Earlier this week, in Teva v. Sandoz, the U.S. Supreme Court ruled that the “factual underpinnings” of a district court’s claim construction decision must be reviewed by the Federal Circuit under the “clear error” standard of review (see our Mar. 31, 2014 post for the question presented).  Many thanks to Clifford A. Katz and Beth D. Jacob who prepared this post.

Background

District Court.  Teva sued Sandoz and Mylan for patent infringement under its patent purportedly covering the drug Copaxone.  Copaxone is used to treat multiple sclerosis and has had more than $2 billion in sales per year.  In this Hatch-Waxman litigation, the validity of Teva’s patent was challenged for indefiniteness under 35 U.S.C. § 112(b).  Sandoz argued that the term “molecular weight” could have three different meanings based on how it was calculated.  The district court considered evidence from experts and agreed with Teva’s expert that a person of ordinary skill in the art would understand how to calculate “molecular weight,” and thus, the term was definite.

Federal Circuit Appeal.  On appeal, the Federal Circuit reviewed the district court’s decision with theCybor de novo standard of review—i.e., no deference to the district court’s legal or factual determinations—and reversed the district court.

In a later unrelated case, the Federal Circuit issued an en banc decision maintaining the Cyborstandard of review.  The majority maintained the Cybor standard under principles of stare decisis to “provid[e] national uniformity, consistency, and finality to the meaning and scope of patent claims.”  Judge Lourie concurred, noting that the standard applied is “legal jargon” that does not negate the practical point that the appellate court will give “informal deference” to the district court’s decision when “appropriate”.  Judge O’Malley dissented, arguing that Rule 52(a)(6) requires deference to the district court’s underlying factual determinations in construing claims.  See our Feb. 21, 2014 post for a more detailed discussion of that Federal Circuit decision.

Supreme Court Reversal

The Supreme Court reversed the Federal Circuit’s decision and remanded the case with instructions to apply a “clear error” standard of review to certain factual findings made by the District Court when construing patent claims.

Majority Decision.  The majority decision, written by Justice Breyer and joined by Justices Scalia, Kennedy, Ginsburg, Sotomayor and Kagan, approached the issue in a very straight-forward manner.  Rule 52(a)(6) provides that a court of appeals reviews a district court findings of fact for “clear error”; evidentiary questions underpinning claim construction are findings of fact; therefore, the Federal Circuit’s review of those findings should have been for clear error and not de novo.  Where district courts need to “consult extrinsic evidence in order to understand, for example, the background science or the meaning of a term in the relevant art during the relevant time period … courts will need to make subsidiary factual findings about that extrinsic evidence.  These are the “evidentiary underpinnings” of claim construction that we discussed in Markman, and this subsidiary factfinding must be reviewed for clear error on appeal.”

Recognizing that Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) held that claim construction is a question of law for the court, the Court noted that the Markman opinion “neither created, nor argued for, an exception to Rule 52(a).”  Patents do not require a separate jurisprudence; construction of a patent is much the same as “construing other written instructions, such as deeds, contracts, or tariffs.”  Similarly, appellate courts have experience in separating factual and legal matters to apply different standards in reviewing district court decisions.  Even if exceptions to Rule 52 could be found, “we cannot find any convincing ground for creating an exception to that Rule here.”

The Court emphasized that “the Federal Circuit will continue to review de novo the district court’s ultimate interpretation of the patent claims,” even if based on a factual finding.  Where the district court relies on extrinsic evidence, and in particular when – as in the case at issue – it resolves a dispute between expert witnesses, the district court’s factual findings cannot be overturned unless the lower court “has made a clear error.”  When only intrinsic evidence is considered below, the district court’s determination will be “solely” a question of law and “the Federal Circuit will review that construction de novo.

The Court recognized that while sometimes the factual finding “will play only a small role,” in other instances it “may be close to dispositive of the ultimate legal question of the proper meaning of the term.”  Nevertheless, according to the Court, “subsidiary factfinding is unlikely to loom large in the universe of litigated claim construction.”

The Court then pointed to one dispute between experts which was resolved by the district court in favor of the plaintiff patent holder, but was overturned by the Federal Circuit without a finding that it was clearly erroneous, and noted that plaintiff had claimed two other instances of improper rejection of factual findings.  The case was remanded to the Federal Circuit to apply the proper standard of review.

Justice Thomas Dissent.  Justice Thomas in dissent, joined by Justice Alito, changed the question.  A patent is more similar to a statute than to a contract, since it binds the public at large and has a historical basis in grants of royal prerogatives.  Claim construction, he wrote, does not involve findings of fact as understood by Rule 52; since they involve more than “a simple historical fact of the case,” thus, “determinations underlying claim construction fall on the law side of the dividing line.”  After all, he pointed out, there is no actual “skilled artisan” with an understanding of a given phrase; this is a legal fiction.  The analysis is no different from a determination of technical meanings in statutes and regulations.  He concluded by noting that the ultimate question at issue was whether the patent claim was indefinite.  As a question of law, this holding “does not turn on ‘findings of fact’ as that term is used in Rule 52(a)(6)” so the Federal Circuit properly applied a de novo standard of review.

Justice Thomas included an additional comment about the majority opinion in his first footnote.  The majority responded to the dissent’s attempt to redefine the question as whether claim construction involved a finding of fact by pointing out that the parties agreed that it did, and so defined the issue presented.  If the majority decision is premised on a stipulation of the parties, he commented, then “its holding applies only to the present dispute, and other parties remain free to contest this premise in the future.”