Lather. Rinse. Repeat -- In re Baxter International, Inc.

The following is a guest blog from Ron Schutz of Robins, Kaplan, Miller & Ciresi. It just got it easier for infringers to use reexamination as a way to wash a judicial patent validity determination right out of their hair. In In re Baxter, a sharply divided panel of the Federal Circuit affirmed a PTO decision invalidating a patent on reexamination. The majority didn’t let itself get tangled up in the fact that PTO reached its ruling after the Federal Circuit had previously affirmed a district court decision upholding the same patent against much of the same art raised by the same party who requested the reexamination. The majority said that differing judicial and PTO proof standards supported the outcome. But a dissenting Judge Newman got truly lathered over the majority’s nullification of a prior Federal Circuit ruling and the potential for endless challenges the decision creates. Our take? En banc reconsideration may be the only way to treat patent law’s latest case of split ends. The patent at issue in Baxter covered an improved dialysis machine. A competitor of patent holder Baxter International brought a declaratory judgment action in district court seeking to have Baxter’s patent invalidated. As the case approached trial, the competitor also filed a request for reexamination based on much of the same art it was relying on in district court. The case was not stayed, and the district court determined that the competitor had not carried its burden of demonstrating that the patent was invalid by clear and convincing evidence. The Federal Circuit affirmed that decision. In the meantime, the reexaminations proceedings had continued in parallel, with the Examiner ultimately determining that the identified art invalidated a number of the patent’s claims, while still others were invalidated when the identified art was combined with other references the Examiner located. The Board of Patent Appeals affirmed, and the issue was once again presented to the Federal Circuit. Despite the Federal Circuit’s earlier opinion, the panel’s majority affirmed the PTO’s contrary validity determination. The majority primarily relied upon the principle that “the PTO and the court system take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions.” The majority then explained that the difference in burden of proofs made all the difference in the ultimate result. But, in an apparent effort to blunt the dissent, the majority noted that when a party who has lost a court proceeding “provokes a reexam using the same presentations and arguments” . . . seeking to take advantage of a more lenient standard of proof, “the PTO ideally should not arrive at a different conclusion.” Judge Newman challenged the majority for not applying long established principles of finality/res judicata and constitutional comity and for essentially allowing a losing challenger a legal do-over. Labeling reexaminations as part of the “tactical armory of litigants,” Judge Newman noted that reexamination proceedings were not intended to subject patent holders to endless challenges. The dissent also questioned whether new art was truly relied upon by the Examiner for all claims at issue. Accused infringers are sure to see Baxter as a way to add volume and body to efforts to derail litigation or set aside adverse verdicts—and patent holders will get snarled in more and continued reexamination proceedings as a result. Litigants will have to factor in the possibility and timing of reexams in the optimum way of obtaining a final decision. Litigants will also have to pay careful attention to what art is being used in parallel proceedings and how they are being used. Given the majority’s concession to the dissent on reexams based on the same art, both sides will be testing the limits of “sameness” and the consequences to challengers who hold back some art from court proceedings in order to create an argument that the reexam was not the same. Patent holders may also test whether the majority’s logic works in the opposite direction; creating an absolute bar (as opposed to a practical one) to a challenger who loses a reexam from relitigating the “same” arguments at court—perhaps, finally, leaving patent holders as the ones with no more tears. In Re Baxter

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