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01.27.2015 Supreme Court Cuts Out a Slice of the Federal Circuit’s De Novo Pie

BY: RICHARD T. MATTHEWS & JOSHUA B. BRADY

Tuesday, the Supreme Court changed the standard of review the Federal Circuit must use when reviewing district court claim construction decisions in patent cases.  Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 574 U.S. ___ (2015).  Under the revised standard, when a district court makes a factual finding (e.g., analyzes extrinsic evidence) in connection with interpreting a patent claim, the Federal Circuit will review the factual finding for clear error.  As a result, litigants may likely increase their reliance on extrinsic evidence, and in particular expert testimony, during claim construction.  Although this may increase the parties’ cost of claim construction, the Federal Circuit will still make a de novo review of the ultimate claim construction decision, which is a matter of law.

Teva’s patent at issue claims a method of manufacturing Copaxone, used to treat multiple sclerosis.  Sandoz challenged the claim term “molecular weight” as indefinite under 35 U.S.C. §112, because the patent did not specify the method to calculate molecular weight—i.e. whether “molecular weight” referred to 1) peak average molecular weight, 2) number average molecular weight, or 3) weight average molecular weight.  Teva v. Sandoz, 574 U.S. __ (2015) (slip op. at *2-3).  The district court based its claim construction on several factual findings, and in particular a resolution of conflicting expert opinions, to conclude ultimately that the claim term was not indefinite.  The Federal Circuit overturned that decision, second-guessing the district court’s treatment of the expert opinions.  Teva appealed to the Supreme Court, challenging whether the Federal Circuit applied the proper standard of review when overturning the district court’s factual finding.  Id. (slip op. at *16).

Claim construction has been the sole territory of the court, not the jury, since the Supreme Court‘s decision in Markman v. Westview Instruments, Inc. holding that interpretation of a patent, which defines the scope of the patentee’s rights, is firmly a question of law.  517 U.S. 370, 372 & 388-91 (1996).  Generally, a court of appeals reviews a district court’s determinations of law de novo—without deference—and a district court’s findings of fact will be adopted by a court of appeals unless the findings are clearly erroneous.  Because claim construction in patent cases is ultimately a question of law, the Federal Circuit under Markman gave no deference to any district court findings and reviewed the construction de novoTeva v. Sandoz, 574 U.S. (2015) (slip op. at *3). 

The Supreme Court found that the Federal Circuit’s de novo review of the factual findings was incorrect because, under Federal Rule of Civil Procedure 52(a)(6), an appellate court should take a district court’s findings of fact as correct “unless clearly erroneous.”  Teva v. Sandoz, 574 U.S. __ (2015) (slip op. at *4).  The Supreme Court further held that the Court’s prior opinion in Markman did not create an exception to Rule 52(a)(6) when a claim construction involves “evidentiary underpinnings,” despite its holding that claim construction is a legal issue.  Teva v. Sandoz, 574 U.S. (2015) (slip op. at *1 & 5) (citing Markman, 517 U.S. at 372 & 390).  In addition, the Supreme Court noted that separate standards of review for claim construction (clearly erroneous for factual findings, and de novo for the overall claim construction) was unlikely to complicate the Federal Circuit’s role, as courts of appeal “have long found it possible to separate factual from legal matters,” and disputes over the evidentiary underpinnings of a claim’s construction arise infrequently on appeal.  Teva v. Sandoz, 574 U.S. (2015) (slip op. at *8).

Ultimately, the Supreme Court held that the Federal Circuit must apply the “clear error” standard when evaluating the district court’s findings of fact underlying a claim construction, and review the application of those factual findings to the disputed term under a de novo standard.  It is important to note that the line drawn between “clear error” and de novo review by the Supreme Court is whether the claim construction relies on the intrinsic evidence—the patent’s claims, specification, and prosecution history—in which case it is reviewed de novo; or whether it relies on the interpretation of extrinsic evidence—evidence of the use of the term within the art at the time, such as technical references, dictionaries, and expert opinions—in which case the interpretation of the extrinsic evidence is reviewed for clear error, regardless of how dispositive that interpretation is to the claim construction as a whole.  This returns the standards of review for claim construction to their state prior to the creation of the Federal Circuit and, further, brings the standards of review into line with the standards of review applied to other patent law inquiries, such as obviousness.  Teva v. Sandoz, 574 U.S. (2015) (slip op. at *7) (citing Harries v. Air King Products, co., 183 F. 2d 158, 164 (2d Cir. 1950) and Dennison Mfg. Co. v. Panduit Corp., 475 U.S. 809, 811 (1986)).

Despite the Supreme Court’s opinion that the impact of this change will be “unlikely to loom large in the universe of litigated claim construction,” Teva v. Sandoz, 574 U.S. (2015) (slip op. at *10), there are implications not only at the appellate level, but also at the trial level, as this may cause an increase in the importance of an expert’s opinion, and the frequency with which it is presented to assist the district court in understanding the scientific or technological background set forth by the extrinsic evidence.