The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s grant of summary judgment which held that, in order to prove a prima facie case of fraud and set aside a prior judgment under Federal Rule of Civil Procedure 60(b), a party must demonstrate mistake, inadvertence or excusable neglect on the part of the opposing party or present newly discovered evidence showing such conduct. The Court also clarified rule 60(b)(3), holding that a party seeking relief in a case in which fraud was alleged greater than one year following judgment must demonstrate egregious acts of fraud which could not have been reasonably discovered within the one-year window. Apotex Corp. v. Merck and Company, Inc., Case No. 06-1405, (Fed. Cir., Nov. 16, 2007) (Newman, J.).
The ruling stemmed from a suit brought by Apotex in1996 against Merck in the Northern District of Illinois, charging that Merck’s process of tablet formulation infringed two of Apotex’s U.S. patents. The court held the patents invalid under 35 U.S.C. 102(g), finding Merck had invented the process of formulation prior to Apotex’s effective date of invention and had not concealed, suppressed or secretly practiced the invention (Apotex I). At trial, it was generally undisputed that Merck had invented the process prior to the effective filing date of the Apotex patents, however, Apotex asserted that in failing to seek patent protection, Merck had in fact practiced the process in secret. As such, Apotex asserted its claims were valid in view of Merck’s concealment. The court disagreed based on testimony demonstrating that Merck had previously disclosed the process publicly in two instances. Based on the previous disclosures, the court held that Merck had not suppressed, concealed or kept the process secret. The U.S. Court of Appeals for the Federal Circuit affirmed (Apotex II).
More than one year later, Apotex brought suit against Merck in district court alleging that several statements made by Merck during the previous litigation were fraudulent and, as such, judgment should be set aside under rule 60(b). Apotex argued that during the prior litigation Merck failed to disclose “critical” aspects of the invention and in doing so had perpetrated fraud upon the court. The Court disagreed, finding that the critical factors did not pertain to claims in the Apotex patents, but rather constituted attorney argument concerning reasonable inferences related to evidence presented at trial. The Court held that to set aside judgment under rule 60(b), the fraudulent activity must have impeded the judicial machinery and, further, must be limited to events that wholly affected the integrity of the court. The Court stated that such instances of fraud were not subject to the one-year limitation but, in any event, must be brought to the attention of the court within a reasonable time of discovery.