Monday, 27 April 2015

Federal Circuit’s Initial Reaction to Teva: “Clearly Erroneous” Review Standard Not Implicated In Most Cases

In the nearly three months since the U.S. Supreme Court ruled that subsidiary factual findings in claim construction proceedings must be reviewed for clear error, the U.S. Court of Appeals for the Federal Circuit has decided a handful of cases requiring it to review claim construction rulings by a district court or the U.S. Patent and Trademark Office. The Federal Circuit has declined to extend deference in any of those cases, and by all indications it is unlikely to do so in many future cases.

Prior to January 20, 2015, the Federal Circuit reviewed claim construction rulings – including subsidiary factual findings – de novo, without affording any deference to the findings or reasoning of the lower court. See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc). In Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., ___ U.S. ___ (Jan. 20, 2015), the Supreme Court held that district court factual findings based on extrinsic evidence are subject to “clearly erroneous” review under Fed. R. Civ. P. 52(a)(6). This more deferential standard applies even if the fact finding is “nearly dispositive” of the ultimate legal question of claim interpretation.

The Teva Court indicated that in reviewing claim construction rulings, the Federal Circuit should review the ultimate ruling on claim construction de novo. If the district court only considered intrinsic evidence (the claim language, specification, and prosecution history), then the entire question of claim construction is subject to de novo review. If, however, the district court ventured into extrinsic evidence (such as expert or inventor testimony), then those specific factual findings are entitled to deference and must be reviewed for clear error. Despite that deference, however, the Federal Circuit still reviews the ultimate claim construction ruling de novo.

In practice, Teva’s effect on Federal Circuit review of claim construction rulings may prove to be limited. The appeals court has held that extrinsic evidence – the only type of finding now afforded any deference – is much less significant in the claim construction analysis than intrinsic evidence. See Phillips v. AWH Corp., 415 F.3d 1303, 1318 (Fed. Cir. 2005) (“We have viewed extrinsic evidence in general as less reliable than the patent and its prosecution history in determining how to read claim terms”). In fact, the Federal Circuit has rarely, if ever, expressly relied on extrinsic evidence when interpreting a claim. It is not likely to start relying on extrinsic evidence following Teva. A review of Federal Circuit cases since Teva illustrates the decision’s limited impact to date.

PTAB Ex Parte Proceedings

The Federal Circuit has addressed Teva in two cases arising from ex parte appeal proceedings before the USPTO Patent Trial and Appeal Board. In In re Imes, 778 F.3d 1250 (Fed. Cir. Jan. 29, 2015), the Federal Circuit reversed a PTAB ruling cancelling claims in a reexamination. The court rejected the USPTO’s construction of the term “wireless” based on an express and unambiguous definition of the term provided in the specification. As a result, the court noted that, “Nothing in this case implicates the deference to fact findings contemplated by the recent decision in Teva[.]” 778 F.3d at 1252 n.1.

In a more recent case involving an ex parte appeal from a final rejection, the Federal Circuit also stated that its review of the USPTO’s claim interpretation did not implicate the Teva standard. In re Bookstaff, No. 2014–1463 (Mar 26, 2015). The court reversed the USPTO’s construction of the term “data that is indicative of a gratuity to be charged” based on the specification and disclosed embodiments, without considering any extrinsic evidence.

PTAB AIA Proceedings

The Federal Circuit addressed the standard for reviewing claim interpretation during an AIA post-grant proceeding in one case, In re Cuozzo Speed Technologies, LLC, 778 F.3d 1271 (Fed. Cir. 2015). After holding that the Teva decision is applicable to PTAB trial appeals, the Federal Circuit proceeded to exercise de novo review. The PTAB based its interpretation of the challenged claim on the patent specification and prosecution history. As a result, the Federal Circuit noted that, “Because there is no issue here as to extrinsic evidence, we review the claim construction de novo.”

District Court Actions

In two appeals from district court judgments, the Federal Circuit also declined to apply Teva’s clearly erroneous standard. In Fenner Investments, Ltd. v. Cellco Partnership, 778 F.3d 1320 (Fed. Cir. 2015), the court noted the Teva standard, but affirmed the district court’s construction of the term “personal identification number” based on the specification and statements made in the prosecution history.

In Enzo Biochem Inc. v. Applera Corp., ___ F.3d ___, (Fed. Cir. Mar 16, 2015), the court considered an appeal from a jury verdict of infringement. The district court ruled that the asserted claim covered both direct and indirect modes of detecting nucleotide probes, based in part on expert testimony that a figure in the patent specification disclosed an example of direct detection. On appeal, the Federal Circuit reversed in a 2-1 decision, relying on claim language and statements in the specification. The majority considered arguments based on the expert testimony to be waived on appeal, but noted that, “Nevertheless, even if we were to consider the district court’s finding, which would be subject to review for clear error under Teva, this sole factual finding does not override our analysis of the totality of the specification, which clearly indicates that the purpose of this invention was directed towards indirect detection, not direct detection.” In a dissent, Judge Newman argued that the district court’s construction was based on specific findings, including those based on expert testimony, and that, “These factual findings are entitled to deference, in accordance with the Court’s instruction in Teva[.]” She accused the majority of “ignoring the testimony and the district court’s findings and the jury verdict based on the evidence at trial.”

In Teva, the Court established that, when construing claims, appropriate deference must be given to the findings of the district court. The district court received some conflicting testimony, along with concessions on cross-examination, from which the court concluded that “at least one component” may include “the whole signaling moiety.” My colleagues show error of neither fact nor law in the court’s findings and conclusions.


 It is difficult to predict the long-term impart of Teva based on the limited number of Federal Circuit decisions applying it. The cases suggest, however, that the Federal Circuit likely will continue to apply de novo review when it resolves claim construction issues based on intrinsic evidence. In addition to situations where the USPTO or district court only considered intrinsic evidence, this approach may extend to situations in which courts considered extrinsic evidence, including expert testimony, but the Federal Circuit views the evidence to be insubstantial to the claim construction analysis.

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