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Structural and Functional Analysis of Disclosed and Prior Art Elements Are Required When Means-Plus-Function Limitations Are at Issue

September 14, 2009

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Last Month at the Federal Circuit - October 2009

Judges: Newman (concurring), Gajarsa (author), Dyk (concurring)

[Appealed from: N.D. Cal., Judge Armstrong]

In Fresenius USA, Inc. v. Baxter International, Inc., Nos. 08-1306, -1331 (Fed. Cir. Sept. 10, 2009), the Federal Circuit affirmed the district court’s judgment that Fresenius USA, Inc. and Fresenius Medical Care Holdings, Inc. (collectively “Fresenius”) failed to provide sufficient evidence of prior art structure to prove that a means-plus-function claim limitation was known in the art, reversed the district court’s grant of JMOL as to the remaining claims asserted by Baxter International, Inc. and Baxter Healthcare Corporation (collectively “Baxter”), vacated the permanent injunction and royalty award it had granted against Fresenius, and remanded.

Baxter owns U.S. Patent Nos. 5,247,434 (“the ’434 patent”), 5,744,027 (“the ’027 patent”), and 6,284,131 (“the ’131 patent”). All three patents are derived from a parent application filed in 1991, and all three disclose and claim a hemodialysis machine integrated with a touch screen user interface.

Fresenius initially brought a DJ action against Baxter on the grounds of invalidity and noninfringement of the ’434, ’027, and ’131 patents. Baxter counterclaimed, alleging infringement of all three patents. The district court granted partial SJ that Fresenius infringed claims of the ’131 and ’434 patents. Following trial, a jury found all the asserted claims invalid as either anticipated or obvious. The district court overturned the jury’s verdict for lack of substantial evidence and granted Baxter’s JMOL motion that its asserted claims were not invalid. The district court also found that Fresenius did not present substantial evidence of a motivation to combine the prior art elements to produce the claimed inventions in the ’131 and ’434 patents.

Following a jury trial on damages, the jury awarded fourteen million dollars to Baxter. The district court granted a permanent injunction against Fresenius and awarded royalties on sales of infringing machines and disposable products linked to the infringing machines. Fresenius appealed the grant of JMOL, entry of the permanent injunction, royalty award, and constructions of specified claim terms. Baxter cross-appealed the jury’s determination that the asserted claims of the ’027 patent are invalid as anticipated.

On appeal, the Federal Circuit determined that Baxter failed to properly raise the argument that substantial evidence did not support the jury’s anticipation determination. The Court noted that Baxter’s motions only briefly mentioned the jury’s anticipation verdict, and in each motion Baxter relegated its discussion of that verdict to a single footnote. As the Court explained, one specific challenge to an anticipation finding does not preserve all possible challenges to that finding. “If a party fails to raise an argument before the trial court, or presents only a skeletal or undeveloped argument to the trial court, we may deem that argument waived on appeal, and we do so here.” Slip op. at 10.

With the exception of claims 26-31 of the ’434 patent, the Federal Circuit reversed the JMOL with regard to the asserted claims on evidentiary grounds. With regard to the ’027 patent, the district court determined that Fresenius had failed to prove by clear and convincing evidence that claim 11 was obvious because the only relevant expert witness testimony did not discuss the limitations of claim 7, from which claim 11 depended. The Court disagreed because another Fresenius witness had previously discussed those limitations when he testified that claim 7 was anticipated. When assessing the obviousness of claim 11, the jury could have reasonably concluded that the limitations of claim 7 were known in the prior art based on the combined testimony of Fresenius’s experts. “In determining whether Fresenius presented substantial evidence to support the jury’s verdict that claim 11 is obvious, we must consider all evidence that was before the jury and draw all reasonable inferences from that evidence in the light most favorable to Fresenius.” Id. at 12.

With regard to the ’131 patent, the district court noted that Fresenius’s expert, who testified that claim 1 was obvious, did not specifically analyze element (a) of claim 1. Element (a) is written as a Markush group, listing a circulation unit among others. In reversing the district court’s finding, the Court pointed out that three witnesses provided testimony that prior art hemodialysis machines contain circulation units. Based on the totality of the testimony presented by these three witnesses, the jury could have reasonably concluded that the limitations of element (a) were known in the prior art.

Claim 14 of the ’131 patent depends from claim 1 and further requires that the touch screen “display a plurality of indicia, each corresponding to a different time-variable hemodialysis parameter.” Although the district court noted that an operating manual for a prior art machine disclosed “an indicium corresponding to a time-variable hemodialysis parameter,” the district court concluded that Fresenius failed to present any evidence that a “plurality of indicia” was present in the prior art. The Court disagreed because Fresenius provided testimony, using an explanatory demonstrative, that the inventors of the prior art machine had provided for more than one time-variable parameter. The demonstrative indicated that the prior art machine allowed for multiple indicia, each corresponding to a different time-variable hemodialysis parameter. The Court reasoned that the jury could have reasonably credited the testimony and concluded that the relevant limitation was present in the prior art machine.

