Fresenius USA, Inc. v. Baxter International, Inc.

After the Federal Circuit’s finding of infringement and validity, a subsequent Federal Circuit affirmance of the PTO’s rejection of the same claims trumps the Federal Circuit’s first ruling.

Winter 2013

GENERICally Speaking: A Hatch Waxman Litigation Bulletin

Case Name: Fresenius USA, Inc. v. Baxter International, Inc., 733 F.3d 1369 (Fed. Cir. Nov. 5, 2013) (Per Curiam; Concurrence by Judge Dyk with whom Judge Prost joins; Dissent by O’Malley, with whom Chief Judge Rader and Judge Wallach join; Dissent by Judge Newman) (Appeal from N.D. Cal., Hamilton, J.) (After the Federal Circuit’s finding of infringement and validity, a subsequent Federal Circuit affirmance of the PTO’s rejection of the same claims trumps the Federal Circuit’s first ruling.)

Patent(s)-in-Suit: U.S. Patent No. 5,247,434 (”the ’434 patent”)

Nature of the Case and Issue(s) Presented: Fresenius filed suit in the district court seeking declaratory judgments of invalidity and non-infringement with respect to three of Baxter’s patents. Baxter counterclaimed for infringement, and after Fresenius stipulated to infringement, Baxter prevailed on the issue of validity. Ultimately, a jury awarded Baxter $14.266 million in damages, and the district court entered judgment in accordance with that verdict. The court then determined that an injunction was appropriate, but delayed entry of that injunction for nine months to allow Fresenius a reasonable period of time to design around Baxter’s patented invention. During that time, Fresenius would pay Baxter a royalty on any post-verdict sales. Both parties appealed. In Fresenius’ first appeal to the Federal Circuit, it challenged the district court’s validity finding, entry of a permanent injunction, choice of royalty used for post-verdict sales, and claim construction (“Fresenius I”). The Federal Circuit invalidated asserted claims from two of the three patents at issue, but did not disturb either the finding of infringement as to the ’434 patent or the pre-verdict damages award. The Federal Circuit remanded the matter to the district court, however, for the limited purpose of considering two discrete issues in light of its decision: (i) the continuing propriety and scope of any permanent injunction; and (ii) the proper measure of any royalty to be paid on post-verdict sales pending the effective date of that injunction. The Federal Circuit mandate issued, and Fresenius petitioned for a writ of certiorari, which was denied. On remand, the trial court recalculated the post-verdict royalty award as directed. Injunctive relief was no longer at issue because the ’434 patent had expired. The district court again entered judgment, both confirming its rulings as to the questions presented on remand and reaffirming the earlier, already-affirmed, judgment in Baxter’s favor. Both parties again appealed to the Federal Circuit (“Fresenius II”).

While that second appeal was pending, the Federal Circuit affirmed a PTO decision finding the relevant claims of the ’434 patent unpatentable (“In re Baxter”). In re Baxter dealt with a parallel reexamination proceeding that Fresenius initiated three years after it had filed the district court suit against Baxter seeking a declaratory judgment that the ’434 patent was invalid.

In Fresenius II, the panel majority concluded that, because the court affirmed the PTO’s decision that certain claims of the ’434 patent are unpatentable in In re Baxter before it had the chance to review the district court’s recalculation of post-verdict royalties, the entirety of the “pending litigation” had been rendered moot. The panel majority vacated all aspects of the district court’s judgment, and instructed the district court to dismiss the case. Baxter filed a combined petition for panel rehearing and rehearing en banc; the Federal Circuit invited a response from Fresenius. The petition for rehearing was referred to the panel that heard the appeal, and thereafter the petition for rehearing en banc, response and briefs of amici curiae 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.

Why Fresenius Prevailed: Judge Dyk’s wrote in response to the two dissents, which argue that there was a final judgment of infringement and validity that would allow Baxter to damages on a patent that was subsequently invalidated. “Nothing in the statute or common sense supports the peculiar result urged by the dissents.” Judge Dyk premises his opinion on the fact that a patentee’s right to damages for infringement is founded on the validity of his patent. In Moffitt v. Garr, the Supreme Court held that the surrender of a patent “is a legal cancellation of [the patent], and hence can no more be the foundation for the assertion of a right after the surrender, than could an act of Congress which has been repealed.”  Judge Dyk continued, “[w]hile Fresenius I may have been sufficiently final to be given collateral estoppel effect in another infringement litigation, we decided in In re Baxter it was not entitled to collateral estoppel effect in the PTO proceedings. In any event, the potential preclusive effect of the Fresenius I decision in another infringement case cannot immunize Fresenius I from the effect of the final decision in In re Baxter.” If the Federal Circuit were to hold that its judgment in Fresenius I is immune to a subsequent adjudication of invalidity, it would contravene controlling Supreme Court (Simmons Co. v. Grier Bros. Co., 258 U.S. 82 (1922)) and Federal Circuit (Mendenhall v. Barber-Greene Co., 26 F.3d 1573 (Fed. Cir. 1994)) authority.

In Judge O’Malley’s dissent from the refusal to consider the case en banc, he commented that the majority’s decision “goes a long way toward rendering district courts meaningless in the resolution of patent infringement disputes. It does so by creating a new regime wherein a district court’s final adjudication can be undone by later decisions of the PTO.” Judge O’Malley summarizes his dissent as follows: “In this case: (1) the district court resolved all issues of validity, infringement, past damages, and the right to post-verdict relief; (2) our court affirmed the resolution of these issues on appeal; and (3) the United States Supreme Court denied Fresenius’ petition for a writ of certiorari. Following the denial of cert, neither the district court, nor this court, could disturb Baxter’s entitlement to damages for infringement. But, according to the majority, the PTO could—and did—erase Baxter’s adjudicated right to be compensated for that infringement. Under no reasonable application of the law, however, could the PTO’s actions eradicate that judgment.” Judge O’Malley is particularly critical of the discrepancy he sees between the majority’s decision in this case and the court’s recent decision in Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305 (Fed. Cir. 2013), where the court held, en banc, that liability determinations in patent cases are final for purposes of immediate appeal under 28 U.S.C. § 1292(c), even when a jury trial on both damages and willfulness remains. Judge O’Malley concludes that the majority opinion here, coupled with the Boschdecision, will interfere with litigants’ ability to access the courts to redress their grievances in a meaningful way and will drastically limit the case management options available to district court judges. Bosch created an incentive for district courts to bifurcate liability determinations from damages and willfulness trials—and all other remedial determinations. Courts will be tempted to try to limit the time and resources spent on patent cases by seeking interlocutory review. In all but those cases where liability determinations in favor of an alleged infringer are affirmed, however, such bifurcations will drag out the litigation, causing multiple appeals and probably multiple remands. Where that occurs, after the panel opinion in this case, even years of litigated decisions, which may be affirmed piecemeal, could be rendered meaningless by much later PTO decisions.

Judge Newman dissented, stating that the PTO cannot override the judgments of the district court, on the same issue and the same premises between the same parties. “A system of override by an administrative agency interferes with the power and obligation of the courts to render dispositive judgments.” The Baxter patent was “immobilized” in litigation or reexamination for eleven years, and Judge Newman’s dissent criticizes the panel decision because it “facilitates” gamesmanship and abuses with no balancing benefit to the public.

Oren D. Langer


Managing Partner, New York Office
Member of Executive Board

Ryan M. Schultz


Pronouns: he/him

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