CAFC Decision Reaffirms In Re Swanson while Dissent Raises Constitutional Questions Over Res Judicata and Issue Preclusion

Michael Caridi | December 14, 2011

In Re Construction Equipment Company, U.S. Court of Appeals for the Federal Circuit 2010-1507

Appeal from the United States Patent and Trademark Office, Board of Patent Appeals and Interferences.

(Reexamination No. 90/008,477)

Decided: December 8, 2011



Court gives a brief precedential decision affirming a finding of obviousness for a much fought over patent.  The decision is more a re-affirming of In re Swanson given the long litigation history of the patent-at-issue than a decision on legal merits of the BPAI’s finding of obviousness.  The lengthy dissent of Judge Newman is highly critical of allowing a re-examination of a patent that had been hotly litigated for years in the judicial branch with an opposite outcome.


Panel’s Decision

Construction Equipment Company (“CEC”) appealed the decision of the BPAI finding that the 5,234,564 patent (directed to a vehicle for screening rocks and other materials based on size for construction work) was obvious.

The Court’s opinion is light on narrative about the claims at issue.  The panel broadly agreed with the BPAI finding that “CEC’s alleged invention consists entirely of combining known elements into a machine that, while possibly new, was nevertheless obvious and therefore unpatentable.”

The more likely reason for the case being designated as precedential is the long history of litigation which preceded the reexamination.

CEC alleged that the request was initiated by Powerscreen International Distribution Ltd. (“Powerscreen”). CEC had asserted the ’564 patent against Powerscreen in the late 1990s and obtained an injunction against further infringement. Constr. Equip. Co. v. Powerscreen Int’l Distrib. Ltd., 45 U.S.P.Q.2d 1206 (D. Or. 1997), aff’d without op., 243 F.3d 559 (Fed. Cir. 2000).

The true meat of the panel’s decision is mostly contained in a lengthy footnote responding to the dissent.  Therein the panel holds that they will not consider issue preclusion for three reasons.

First, issue preclusion was not apparently briefed by CEC or the PTO, hence the panel considers the issue waived.

“The appellate courts of the federal judiciary have a well-established practice of declining to take up arguments not timely made by the parties. Singleton v. Wulff, 428 U.S. 106, 121 (1976); Boggs v. West, 188 F.3d 1335, 1337–38 (Fed. Cir. 1999).”

Second, the panel considers In Re Swanson to be unequivocally controlling in regards to issue preclusion.

“On the thin record before us, we see no reason why Swanson would not control this case. In both cases, the reexamination was initiated by a party that had previously failed to prove the patent invalid in litigation. We also note that, in this case, the reexamination involved numerous references, combinations, and even claims not treated by the district court. Compare Constr. Equip. Co. v. Powerscreen Int’l Distrib. Ltd., No. 96-1574, slip op. (D. Or. June 11, 1998) (reviewing novelty and nonobviousness of seven claims over three references) J.A. 97 with BPAI Op. (affirming rejection for obviousness of twelve claims over various combinations of seven references, two of which were considered in the Powerscreen litigation). Thus, even if we were to depart from this court’s prior holdings concerning waiver, we do not think we would take up the dissent’s invitation to find the reexamination proceeding improper. “

Third, the panel found that inserting issue preclusion into the current case would be contrary to the standing law governing collateral estoppel.

“Finally, the dissent’s suggestion that a finding that a patent is not invalid in one proceeding against one party would bar any other validity challenge would be a dramatic expansion of the concept of non-mutual offensive collateral estoppel. We decline to adopt a rule for patent cases that is inconsistent with all other governing law regarding collateral estoppel.”

The above form of the opinion reveals that the panel was not concerned with the details of the obviousness finding by the BPAI, but more so with the fact that the patent-at-issue was prior litigated and the reexamination had an opposite outcome.  Hence, the greatest take away is a reaffirming of In Re Swanson.

“In re Swanson, 540 F.3d 1368 (Fed. Cir. 2008), is highly instructive.

In that case, we found no error in the PTO’s holding that reexamination could be instituted on the strength of a reference that the requesting party had unsuccessfully asserted as prior art in litigation involving the same patent, even where this court had affirmed the district court’s judgment of validity. Id. at 1379. Swanson included detailed discussion of the reexamination statutes and legislative history thereof. Id. at 1376–77. It specifically noted that the district court’s judgment, which this court affirmed, was not incompatible with the Examiner’s rejection of claims on reexamination. The reason was that the district court’s judgment was not that the patent was valid per se, but that the accused infringer had failed to carry his burden to prove it invalid. Id. at 1379; see also Stevenson v. Sears Roebuck & Co., 713 F.2d 705, 710 (Fed. Cir. 1983) (holding that, for this reason, issue preclusion is generally not applicable in patent validity judgments). There was therefore no contradiction between the affirmed litigation judgment and the Examiner’s rejection during reexamination.”


