Fresenius Escapes $25 Million Damages Award, Based On Invalidation Of Baxter Patent In Ex Parte Reexamination

In Fresenius, USA Inc. v. Baxter International, Inc., the Federal Circuit interpreted the ex parte reexamination statutes (35 USC §§ 301-307) as providing that the final cancellation of claims in a reexamination proceeding is binding on concurrent litigation proceedings, as long as the litigation is still pending. This decision validates the use of ex parte reexamination to launch a collateral attack on patents in litigation. While many defendants hesitate to bring an ex parte reexamination because of the very limited role they would have in the proceedings, because ex parte reexamination is not limited by the timing requirements of inter partes review and post grant review proceedings, and does not carry the same litigation estoppel, it may be worthy of a second look under appropriate circumstances.

The District Court Litigation

The lengthy district court proceedings are summarized in the Federal Circuit opinion as follows:

In 2003, Fresenius brought a declaratory judgment action asserting non-infringement and invalidity of certain claims of Baxter's U.S. Patent 5,247,434, U.S. Patent 5,744,027, and U.S. Patent 6,284,131, relating to kidney dialysis machines.

After the court construed the claims, Fresenius stipulated to infringement, but asserted that the claims at issue were invalid. A jury returned a verdict in Fresenius' favor; however, the district court granted Baxter's motion for judgment as a matter of law (JMOL), finding that the jury verdict was not supported by sufficient evidence. After a jury trial on damages, Baxter was awarded $14.266 million for infringement and the district court issued a permanent injunction.

Both parties appealed to the Federal Circuit, which rendered its decision in September of 2009,

finding the asserted claims of the '027 patent and the '131 patent invalid (and thus reversing the JMOL as to those patents), but affirming the district court's decision that Fresenius had failed to present sufficient evidence to invalidate the asserted claims of the '434 patent.

The case was remanded to the district court for reconsideration of the damages award and injunction. On March 8, 2012, the district court awarded Baxter post-verdict damages at a reduced royalty rate. On March 16, 2012, the district court entered final judgment for Baxter, ordering Fresenius to pay $14.266 million plus interest in pre-judgment damages (based on the original jury award), $9.3 million plus interest in post-verdict royalties on infringing machines, additional royalties on related disposables sold prior to the...