On January 20, 2015, resolving a long debated issue, the U.S. Supreme Court set aside the Federal Circuit’s de novo review of every aspect of a lower court’s claim construction decision, rejecting that form of review where the district court has resolved factual disputes and made factual findings about the extrinsic evidence. Teva Pharms. USA, Inc. v. Sandoz, Inc., No. 13-854 (“Op.”) at 1-2. The U.S. Supreme Court held that the “clear error” standard of review applies in those circumstances. Id. However, it also confirmed that the “ultimate” construction of the claim, even where underlying factual disputes have been resolved, remains a legal conclusion that the Federal Circuit can review de novo. Op. at 13. The U.S. Supreme Court also confirmed that de novo review is appropriate in cases where the district court reviews only evidence intrinsic to the patent.
Differing Standards for De Novo Review of Claim Construction
Commentators have widely criticized the de novo review of claim construction, largely because of the uncertainty it injects into the litigation process. Since determinations of infringement often turn on claim constructions, a reversal on claim construction can mean a total “do-over” or turn a victory into a defeat. The rate of reversal at the Federal Circuit is perceived to be quite high. Thus, prevailing parties at the district court level are hesitant to celebrate a win, particularly where claim construction was pivotal, until they hear from the Federal Circuit.
There has also been significant concern about whether the Federal Circuit is giving proper deference to the lower court’s factual findings in view of Federal Rule of Civil Procedure 52(a)(6), under which a court of appeals “must not . . . set aside” a district court’s “[f]indings of fact” unless they are “clearly erroneous.” District Court Judges often do a tremendous amount of work in connection with construing claims, including sitting through technology tutorials and conducting Markman hearings, as well as reading and analyzing numerous briefs and related filings from the parties. More than one district court judge has lamented that this work is all for naught with de novo review.
The U.S. Supreme Court previously held that a patent claim is the “portion of the patent document that defines the scope of the patentee’s rights” and as such, its construction is “exclusively” for the court and not a jury to decide, even if there are “evidentiary underpinnings.” Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996). The Federal Circuit relied on this as support for its “conclusion that claim construction, as a purely legal issue, is subject to de novo review on appeal.” Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454 (Fed. Cir. 1998) (en banc). The Federal Circuit en banc had recently reaffirmed de novo review in Lighting Ballast Control LLC v. Philips Elecs. N.A. Corp., 744 F.3d 1272, 1311 (Fed. Cir. 2014) (en banc).
In Teva, the parties’ dispute centered on the meaning of the term “molecular weight” in connection with an assertion that a claim was indefinite under 35 U.S.C. § 112. Op. at 3. To resolve this question, the District Court reviewed expert testimony, finding the term definite. Id. In reversing that determination, the Federal Circuit applied its de novo review standard. Id. Teva argued that the Federal Circuit’s standard was inappropriate; while, Sandoz, like the Federal Circuit in Lighting Ballast, emphasized the difficulty of “disentangling” the factual and legal issues, arguing for the simpler de novo review in all instances. Lighting Ballast, 744 F.3d at 1311; Op. at 8.
The U.S. Supreme Court rejected the call of simplicity, taking a more nuanced view, focusing on the Federal Rules of Civil Procedure, and citing, among other things, the arguments of Judge Newman in the dissent of Cybor and Judge Lourie in the concurrence of Lighting Ballast. Op. at 9. The Court emphasized that its decision in Markman did not create an exception to Rule 52(a)(6). Id. at 5. It explained that district courts may need to make “subsidiary” factual findings (such as when presented with conflicting expert testimony). Id. at 6-7. These subsidiary factual findings must be reviewed under the “clear error” standard. Id. at 7. However, the “ultimate construction” of the claim is a legal conclusion that the appellate court can review de novo. Id. at 9. Of course, in those circumstances where the district court reviews only evidence intrinsic to the patent, the judge’s determination is solely a determination of law, and the de novo standard will apply. Id. at 11-12.
Going further, and perhaps sensitive to the “disentangling” argument, the U.S. Supreme Court provided further guidance as to how to apply these standards. Op. at 11-13. The Court further downplayed the significance of the applicable standard of review, noting that fact finding in claim construction is “unlikely to loom large.” Id. at 10.
While there may be debate about how much guidance was provided, it is clear that litigators need to be thoughtful and, perhaps intentional, about the introduction of evidence into the claim construction process. District Court Judges, aware of their fact finding role, may be even more attuned to the consideration of expert testimony and other extrinsic evidence, even directed solely to explaining the background of the technology. Indeed, a plaintiff looking to avoid a later reversal, might emphasize factual disputes and look for opportunities to introduce such evidence whenever possible. In contrast, a defendant who is less confident that the district court will “get it right” might hesitate in relying on extrinsic evidence, except where necessary to rebut the plaintiff’s submissions, and might downplay factual disputes. The party who now advocates for “ordinary meaning” is telling the district court judge that it need resolve no factual disputes, and the review on appeal should be de novo. See Op. at 6.
In either event, all should expect District Court Judges to be more explicit about their factual findings. Where they are not (and particularly where their determination is favorable), litigators should consider seeking clarification from the court, to make a better record for appeal.