Baxter additionally asserted that Fresenius failed to demonstrate that a verification limitation of claim 16 existed in the prior art. The Court remained unpersuaded because Fresenius’s expert testified that a prior art machine contained the verification limitation, referring to a specific page of an operating manual for support.

Claims 26–31 of the ’434 patent contain means-plus-function limitations that require a “means for delivering the dialysate to a dialysate compartment of a hemodialyzer.” After stating that a structural analysis is required when means-plusfunction limitations are at issue and a functional analysis alone will not suffice, the Court found that Fresenius neither identified the structure in the specification that corresponds to the means for delivering dialysate nor compared it to the structures present in the prior art. The Court explained that, at most, the evidence of record supports a finding that some structures that could perform the claimed function existed in the prior art, and such a finding is insufficient.

The Court also noted an additional reason for affirming the district court’s grant of JMOL regarding dependent claim 30. Claim 30 requires a “means for delivering an anticoagulant to a patient,” which the jury was instructed requires a microprocessor and stepper motor. However, Fresenius cited no testimony discussing a “stepper motor.” While Fresenius contends that an operating manual for a CMS 08 dialysis machine disclosed the necessary structure, Fresenius cited no pages that reference a “stepper motor.” The Court independently reviewed the record, noting that the manual briefly mentions a “stepper motor” but does not discuss that structure in the context of the claimed function. “Moreover, even if the CMS 08 manual disclosed a stepper motor for delivering an anticoagulant, it was Fresenius’s burden to clearly disclose, discuss, and identify for the jury the supporting evidence upon which it was relying to prove that the claim limitation was present in the prior art.” Id. at 18.

The Court also reversed the district court’s determination that Fresenius had failed to demonstrate the required motivation to combine prior art elements in support of the jury’s obviousness determination. Although the district court issued its JMOL opinion before KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), was decided, the Court noted that it remains appropriate post-KSR “to determine whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue.” Slip op. at 20 (quoting KSR, 550 U.S. at 418). Thus, the jury’s obviousness verdict remains relevant to the Court’s review because implicit factual findings underlying the jury’s verdict will not be overturned if they are supported by substantial evidence.

In support of its obviousness argument, Fresenius presented a prior art publication by Dr. Rau that disclosed a touch screen interface on an anesthesia-delivery system. The publication mentioned that advancing areas of medicine, such as hemodialysis, could benefit from an improved user interface. Another Fresenius witness, Dr. Phares, also described the ease and prevalence of “integrating a touch screen into some kind of a computer-controlled machine,” such as a hemodialysis machine. Id. at 21.

Under KSR, “if a technique has been used to improve one device, and a person of ordinary skill in the art would recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill.” Id. (quoting KSR, 550 U.S. at 417).

The Court reasoned that the jury had implicitly found that the prior art suggested combining a touch screen with a hemodialysis machine. That finding was supported by substantial evidence because a reasonable jury could have concluded that Dr. Rau’s publication contained an explicit suggestion to combine the benefits of a touch screen interface with a hemodialysis machine. Based on Dr. Phares’s testimony, the jury could also have reasonably concluded that an ordinarily skilled artisan would have known how to make that same combination.

Fresenius asserted several challenges to the district court’s injunctive order. However, the Court found that Fresenius had cited no legal error and failed to demonstrate that the district court had made any clearly erroneous factual findings. While the Court concluded that the district court did not abuse its discretion in granting permanent injunctive relief, the injunction was vacated and remanded for the district court to reconsider in light of the partial JMOL reversal. Likewise, the Court vacated the royalty award and remanded for the district court to reconsider whether the previous award was proper in light of the modification of the district court’s judgment.

The Court also considered the parties’ other arguments and found them unpersuasive. For example, Fresenius asserted that the district court erred in construing several claim terms. The Court declined to consider these arguments because Fresenius failed to clearly explain what result would occur if the Court adopted Fresenius’s proposed claim constructions. Moreover, Fresenius unconditionally stipulated to infringement of the asserted claims. The Court reasoned that the infringement judgment cannot be altered by a modified claim construction because Fresenius’s stipulation in no way stated or indicated that it was conditioned upon the district court’s claim construction.

In a concurring opinion, Judge Dyk asked whether the district court could, in its discretion, stay further proceedings pending the outcome of a reexamination before the PTO. Judge Dyk noted that while Fresenius had not established the invalidity of claims 26-31 of the ’434 patent, those claims on their face were of dubious validity in light of the Court’s holding that the asserted claims of the ’131 patent and the ’027 patent are invalid. Judge Newman responded to Judge Dyk’s concurrence in a separate concurring opinion because she was concerned about distorting the role of reexamination. While a strong supporter of the principle of reexamination, Judge Newman stated that staying the action at this late stage would entail several years of additional delay. Judge Newman pointed out that the PTO had yet to finally decide the reexamination, which remains subject to judicial review on the same issues.

Summary authored by Jeremy P. Bond, Esq.