In November 2014, this column reported that the U.S. Supreme Court had granted certiorari in three intellectual property cases, and just last week, the Supreme Court decided two of them. In Teva Pharmaceuticals USA v. Sandoz,1the court ruled in a 7-2 decision, that claim construction may not always be a pure question of law entitled to de novo review as the U.S. Court of Appeals for the Federal Circuit had previously enunciated, but instead may involve underlying factual findings subject to “clear error” review. Similarly, in Hana Financial v. Hana Bank,2 the Supreme Court ruled, this time unanimously, that the issue of “tacking” (i.e., whether the use of an older mark in a different manner may be ‘tacked on’ to the use of a newer one for purposes of determining priority) is a factual one for juries. This article will address both cases, as well as the Federal Circuit’s recent split affirmance of a willful infringement finding leading to an award of double damages.

‘Markman’ Clarified

In the Teva case, at issue was whether the Supreme Court’s prior decision inMarkman v. Westview Instruments,3 required that all patent claim construction decisions be reviewed, as a matter of law, de novo. There, the Supreme Court held that “the construction of a patent, including terms of art within its claim,” is not for the jury but “exclusively” for “the court” to determine. The Teva case, however, involved claim construction with “evidentiary underpinnings.”

The claims at issue in Teva are directed to methods for manufacturing copolymer-1, the active ingredient in Copaxone®, a Teva-marketed drug used in treating multiple sclerosis. After Sandoz submitted its abbreviated new drug application seeking Food and Drug Administration approval to market a generic version of Copaxone®, Teva filed a patent infringement suit against Sandoz.

The primary defense for Sandoz was that the claim term “average molecular weight” had multiple possible meanings that rendered the disputed claims invalid for indefiniteness. Although “average molecular weight” could, according to Sandoz, refer to several different measures, like peak average molecular weight (Mp), number average molecular weight (Mn), and weight average molecular weight (Mw), the district court rejected the indefiniteness defense, agreeing with Teva’s expert, holding that a person of ordinary skill in the art would understand from the specification that the claim term means Mp even if Teva offered contradictory definitions of “average molecular weight” while prosecuting related patent applications.

On appeal, the Federal Circuit reversed, reviewing the issue of indefiniteness de novo, and ignoring Teva’s expert’s testimony. It stated that the claims’ “plain language does not indicate which average molecular weight measure is intended,” and neither the specification nor the prosecution history resolved this ambiguity.1 Thus, according to the Federal Circuit, the claim term was indefinite and the disputed claims invalid.

The Supreme Court, however, opined that a more deferential standard of review should apply to underlying factual findings because“[a] district court judge who has presided over, and listened to, the entirety of a proceeding has a comparatively greater opportunity to gain [a] familiarity [of scientific problems and principles needed in patent law disputes] than an appeals court judge who must read a written transcript or perhaps just those portions to which the parties have referred.”

The court also provided guidance regarding the application of its holding: When a district court judge examines evidence intrinsic to the patent (e.g., the claims, specification, and prosecution history), the judge’s determination is based on legal questions and thus, this determination should be reviewed de novo. Conversely, when the judge consults extrinsic evidence (e.g., background science, relevant art, experts), the judge is conducting fact-finding which should be reviewed for clear error. In the end, however, the Federal Circuit should still review de novo the district court’s ultimate construction of the claim.

The Supreme Court rejected the notion that the court in Markman created an exception to Federal Rule of Civil Procedure 52(a)(6) for appellate review of patent claim construction. Instead, the court in Markman recognized that district courts “may have to resolve subsidiary factual disputes” during claim construction and as such, Rule 52(a)(6) requires the Federal Circuit to review these factual findings under the “clear error” standard.

The court also pointed to pre-Federal Circuit precedent that supports this holding and analogized to precedent where the court subjected subsidiary factual findings concerning obviousness to the “clear error” standard. The court also did not agree that a de novo standard should apply to the entirety of claim construction because separating fact and law questions could be difficult, citing to precedent illustrating that complexities still existed under the prior standard. Finally, the court disputed the fear that two standards of review would lead to less uniformity by reinforcing, inter alia, that “subsidiary factfinding is unlikely to loom large in the universe of litigated claim construction.”

The Supreme Court explained “how” the rule should be applied:

Accordingly, the question we have answered here concerns review of the district court’s resolution of a subsidiary factual dispute that helps that court determine the proper interpretation of the written patent claim. The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them. This ultimate interpretation is a legal conclusion. The appellate court can still review the district court’s ultimate construction of the claim de novo. But, to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual findings, has made a clear error. Fed. Rule Civ. Proc. 52(a)(6).

In view of the foregoing, the Supreme Court ruled that the Federal Circuit was “wrong” in failing to either (1) accept Teva’s expert’s explanation “as to how a skilled artisan” would interpret a graph used in the asserted patent, or (2) find the district court’s determination accepting Teva’s explanation “clearly erroneous.” According to the Supreme Court, the “Federal Circuit should have accepted the District Court’s finding unless it was clearly erroneous.”

