Teva Pharmaceuticals USA, Inc. v. Sandoz Inc., No. 13-854, slip op. at 1-2 (U.S. Jan. 20, 2015).

In a 7-2 decision, the Supreme Court has held that an “appellate court [Court of Appeals for the Federal Circuit] must apply a 'clear error,' not de novo, standard of review” to the factual aspects of evidentiary underpinnings of a District Court's claim construction determination. The Court grounded its decision in Federal Rule of Civil Procedure 52(a)(6), which provides that in matters tried to District Court, the court's
“[f]indings of fact . . . must not be set aside unless clearly erroneous.”

Until now, and since the Cybor Corp decision in 1998, the Federal Circuit has been applying de novo review to all aspects of claim construction. The aspects of claim construction being “intrinsic evidence” (i.e. the patent claims and specification and additionally the prosecution history of the patent – the legal aspects) and “extrinsic” evidence (further information required in order to understand, for example, the background science or the meaning of a term in the relevant art during the relevant time period – the factual aspects).

Following the decision in Teva v Sandoz, determinations regarding evidence “intrinsic” to the patent will continue to be reviewed de novo on appeal. However, the change from Cybor Corp is that conclusions regarding “extrinsic” evidence will not be reviewed de novo as such evidence is subject to the ordinary fact-finding rules of court and will be reviewed with deference on appeal. This is to be the case, unless the Federal Circuit determines that the District Court made a “clear error” in their subsidiary fact-finding. In the decision, Justice Breyer provides fairly detailed guidance towards how the Federal Circuit should distinguish questions of fact (extrinsic evidence) and questions of law (intrinsic evidence).

The decision in Teva v Sandoz is important, both because claim construction has become such a major element of patent litigation and because the Court of Appeals for the Federal Circuit has a history of reversing a high percentage of claim construction decisions. Time will tell whether the decision provides increased predictability and certainty in litigation cases or whether the decision leaves the Federal Circuit with enough power to continue reviewing the claim construction without deference. In the meantime, it is likely that the decision will lead to increased cost and complexity for District Court litigants as they seek to increase their support for any “extrinsic” evidence submitted.