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Reexamination Estoppel Takes Effect Only After All Appeal Rights Are Exhausted

October 03, 2011

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Last Month at the Federal Circuit - November 2011

Judges: Bryson, Linn (author), Reyna (dissenting)

[Appealed from: N.D. Ohio, Judge Zouhary]

In Bettcher Industries, Inc. v. Bunzl USA, Inc., Nos. 11-1038, -1046 (Fed. Cir. Oct. 3, 2011), the Federal Circuit affirmed the denial of JMOL or a new trial on the issue of anticipation, vacated the denial of a new trial on invalidity based on 35 U.S.C. § 315(c), and affirmed the denial of a new trial on the issue of infringement. The Court remanded for further proceedings.

Bettcher Industries, Inc. (“Bettcher”) is the owner of U.S. Patent No. 7,000,325 (“the ’325 patent”), directed to a power-operated knife used in the meat packing and other commercial food processing industries. Bettcher sued Bunzl Processor Distribution, LLC (“Bunzl”) for infringement based on Bunzl’s manufacture and sale of blades marketed as replacement blades for rotary knives manufactured and sold by Bettcher.

Bunzl argued during trial that the ’325 patent was invalid as anticipated, and moved for JMOL of invalidity after the close of evidence. The district court denied the motion. Bunzl renewed its motion for JMOL and brought an alternative motion for a new trial on invalidity. The district court denied the motions, and Bunzl appealed.

After Bettcher had filed suit, Bunzl requested inter partes reexamination of the ’325 patent before the PTO. The examiner declined to adopt the grounds of rejection proposed by Bunzl and issued a Right of Appeal Notice (“RAN”). Bettcher argued in the infringement litigation that Bunzl was estopped from asserting certain invalidity references under 35 U.S.C. § 315(c), because § 315 estoppel took effect as soon as the examiner issued the RAN. The district court agreed and granted Bettcher’s request to exclude the references. In Bunzl’s motion for a new trial, it included the exclusion of these references as a separate basis, and the district court denied the motion.

Bettcher also moved for a new trial on the issue of infringement after the jury returned a verdict of noninfringement. The district court denied the motion, and Bettcher appealed.

On appeal, the Federal Circuit affirmed the district court’s denial of JMOL of invalidity or a new trial on anticipation. The Federal Circuit found that the prior art blades did not inherently anticipate the claims, and that the jury was entitled to reject Bunzl’s argument. “The speculative notion that by happenstance the [prior art parts] might, under hypothetical circumstances, be capable of operating [according to the claims] is an insufficient basis to mandate overturning the jury’s verdict.” Slip op. at 17. The Court thus affirmed the district court’s denial of JMOL of invalidity.

The Court also affirmed the district court’s denial of a new trial on the basis of improper claim construction or jury instructions. The Federal Circuit found that Bunzl’s claim construction argument lacked merit, because the district court issued the Markman order premised on the express belief that claim construction was not disputed. The Court found that the district court did not abuse its discretion in holding that Bunzl could not add new claim construction theories on the eve of trial. With respect to the jury instructions, the Federal Circuit found that Bunzl’s only argument regarding the language, “viewed by one of ordinary skill in the art,” rested entirely on the incorrect premise that the claims were inherently anticipated. The Court found that Bunzl’s argument that the “no difference” language excluded extraneous features did not demonstrate prejudice, because no such extraneous features were at issue in the case.

The Federal Circuit next considered Bunzl’s request for a new trial on the basis that the district court wrongly interpreted 35 U.S.C. § 315(c) in finding that its estoppel provision applied when the examiner issued the RAN. The Federal Circuit noted that the issue of when § 315 estoppel applies was a question of first impression. The Court stated that the party’s arguments required it to decide the meaning of “finally determined” in § 315(c) in view of the language of the statute, the legislative framework, the related regulations, and the legislative history. The Federal Circuit found that while § 315 did not expressly define “finally determined,” its content and context did. The Court concluded that “the estoppel provision of § 315 is triggered not when examination is completed but only after all appeal rights have been exhausted.” Id. at 23.

The Court found that the placement of the estoppel provision within the inter partes reexamination statute strongly suggested that “finally determined” refers to the stage of the proceedings when the events contemplated by the statute’s other subsections have run their course. The other subsections state that the parties may appeal decisions to the Board and the Federal Circuit, and the Court found that this implied that estoppel requires exhaustion of all appeal rights, including appeals to the Federal Circuit. The Court noted that its interpretation was further supported because the other subsections refer to “final decisions” while subsection (c) refers to “final determinations,” and that the appealable “decisions” of the other subsections thus do not themselves amount to “final determinations.”

Looking to other sections, the Federal Circuit found that under § 316, a determination of patentability occurs only after all appeals have terminated, and that § 317(b) applies only when reexamination and all appeals have terminated. Looking to the reexamination framework, the Federal Circuit found that because new grounds of rejection on appeal entitle applicants to continue prosecution before the examiner, reexamination is not final until all appeal rights are exhausted.

The Court found unconvincing Bettcher’s argument that the regulations discussing the RAN established it as a final determination, noting that the regulations do no address estoppel. The Court also found unpersuasive Bettcher’s argument based on the purpose of “minimizing harassment,” because the argument did not overcome the weight of evidence against Bettcher’s proposed interpretation. The Federal Circuit vacated the denial of Bunzl’s motion for new trial on invalidity based on references excluded under the district court’s interpretation of § 315(c), and remanded it for the district court to determine whether a new trial was warranted.

Finally, the Federal Circuit affirmed the district court’s denial of Bettcher’s motion for a new trial on infringement. The Court found that testimony by a patent lawyer who allegedly gave Bunzl an unwritten opinion on infringement did not warrant a new trial, because the testimony was relevant and admissible, at least with respect to Bunzl’s state of mind and its bearing on indirect infringement. The Federal Circuit also gave no weight to Bettcher’s argument that it was precluded from arguing its infringement theory, because it was undisputed that the accused blades did not infringe as sold. The Court thus concluded that Bettcher could not establish either intent or the absence of a substantial noninfringing use for the accused blades, and affirmed the district court’s denial of a new trial on the issue of infringement.

Judge Reyna dissented from the majority opinion with respect to anticipation of the ’325 patent, stating that he would reverse the district court, enter JMOL of anticipation, and not reach the other issues presented on appeal. Judge Reyna stated that the plain meaning of the claim language reads on Bettcher’s own prior art products, which include all of the structural features required by the claims, and which possess the capability of satisfying the functional or intended use limitations.

Summary authored by Amanda Joy Dittmar, Esq.