alters the governing legal
principles of res judicata or abandons the concept of
finality those principles further.
    The majority here concludes—rightly in my view—
that a prior court decision in which a party has failed to
prove a patent invalid does not bar the Patent and Trade-
mark Office (PTO) from subsequently reexamining that
same patent. And, it concludes that, despite a final court
IN RE BAXTER INTL                                         2

judgment reaching a contrary conclusion as between the
patent holder and one alleged infringer, the PTO is free to
conclude that the patent is, indeed, invalid. That proposi-
tion is an unremarkable one.
     In a court proceeding, a patent is not found “valid.” A
judgment in favor of a patent holder in the face of an
invalidity defense or counterclaim merely means that the
patent challenger has failed to carry its burden of estab-
lishing invalidity by clear and convincing evidence in that
particular case—premised on the evidence presented
there. See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1429 n.3
(Fed. Cir. 1988). If the PTO later considers the validity of
that same patent, it does so based on the evidence before
it and under the lesser burden of proof that applies in
reexamination proceedings. As the majority notes, Con-
gress granted the PTO the right to act within the realm of
its authority. In re Baxter, Int’l Inc. 678 F.3d at 1365.
    These conclusions do not mean, however, that, when
the PTO does act in the context of a reexamination pro-
ceeding, its conclusions can alter the binding effect of a
prior judgment in a judicial proceeding. They cannot, and
the PTO concedes as much in its response to the petition
for rehearing en banc when it states that “[i]f a federal
court awards relief to a patent holder against an in-
fringer, a subsequent reexamination decision that the
patent is invalid does not disturb the judgment of the
court or alter its binding effect on the parties.” PTO
Response at 14. This concession is consistent with, and
dictated by, well-established principles of res judicata.
See San Remo Hotel, L.P. v. City & Cnty. of S.F., 545 U.S.
323, 336 n.16 (2005) (“Under res judicata, a final judg-
ment on the merits of an action precludes the parties or
their privies from relitigating issues that were or could
have been raised in that action.”); see also Reed v. Allen,
286 U.S. 191, 198-99 (1932) (“[the] well-established doc-
3                                         IN RE BAXTER INTL

trine of res judicata [was] conceived in the light of the
maxim that the interest of the state requires that there be
an end to litigation—a maxim which comports with
common sense as well as public policy.”); Foster v. Hallco
Mfg Co., Inc., 947 F.2d 469, 475-76 (Fed. Cir. 1991) (“The
principles of law denominated ‘res judicata’ embody the
public policy of putting an end to litigation.”).
    The dissent’s fears, and the premise of the petition for
rehearing en banc are unfounded.          Well-established
principles of res judicata will govern the continuing
relationship between the parties to any court proceeding
and will dictate whether the PTO’s reexamination ruling
will have any impact on them going forward. Reassured
by this fact, I concur in the denial of the request for
rehearing en banc in this matter.
  United States Court of Appeals
      for the Federal Circuit
               __________________________

       IN RE BAXTER INTERNATIONAL, INC.
              __________________________

                       2011-1073
               __________________________

    Appeal from the United States Patent and Trademark
Office, Board of Patent Appeals and Interferences in
Reexamination No. 90/007,751.
              __________________________

    NEWMAN , Circuit Judge, dissenting from denial of the
petition for rehearing en banc.
     Baxter requests rehearing en banc, for the court holds
that a final judgment of this court, after trial and appeal,
has no preclusive effect on administrative agency review
of the same issue on the same evidence—and also has no
preclusive effect on our judicial redetermination of the
same issue on the same evidence. Thus the loser in the
initial adjudication need only seek reexamination of the
patent that was finally adjudged to be infringed, and the
agency is authorized to start again, again encumbering
the patent. This principle is critically at odds with the
tenets of repose and conclusiveness of judicial determina-
tion:
   This general rule is demanded by the very object
   for which civil courts have been established,
   which is to secure the peace and repose of society
   by the settlement of matters capable of judicial
   determination. Its enforcement is essential to the
IN RE BAXTER INTL                                           2

    maintenance of social order; for the aid of judicial
    tribunals would not be invoked for the vindication
    of rights of person and property if, as between
    parties and their privies, conclusiveness did not
    attend the judgments of such tribunals in respect
    of all matters properly put in issue, and actually
    determined by them.
Southern Pac. R.R. v. United States, 168 U.S. 1, 49 (1897).
    Nonetheless, the Federal Circuit today again endorses
this departure from established judicial and administra-
tive process. This departure directly confronts the Consti-
tution, for “[j]udgments, 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.
Airlines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 114
(1948). I respectfully dissent.1
                        DISCUSSION
    The court holds that the Federal Circuit’s final deci-
sion of patent validity, upon full trial and appeal,2 is of no
effect on subsequent redetermination of patent validity by
the Patent and Trademark Office, and of no effect on the
Federal Circuit’s subsequent review of that redetermina-
tion. However, issues that have been litigated and finally

