Shire Development v. Watson Pharmaceuticals; Teva Pharmaceuticals v. Sandoz

Addressing the impact of expert testimony used during claim construction, the U.S. Court of Appeals for the Federal Circuit in a case remanded by the U.S. Supreme Court, following its January 5, 2015 decision in Teva Pharmaceuticals v. Sandoz, again reversed the district court’s construction of disputed claim terms and finding of infringement, finding that the lower court construed relevant terms too broadly in view of the statements made during prosecution. Shire Development v. Watson Pharmaceuticals, Case No. 13-1409 (Fed. Cir., June 3, 2015) (Hughes, J.). Less than two weeks later, the Federal Circuit issued its decision in the Supreme Court remand ofTeva and stood its claim construction ground. Teva Pharmaceuticals v. Sandoz, Case Nos. 12-1567; -1568; -1569 and -1570 (Fed. Cir., June 18, 2015) (Moore, J.) (Mayer, J., dissenting)

In January of 2015 the U.S. Supreme Court, in Teva v. Sandoz, ruled that the Federal Circuit must generally apply a “clear error” standard when reviewing a district court’s claim construction that is not based on intrinsic claim construction evidence (IP Update, Vol.18, No.1).

Shire owns a patent directed to a controlled-release oral pharmaceutical composition for treating inflammatory bowel disease. The patent requires the claimed composition to have an inner lipophilic matrix consisting of substances and an outer hydrophilic matrix consisting of compounds. After Watson filed an Abbreviated New Drug Application (ANDA) to obtain approval to sell a generic form of the drug, Shire sued for infringement.

The district court found infringement based on its construction of disputed terms “inner lipophilic matrix” and “outer hydrophilic matrix.” Watson appealed. In the first appeal, the Federal Circuit disagreed with the district court’s construction of the terms “inner lipophilic matrix” and “outer hydrophilic matrix” and determined that the matrix—not just an excipient within the matrix—must exhibit the lipophilic or hydrophilic characteristic and that the inner lipophilic matrix and outer hydrophilic matrix should be construed as separate from one another, based on the prosecution history. Shire filed for certiorari. After issuing its decision in Teva, the Supreme Court remanded the case back to the Federal Circuit for reconsideration in light of the new “clear error” standard of review for factual findings that underlie a district court’s claim construction.

Shire argued that the because the district court heard testimony from various expert witnesses during a Markman hearing and at trial, the Court must defer to the district court’s construction of the disputed terms because no “clear error” exists in these claim constructions. The Federal Circuit explained that under Teva, the disputed terms can be construed based on review of the intrinsic evidence including the specification, related claim language and prosecution history. Despite Shire’s arguments to the contrary, the Federal Circuit explained that the deferential standard of review is not trigged any time a district court hears or receives extrinsic evidence. The Court reasoned that there is no indication that the district court made any factual findings based on the extrinsic evidence that underlie its claim construction of the “inner lipophilic matrix” and “outer hydrophilic matrix.”

Less than two weeks later, in its remand consideration of the Teva case, the same Federal Circuit panel that decided the original appeal in Teva again found that the asserted claims were invalid as indefinite under § 112(b), applying both the Supreme Court’s decisions on claim construction (Teva) and its intervening decision on claim indefiniteness (Nautilus v Biosig, IP Update, Vol. 17, No. 6).

The claim term in issue was to a copolymer “having a molecular weight of about 5 to 9 kilodaltons.” As detailed in the Teva IP Updatecase note cited above, there are three possible ways for a polymer chemist to calculate molecular weight, but none was specified and there was no “default” that would be used by those skilled in the art. Although the § 112(b) issue was ultimately decided on the basis of whether the claim scope lacked “reasonable certainty” under Nautilus, the finding was predicated on the interpretation of the claim term in issue. At the district court there was expert testimony (by the patentee) that the molecular weight should be calculated as a “peak average” because it was the most “straightforward” calculation. The district court relied on that testimony in its analysis.

In the remand appeal, the Court gave “deference” to the district court’s factual conclusion but nevertheless rejected it in light of the most important intrinsic evidence of all: the actual claim language:

“A party cannot transform into a factual matter the internal coherence and context assessment of the patent simply by having an expert offer an opinion on it. The internal coherence and context assessment of the patent, and whether it conveys claim meaning with reasonable certainty, are questions of law. The meaning one of skill in the art would attribute to the term molecular weight in light of [the intrinsic evidence].”

“Even accepting as correct the district court’s factual determinations about … [the expert testimony] these facts do not resolve the ambiguity in the Group I claim about the intended molecular weight measure.”

In dissent, Judge Mayer argued that under the Supreme Court Teva ruling the expert testimony is dispositive and was improperly rejected by the majority. Rather than vacate the district court claim construction and find the claim indefinite, Mayer would have remanded the case for the district court to consider, in the first instance, whether further factual development was needed to resolve the § 112(b) issue.

Practice Note: Extrinsic evidence may be considered if needed to assist in determining the meaning or scope of technical terms in patent claims, but if reliance on that extrinsic evidence is not necessary to determine the scope of the patented invention, the Federal Circuit may decline to apply a deferential standard of review.

The outcome of this second (i.e., remand) appeal in Shire is consistent with the Federal Circuit’s tendency, post-Teva, to not apply a deferential, clear-error review in cases where claim construction can be decided without reference to the extrinsic evidence. See for example, the discussions on Lighting Ballast, TomTom and Kaneka Corp. (this edition) as well as IP Update, Vol. 18, No. 1 and IP Update, Vol. 18, No. 3.