On January 20, 2015, the U.S. Supreme Court handed down its
first patent decision of the current term, rejecting the U.S. Court of Appeals
for the Federal Circuit’s long-standing practice of reviewing district court
patent claim construction rulings, including subsidiary factual findings, without
deference. The Supreme Court ruled that the Federal Circuit review all district
court factual findings for “clear error,” even if the fact is nearly dispositive
of the claim construction issue. The ultimate interpretation of the claim
remains a legal conclusion, however, that the Federal Circuit will review
de novo.
Teva Pharmaceticals USA, Inc. v. Sandoz, Inc., Case No. 13-854 (Jan.
20, 2015). The slip opinion is available
HERE.
Background:
The interpretation of the asserted claims frequently is
critical to the outcome of a patent dispute. The construction of disputed claim
terms determines whether an accused product infringes the patent and is pivotal
to most invalidity defenses. In Markman
v. Westview Instruments, Inc., 517 U.S. 370 (1996), the Supreme Court
ruled that claim construction is an issue delegated to the trial judge, even
when it involves fact issues, such as the meanings of terms of art recited in a
claim. Markman did not expressly
state whether those factual findings subsumed in a claim construction ruling are
subject to de novo review (as
normally would be the case for legal rulings) or to review for “clear error”
(as normally would apply to judicial fact findings). In Cybor
Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), the Federal Circuit held that it
would review district court claim construction rulings to de novo, reviewing the record without deference. Critics of the Cybor policy, including several Federal
Circuit judges, have pointed out that the approach is inconsistent with the prevailing
claim construction analysis, which requires district courts to consider a
factual record consisting of both “intrinsic” evidence (the patent claims,
specification, and prosecution history) and “extrinsic” evidence (such as
expert testimony, treatises, art references, and other facts outside the patent
and prosecution).
Teva Pharmaceuticals v. Sandoz Dispute
The Supreme Court ruling comes in a case involving drug
patents under the Hatch Waxman Act. Teva Pharmaceuticals owns several patents
covering its Copaxone® multiple sclerosis drug. Sandoz and other generic drug
companies filed Abbreviated New Drug Applications seeking approval to market a
generic form of the drug. In response, Teva filed an infringement action under
the Hatch Waxman Act. 35 U.S.C. § 271(e)(2).
Sandoz argued that a group of claims in the Teva patents
were invalid as indefinite, because the term “molecular weight” appearing in
the claims was subject to multiple incompatible meanings, and the patents
themselves and the relevant prosecution histories did not resolve the
ambiguity. The United States District Court for the Southern District of New
York ruled that the claims were not indefinite. Among other things, the
district court based its determination on its construction of the disputed
term, relying on expert testimony presented by Teva that the term "molecular
weight" was not ambiguous.
On appeal, the Federal Circuit, reversed, ruling that the
claims were indefinite. The Federal Circuit reviewed the conflicting expert
testimony Teva and Sandoz presented to the trial court on the question whether the
term “molecular weight” was ambiguous. The Federal Circuit concluded that “on de novo review of the district court's
indefiniteness holding, we conclude that Dr. Grant's testimony [introduced by
Teva] does not save Group 1 claims from indefiniteness." Teva appealed to
the Supreme Court.
Supreme Court
Decision
In a 7-2 decision, the Supreme Court reversed the Federal
Circuit, holding that it should have accepted the district court’s determination
that “molecular weight” was not ambiguous unless the finding was clearly
erroneous. Justice Breyer, writing for the majority, reasoned that Fed. R. Civ.
P. 52(a)(6) mandates this more deferential standard of review and nothing
in the Court’s jurisprudence or the rationales adopted by the Federal Circuit
in Cybor permitted a different
standard.
Breyer noted that although Markman gives the district judge sole responsibility to construe a
patent claim, it recognizes that claim construction will require subsidiary
factual findings. Analogizing a judge’s role in claim construction with a
similar role in interpreting contracts or deeds, the Court observed that these subsidiary
findings are subject to review for clear error, even when the ultimate
interpretation of the documents receives de
novo review. During the claim construction process, “courts may have to
resolve subsidiary factual disputes. And . . . [Rule 52(a)(6)] requires
appellate courts to review all such subsidiary factual findings under the
‘clearly erroneous’ standard.” Slip op.
at 7.
The majority was not impressed with Teva’s policy argument
that de novo review was important to ensure uniform interpretation of patents
nationwide, preventing a “zone of uncertainty” that would discourage
innovation. Instead, the Court stated that district court judges were reliable
factfinders for scientific or technical disputes, noting that, “A district
court judge who has presided over, and listened to, the entirety of a
proceeding has a comparatively greater opportunity to gain that familiarity
than an appeals court judge who must read a written transcript or perhaps just
those portions to which the parties have referred.” Slip op. at 7-8. Moreover, it stated that inconsistent claim
construction rulings by different trial courts would be infrequent and unlikely
to cause uncertainty:
Neither the [Federal] Circuit nor
Sandoz, however, has shown that (or explained why) divergent claim construction
stemming from divergent findings of fact (on subsidiary matters) should occur
more than occasionally. After all, the Federal Circuit will continue to review de novo the district court’s ultimate
interpretation of the patent claims. And the attorneys will no doubt bring
cases construing the same claim to the attention of the trial judge; those
prior cases will sometimes be binding because of issue preclusion, see Markman, 517 U. S., at 391, and
sometimes will serve as persuasive authority. Moreover, it is always possible
to consolidate for discovery different cases that involve construction of the
same claims. And, as we said in Markman,
subsidiary fact-finding is unlikely to loom large in the universe of litigated
claim construction.
Slip op. at 9.
Finally, the Court provided specific guidance on how to
apply both review standards in claim construction appeals. First, in situations
where the district court relies only on the intrinsic evidence (claim language,
specification and prosecution history), its ruling is subject to de novo review. If the district court
decision relies on factual underpinnings, however, such as evidence concerning
the “background science or the meaning of a term in the relevant art during the
relevant time period[,]” it should make specific factual findings and those
findings are subject to review for clear error:
The district judge, after deciding
the factual dispute, will then interpret the patent claim in light of the facts
as he has found them. This ultimate interpretation is a legal conclusion. The
appellate court can still review the district court’s ultimate construction of
the claim de novo. But, to overturn
the judge’s resolution of an underlying factual dispute, the Court of Appeals
must find that the judge, in respect to those factual findings, has made a
clear error. Fed. Rule Civ. Proc. 52(a)(6).
Slip op. at 13.
The clear error standard applies even when the factual finding “is close to dispositive
of the ultimate legal question of the proper meaning of the term in the context
of the patent.” Id.
Applying this framework to the case on appeal, the Court
held that the district court’s fact finding that a person skilled in the art
would not have consider the “molecular weight” ambiguous was entitled to
deference. “The Federal Circuit should have accepted the District Court’s
finding unless it was “clearly erroneous.” Our holding today makes clear that,
in failing to do so, the Federal Circuit was wrong.” Id. at 16.
Justice Thomas dissented, arguing that the entire claim construction
issue was legal, notwithstanding any subsidiary facts, and should be subject to
de novo review, just as a trial court’s interpretation of a statute is reviewed
without deference. He added that he feared the ruling would lead to divergent decisions in patent cases, leading to uncertainty and, ultimately, suppression of innovation.
Although the Teva decision does not expressly alter the analytic framework used
in claim construction proceedings since Phillips
v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), it is likely to introduce important strategic issues in
patent cases, especially relating to conduct of claim construction proceedings.
The extent of those changes will depend on how the Federal Circuit applies the
decision in subsequent cases.
