721 F.3d 1330 (Fed. Cir. 2013), 2012-1334, Fresenius USA, Inc. v. Baxter Intern., Inc.

Docket Nº:2012-1334, 2012-1335.
Citation:721 F.3d 1330, 107 U.S.P.Q.2d 1365
Opinion Judge:DYK, Circuit Judge.
Party Name:FRESENIUS USA, INC., and Fresenius Medical Care Holdings, Inc., Plaintiffs-Appellants, v. BAXTER INTERNATIONAL, INC., and Baxter Healthcare Corporation, Defendants-Cross Appellants.
Attorney:Juanita R. Brooks, Fish & Richardson, P.C., of San Diego, CA, argued for plaintiffs-appellants. With her on the brief was Michael E. Florey, of Minneapolis, MN. Michael J. Abernathy, K & L Gates, LLP, of Chicago, IL, argued for defendants-cross appellants. With him on the brief were Sanjay K. Mur...
Judge Panel:Before NEWMAN, DYK, and PROST, Circuit Judges. Dissenting opinion filed by Circuit Judge NEWMAN. NEWMAN, Circuit Judge, dissenting.
Case Date:July 02, 2013
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1330

721 F.3d 1330 (Fed. Cir. 2013)

107 U.S.P.Q.2d 1365

FRESENIUS USA, INC., and Fresenius Medical Care Holdings, Inc., Plaintiffs-Appellants,

v.

BAXTER INTERNATIONAL, INC., and Baxter Healthcare Corporation, Defendants-Cross Appellants.

Nos. 2012-1334, 2012-1335.

United States Court of Appeals, Federal Circuit.

July 2, 2013

Page 1331

Juanita R. Brooks, Fish & Richardson, P.C., of San Diego, CA, argued for plaintiffs-appellants. With her on the brief was Michael E. Florey, of Minneapolis, MN.

Michael J. Abernathy, K & L Gates, LLP, of Chicago, IL, argued for defendants-cross appellants. With him on the brief were Sanjay K. Murthy and Devon C. Beane; and David A. Simons, of Boston, MA.

Before NEWMAN, DYK, and PROST, Circuit Judges.

Dissenting opinion filed by Circuit Judge NEWMAN.

OPINION

DYK, Circuit Judge.

Appellants Fresenius USA, Inc. and Fresenius Medical Care Holdings, Inc. (collectively, " Fresenius" ) brought a declaratory judgment action against Baxter International, Inc., and Baxter Healthcare Corporation (collectively, " Baxter" ), alleging, inter alia, that claims 26-31 of U.S. Patent No. 5,247,434 (" the '434 patent" ) were invalid and not infringed. Baxter counterclaimed for infringement. The district

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court entered judgment against Fresenius, finding the specified '434 claims infringed and not invalid. On appeal, the parties did not contest infringement. We affirmed the determination that the claims were not invalid, but remanded to the district court to reconsider its injunction and post-verdict damages.

While the litigation was pending on remand, the United States Patent and Trademark Office (" PTO" ) completed a reexamination of the '434 patent and determined that all asserted claims were invalid. We affirmed the PTO's determination in the reexamination proceeding, and our mandate issued. Meanwhile the district court entered judgment against Fresenius in the pending infringement proceedings. Both parties appealed. In light of the cancellation of the asserted claims of the '434 patent, and the fact that the infringement suit remains pending before this court, Fresenius argues that Baxter no longer has a cause of action. We agree. We accordingly vacate the district court's judgment and remand with instructions to dismiss.

BACKGROUND

The issue in this case is whether the cancellation of the asserted claims of the '434 patent by the PTO, pursuant to the agency's statutory reexamination authority, must be given effect in this pending infringement litigation.

Baxter is the owner of the '434 patent, which is directed to a hemodialysis machine. Hemodialysis machines are used in the place of kidneys to cleanse the blood of toxins. See Fresenius USA, Inc. v. Baxter Int'l, Inc., 582 F.3d 1288, 1291-92 (Fed.Cir.2009) (" Fresenius I " ). When a person's blood is pumped through the machine, toxins pass from the blood into a solution called dialysate. The relevant claims of the '434 patent teach the use of a dialysis machine with an integrated touch screen interface. See ' 434 patent col. 40 ll. 29-68.

I

In 2003, Fresenius, a manufacturer of hemodialysis machines, filed suit in the United States District Court for the Northern District of California seeking declaratory judgments of invalidity and non-infringement with respect to three 1 Baxter patents, including claims 26-31 of the '434 patent, as well as claims of U.S. Patent No. 5,744,027 (" the '027 patent" ) and U.S. Patent No. 6,284,131 (" the '131 patent" ). Fresenius Med. Care Holdings, Inc. v. Baxter Int'l, Inc., No. 03-1431, 2007 WL 518804, at *1 (N.D.Cal. Feb. 13, 2007). Baxter counterclaimed for infringement. Id. Following claim construction, Fresenius stipulated to infringement of the ' 434 patent's claims, but asserted that the claims were invalid. Id. at *2. A jury returned a verdict in Fresenius' favor, finding the relevant claims of the '434 patent invalid, and also finding certain claims of the '027 and '131 patents invalid. Id.

