Federal Circuit Defines Substantial New Question of Patentability for Purpose of Reexamination Not Precluded by District Court Validity Finding

In In re Swanson, 540 F3d 1368 (Fed. Cir. 2008), ­­­Surmodics, Inc. (“Surmodics”) appealed the Federal Circuit for the United States Patent and Trademark Office’s (“PTO”) Board of Patent Appeals and Inferences (“Board”), which upheld the examiner’s rejection of claims 22-25 of U.S. Patent No. 5,073,484 (“the ‘484 patent”) in a reexamination proceeding. The Federal Circuit affirmed.

On February 23, 1983, Melvin Swanson and Patrick Guire filed the ‘484 patent.  The ‘484 patent discloses a method of quantitatively analyzing small amounts of biological fluids (e.g., milk, blood, urine, etc.) to detect the presence of a particular substance (the analyte). The method discloses one or more “reaction zones” that contain a bound reactant and are spaced out on a test strip made of a liquid-permeable solid. When a test solution is applied to the test strip, it moves along a flow path to sequentially encounter the reactant-containing zones. When a solution containing the requisite analyte reaches each of the reaction zones, selected detectors in the reaction zones indicate, preferably by a change of color, the presence of analyte, reactant, or predetermined product. The specification does not limit the invention to a certain type of detection and suggests that the analyte can be “substantially all chemical substances that are reactive with a reactant to form a product.”

The independent claim at issue, claim 22, claims a method of detection in which the analyte and reactant form a ligand-antiligand binding pair. Claims 23, 24, and 25 are dependent claims. Claim 23 limits the detection of the ligand-antiligand pair via a chemical moiety, and claims 24 and 25 further limit this chemical moiety to include an enzyme and to be a radioisotope, respectively.

The prior art at issue in this appeal is U.S. Patent No. 4,094,647 (“Deutsch”), which also discloses a method of detecting ligand-antiligand binding pairs in order to determine the presence of a ligand (the analyte) in a biological fluid sample. Deutsch claims a detectable product that may be labeled with “any chemical substance or moiety having a detectable characteristic including radioactivity.” Further, U.S. Patent No. 3,641,235 (“Weiss”) teaches a similar immunoassay method for visually detecting the presence of an analyte in biological fluid. Finally, U.S. Patent No. 3.466,241 (“Tom”) discloses another immunoassay method, in which of the reagents comprises “a signal creating system” that includes “radioactive substances, enzymes and chromogenic substances.”

In the ‘484 patent’s initial examination, the examiner rejected all the claims in the application that resulted in the ‘484 patent as obvious under 35 U.S.C. § 103 in light of various combinations of references, and used Deutsch as a secondary reference for purposes of immunoreactions examples. The claims were amended, and on December 17, 1991, the ‘484 patent was granted. The ‘484 patent was subsequently assigned to Surmodics, who exclusively licensed the patent to Abbott Laboratories (“Abbott”).

On December 30, 1998, Abbott sued Syntron Bioresearch, Inc. (“Syntron”) for infringement of the ‘484 patent. Syntron counterclaimed that the patent was invalid because, inter alia, claims 22 and 23 were invalid in light of Deutsch. On October 4, 2001, the jury returned a special verdict finding that the ‘484 patent was not infringed and that Syntron had failed to prove by clear and convincing evidence that the claims were anticipated, obvious, or otherwise invalid. The District Court entered judgment accordingly.

Abbott appealed, and Syntron cross-appealed to the Federal Circuit, which affirmed-in-part and remanded-in-part the judgment of noninfringement of the ‘484 patent and affirmed the judgment of validity on all asserted claims of the ‘484 patent. In particular, the Federal Circuit sustained the judgment that Deutsch did not anticipate the asserted claims, noting that “the burden having been on Syntron to prove by clear and convincing evidence that the claims were anticipated, [the Federal Circuit could not] conclude that the jury verdict on anticipation was not supported by substantial evidence.” The Federal Circuit explained that the only issue regarding anticipation was whether Deutsch taught “flowing said solution along the medium,” and it agreed that the jury reasonably could have found it did not.

Following appeal, Syntron filed a request for an ex parte reexamination of the ‘484 patent, claiming that there was a substantial new question of patentability, and in part, asserted that certain claims were anticipated or made obvious in light of Deutsch. The examiner granted the request and after reviewing the claims in light of prior art, rejected claims 22, 23, and 25 as anticipated by Deutsch, claims 22 and 23 as anticipated by U.S. Patent No. 3,641,235 (Weiss) under 35 U.S.C. § 102(b), and claim 24 as obvious under 35 U.S.C. § 103 in light of Deutsch and a secondary reference, U.S. Patent No. 3,466,241 (Tom).

