Rage Against the PowerScreen

Rage Against the PowerScreenSometimes, the most interesting part of a patent opinion is the dissent, and Judge Newman turned in a doozy for this case.

In re Construction Equipment Co., No. 2010–1507 (Fed. Cir. Dec. 8, 2011) (Judges Newman, Prost, and O’Malley)

The case is an appeal from the Board of Patent Appeals and Interferences, which affirmed the rejection of Construction Equipment Co.’s (CEC’s) patent after a reexamination. But the case really started years ago, when CEC sued Powerscreen International Distribution for patent infringement in the late 1990s, using the patent-at-issue here. CEC won, and got an injunction against Powerscreen. The Federal Circuit upheld that injunction back in 2000.

CEC’s patent is for a vehicle for screening and separating rocks and plants (by size) from soil or dirt at a construction site.

Exhibit Image for Rage Against the Powerscreen

A few years ago, Powerscreen requested a reexamination of the patent by the Patent & Trademark Office (PTO). The examiner rejected the reexamined claims and the Board of Patent Appeals and Interferences (BPAI) affirmed the rejections. CEC appealed.

The Federal Circuit affirmed the BPAI’s decision without much comment. Judge Newman, however, strongly criticized the majority for failing to explain its reasoning, and she definitely has a point. Here is the majority’s entire explanation for affirming the BPAI’s decision:

Reviewing the record prior art, we agree with the Board that every limitation of each claim on appeal is found in one or another of the available references. We further agree one of ordinary skill in the art would have been able to combine the available references in such a way as to practice the alleged invention of each claim. And we agree that such a person would have had a reason to make such combinations, for the reasons set forth by the Board and by the Examiner.

As CEC itself admits, the basic concepts of sifting and sorting material are not new. Neither are the concepts of carrying material via conveyors, or of positioning the sorting machine on a trailer, as the ’564 patent does. CEC’s alleged invention consists entirely of combining known elements into a machine that, while possibly new, was nevertheless obvious and therefore unpatentable.

(Opinion at page 4.) Antigone wrote about another case recently where the court did something similar, affirming the PTO’s decision of obviousness without citing any evidence or explaining its reasoning. I agree with Antigone. I find these decisions, at best, unsatisfying and, at worst, dangerous. To be fair, this might be a case where the majority would have used a summary affirmance but felt they had to write an opinion in light of Judge Newman’s dissent.

A Second Bite at the Apple?

Judge Newman’s dissent is definitely the main event in this opinion. The heart of the dispute is whether Powerscreen should be able to get out of the injunction. Powerscreen may have overplayed its hand: as soon as the examiner rejected CEC’s claims, it asked the court to suspend the injunction. That court refused, because the appeals involving the reexamination were still active.

CEC raised the issue at the Federal Circuit, arguing that Powerscreen shouldn’t be entitled to what amounts to a Mulligan. The majority declined to address the question, saying that they expressed no opinion on whether Powerscreen might be able to get the injunction lifted.

Judge Newman, however, wasn’t so shy. In a passionate dissent, she argued that the validity of CEC’s patent had been decided already and that it was unconstitutional for the PTO to revisit the issue. As she noted, neither the executive nor the legislative branch can overturn a judgment of an Article III court. In Judge Newman’s view, the PTO was doing just that by finding CEC’s patent invalid after the Federal Circuit had issued a judgment that it wasn’t.

As the majority noted, the reexamination involved claims and references that weren’t raised in the original litigation. The decision at the time was not that CEC’s patent was valid, but rather that Powerscreen had failed to prove it invalid – and that decision wasn’t changed by the reexamination. (Although neither the majority nor the dissent mentions it, the Federal Circuit upheld the original finding of no invalidity with a summary affirmance. That is, there was no written opinion explaining its decision.)

Judge Newman wasn’t done. She was clearly frustrated that Powerscreen was getting another shot after losing the first time. She wanted to treat Powerscreen as the other party here, rather than the PTO, and apply the doctrine of issue preclusion to prevent CEC’s patent from being invalidated.

Issue Preclusion: A Way to Stop the Madness

Normally, issue preclusion stops a party from relitigating an issue after it’s had the chance to fully litigate it already. For example, if a court finds that a patent is invalid and that judgment is final, any other defendant can use issue preclusion to block the patent owner from arguing that the patent isn’t invalid in another case. The idea is that, in the example, the patent owner had a full and fair chance to make its case and lost. (This is an example of “non-mutual defensive issue preclusion,” because only one of the parties litigated the issue and it’s being used defensively against that party.)

But it doesn’t work the other way. If a court finds a patent isn’t invalid in one case against one defendant, a different defendant in a different case could still argue that the patent is invalid. The reasoning behind this is mainly because the new defendant never got a chance to make its arguments in court. The first defendant had different interests and motivations, as well as resources. It wouldn’t be fair to force the second defendant to live with a result that an unrelated party got. (If the new defendant could have intervened in the first litigation but chose not to, there might be an exception, but let’s not get too complicated.)

Issue preclusion can be critical to preventing an endless cycle of litigation over the same issues.

Will the Real Party Please Stand Up?

According to the caption, the parties in the case are CEC and the PTO, so why are we even talking about issue preclusion? Judge Newman argued that the real parties are CEC and Powerscreen, with the PTO acting as a sort of proxy. In her view, Powerscreen lost already, and it should be precluded from relitigating its invalidity defense through a reexamination request.

I understand Judge Newman’s outrage at what Powerscreen has done here, but I think it’s misplaced for a few reasons. First, patent infringement defendants file reexamination requests during litigation all the time, and it’s not uncommon for the reexamination to continue after the litigation is done. It’s also hard to reconcile Judge Newman’s strong criticism of the majority’s vague affirmance of the PTO’s obviousness rejection with her passionate insistence that a summary affirmance is entitled to absolute deference.

Most importantly, I don’t agree that Powerscreen is the other party here. The PTO represents the public, not a particular party. Yes, Powerscreen asked the PTO to act, but the PTO had no obligation to reject the patent. It did its job of reviewing the patent claims and concluded that the patent is invalid. The fact that Powerscreen is a potential beneficiary doesn’t change the PTO’s role in the process. Moreover, the PTO was apparently considering different art than Powerscreen used at trial. Should the public be required to allow an invalid patent to stay in force just to prevent a benefit from flowing to a party that lost at trial? If some other party had requested the reexamination, this wouldn’t even be a dispute.

If the patent is really invalid, why should Powerscreen still be enjoined? What purpose does it serve to keep punishing them, and the market, if the patent never should have issued? I don’t see any great benefit to leaving an invalid patent in force because the Federal Circuit once held that different art didn’t invalidate it.

Whatever your views, this opinion is a provocative one and worth a read.

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