However, in February of 2007 the district court granted Baxter's motion for judgment as a matter of law (" JMOL" ), finding that Fresenius had presented insufficient evidence to support the jury's

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invalidity verdict, and that Fresenius had therefore not proven that the claims of the patents were invalid. Id. at *2, *8-13. In October of 2007, the district court proceeded to a jury trial on damages. The jury awarded $14.266 million to Baxter for infringement of the three asserted patents. In April of 2008, the district court entered a permanent injunction, which it stayed, and awarded Baxter ongoing post-verdict royalties on infringing machines and related disposables sold by Fresenius. Both parties appealed to this court.2

On September 10, 2009, we reversed-in-part, affirmed-in-part, vacated-in-part, and remanded. Fresenius I, 582 F.3d at 1304. We held that the asserted claims of the '027 patent and the '131 patent were invalid, reversing the district court's JMOL decision as to those patents. Id. at 1296-1302. However, we agreed that as a matter of law, Fresenius had failed to present sufficient evidence showing that claims 26-31 of the '434 patent would have been obvious. Id. at 1302. These claims required a " means for delivering the dialysate to a dialysate compartment of a hemodialyzer," '434 patent col. 40 ll. 33-35, and Fresenius " failed to present any evidence— let alone substantial evidence— that the structure corresponding to the means for delivering dialysate limitation, or an equivalent thereof, existed in the prior art." Fresenius I, 582 F.3d at 1299. We further held that Fresenius failed to present evidence that a structure required by dependent claim 30, a " means for delivering an anticoagulant to a patient," existed in the prior art references. Id. at 1300.

We therefore affirmed the district court's grant of JMOL with respect to the claims of the '434 patent, reversed with respect to the other two patents, and vacated the district court's injunction and royalty awards. Id. at 1302. We " remand[ed] for the district court to revise or reconsider the injunction in light of our reversal of the district court's grant of JMOL regarding the '027 and '131 patents," and " to consider whether the previous [royalty] award [wa]s proper in light of this court's modification of the district court's judgment." Id. at 1303. We noted that, " [i]n particular, ... our decision ... may [have] affect[ed] how the district court weighs [the relevant] factors" in determining the royalty award. Id.

On remand, Baxter moved for a final decision on the permanent injunction and ongoing royalty. Fresenius responded that no injunction should issue because it was no longer selling infringing machines, and that the amount of the post-verdict ongoing royalties was unreasonable. Fresenius also sought a new trial for pre-verdict damages for infringement of the '434 patent. In May of 2011, the district court denied Fresenius' motion for a new pre-verdict damages trial. See Fresenius USA, Inc. v. Baxter Int'l, Inc., No. 03-1431, 2011 WL 2160609 (N.D.Cal. May 26, 2011). The district court scheduled further proceedings on the post-verdict royalties, and held an evidentiary hearing in December of 2011. The permanent injunction was no longer an issue at this point because the '434 patent had expired in April of 2011.

On March 8, 2012, the district court awarded Baxter post-verdict damages at a reduced royalty rate. See

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Fresenius USA, Inc. v. Baxter Int'l, Inc., No. 03-1431, 2012 WL 761712, at *14-16 (N.D.Cal. Mar. 8, 2012). One week later, on March 16, 2012, the district court entered final judgment for Baxter. J.A. 66-67. The district court ordered Fresenius to pay Baxter $14.266 million plus interest in pre-judgment damages (based on the original jury award), $9.3 million plus interest in post-verdict royalties on infringing machines, additional royalties on related disposables sold prior to the expiration of the '434 patent, and costs. Fresenius appealed, arguing that a new pre-verdict damages trial was required, while Baxter cross-appealed the district court's reduction of the postverdict royalties. On May 3, 2012, the district court granted Fresenius' motion to stay execution of the new judgment pending this appeal. In granting Fresenius' motion to stay, the court rejected the argument that Baxter was entitled to enforce and execute on the 2007 judgment. The district court explained that " the March 16, 2012 final judgment appears to supercede [sic] the Nov. 7, 2007[,] final judgment." J.A. 995.

II

We now turn to the PTO reexamination proceedings. In 2005, while the district court litigation was pending, Fresenius requested ex parte reexamination of claims 26-31 of the '434 patent, which, as noted, are the only claims remaining in the pending infringement litigation. See In re Baxter Int'l, Inc., 678 F.3d 1357, 1360 (Fed.Cir.2012), reh'g en banc denied, 698 F.3d 1349 (Fed.Cir.2012).

In January of 2006, the PTO agreed that a substantial new question of patentability had been raised in light of new prior art, and granted the request for reexamination. The reexamination proceeded in parallel with the district court litigation. In December 2006, less than a year before the damages trial, the PTO examiner reached an initial determination that the claims would have been obvious. In December of 2007, the PTO examiner reached a final determination rejecting claims 26-31 of the '434 patent. The examiner concluded, inter alia, that all structures required by claim 26, including the " means for delivering the dialysate," were present in the prior art, and that the claim would have been obvious. See Ex parte Baxter Int'l, Inc., No...

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