Last month, on October 26, 2012, while so many of us were at the AIPLA annual meeting, the United States Court of Appeals for the Federal Circuit issued an opinion in a matter denying panel rehearing and simultaneously denying rehearing en banc. The case — In re Baxter, Int’l Inc.
In the initial panel decision in In re Baxter, Int’l Inc., Baxter appealed from the decision of the Board of Patent Appeals and Interferences (“the Board”) affirming the examiner’s rejections of claims 26–31 of U.S. Patent 5,247,434 (“the ’434 patent”) for obviousness under 35 U.S.C. § 103(a). This may seem like an ordinary, garden variety matter, but this patent had previously been litigated to final judgment in the district court and on appeal to the Federal Circuit.
In her dissent from the original panel decision, Judge Newman quite correctly pointed out:
[W]hen the judicial decision is final as to the issue before the agency, the decision is binding on the agency. Finality is reflected in the law of the case doctrine, which “promotes the finality and efficiency of the judicial process by protecting against the agitation of settled issues.” Christianson v. Colt Industries, Inc., 486 U.S. 800, 815–16 (1988)….A patent that has been adjudicated to be valid cannot be invalidated by administrative action, any more than a patent adjudicated to be invalid can be restored to life by administrative action.
All very sensible, but of course this is the world of patents where fiction, fantasy and irrational decision frolic in the autumn mist!
Subsequent to the original patent decision, Baxter requested rehearing en banc and/or rehearing by the original panel. Both requests were denied. Judge O’Malley, writing for herself and joined by Chief Judge Rader and Judge Linn, wrote in the opinion accompanying the denial of rehearing:
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 concludes that, 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.
Obviously, the proposition is extraordinarily remarkable. That a patent could be litigated fully and survive challenge only to be re-investigated by the USPTO and found to have invalid claims is nothing short of breathtaking. At what point in time do we ever have a settled expectation in an issued patent?
In dissent, again, in the ruling on the petition for rehearing, Judge Newman explained:
[T]he 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.
It is hard to understand Judge O’Malley’s rationale. How is it possible that she finds this unremarkable? Perhaps it is unremarkable to the extent that such lunacy is hardly unexpected. But a final decision is really supposed to be a final decision, not some interim order. What a fine mess this creates. We now have two binding rulings on the same patent, one finding the claims invalid (from the USPTO and affirmed by the CAFC) and one finding the claims not invalid (from the district court and affirmed by the CAFC). So the claims are either definitively invalid or definitively not invalid, depending upon which binding precedent you prefer to cite. How ridiculous!
Patents can be litigated in the United Stated District Courts, as well as in the International Trade Commission. Ultimately all of these are appealable to the United States Court of Appeals for the Federal Circuit. It is incomprehensible that what happens in one forum bears no relationship to what happens in another forum.
Patents can also now be challenged post-issuance through reexamination, inter partes review and soon via post-grant review. Already there is a flavor of post-grant review for so-called covered business methods.
With all the potential challenges to patents in variety of different forums, and with the multitude of post-issuance challenges available at the USPTO, does one every really own a patent right? Ownership at some point must be settled in order for the right to be, or even approximate, a property right. But that is not what we have at the moment. Serial challenges are not only possible, but you would have to be a fool not to bring them if you are accused of infringing. The patent owner has to win in ever forum 100% of the time. The infringer can lose in every forum, appeal all the way up to the Federal Circuit, then lose at the Federal Circuit. Then bring another challenge in another forum and start all over because the Federal Circuit in one case is not bound by the determination of the Federal Circuit in another case dealing with the same claims in the same patent.
This is not a property rights regime. If this latest debacle from the Federal Circuit is allowed to stand, what patents have become is nothing more than an unvested option. Only upon winning in every forum and via every conceivable procedural avenue of challenge can a patent owner be said to have settled rights.
The Baxter case should send shivers down the spine of patent owners everywhere. I can’t believe I’m saying this, but we need the Supreme Court to step in and fix this matter. Even they should be able to handle what seems like an easy lay-up regarding procedure and the deference owed to final determinations. While the Supreme Court has been known to muff even easy lay-ups, having them get involved here presents no risk. Even they can’t screw up this situation any more than the Federal Circuit already has.