By
Kevin E. Noonan —

In
a case that raises important issues of perhaps Constitutional dimensions (at
least in Circuit Court Judge Newman's view), the Biotechnology Industry Organization
(BIO) urged the Federal Circuit to rehear the panel decision en banc in Fresenius v. Baxter Int'l.  According
to the Federal Circuit, the question the panel addressed was "Whether
under the reexam statute, the cancellation of claims by the Patent and Trademark
Office is binding in pending district court infringement litigation."  But BIO, as well as others, have posed the
question differently:  when is a district court decision "final" for
purposes of later PTO determination of invalidity?

To recap the facts and circumstances of
the decision, the suit arose from a declaratory judgment action by Fresenius
against Baxter over U.S. Patent Nos. 5,247,434
(and two others no longer at issue).  After a protracted procedural history, the District Court granted
judgment in favor of Baxter, finding that Fresenius had not established
invalidity of the '434 claims by clear and convincing evidence, and the Federal
Circuit affirmed (but, importantly for the issue at bar, vacated an injunction
and royalty award an remanded to the District Court for reconsideration).  The District Court on remand awarded
Baxter post verdict damages at a reduced royalty rate and entered final
judgment.  Fresenius USA, Inc. v. Baxter Int'l, Inc., No.
03-CV-1431, 2012 WL 761712 (N.D. Cal. Mar. 8, 2012).

Meanwhile, however, Fresenius had filed
a parallel ex partes reexamination in
the PTO (filed two years after the lawsuit).  In this action, the very same claims at issue before the District Court
were found invalid, a decision affirmed by the Board of Patent Appeals and
Interferences (now, the Patent Trial
and Appeal Board) in Ex parte Baxter, Int'l,
Inc.,
No. 2009-006493, 2010 WL 1048980 (B.P.A.I. Mar. 18, 2010) and
the Federal Circuit in In re Baxter Int'l, Inc.,
678 F.3d 1357 (Fed. Cir. 2012).  In this action, the Federal Circuit majority
held that, because there was
not "final judgment" in the district court action, the Court was
bound by the PTO determination and reversed the District Court decision in
Baxter's favor and remanded with instruction to dismiss (equivalent to entering
judgment in favor of Fresenius).

Like Judge Newman in dissent, BIO's
amicus brief focuses on the importance of finality and issue preclusion in the
circumstances in this case.  BIO's brief
makes three points:

• The Court should revisit the
panel majority's "final judgment" requirement.

• En banc reconsideration is necessary
to "resolve ambiguity" in the Court's precedent.

• Equitable factors and their role
should be considered on remand.

The panel's "final judgment"
requirement was the principle basis for the majority decision, i.e., that in order for the later
determination of invalidity to not govern the district court decision needed to
be "final" under Mendenhall v.
Barber-Greene Co., 26 F.3d. 1573 (Fed. Cir. 1994).  Because, in the majority view the decision
was not final under well-settled precedent, the PTO determination mooted the
district court action.  BIO cites Judge
Newman's dissent with regard to the question of issue preclusion, wherein
courts generally do not revisit a ruling on an issue "that was fairly
litigated and conclusively decided."  The question here, and for the en banc court, is whether the majority or
Judge Newman was correct regarding whether the District Court decision on
invalidity was "final" under the circumstances in this case.

BIO's brief also notes that Federal
Circuit precedent is inconsistent on the question.  The brief notes that prior precedent require
concurrent PTO decisions in reexamination to be plead as an affirmative defense
and not "be given automatic effect."  The brief cited In re Swanson, 540 F.3d 1368, 1379 n.5 (Fed. Cir. 2008), and In re Baxter, 698 F.3d 1349 (Fed. Cir. 2012), to the effect that "final"
court decisions are not subject to reconsideration of "prior binding
judgment" by courts, citing "well-established principles of res judicata."  These principles include "a careful
consideration of the relationship of the parties, their claims for relief
against each other, [and] the transaction or occurrence that gave rise to the
litigation," among others.  BIO's
brief characterizes the panel majority decision as establishing a "bright
line rule" that a PTO determination "automatically, without regard
to choices made by the parties during years of litigation" (choices BIO
argues should be binding on the parties) gives effect to the PTO invalidity
determination.

