Teva Pharm. USA, Inc. v. Sandoz, Inc., 574 U.S. -- (January 20, 2015)

In a 7-2 decision, the Supreme Court recently clarified the standard of review that should be applied to a district court’s determination of a patent’s claim construction.

Teva Pharmaceuticals USA, Inc. owned the patent-in-suit, which disclosed a manufacturing method for a drug that treats multiple sclerosis. Teva sued Sandoz, Inc. for patent infringement and Sandoz defended claiming that the patent was invalid under 35 U.S.C. § 112(b) because the specification was indefinite. At issue during claim construction was the term “molecular weight.”

After considering evidence from experts, the District Court for the Southern District of New York found the term to be sufficiently definite and therefore found the patent to be valid. On appeal, Federal Circuit held that the term was indefinite after reviewing the District Court’s findings regarding claim construction using a de novo standard.  

In clarifying the standard of review that should apply, the Supreme Court first relied on Federal Rule 52(a)(6), which states that an appellate court must not set aside a district court’s finding of fact unless the findings are clearly erroneous. The Court considered the rule in the context of its decision in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), in which the Court was asked to determine if a jury or judge should construe patent claims, ultimately ruling that it was solely within the province of the judge. Because construction of claim terms is analogous to the interpretation of a written instrument, these determinations are questions of law.

The Court noted that in finding that claim construction was an issue for the judge in Markman, the Court did not create exception to Federal Rule 52(a) or render the rule inapplicable to claim construction rulings because subsidiary fact-finding is sometimes necessary for claim construction. Should the district court only require the consideration of intrinsic evidence during claim construction, its determination will be one of law and appellate review will be de novo. However, if the district court must look beyond intrinsic evidence and make subsidiary factual findings based on extrinsic evidence, its decisions regarding the factual underpinnings will be reviewed for clear error. Ultimately, after the subsidiary factual questions are resolved, the interpretation of the patent claims will be a legal conclusion. In other words, the Court ruled that appellate courts should review the district court’s ultimate claim construction using a de novo standard but must find clear error to overturn any underlying factual disputes that leads the court to its ultimate construction.

The Court supported its ruling with practical considerations noting that patent law is a “field where so much depends upon familiarity with specific scientific problems and principles not usually contained in the general storehouse of knowledge and experience.” Citing Graver Tank & Mft. Co. v. Linde Air Products Co., 339 U.S. 605 (1950). Further, “[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 than an appeals court judge who must read a written transcript or perhaps just those portions to which the parties have referred.” Therefore, the district court should be afforded more deference in its claim construction analysis.

In Teva’s case, the District Court for the Southern District of New York gave more credit to Teva’s expert opinion, rejecting Sandoz’s expert opinion in the court’s claim construction analysis. Giving more weight to Teva’s expert was a factual finding, upon which the district court reached its legal conclusion. The Supreme Court held that the Federal Circuit improperly failed to accept Teva’s expert’s explanation without first finding the district court’s determination to be clearly erroneous.

Justice Thomas dissented joined with Justice Alito, and argued that claim construction does not involve findings of fact but was more akin to interpretation of a statute—a pure question of law. As a result, Justice Thomas asserted that a de novo review of subsidiary evidentiary determinations would help create uniformity. Further, he argued that no finding of indefiniteness could ever amount to a “finding of fact.” The majority rejected this argument, finding that the interpretation of claim construction was distinguishable from statutory interpretation due in part to the public’s input in statutes prior to their enactment.

Procedurally, the decision is relatively minimal; however, the decision is important because the Federal Circuit has a history of reversing a high percentage of claim construction decisions and this decision will make it more likely that the Federal Circuit will affirm claim construction decisions. Following the Court’s ruling, the party unsatisfied with a district court’s claim construction will have a lower chance of reversal on appeal. Additionally, this decision will likely increase the focus and importance of providing expert testimony and extrinsic evidence during claim construction hearings.