The Federal Circuit has ruled that a patent infringement judgment in excess of fourteen million dollars ($14,000,000.00) was rendered void and moot by a PTO decision invalidating the subject patent despite a prior Federal Circuit decision in the case affirming the validity of the patent.  Fresenius USA, Inc. v. Baxter Intern., Inc.— F.3d —-, 2013 WL 3305736 (C.A.Fed., July 2, 2013 (Cal.)) Coupled with the new broader scope and expedited administrative review provided for in the America Invents Act, the decision continues a trend of favoring or promoting administrative review of patents over district court litigation.

The decision will allow defendants to consider administrative challenges to the validity of a patent much further into the district court litigation process.  Prior to this ruling, prevailing wisdom was that a re-examination proceeding needed to be completed prior to the conclusion of district court proceedings to be useful.  A defendant who uncovers relevant prior art late in a proceeding may now be more likely to commence a re-examination proceeding as long as it can be completed prior to any appeals.

The decision raises interesting issues concerning separation of powers and the finality of judgments.  In a strongly worded and well-reasoned dissenting opinion, Judge Pauline Newman argued the decision improperly allows an administrative agency to void a final Federal Circuit Court of Appeals judgment.  Judge Newman wrote:

The court today authorizes the Patent and Trademark Office, an administrative agency within the Department of Commerce, to override and void the final judgment of a federal Article III Court of Appeals. The panel majority holds that the entirety of these judicial proceedings can be ignored and superseded by an executive agency’s later ruling.

The majority justified its decision on the grounds that the there was no “final” judgment. According to the majority, the prior decision affirming the validity of the patent was not final because the matter had been remanded solely to address post-judgment damage issues.  According to Judge Newman this position is inconsistent with well-established principals of finality:

The panel majority argues that the rules of finality do not apply here because the Federal Circuit, with its final judgment, included a remand to the district court to assess post-judgment damages. The courts of the nation have dealt with a variety of circumstances in which a final judgment included a remand to the district court. Here, all of the issues on appeal were finally adjudicated by the Federal Circuit; the remand authorized the district court to determine only post-judgment royalties. The remand had no relation to any issue in reexamination; validity had been finally resolved in the courts.

. . .The majority proposes that the final adjudication of patent validity can be redecided by the courts and thus by the PTO, because of the remand to assess post-judgment damages. This theory is contrary to the precedent of every circuit. All circuits impose finality and preclusion as to issues that were finally decided in full and fair litigation. . .

The America Invents Act contains certain procedural mechanisms which should prevent this from becoming a recurring concern.  Specifically, under the AIA: 1) Post Grant Review and Inter Partes Review will be prohibited if a civil action challenging the validity of the patent has been previously filed; and 2) a civil action challenging validity filed after the filing of either a Post Grant Review or Inter Partes Review petition will automatically be stayed (With the exception of “Covered Business Method Patents” these provisions are applicable only to patents issued from applications filed after March 16, 2013 (patents granted under the new “First Inventor to File” Rules).