In this regard BIO raises the specter
of increased post-grant procedures under the America Invents Act that will
likely increase the frequency with which courts are faced with contrary
decisions by the PTO on invalidity questions (if only because the presumptions,
standards of claim construction and burden of proof are so significantly
different in the PTO compared with patent infringement litigation).  BIO cites PTO statistics to the effect that
66% of reexamination and reissue proceedings initiated since November 1999
involved concurrent litigation, and that the number of inter partes reexamination/review proceedings have gone up while
the time for these proceedings in the Office is slated to be reduced to 18
months.  All of these factors, BIO
argues, suggest that the full court should clearly establish whether the panel
majority properly decided that judgment was not sufficiently "final"
to immunize that judgment from administrative overthrow.

BIO's final argument is that judges
may, and perhaps should, take equitable considerations into account.  Such considerations include delay,
inadvertence, fraud, or whether a party has requested a stay.  BIO analogizes the equitable factors that
could be considered with motions from relief from final judgment under Fed. R.
Civ. Pro. 60(b) as illustrated by the Court's decision in Flexiteek v. Plasteak, 2012 U.S. Dist. LEXIS 156086 (S.D. Fla.
Sept, 12, 2012) (granting the motion based on prevailing party misconduct), and Amado v. Microsoft, 517 F.3d 1353 (Fed
Cir. 2008) (denying the motion
because the defendant had not timely requested PTO review).

BIO argues that using such a "flexible
standard" would not interfere with the PTO or "change the impact of
[an adverse] PTO decision going forward."  The only parties affected will be those who have had "an ample
opportunity to litigate their position on patent validity" which
presumably should be enough.  And the
absence of access to equitable considerations can be expected to provide
incentives for defendants to file parallel post-grant review actions in the
PTO, and moreover "to wait as long as possible to file the reexamination
request to get a 'second bite at the apple'" to immunize against an
adverse district court decision.  This
behavior could even include filing multiple, successive post-grant review
actions that would delay settlement and provide opportunities to "game"
the system due to the possibility that any "successful challenge at the
PTO would trump any prior federal court ruling" provided that no final
judgment on "each and every issue" had been entered.  This would be inconsistent with Congressional
intent, according to BIO, because these post-grant review provisions were enacted
to provide an alternative and reduce the burden on parties and the courts in
resolving issues of patent invalidity and infringement, not encourage "war
on two fronts" for patentees.

There
are several reasons why the Supreme Court should remand for en banc consideration any panel decision
for which it is inclined to grant certiorari.  First, insofar as the Court continues to
believe that the Federal Circuit brings any form of particular expertise to
questions of patent law, en banc
consideration would give the Court the benefit of that expertise.  Second, remand would provide the Federal
Circuit with the opportunity to expand on its opinion in ways that might inform
the Court as to the bases for its decisions, both as matters of law and policy,
that are not readily provided by the parties and amici, if for no other reason
than that no party can be expected to have the perspective of the appellate
court that will need to implement whatever decision the Court hands down (see, e.g.,
CLS Bank).  Such a remand would also signal the Federal
Circuit that the Court perceives some deficiency in the panel reasoning or
believes the panel erred, and would give the full court the opportunity to
correct the error or explain its reasoning more fully.  Indeed, upon further review, the en banc court
might arrive at a decision that does not need review on certiorari, sparing the Court the burden of considering the issues
(and sparing the rest of us from having to decipher the Court's meaning).  Until such time as the Supreme Court
recognizes these and other advantages of remanding panel decisions to the
Federal Circuit so it can have the full court's views, prudence suggests that
in cases such as this one the Federal Circuit avail itself of the opportunity
to reconsider, if only to avoid another instance of the Supreme Court
undermining its institutional authority in matters of patent law.