The CAFC’s split panel decision this past week – In re Construction Equipment Company – extends the PTO’s authority to reexamine a patent even where its validity has already been adjudicated and confirmed by the courts. Yet the CAFC once again fails to explain how a PTO reexamination finding that a patent is invalid effects an earlier judicial determination that the same patent is valid and infringed.
In re Swanson
The authority of the PTO to reexamine a patent that has previously been found to be valid by the courts was established by the CAFC’s 2008 decision, In re Swanson. There, the patent owner sued for infringement. A jury found that the patent was not infringed, but additionally found that the patent was not invalid over the so-called Duetsch reference. The trial judge denied the various post-trial motions, confirming the jury’s verdict. And the CAFC affirmed the trial judge’s judgment regarding validity, explicitly finding that “Deutsch” did not anticipate the patent claims.
Following the appeal, the accused infringer requested reexamination based on the Deutsch reference that had been before the examiner in the original prosecution. The PTO found that the Deutsch reference had been considered in the original prosecution only as a secondary reference related to a single limitation, so that the assertion of Deutsch as an anticipatory reference in the reexamination request raised a substantial new question of patentability. The PTO proceeded with the reexamination, ultimately determining that the patent claims were either anticipated by or obvious over Deutsch and canceling the patent claims.
The CAFC affirmed the PTO’s cancelation of the claims. But since the patentee had waived any challenge to the rejection itself, the sole issue on appeal was “whether Deutsch raised a substantial new question of patentability.” Judge Gajarsa (writing for himself and Judges Lourie and Bryson) agreed with the PTO’s decision to grant reexamination, specifically that the question of patentability raised in the request for reexamination had not been considered in the original prosecution.
The fact that both the trial court and the CAFC had already considered “the precise question at issue on reexamination [of] whether Deutsch anticipates” the claims, was irrelevant to the threshold reexamination requirement of substantial new question of patentability. “The focus on previous examinations rather than prior litigation follows from the fact that ‘reexamination[s are] conducted according to procedures established for initial examination,’ 35 U.S.C. § 305, and PTO examination procedures have distinctly different standards, parties, purposes, and outcomes compared to civil litigation.” Further, “the court’s judgment and the examiner’s rejection are not duplicative – they are differing proceedings with different evidentiary standards for validity.” Judge Gajarsa then concluded from the ex parte reexamination statute and legislative history “that Congress did not intend a prior court judgment upholding the validity of a claim to prevent the PTO from finding a substantial new question of validity regarding an issue that has never been considered by the PTO.”
As to the Constitution, Judge Gajarsa stated that “there is no Article III issue created when a reexamination considers the same issue of validity as a prior district court proceeding.”
Left untouched in the Swanson decision was whether the cancelation of the claims in reexamination could be used by the accused infringer to attack the trial court’s final judgment. Judge Gajarsa stated only that “an attempt to reopen a final federal court judgment of infringement on the basis of a reexamination finding of invalidity might raise constitutional problems.” (Emphasis added).
In re Construction Equipment
The history of the Construction Equipment case is similar to that of Swanson. In the original case, the patent was determined to be valid and infringed, and the trial judge issued an injunction against further infringement. The judgment was then affirmed by the CAFC in 2000. Reexamination was requested by the accused infringer and granted by the PTO. The PTO subsequently found the claims to be invalid over the prior art and canceled the claims. Finally, in the decision released on Friday, December 9, 2011, Judge Prost (joined by Judge O’Malley) affirmed the PTO’s cancelation of the claims. Judge Prost’s majority opinion expressly affirmed the PTO’s authority to grant reexamination despite an earlier court decision affirming the patent’s validity. Additionally, unlike the opinion in Swanson, the Construction Equipment opinion affirmed the PTO’s authority to reject claims in reexamination and then affirmed the rejection itself.
The majority opinion, however, was brief, and it was Judge Newman’s dissent that laid out the issues. She called the majority opinion “curious” and the outcome “unconstitutional.” Critically, for Judge Newman, the rejection of claims in reexamination after a favorable judgment in the courts constituted a reversal of that judgment. Citing Supreme Court precedent dating back to 1792, she explained that the “plan of the Constitution places the judicial power in the courts, whose judgments are not thereafter subject to revision or rejection. Neither the legislative nor the executive branch has the authority to revise judicial determinations.” The court’s earlier decision affirming the validity of the patent is complete and “warrants the finality of the Judicial Power.” To do otherwise would make the court’s judgment “merely advisory” and preliminary to the final decision of the PTO.
Judge Newman acknowledged Judge Gajarsa’s recitation of the differences between infringement actions in court and reexamination at the PTO, but “a lower standard of proof in an administrative agency cannot override the finality of judicial adjudication.” She called the result of the majority a waste of “judicial and administrative resources.” Moreover, the “adverse effect on the patent incentive, due to uncertainty as to the validity of a duly granted patent, is notorious, and permeates the hearing record of the recently enacted America Invents Act.” She acknowledged the laudatory purpose of the reexamination statute in offering a less expensive alternative to patent litigation, “but when the same issue has already been litigated and finally adjudicated, interested persons should be able to rely on the judicial decision.”
Touching briefly on the merits of the rejection itself, she called it a “hindsight combination” of art, “unaccompanied by any ‘articulation of a rational underpinning’ for combining the references” to obtain the claimed invention.
Judge Newman concludes by invoking the “fundamental principles” of the Constitution, judicial powers, legislative structure, and national innovation policies, to conclude that “reexamination in the PTO is not generally available after the issue of patentability has been litigated to a final judgment from which no appeal can be or has been taken.” Other than that, Mrs. Lincoln, how do you enjoy the play?
The meat of the majority opinion, replying to Judge Newman, is in the two-page long footnote 3. There, Judge Prost essentially relied upon Judge Gajarsa’s constitutional analysis in Swanson. Since “the district court’s judgment was not that the patent was valid per se, but that the accused infringer had failed to carry his burden to prove it invalid,” there was not impermissible reversal of the trial court’s judgment.
Significantly, however, the majority opinion gives no guidance on the effect that the PTO’s cancelation of the claims might have on the trial court’s final judgment and injunction: “We express no opinion on whether [the accused infringer] might not be entitled to seek abrogation of the injunction.” That statement is likely the correct comment on an issue that was not presented to an appellate court, but it does not help the parties now or in the future.
More questions are raised than settled. If the accused infringer in Construction Equipment does proceed successfully to challenge the final judgment or the injunction, would such a challenge undermine the rationale in the opinions of Judge Gajarsa and Judge Prost – specifically, the premise that the grant of reexamination (Swanson) or the cancelation of claims in reexamination (Construction Equipment) does not negate the court’s judgment? Yet, how could a court deny a challenge to the injunction after the PTO has determined that the patent on which the injunction is based is invalid?
Clearly, the best way for resolving the uncertainties that now abound regarding the effect of post-judgment reexaminations would have been resolved in the America Invents Act. But that did not happen. What did happen was a multiplication of post-grant procedures that is likely to replicate the dilemmas left unresolved in Construction Equipment.