Federal Circuit Allows PTO to Overrule Court Decision Again

The Federal Circuit has again permitted the PTO to overrule a decision by a district court, affirmed on appeal by the Federal Circuit.  As in Fresenius USA, Inc. v. Baxter Int’l, Inc., Judge O’Malley has issued a vigorous dissent.  ePlus, Inc. v. Lawson Software, Inc.

In ePlus, the district court had found a number of asserted claims to not be invalid and a jury had found them to be infringed.  The court had issued an injunction against further infringement.  On appeal, the Federal Circuit reversed on a number of the issues, but affirmed that one of the asserted claims was not invalid and was infringed.  The court remanded the case to the district court to make necessary modifications to the injunction.

On remand, the district court modified the injunction and found the defendant to be in contempt for violating the injunction.  You can probably tell where this is going.  In a reexamination, the PTO ruled that the infringed claim was invalid, the finding of which was affirmed in a separate opinion by the Federal Circuit, while the present appeal was pending.

In the present appeal, due to the PTO overruling the court’s invalidity determination, the divided panel vacated the injunction and the contempt order.

The majority, per Chief Judge Prost, argue that the injunction was not final when the case was remanded to the district court.  Therefore, the injunction and the civil contempt citation based on violation thereof must be vacated.  This result is dictated by Fresenius.

O'MalleyJudge O’Malley agrees with the majority that the ongoing injunction must be set aside once the patent claim upon which it was based is no longer in effect.  Where she differs with the majority is that she doesn’t believe that all penalties for violating the injunction that was in effect for four years should also be erased.

She seeks to distinguish Fresenius on a number of grounds.  First, she notes that the judgment of validity and infringement of the claim at issue was final as between ePlus and Lawson.  The Federal Circuit had affirmed the judgment of the district court on this issue.  

Second, the injunction was in effect.  The remand instructions were different from Fresenius where the court had instructed the district court to “revise or reconsider” the injunction, which was vacated.  In this case, the Federal Circuit did not vacate the injunction, but had merely instructed the district court to “consider” necessary changes to the injunction.  Those changes were made by the district court and are now the subject of the present appeal.  Finally, when challenging a contempt ruling, the challenger cannot challenge the underlying reasons for the injunction; it can only challenge whether it actually violated the injunction.

Next, Judge O’Malley reiterates her view that Fresenius was wrongly decided.  What incentive do district courts have to decide patent cases?  They should simply wait until all matters related to such cases are decided by the PTO.  In this case, as in Fresenius, the district court and Federal CIrcuit’s earlier work (not to mention the jury) seems to have been largely wasted time.

Judge O’Malley further argues that parties have begun reading Fresenius rather broadly and are seeking to reopen what would seem to be final judgments in litigation if the PTO makes a later ruling favorable to infringers.  She seems to be trying to garner support for Supreme Court review by arguing that the Federal Circuit’s view of finality is contrary to the view of the DC Circuit.

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