This is an interesting case that deals with Res judicata or claim preclusion. In this case, damages were being decided after the case appealed at the federal circuit while claims of a patent were being invalidated at the USPTO.
Appellant Fresenius brought a declaratory judgment action against Baxter alleging claims 26-31 of US Patent Number 5,247,434 were invalid, and therefore Fresenius did not infringe the claims. Baxter counterclaimed for infringement.
Initially, the district court entered judgment against Fresenius, finding that they infringed the claims of the ‘434 patent, and the ‘434 patent was not infringed. On appeal, the court of appeals affirmed the determination that the claims were valid, but remanded the case to the district court to reconsider damages. While the litigation was pending on Remand, the USPTO completed a reexamination of the ‘434 patent and determined all claims were invalid. Due to the patent claims being held invalid, Fresenius correctly argued that Baxter no longer had a cause of action, while Baxter incorrectly argued that the case had been decided on the merits and only damages were being decided.
Although Baxter agreed that when a claim is cancelled, the patentee loses any cause of action based on that claim, and pending litigation is rendered moot. However, Baxter argues that the cancellation of the asserted claims cannot be given effect at this point during the current litigation because the validity of the ‘434 and Fresenius’s liability were conclusively decided by the district court and the court of appeals. Specifically, Baxter argues that the district court’s judgment was final, binding, on the merits, and including the parties in this case, and therefor res judicata bars the effect of the USPTO’ s ruling.
The court of appeals reasoned that Baxter is correct that the future cancelling of a patent’s claims cannot be used to reopen final damages judgment ending a suit based on those claims. However, the court of appeals articulated that it is important to distinguish what is the “finality” of a cause of action. The court of appeals agreed that a “final” court judgment had been entered by the district court, the district court’s final judgment was not sufficiently final to preclude application of an intervening final judgment for these parties (the USPTO’ s invalidity of the patented claims). The court of appeals stated that the district court’s final judgment did not rise to a level that litigation must be entirely concluded so that the cause of action was merged into a final judgment “one the ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” The court of appeals reasoned that the court of appeals remand left open several aspect of the district court’s original judgment unresolved, including: royalties on the infringing machines, royalties on related disposables and injunctive relief. Essentially, the court of appeals reasoned that because “damages and remedies” are party of a case “on the merits” and these issues were not “finally decided” that this case was not a finality of a cause of action. Because the USPTO’ s concurrent reexamination of the ‘434 held that the patented claims were invalid and that this reexamination would no longer be looked at that this was a final judgment, ending Baxter’s cause of action in their concurrent cause.
PATENT ATTORNEY TAKE-A-WAYS:
- This case reaffirms the power of the PTO. If the PTO was not able to invalidated patent claims after a case was “final,” then maybe even a district court’s holding that a patent was valid, a reexamination would not be able to invalidate the patent.
- Baxter may have been able to settle their case if they would have negotiated after the court of appeal’s ruling but before the PTO’s holding of invalid claims. This is much easier to say in hindsight, but it is something to consider.