As an update to our earlier 2014 postings, The Copaxone Story in the U.S. and India, The Copaxone Story in the U.S. and India: An Update, The Copaxone Story in the U.S. and India: A Further Update and The Copaxone Story in the U.S. and India: To Stay or Not to Stay is the Question, the U.S. Supreme Court (Supreme Court), on January 20, 2015, held 6-2 that questions of fact resolved by a district court prior to claim construction must be given deference by the Court of Appeals of the Federal Circuit (Federal Circuit) and can only be reversed if clearly erroneous.

Background

On December 27, 2007, Sandoz, Inc. (Sandoz) filed the first abbreviated new drug application (ANDA) with the U.S. Food and Drug Administration (FDA) seeking approval to manufacture and sell its proposed generic version of Copaxone®, before the expiration of the Orange Book patents. On June 29, 2009, Mylan filed its own ANDA. In view of the ANDA submissions, Teva Pharmaceutical Industries Ltd.’s (and Yeda Research and Development Co., Ltd.) (Teva) separately sued Sandoz (in August 2008) and Mylan and Natco (in October 2009) in the U.S. District Court, Southern District of New York (District Court) for infringement of the Orange Book patents as well as U.S. Patent Numbers 5,800,808 (‘808 patent) and 6,048,898 (‘898 patent). The District Court issued an injunction barring Sandoz and Mylan from marketing their generic versions of Copaxone® until September 1, 2015 (the expiration date of the ‘808 patent).

The lawsuits were consolidated and on June 29, 2012, the Judge found all nine patents valid, enforceable and infringed. Specifically, the Judge found Mylan had infringed seven of the patents and Sandoz infringed four patents. On July 26, 2013, the Federal Circuit ruled that four of the patents were valid but found five invalid for indefiniteness. Specifically, the Federal Circuit ruled that the claims of the five patents were indefinite because a person skilled in the art could not discern the boundaries of the claims. The patents declared invalid were U.S. Patent Numbers 5,800,808, 5,981,589, 6,048,898, 6,620,847 and 6,939,539. The patents held valid were U.S. Patent Numbers 6,054,430, 6,342,476, 6,362,161 and 7,199,098. The invalidation of the ‘808 patent was significant because of all the Orange Book listed patents, it had the longest expiration date (namely, September 1, 2015 (all of the remaining patents expire on the same date – May 24, 2014)). The Federal Circuit remanded the case to the District Court to determine whether to modify its injunction.

On November 13, 2013, the Supreme Court denied Teva’s request to stay the Federal Circuit’s decision during appeal. As a result of this denial, the District Court was compelled to follow the Federal Circuit’s mandate and modified its injunction. As a result, Sandoz and Mylan are permitted launch their respective generic versions of Copaxone® beginning May 24, 2014 (rather than September 1, 2015).

On March 31, 2014, the Supreme Court granted Teva’s writ of certiorari to review the Federal Circuit’s decision. Specifically, Teva petitioned for writ of certiorari to clarify the correct standard of review used by Federal appellate courts when reviewing factual findings made by a district court.

U.S. Supreme Court Decision

The Supreme Court reversed the Federal Circuit and established a new split standard of review of district courts’ claim construction rulings. Since Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) (Markman), the Federal Circuit has applied a de novo standard of review to all portions of district courts’ claim construction rulings, meaning the Federal Circuit reviewed “anew” the district court’s entire ruling, including the lower courts’ factual findings. The Supreme Court ruled that the de novo standard alone is improper and instead, the Federal Circuit must apply a “clear error” standard of review on “subsidiary factual disputes” resolved by district courts in construing a patent’s claims.

The Supreme Court agreed with Teva that the Federal Circuit applied the wrong standard of review in not giving deference to the District Court’s factual determinations. Specifically, the Supreme Court concluded that while Markman determined that the issue of claim construction is a question of law, Markman also recognized that “subsidiary factfinding is sometimes necessary” during this construction. Id. at 6, 574 U.S. ____. Federal Rule of Civil Procedure 52(a)(6) (Rule 52) required that courts of appeal not set aside a district court’s findings of fact unless “clearly erroneous.” Based upon Rule 52, as well as additional precedent, the clearly erroneous standard applied to district courts’ factual findings used in the proper construction of a patent claim. The Supreme Court also relied on the fact that “practical considerations favor clear error review.” In particular, patent law frequently requires knowledge of specific scientific problems and principles that are “not usually contained in the general storehouse of knowledge and experience.” Id. at 7, 574 U.S. ____, (citing Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605, 610 (1950)). The Court noted that a district court judge who has presided over a proceeding has a “comparatively greater opportunity to gain” more familiarity with the specific scientific problems and principles than an appeals court judge.

Additionally, the Supreme Court held that while the ultimate issue of the proper construction of a claim remains a question of law that the Federal Circuit reviews de novo, any subsidiary factual disputes resolved by a district court, including those that may be dispositive to the proper construction of a claim, must be reviewed under Rule 52’s “clearly erroneous” standard.

The Supreme Court also provided an explanation to ensure that the federal courts properly applied this change in the standard of review. The Court explained that when a district court’s claim construction required it to review only evidence intrinsic to a patent, that is, only the patent claims and the specification, along with the prosecution history, the district court’s determination would be solely a question of law, and thus, subject to de novo review. Conversely, where a district court is forced to look beyond the patent’s intrinsic evidence and consider extrinsic evidence in constructing a patent’s claims the clear error standard must apply. Thus, for example, where a district court considers opposing testimony of experts and makes a factual finding, that determination is subject to clear error review, but the ultimate construction based upon that factual underpinning remains subject to de novo review.

Application of the new split standard to the facts required reversal of the Federal Circuit’s determination. The Supreme Court found that the Federal Circuit erred in not accepting the District Court’s determination that Teva’s expert’s explanation was correct in analyzing how to determine molecular weight. The Supreme Court reversed and remanded to the Federal Circuit to consider the appeal in light of the new standard.

Finally, Justices Thomas and Alito dissented from the majority decision. Writing for the dissent, Justice Thomas argued that the District Court’s “subsidiary findings” made in the course of constructing the patent’s claims were not “factual findings” that fall within the purview of Rule 52. Instead, according to the dissent, the subsidiary findings associated with construing claim language is more closely related to the findings associated with construing a statute and thus, according to the dissent, de novo review should be applied.