The Board affirmed the examiner’s rejections of claims 22, 23, and 25 of the ‘484 patent. First, the Board rejected Surmodics’s argument that Weiss lacked detection “in the reaction zone” and agreed with the examiner that, “detection may occur in a ‘reaction zone’ by determining whether dye has been displaced from the particle or not.” Second, the Board affirmed the examiner’s finding that Deutsch anticipated claims 22, 23, and 25, rejecting Surmodics’s argument that Deutsch could not anticipate the claims because it uses a developing fluid to provide the required flow through the test medium. The Board agreed with the examiner that “the claim is open to additional steps as it uses the term ‘comprising.’”

Last, the Board rejected Surmodics’s claim that reexamination was improper as to Deutsch because Deutsch did not raise “a substantial new question of patentability” as required by 35 U.S.C. § 303. The Board found that the reference did raise a substantial new question of patentability despite having been cited in the original prosecution because it was not cited in regard to the presently rejected claims, and it was not relied upon for the same reason the examiner now relied upon it. Moreover, the Board dismissed Surmodics’s argument that because a jury had affirmed a finding of validity over the reference and the Federal Circuit had affirmed, Deutsch could not raise a substantial new question of patentability for purposes of 35 U.S.C. §303.

On appeal, the Federal Circuit noted that the civil courts and PTO have different standards of proof for determining invalidity. In civil litigation, a challenger who attacks the validity of patent claims must overcome the presumption of validity with clear and convincing evidence that the patent is invalid. 35 U.S.C. § 282.  If the statutory burden is not met, it simply means that patent challenger did not carry his or her burden of establishing invalidity, not that the patent is valid. On the other hand, the Federal Circuit noted that during examinations and reexaminations, the standard of proof is a preponderance of the evidence, which is substantially lower than in a civil case. In re Caveney, 761 F.2d 671, 674 (Fed. Cir. 1985). Also, for the USPTO there is no presumption of validity, and the Federal Circuit noted that “examiner is not attacking the validity of the patent but is conducting a subjective examination of the claims in light of prior art.” In re Etter, 756 F.2d 852, 856-58 (Fed. Cir. 1985). Unlike in District Courts, in reexamination proceedings, “[c]laims are given ‘their broadest reasonable interpretation, consistent with the specification….’” Trans Tex. Holdings, 498 F.3d at 1298 (quoting In re Yamamoto, 740 F.2d 1569, 1571 (Fed. Cir. 1984)). Therefore, based on the differences outlined above, the Federal Circuit noted that considering an issue at the District Court is not equivalent to the USPTO having had the opportunity to consider it such that a finding of validity over a reference by a District Court does not preclude the USPTO from rejecting the claims over the same reference.

Next, the Federal Circuit addressed Surmodics’ argument that the District Court’s decision in light of Deutsch precludes the use of Deutsch during reexamination due to 35 U.S.C. §303.  In 2002, 35 U.S.C. § 303(a) was amended to state that the USPTO may only grant a reexamination request if “[t]he existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office.” The statute does not define what constitutes a “substantial new question of patentability.” As such, the scope of the “substantial new question of patentability” requirement had not yet been evaluated since the 2002 amendment, so the Federal Circuit had the duty of first impression in this case.

In reviewing the provision, the amended statute specifically discusses references “previously cited by the Office or considered by the Office,” 35 U.S.C. § 303(a) (2002) (emphasis added), but does not address any prior citation or consideration by the courts. The 2002 amendment removed the focus of the inquiry from whether the reference was previously considered, and returned it to whether the particular question of patentability presented by the reference in reexamination was previously evaluated by the USPTO. It remained unchanged pre- or post-amendment that an “argument already decided by the Office, whether during the original examination or an earlier reexamination” cannot raise a new question of patentability. H.R. Rep. No. 96-1307; see also H.R. Rep. No. 107-120, at 3. Likewise, the legislative history for both the original and amended reexamination statute suggest that Congress was concerned only with the consideration of issues in prior USPTO examinations, not prior civil litigation.  As such, the Federal Circuit found that the only issues precluded by 35 U.S.C. §303(a) are those raised and resolved by the USPTO during the initial examination, not those raised and resolved by a District Court during litigation.