    1
        I take note of my concurring colleague’s support
for this inaction, offering the hope that “res judicata will
govern.” However, res judicata did not govern, and the
court's refusal to reconsider the issue assures that res
judicata will not govern.
    2
        Fresenius Med. Care Holdings, Inc. v. Baxter Int’l,
Inc., No. C 03-1431 SBA, 2007 WL 518804 (N.D. Cal. Feb.
13, 2007), aff’d, Fresenius USA, Inc. v. Baxter Int’l, Inc.,
582 F.3d 1288 (Fed. Cir. 2009).
3                                          IN RE BAXTER INTL

adjudicated, are finally decided. As the Court reiterated
in Marrese v. American Academy of Orthopaedic Sur-
geons, 470 U.S. 373, 390–91 (1985), "a party is precluded
from asserting a claim that he had a ‘full and fair oppor-
tunity’ to litigate in a prior action.” There is no issue in
this case of previously unavailable information, or fraud,
or any other reason for discarding the finality of the final
adjudication. See San Remo Hotel, L.P. v. City & Cnty. of
San Francisco, 545 U.S. 323, 336 n.16 (“Under res judi-
cata, a final judgment on the merits of an action precludes
the parties or their privies from relitigating issues that
were or could have been raised in that action”). Relitiga-
tion in the guise of inter partes reexamination is not
liberated from these constraints.
    My concern is not with the principle of patent reex-
amination and the useful purposes for which it was de-
signed; my concern is that reexamination is inappropriate
for redetermination of issues that have been finally de-
termined in judicial proceedings. Since only valuable
patents on successful inventions are litigated, the court
has created an additional burden and disincentive to
inventors, for reexamination after a patent has been
sustained in court is a multiplier of cost, delay, and uncer-
tainty, in direct negation of the principles of res judicata.
    The patent here at issue is for an invention that Bax-
ter commercially developed and is marketing. The patent
was granted in 1993. The litigation was initiated by
Fresenius in 2003 by declaratory action. The action was
decided by the district court in 2007, sustaining patent
validity, and the appeal to the Federal Circuit was de-
cided in 2009, sustaining patent validity. See n.2 supra.
A reexamination request was filed by Fresenius in 2005,
and in 2010 the Board of Patent Appeals and Interfer-
ences, stating that “the agency is not bound by the court’s
determination,” BPAI Op. at 26, decided the same issues
IN RE BAXTER INTL                                           4

of patent validity on the same evidence, to contrary re-
sult.3
    The appeal is again in the Federal Circuit, with this
court deferring to the PTO's decision as “substantially”
supported, and refusing to recognize our own final deci-
sion three years earlier on the same evidence. Although
patent validity is a question of law, the court declines de
novo review, refuses to be bound by our prior decision,
and authorizes the agency to overrule the court, all with-
out a nod to finality, or correctness, or res judicata, or the
Constitution.
    Finality is central to legal systems, and “‘has found its
way into every system of jurisprudence, not only from its
obvious fitness and propriety, but because without it, an
end could never be put to litigation.’” San Remo Hotel,
545 U.S. at 336–37 (quoting Hopkins v. Lee, 19 U.S. (6
Wheat.) 109, 114 (1821)). Those who bring inventions
into commerce depend on the repose created by final
judgments. Patents are increasingly litigated, perhaps
due to the importance of today's technologies, but after
the litigation is done, the prevailing party is entitled to
rely on the final judgment. “Public policy dictates that
there be an end of litigation; that those who have con-
tested an issue shall be bound by the result of the contest,
and that matters once tried shall be considered forever
settled as between the parties.” Federated Dep’t Stores,
Inc. v. Moitie, 452 U.S. 394, 401 (1981) (quoting Baldwin
v. Traveling Men's Ass’n, 283 U.S. 522, 525 (1931)).
    The Constitution and the Court leave no doubt that
final judgments are final. Even if a court errs in its

    3
       Ex parte Baxter Int’l, Inc., No. 2009-006493, 2010
WL 1048980 (B.P.A.I. Mar. 18, 2010) (“BPAI Op.”); Ex
parte Baxter Int’l, Inc., No. 2009-006493, 2010 WL
3032865 (B.P.A.I. July 20, 2010) (rehearing denied).
5                                          IN RE BAXTER INTL