In the lengthy dissent, Judge Newman would have been hard pressed to disagree more fervently.

Judge Newman begins her dissent with a recitation of the constitutional requirement that the Judical branch be given total deference to “deciding” issues put before it.  In response to the panels footnote that issue preclusion was waived due to lack of proper briefing, she responds that constitutional issues are always within the confines of the Courts whether briefed or not.

“Waiver is inapplicable to “significant questions of general impact or of great public concern.” Interactive Gift Express, Inc. v. Compuserve Inc., 256 F.3d 1323, 1345 (Fed. Cir. 2001). The constitutional impact of the procedure that gives rise to this appeal cannot be deemed waived, for it affects no less than the integrity of judgments and the separation of powers. Constitutional principles are not required to be set aside merely because they were not raised in the administrative forum. See Hormel v. Helvering, 312 U.S. 552, 555–59 (1941)…”

She then subtly notes the encroachment of executive agencies through administrative proceedings and decisions onto, what she considers, sacrosanct judicial turf.

“With the emergence of the administrative state, “Article III, §1 safeguards the role of the Judicial Branch in our tripar-tite system by barring congressional attempts ‘to transfer jurisdiction [to non-Article III tribunals] for the purpose of emasculating’ constitutional courts, and thereby preventing ‘the encroachment or aggrandizement of one branch at the expense of the other.’” Schor, 478 U.S. at 850 (brackets in original, internal citations omitted).”

After laying this ground work, Judge Newman expounds why the prior decision of the Judicial courts finding the patent-at-issue valid should be given full deference.  She notes that the prior litigation and the reexamination decision had the same primary reference.  She implies that the largest change which had occurred between the litigation proceedings and the reexamination was the shift in the obviousness burden at the USPTO resulting from the KSR decision, and asserts that In re Swanson should not be a vehicle to take advantage of such changes.

Seven years later Powerscreen requested reexamination on the ground of obviousness, citing the same references and additional references, placing strongest reliance on the same references that had been cited in the litigation. However, when an issue has been litigated and judgment entered in a court of last resort, “[t]he underlying rationale of the doctrine of issue preclusion is that a party who has litigated an issue and lost should be bound by that decision and cannot demand that the issue be decided over again.” In re Freeman, 30 F.3d 1459, 1465 (Fed. Cir. 1994) (in a reexamination completed after litigation, the PTO gave preclusive effect to the district court’s ruling on claim scope, although the Board stated that it did not agree with the district court). These fundamentals of judicial authority and administrative obligation are not subject to the vagaries of shifts in the burden or standard of proof in non-judicial forums, as the panel majority proposes. Although this aspect was weighed in In re Swanson, 540 F.3d 1368 (Fed. Cir. 2008), a lower standard of proof in an administrative agency cannot override the finality of judicial adjudication. The burden of proof assigned to administrative bodies is a matter of policy and procedure, not a change in substantive law. Administrative burdens do not override the Judicial Power of dispositive judgment.

She concludes her dissent on issue preclusion by noting that while the reexamination statute in its “evolving forms” is a viable and necessary component to patent law to avoid costly litigation, it should not be available as a second bite at the apple from an unfavorable decision

The reexamination statute seeks to replace or reduce the expense and encumbrance of litigation; but when the same issue has already been litigated and finally adjudicated, interested persons should be able to rely on the judicial decision. Throughout the legislative adjustments to reexamination, no one suggested that reexamination in the PTO could override a final judicial decision. Such an unconstitutional act would not have been contemplated by the Congress, and is improperly endorsed by this court.

Finally, Judge Newman dissents on the merits as well.  She notes that lack of a rationale to make the combination and asserts that the majority was using hindsight to reach a finding of obviousness.

The Court recognized in KSR that “inventions in most, if not all instances rely upon building blocks long since uncovered, and claimed discoveries almost of necessity will be combinations of what, in some sense, is already known.” 550 U.S. at 419. See Ruiz v. A.B. Chance Co., 357 F.3d 1270, 1275 (Fed. Cir. 2004) (“Inventions typically are new combinations of existing principles or features.”). We are offered no rationale for the combination now deemed obvious, other than the patentee’s achievement.


For accused infringers, the door to reexamination after litigation is clearly open as In Re Swanson is re-affirmed.

For patentees, briefing the constitutionality of a reexam after litigation at the CAFC may not fall on deaf ears.

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