Moreover, in regards to issues resolved outside of the USPTO in District Court, the Federal Circuit found that 35 U.S.C. §303 did not preclude raising such issues again during a reexamination.  The Federal Circuit relied upon the language of 35 U.S.C. §303 language and legislative history, and further relied upon the differences between the two proceedings, all of which suggested that Congress did not intend a prior court judgment upholding the validity of a claim to prevent the USPTO from finding a substantial new question of validity regarding an issue that had never been considered by the USPTO.

Surmodics argued that this reading of the statute—allowing an executive agency to find patent claims invalid after an Article III court had upheld their validity—violated the constitutionally mandated separation of powers. The Federal Circuit disagreed. The court’s final judgment and the examiner’s rejection were not duplicative, and the examiner’s rejection of claims in the ‘484 patent pursuant to reexamination did not disturb the court’s earlier holding that Syntron had not met its burden of proving that the ‘484 patent was invalid. The examiner instead evaluated the ‘484 patent claims in light of prior art, some of which Syntron had presented at trial, and found there was a preponderance of evidence supporting invalidity. Cf. Stevenson, 713 F.2d at 710. There is no Article III issue created when a reexamination considers the same issue of validity as a prior District Court proceeding. Therefore, the Federal Circuit concluded that the Board did not err in holding that the prior District Court litigation did not prevent the Deutsch reference from raising a “substantial new question of patentability” under § 303(a). As properly interpreted, a “substantial new question of patentability” referred to a question that had never been considered by the USPTO; thus, a substantial new question can exist even if a federal court previously considered the question.

Surmodics also argued that Deutsch did not raise “a substantial new question of patentability” because Deutsch was also considered by the USPTO during the initial examination and relied on as a secondary reference for rejecting various dependent claims as obvious. It urged the Federal Circuit to adopt a bright-line rule that “would preclude rejections in reexaminations based solely on references used in a rejection of claims in the original patent prosecution.” The Federal Circuit declined this invitation, finding that such a rule would be inconsistent with the clear text of the amendment.

Instead, the Federal Circuit found that, to decide whether a reference that was previously considered by the USPTO creates a substantial new question of patentability, the USPTO should evaluate the context in which the reference was previously considered, the scope of the prior consideration, and determine whether the reference is now being considered for a substantially different purpose. See H.R. Rep. No. 107-120, at 3. The Federal Circuit agreed with the Board that whether Deutsch anticipated claims 22-24 raised a substantial new question of patentability under the amended § 303(a) since Deutsch had not previously been relied upon for purposes of anticipation, but had instead only been relied upon for purposes of an example of an immunoreactions. Substantial evidence supported the Board’s conclusion that in the initial examination, “Deutsch was relied upon, as a secondary reference,” for the limited purpose of “teaching immunoreactions in general, and not for the specific method steps claimed.” The independent claims were found obvious without any reliance on Deutsch, and Deutsch was cited only to reject the dependent claims that limited the analyte-reactant pair used in the method to a ligand-antiligand pair. Nowhere in its decision did the examiner consider the particular analytical method disclosed by Deutsch. In light of the extremely limited purpose for which the examiner considered Deutsch in the initial examination, the Board is correct that the issue of whether Deutsch anticipated the method disclosed in claims 22, 23, and 25 was a substantial new question of patentability, never before addressed by the USPTO.

In conclusion, the Federal Circuit held that under 35 U.S.C. § 303(a), as amended in 2002, despite consideration of the Deutsch patent in the initial examination and the Federal Circuit’s prior decision, there was a substantial new question of patentability regarding whether Deutsch anticipated and made obvious claims 22-25 that made reexamination warranted. As Surmodics did not raise additional objections to the Board’s rejections over Deutsch, the Board’s finding that claims 22-25 of the ‘484 patent were anticipated and would have been obvious in light of Deutsch was affirmed.

Significance to Patent Owners

In Swanson, the Federal Circuit confirmed that the scope of reexamination has been significantly enlarged to any issue not considered by the Examiner during the original prosecution, even where a particular reference has already been considered during that prosecution.  On a more troubling note for patent owners, the Federal Circuit allowed the reexamination to continue in spite of what had otherwise been a final resolution of the issue at the District Court level.  While rationalizing that the standards of review are different, the practical effect is that accused infringers will be tempted to initiate reexaminations at the same time they are asserting invalidity at the District Court level.  While this will increase the likelihood of an invalidity ruling without substantially more cost to the infringer, it will force the patent owner to incur substantially greater costs in defending the patent in different fora and will represent a cloud on enforceability even after a finding of validity.