Two days ago, on remand from the U.S. Supreme Court, the Federal Circuit in Shire v. Watson again affirmed its reversal of the district court’s finding, holding that “when the district court reviews only evidence intrinsic to the patent ..., and [we] will review that construction de novo. … If, on the other hand, a district court resolves factual disputes over evidence extrinsic to the patent, we ‘review for clear error those factual findings that underlie a district court’s claim construction.’” For the second time in four months (following In re Papst Licensing), the Federal Circuit applied de novo standard of review and gave no deference to the lower court’s findings.

In Shire v. Watson, Shire is the exclusive licensee of a patent that covers Lialda, a drug used to treat inflammatory bowel diseases. It sued Watson for patent infringement in 2012 after Watson filed a drug application for FDA approval to sell a generic version of Lialda. The district court found the patent valid and infringed based on claim terms construed during Markman. Watson appealed. The Federal Circuit reviewed the district court’s claim construction de novo, and summarily reversed the district court’s decision. Shire then filed a petition for writ of certiorari, arguing that the district court had considered extrinsic evidence during Markman that was entitled to deference. The U.S. Supreme Court granted the petition, vacated the judgment, and remanded the case back to Federal Circuit for further consideration in light of Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. In Teva, the Supreme Court held that factual findings made by a district court when construing the claims of a patent are entitled to deference on appeal and should be overturned only when “clearly erroneous.” 

In reaffirming that Shire’s patent was invalid, the Federal Court noted that the district court did not make any factual finding underlying its claim construction ruling. Because the district court did not make any factual finding, the Federal Circuit found that no deferential standard of review was necessary. The Federal Circuit reasoned that the main issue surrounding the district court’s claim construction was whether the disputed terms have an plain and ordinary meaning (which is a question of law subject to de novo review) and not what the terms mean to one skilled in the art (which is a question of fact subject to deference). Most important, the Federal Circuit emphasized that “the [Supreme] Court did not hold that a deferential standard of review is triggered any time a district court hears or receives extrinsic evidence.”

Shire Dev. LLC et al. v. Watson Pharm., Inc. et al., No. 2013-1409, 2015 U.S. App. LEXIS 9250 (Fed. Cir. June 3, 2015) (C.J. Prost).