judgment, that does not deprive the decision of its finality.
See Johnson v. Watkins, 101 F.3d 792, 795 (2d Cir. 1996)
(“the occasional permanent encapsulation of a wrong
result is a price worth paying to promote the worthy goals
of ending disputes and avoiding repetitive litigation”).
Patent rights, like other commercial and property rights,
are not immune from this fundamental judicial principle.
In Gordon v. United States, 117 U.S. 697, 702 (1865) the
Court reiterated that judgments of Article III courts are
“final and conclusive upon the rights of the parties.”
    Here, the parties are the same in the litigation and
the reexamination. In the earliest days of this nation, it
was established that “Congress cannot vest review of the
decisions of Article III courts in officials of the Executive
Branch.” Plaut v. Spendthrift Farm, Inc., 514 U.S. 211,
218 (1995) (citing Hayburn's Case, 2 U.S. (2 Dall.) 409
(1792)). The Court has reinforced these principles as the
complexity of the administrative state has increased, and
has stressed that “Article III, §1 safeguards the role of the
Judicial Branch in our tripartite system by barring con-
gressional attempts ‘to transfer jurisdiction [to non-
Article III tribunals] for the purpose of emasculating’
constitutional courts.’”      Commodity Futures Trading
Comm’n v. Schor, 478 U.S. 833, 850 (1986) (brackets in
original, citations omitted).
     The judicial power as established in Article III is “an
inseparable element of the constitutional system of checks
and balances.” N. Pipeline Constr. Co. v. Marathon Pipe
Line Co., 458 U.S. 50, 58 (1982). Patent reexamination is
not an exception to the constitutional structure. Its
review of patentability clarifies the patent grant, but not
without cognizance of any intervening litigation. The
intent was that a reexamination system could avoid
litigation; not that it could overturn the result of litiga-
tion. See Patent Reexamination: Hearing on S. 1679
IN RE BAXTER INTL                                           6

Before the Senate Comm. on the Judiciary, 96th Cong.
15–16 (1979) (statement of Comm’r Sidney Diamond)
    Reexamination would eliminate or simplify a sig-
    nificant amount of patent litigation. In some
    cases, the PTO would conclude as a result of reex-
    amination that a patent should not have issued.
    A certain amount of litigation over validity and in-
    fringement thus would be completely avoided.
See also, e.g., 126 Cong. Rec. 30,364 (1980) (statement of
Sen. Bayh) (“Reexamination would allow patent holders
and challengers to avoid the present costs and delays of
patent litigation. . . . Patent reexamination will also
reduce the burden on our overworked courts by drawing
on the expertise of the Patent and Trademark Office.”);
126 Cong. Rec. 29,901 (1980) (statement of Rep. Hollen-
beck) (“As a result of the provision for reexamination, the
potential conflict can be settled by the Patent Office itself
in far shorter time and at far smaller expense to the
challenger or to the patent holder than would be the case
if the only recourse was through the court system.”).
    My colleagues state that the Federal Circuit is justi-
fied in refusing to be bound by our own final decision of
the same issue, by purporting to apply a different stan-
dard of review. However, patent validity is a question of
law; law is not subject to deferential determination. See
Beachcombers, Int'l, Inc. v. WildeWood Creative Prods.,
Inc., 31 F.3d 1154, 1163 (Fed. Cir. 1994) (claims must be
interpreted the same way at the PTO as they are in the
courts). It is time for this court to confront its conflicting
precedent, founded in Standard Havens Products, Inc. v.
Gencor Industries, Inc., 996 F.2d 1236, 1993 WL 172432
(Fed. Cir. May 21, 1993), where this court held that
"contrary to the assumption of the trial court, the reex-
amination proceeding 'would control' the infringement
7                                                  IN RE BAXTER INTL

suit." Id. See also In re Translogic Tech., Inc., 504 F.3d
1249 (Fed. Cir. 2007); Translogic Tech., Inc. v. Hitachi,
Ltd., 250 Fed. Appx. 988 (Fed. Cir. 2007). The message
has not escaped practitioners, see, e.g., Gregory V. Novak,
Concurrent Reexaminations as a Strategic Patent Litiga-
tion Defense Tool, Practicing Law Institute Intellectual
Property Course Handbook, at 818–23 (Sept–Nov 2010);
Wayne B. Paugh, The Betrayal of Patent Reexamination:
An Alternative to Litigation, Not a Supplement, 19 Fed.
Cir. B.J. 177 (2009–2010).
     These departures from the constitutional require-
ments of judicial authority require attention, for the
holding that reexamination can override the finality of
final judicial is having enlarged impact.4 The PTO grants
most requests for reexamination, see USPTO Reexamination
Filing Data – June 30, 2012, http://www.uspto.gov/patents/stats/index.jsp
(granting 92% of ex parte and 94% of inter partes reexami-
nation requests), and a patent in reexamination carries a
“stigma of uncertainty regarding entitlement to the
patent,” Bruning v. Hirose, 161 F.3d 681, 685 (Fed. Cir.
1998).
     It is time for the court to resolve the concerns and con-
flicts it has created.

    4
       My concurring colleague deems it “unremarkable”
that the PTO is authorized to overturn a ruling finally
decided between the same parties in litigation. Such a
weighty matter should not be so casually dismissed.
“Deciding whether a matter has in any measure been
committed by the Constitution to another branch of
government, or whether the action of that branch exceeds
whatever authority has been committed, is itself a deli-
cate exercise in constitutional interpretation, and is a
responsibility” entrusted to the courts. Baker v. Carr, 369
U.S. 186, 211 (1962).