Federal Circuit Won't Reconsider When PTO Should Trump Courts

, The Litigation Daily

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Cheryl Miller writes for The Recorder, an American Lawyer affiliate.

The U.S. Court of Appeals for the Federal Circuit declined Tuesday to rehear en banc a case involving conflicting findings by the U.S. Patent and Trademark Office and a district court.

The decision lets stand a July panel ruling, which undid a $23 million award and royalty finding against dialysis supply manufacturer Fresenius USA Inc. after the PTO subsequently invalidated the patent at issue. The ruling drew strong criticism from four dissenters, including Circuit Judge Kathleen O'Malley.

"The panel majority's decision in this case goes a long way toward rendering district courts meaningless in the resolution of patent infringement disputes," O'Malley wrote. "It does so by creating a new regime wherein a district court's final adjudication can be undone by later decisions of the Patent and Trademark Office."

O'Malley was joined in her dissenting opinion by Chief Judge Randall Rader and Judge Evan Wallach. Judge Pauline Newman authored a separate dissent.

The case, which drew amicus briefs at the circuit level from the Intellectual Property Owners Association and the Biotechnology Industry Organization, stems from patent litigation between Fresenius and rival Baxter International Inc. In October 2007, a jury in the Northern District of California awarded Baxter more than $14.2 million on the grounds that Fresenius had infringed on a patent covering a piece of dialysis equipment.

Both sides appealed part of the decision to the Federal Circuit. The appeals court upheld the infringement finding and patents but remanded the case to U.S. District Judge Phyllis Hamilton to reevaluate the scope of a permanent injunction and any royalties Fresenius owed to Baxter. In March 2012, Hamilton entered a final judgment that added $9.3 million in post-verdict royalties. Both companies appealed again.

While the litigation was moving between the district and appellate courts, Fresenius had asked the PTO to reexamine Baxter's patent. The PTO ultimately found Baxter's claims invalid, a decision that was then upheld by both the patent appellate board and, later, the Federal Circuit.

The Washington, D.C.-based appeals court then turned its attention to the appeal of Hamilton's 2012 judgment. A panel majority held that, because the circuit court upheld the PTO's rejection of Baxter's patent before the district court affirmed its final order, the jury verdict and royalty award were moot. The majority vacated Hamilton's judgment and instructed her to dismiss the case.

Writing for the majority in Tuesday's decision rejecting an en banc hearing, Judge Timothy Dyk said there was no final judgment when Baxter's patent was declared invalid.

"Nothing in the statute or common sense supports the peculiar result urged by the dissents," Dyk wrote.

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