In re Baxter Int'l, Inc.

• Decision Date: 26 October 2012
• Docket Number: No. 2011–1073.,2011–1073.
• Parties: In re BAXTER INTERNATIONAL, INC.
• Court: U.S. Court of Appeals — Federal Circuit

698 F.3d 1349

In re BAXTER INTERNATIONAL, INC.

No. 2011–1073.

United States Court of Appeals, Federal Circuit.

Oct. 26, 2012.

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

William F. Lee, Wilmer Cutler Pickering Hale and Dorr, LLP, of Boston, MA, 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 Alexandria, VA, 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.

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.

ON PETITION FOR PANEL REHEARING AND REHEARING EN BANC

PER CURIAM.

ORDER

A combined petition for panel rehearing and rehearing en banc was filed by Appellant, and a response thereto was invited by the court and filed by Appellee. The petition 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.

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 Trademark Office (PTO) from subsequently reexamining that same patent. And, it concludesthat, despite a final court 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 proposition 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 establishing 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, Congress 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 proceeding, 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 infringer, 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, 125 S.Ct. 2491, 162 L.Ed.2d 315 (2005) (“Under res judicata, 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.”); see also Reed v. Allen, 286 U.S. 191, 198–99, 52 S.Ct. 532, 76 L.Ed. 1054 (1932) (“[the] well-established doctrine 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.

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 determination:

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 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, 18 S.Ct. 18, 42 L.Ed. 355 (1897).

Nonetheless, the Federal Circuit today again endorses this departure from established judicial and administrative process. This departure directly confronts the Constitution, 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. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 114, 68 S.Ct. 431, 92 L.Ed. 568 (1948). I respectfully dissent.¹

Discussion

The court holds that the Federal Circuit's final decision 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 redetermination. However, issues that have been litigated and finally adjudicated, are finally decided. As the Court reiterated in Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 390–91, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985), “a party is precluded from asserting a claim that he had a ‘full and fair opportunity’ 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, 125 S.Ct. 2491, 162 L.Ed.2d 315 (“Under res judicata, 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”). Relitigation in the guise of inter partes reexamination is not liberated from these constraints.

My concern is not with the principle of patent reexamination and the useful purposes for which it was designed; my concern is that reexamination is inappropriate for redetermination of issues that have been finally determined 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 uncertainty, in direct negation of the principles of res judicata.

The patent here at issue is for an invention that Baxter 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 decided 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 Interferences, stating that “the agency is not bound by the court's determination,” BPAI Op. at 26, decided the...