Jessica M. Karmasek Jul. 8, 2013, 4:30pm

WASHINGTON (Legal Newsline) -- A federal appeals court ruled last week that federal trial and appellate courts are required by statute to dismiss pending patent cases if the U.S. Patent and Trademark Office has cancelled the asserted claims through reexamination.

At issue in Fresenius USA Inc. v. Baxter International Inc. was a patent for a hemodialysis machine.

Such machines are used in the place of kidneys to cleanse the blood of toxins. When a person's blood is pumped through the machine, toxins pass from the blood into a solution called dialysate.

Plaintiffs Fresenius USA Inc. and Fresenius Medical Care Holdings Inc. sued Baxter International Inc. and Baxter Healthcare Corporation in 2003, seeking a declaratory judgment that it did not infringe any valid claims of certain Baxter patents.

In particular, Fresenius alleged that claims 26-31 of U.S. Patent No. 5,247,434 -- or the '434 patent -- were invalid and not infringed.

The relevant claims of the '434 patent teach the use of a dialysis machine with an integrated touch screen interface.

Baxter, the owner of the '434 patent, counter-sued for patent infringement.

In 2005, Fresenius hired Dallas-based Fish & Richardson PC -- a national law firm practicing intellectual property law -- as new counsel for the district court litigation, and the firm quickly filed a request for ex parte reexamination of Baxter's patents.

In the district court proceedings, a single Baxter patent survived trial and a 2009 appeal sent the case back to district court for further proceedings on damages issues.

In the meantime, the PTO invalidated the asserted claims in the remaining patent.

Fresenius appealed from the district court and Baxter appealed from the PTO reexamination.

The U.S. Court of Appeals for the Federal Circuit heard the reexamination appeal first, affirming the PTO's ruling that invalidated all the asserted patent claims.

Fresenius then argued in the other appeal that Baxter's case had to be dismissed because its claims had been cancelled.

In its July 2 ruling, the Federal Circuit agreed, vacated the district court judgment and remanded with instructions to dismiss the case.

The court recognized and gave effect to its prior affirmance of the PTO's cancellation of the asserted claims in the appeal from the patent office's reexamination, even though the court, in the first appeal from the district court, had held that there was not clear and convincing evidence of invalidity before the jury.

It reasoned that once the PTO cancellation of the asserted claims was affirmed, the patent owner no longer had a viable cause of action.

"Under either the reissue or reexamination statute, if the PTO confirms the original claim in identical form, a suit based on that claim may continue, but if the original claim is cancelled or amended to cure invalidity, the patentee's cause of action is extinguished and the suit fails," Judge Timothy B. Dyk wrote in the Federal Circuit's 31-page opinion.

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