Tacking Allowed

In the Hana case, the court addressed a trademark issue—and whether a judge or jury should determine if tacking is available in a given case. As background, rights in a trademark are determined by the date of the mark’s first use in commerce, the earlier the better since “priority” (who was first to market) is often the key test in determining which party should prevail. Courts have recognized that trademark owners ought to be able to make certain modifications to their marks over time without losing priority—thus “tacking” their earlier mark’s priority onto the mark’s newer version.

Tacking has been allowed “when the original and revised marks are ‘legal equivalents’ in that they create the same, continuing commercial impression.” Because “the tacking inquiry operates from the perspective of an ordinary purchaser or consumer,” the court held that a jury, not judge, should make this determination (when a jury trial has been requested and summary judgment has not been entered).

Willful Infringement

Affirming a willful patent infringement finding, and over a blistering dissent, a split threejudge panel of the Federal Circuit let stand a district court’s decision inBard Peripheral Vascular v. W.L. Gore & Associates, No. 2014-1114 (Fed. Cir. Jan. 13, 2015), to double a damages award totaling approximately $200 million, and to award attorney fees and costs related to a dispute lasting almost three decades. Although not reflected in its decision, the total amount allegedly recoverable, including post-verdict royalties, hovers over $1 billion.

As this column reported previously in “Federal Circuit Refines Willful Patent Infringement,” July 25, 2012, this long saga started back in 1974 with the filing of the patent application by Bard that led to U.S. Patent No. 6,436,135 (the 135 patent), and the patent-in-suit. The patent relates to highly expanded polytetrafluoro ethylene (ePTFE), sold by defendant Gore under the brand name “Gore-Tex,” but which generally covers a vascular graft formed by ePTFE that is homogeneously porous—a structure that allows uniform cell regrowth to establish a firm integration of the graft into the body.

Bard filed suit in 2003. A jury found the ‘135 patent valid and willfully infringed. In February 2012, the Federal Circuit affirmed with an en banc court remanding the willfulness finding so the district court could apply the following new standard:

To establish willful infringement, the patentee has the burden of showing “by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc) cert denied 552 U.S. 1230 (2008). “The state of mind of the accused infringer is not relevant to this objective inquiry. Id. Only if the patentee establishes this “threshold objective standard” does the inquiry then move on to whether “this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” Id.

So, the test involves a two-prong approach, the first being “objective” and the second being “subjective.” The Federal Circuit held that threshold “objective” first prong is one of law while the second prong, involving underlying factual issues, is a question of fact. Significantly, even though the court acknowledged that the second prong is one of fact, the court concluded that the ultimate question of willfulness is one of law and, consequently, can be, and should be, reviewed de novo. Moreover, objective recklessness will not be found where the accused infringer raises a “reasonable” defense or has raised a “substantial question” as to validity or noninfringement of the patent.

On remand, the district court again found willfulness, stating that defendant Gore as a “reasonable litigant” could not have “realistically expected” its defenses to succeed. In so ruling, the district court evaluated several defenses raised by Gore and determined that none of them were objectively reasonable. On appeal, Gore only appealed the court’s determination with respect to Gore’s inventorship defense and more specifically regarding (1) what constitutes the ‘definite and permanent idea’ of the inventor at issue; and (2) whether Copper and Goldfarb (the questioned and named inventor, respectively) acted in concert to jointly arrive at that idea. Significantly, this issue of inventorship had been litigated previously in an interference proceeding in the Patent Office, and previously reviewed by the Federal Circuit.

As such, the Federal Circuit was not sympathetic to Gore’s re-raising of the same defense without any new evidence or theories. “Within the backdrop of the extensive proceedings prior to this litigation,” the Federal Circuit once again affirmed, agreeing that “Gore’s position was not susceptible to a reasonable conclusion that the patent was invalid on inventorship grounds”—despite the fact that “a member of the previous panel dissented.”

Judge Todd Hughes, in concurrence, also agreed that Gore’s defenses were not objectively reasonable, but wrote separately “to reiterate my belief that the full court should review our willfulness jurisprudence in light of the Supreme Court’s recent decision” in Highmark v. Allcare Health Management Sys., 134 S. Ct. 1744 (2014) and Octane Fitness v. ICON Health & Fitness, 134 S. Ct. 1749 (2014).

Those decisions call into question our twopart test for determining willfulness, In Re Seagate Tech., LLC, 497 F.3d 1360 (2007) (en banc), and our de novo standard for reviewing the district court’s willfulness determination. Bard Peripheral Vascular, Inc. v. W.L Gore & Assocs., Inc., 682 F.3d 1003, 1006-07 (Fed. Cir. 2012) (Bard II). See Halo Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371, 1383 (Fed. Cir. 2014) (O’Malley, J., concurring).

In dissent, however, Judge Pauline Newman disagreed on all fronts, stating that “the question as it relates to willfulness is whether the defense of invalidity could reasonably be raised, not whether it eventually succeeded,” that the “public benefit” of Gore’s product should not be ignored, that “[e]xtensive precedent supports judicial refusal to enhance damages when the case is close and the equities counsel moderation, not punishment,” and that regardless of whether willfulness was a supportable ruling, the doubling of the damage award is untenable.”

No doubt, this story is not over, particularly in view of the Supreme Court’s clear disdain for de novo review when issues of fact are involved.