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IP Litigation

Fresenius USA, Inc. v. Baxter Int’l, Inc.

November 12, 2013

IP Litigation

Fresenius USA, Inc. v. Baxter Int’l, Inc.

November 12, 2013

Back to Fish's Litigation Blog

 

The original panel decision:  The panel’s decision (reported at 721 F.3d 1330) was the latest of a series of opinions involving Baxter’s patent infringement accusations against Fresenius; some procedural history is necessary for context.  In 2006, a jury had found all the claims of Baxter’s patents invalid, but the district court set aside the invalidity verdict on JMOL and ordered a re-trial on damages, which then resulted in a $23.5 million judgment against Fresenius and an injunction.  In 2009, the Federal Circuit set aside most of the JMOL, reinstated the first jury’s invalidity verdict as to all but four claims of one Baxter patent, and, as a result, vacated the injunction and remanded for reconsideration of an ongoing royalty that had been imposed for a period before the injunction took effect.  On remand, Fresenius moved for a new trial on pre-verdict damages (because there were now fewer patents at issue after the JMOL was set aside); the district court denied that motion but reduced the ongoing royalty rate.  Fresenius appealed from those orders, and, while that appeal was pending, the Federal Circuit in In re Baxter affirmed the PTO’s decision invalidating the four remaining claims in reexamination.

The panel held that the PTO’s now final decision canceling the remaining claims required them to vacate the district court’s $23.5 million judgment against Fresenius.  The panel agreed that the results of the reexamination would not have voided a “final judgment” against Fresenius but held there was no final judgment in the district court litigation because “several aspects of the district court’s original judgment remained unresolved, including royalties on infringing machines, royalties on related disposables, and injunctive relief,” and there can be no “final judgment” until all issues regarding remedies are resolved and there is “nothing for the court to do but execute the judgment.”  Slip op. at 20.  The panel distinguished “finality” in this context from the use of the term in other contexts, such as res judicata or appealability under 28 U.S.C. §§ 1295 or 1292, relying heavily on the Court’s prior decision in MendenhallId. at 19, 25.  The panel also found there was no separation of powers problem with giving effect to the PTO’s decision because the judgment in the district court litigation was not final.  Id. at 26-29.

The Rehearing petition:  The full court denied Baxter’s petition for rehearing en banc, with the panel majority members filing a concurrence and four judges dissenting:

  • Judge Dyk’s concurrence, joined by Judge Prost:  Responding to the dissenters, the panel majority members noted the dissents urge the “peculiar result” that “a  plaintiff should be allowed to secure damages for infringement of a patent that has been conclusively found invalid by the PTO.”  Concurrence at 2.  They reiterated the panel opinion’s conclusion that there had never been a final judgment in the district court proceedings based on three prior cases:  (1) Moffit (where the Supreme Court held that surrender of a patent in reissue cuts off a party’s rights for future relief but not damages already “recovered,” i.e., subject to an executable judgment), (2) Simmons (where the Third Circuit had found a patent invalid but remanded for damages proceeding on an accompanying unfair competition claim, then an intervening Supreme Court decision in a separate case found the patent was not invalid, and the Supreme Court’s decision was given effect in the first case), and (3) Mendenhall (where the Fed Cir had affirmed findings of infringement and no invalidity in a first case but remanded for determination of damages, then the Fed Cir in a separate case had affirmed a judgment the patent was invalid, and, when the first case came back for a subsequent appeal, the Fed Cir held that the final invalidity judgment from the second suit applied in the first suit because there was no final judgment as the issue of damages was still pending).  Id. at 2-4.  The concurrence distinguished a D.C. Circuit opinion cited by the dissent as “simply constru[ing] certain Congressional legislation as inapplicable to an earlier court decision,” and described Bosch as addressing finality under § 1292(c), “a very different question than the one presented here” because it deals with appealability.  Id. at 5 n.1.
  • Judge O’Malley’s dissent, joined by Chief Judge Rader and Judge Wallach:  These judges would have reheard the case en banc because they believed the judgment for past damages against Fresenius was final.  They argued that, in the first appeal, Fresenius did not raise the issue of pre-verdict damages, which therefore limited the open issues on remand to the scope of injunctive relief and a re-calculation of post-verdict royalties.  “The only live issues remaining in the case related to post-verdict relief.  And, even the live issues regarding post-verdict relief did not concern the right to such relief—which was established; the remand only asked that the court reconsider the scope of and formula used for such relief.  All other aspects of the case had been conclusively resolved.”  Dissent at 6.  This meant, in the dissenters’ view, that the issue of past damages was conclusively resolved and the resulting judgment on that issue was final.  They distinguished Mendenhall and Simmons because, in those cases, the amount of past damages was still in dispute at the time of the intervening decision, while, here, past damages were (in the dissent’s view) conclusively resolved before the PTO’s decision became final.  The dissenters argued the panel had created a circuit split with a D.C. Circuit decision which held that an applicant that had been wrongly denied an FCC license was still entitled to a remedy even though Congress had withdrawn the Commission’s authority to grant that type of license while remand proceedings on the nature of the remedy were pending in the agency.  Id. at 10-12.  And they believed the panel’s decision was inconsistent with Bosch, which took a “very liberal view of finality” and determined that “‘damages’ and ‘willfulness’ are sufficiently ‘ministerial’ to constitute no more than an ‘accounting,’” making a liability determination a “final” judgment under § 1292(c).  Id. at 16-19.  Although acknowledging that finality might be applied differently in the contexts of preclusion and appealability, the dissenters argued that “finality often may be applied less strictly for preclusion purposes than for purposes of appeal, not more so.”  Id. at 17 (emphases in original).  Finally, the dissenters expressed concern that the result here will impede the ability of patentees to obtain relief because the PTO frequently grants reexamination, Bosch creates an incentive for district courts to bifurcate damages and willfulness (thus extending the length of litigation), and, once district courts “come to understand the fragility of their judgments” they will stay every patent case where parallel PTO proceedings are pending rather than exercising sound case-by-case discretion when assessing stay requests.  Id. at 19-20 & n.9.
  • Judge Newman’s dissent:  Judge Newman reiterated her view (explained at length in her panel dissent) that “an executive branch agency [cannot] override the judgments of Article III courts, on the same issue and the same premises between the same parties.”  Dissent at 1.  She expressed concern that the Court had weakened the innovation incentive of the patent system by “reducing the reliability of the patent grant,” which could be a particular problem “for technologies that incur heavy development costs yet are readily copied.”  Id. at 2.  She also noted the potential for abuse of the reexamination system and the problem of duplicated efforts between the courts and the PTO, citing statistics showing at least 66% of patents that had undergone inter partes reexamination were also involved in litigation.
  • Note:  Judges Chen and Hughes did not participate in the decision on the petition.

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