The Federal Circuit Court of Appeals hears all appeals in patent infringement cases. When it was established by Congress in 1982 to create national unity in patent law, the Federal Circuit envisioned itself as becoming the last word in patent litigation matters. Over the years, the Federal Circuit has expanded the extent to which it reviews on a de novo basis District Court patent decisions and determinations. This led to much uncertainty among litigants and the sense that an appeal of a patent case was as unpredictable as a coin flip, as the Federal Circuit could seemingly reverse the action of the District Court without deference to the many hours of work invested in its findings. Yet the Supreme Court has been chipping away at the Federal Circuit's exertion of power in favor of the District Courts: last year the Supreme Court decided six patent cases, and reversed the Federal Circuit in five of them.
Continuing this trend, the Supreme Court ruled yesterday 7-2 that the Federal Circuit must now apply the "clear error" standard, rather than de novo review, in evaluating factual findings by a District Court during patent claim construction proceedings. The Court clarified that the de novo standard of review can only be applied to the ultimate construction of a patent claim. Teva Pharms. USA Inc. v. Sandoz, Inc., No. 13-854, 574 U.S._______(2015).
The underlying dispute focused on Teva's patent for the drug Copaxone, which is used to treat multiple sclerosis. Teva brought a lawsuit against drug manufacturer Sandoz for attempting to market a generic version of Copaxone. Sandoz argued in defense that Teva's patent was invalid as indefinite and unclear in that a claim limitation referring to "molecular weight" was equally susceptible to three different interpretations. The District Court disagreed with Sandoz and found that the claim was valid. Because definiteness of a patent claim under the Patent Act is determined according to the knowledge of a skilled artisan at the time of patent application, the District Court relied upon expert testimony to determine an appropriate definition of the term molecular weight to use in the patent claim. Applying the then-existing de novo review standard, the Federal Circuit reversed and found that the claim was invalid as indefinite and, in so doing, did not afford any deference to the District Court's factual findings on the expert evidence and testimony.
Explaining that "the Federal Circuit reviews the claim construction decisions of federal district courts throughout the Nation, and we consequently believe it important to clarify the standard of review that it must apply while doing so," the Supreme Court reversed the Federal Circuit's analysis. Writing for the majority, Justice Breyer primarily relied upon the "clear command" of Federal Rule of Civil Procedure 52(a)(6), which states that a court of appeals "must not...set aside" a District Court's "findings of fact" unless they are "clearly erroneous." While agreeing with the Federal Circuit's determination that claim construction was a question of law rather than fact, the Supreme Court also reasserted the finding from its seminal Markman opinion that claim construction may involve underlying factual disputes, such as the need to define a technical word or phrase used in the patent that might not be commonly understood, but whose meaning might be determined with extrinsic evidence. Because these questions of extrinsic interpretation are issues of fact, even if subsidiary, Justice Breyer concluded that the Federal Rules mandate that a clear error standard be applied to their review.
The Supreme Court dismissed several counterarguments relating to the practical difficulty of implementing this standard. First, the Court determined that it would not be too difficult to distinguish questions of fact from questions of law, as courts have a long history of doing so, and have commonly recognized such distinctions within the claim construction context. Second, the Court was not concerned that this standard of review would ultimately lead to a decrease in uniformity among District Courts, as there was no evidence suggesting that different District Courts would commonly issue different claim constructions as a result of making different findings of fact, or that litigants would not be able to consolidate matters in order to facilitate consistent construction of the same patent claims.
The Teva decision is particularly noteworthy for furthering two recent trends in Supreme Court jurisprudence.1 First, Teva is consistent with the Supreme Court's recent decisions providing increased autonomy and authority to District Courts. Justice Breyer noted that District Court autonomy in the patent claim construction context is particularly justified: after all, he wrote, "[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 [with specific scientific problems and principles] than an appeals court judge." This trend extends to other contexts as well, as evidenced, for example, by the Supreme Court's 2014 decisions granting greater discretion to District Courts in awarding attorney fees.
Second, the Teva decision continues the Supreme Court's departure from the notion that patent law, particularly as reviewed by the Federal Circuit, is an exceptional field of law requiring greater appellate review than other fields. To the contrary, Teva analogized the underlying factual disputes in claim construction to the process of determining the meaning of a "usage" in contract interpretation, concluding that a "clear error" standard of review is not unprecedented. Ultimately, the Court characterizes its application of a "clear error" standard in this context not as developing a new rule, but rather, as denying an exception to an established one.
The full impact of Teva, of course, remains to be determined as the District Courts, the Federal Circuit, and perhaps the Supreme Court will be called upon to grapple with the line dividing the factual and legal portions of claim construction. The authors expect that, in order to insulate their decisions from reversal on appeal, District Court judges will now place greater emphasis on factual findings in their claim construction orders, which may include a greater reliance on expert testimony and other extrinsic sources of evidence, such as dictionaries and treatises. Savvy litigants will now highlight such evidence, which has traditionally been given far less weight than the intrinsic record. We also expect to see a lower rate of reversal on appeal, as claim construction issues have played a prominent role in the Federal Circuit's high reversal rate for District Court opinions. Finally, given the increased discretion for District Court patent claim construction determinations, litigants will place even greater emphasis on the claim construction tendencies of particular judges in their forum shopping and venue transfer analyses.