The United States Supreme Court has overturned the Federal Circuit’s longstanding rule that all district court claim construction rulings are reviewed de novo on appeal, ruling instead that where such decisions involve factual findings regarding extrinsic evidence, those findings are entitled to deference.  Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 574 U.S. ___ (2015) (Breyer, J.).

In a 7-2 decision written by Justice Breyer, the Court brought findings of fact considered during claim construction in line with Federal Rule of Civil Procedure 52(a)(6), requiring that they be left undisturbed on appeal unless they are “clearly erroneous.”  Id. at 3.  The Court explained that its landmark claim construction decision in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), did not create an exception to Rule 52(a).  Id. at 5.

In addition to why factual findings must be reviewed under the more deferential “clearly erroneous” standard, the Court explained how this rule should be applied.  Where only intrinsic evidence is at issue, the decision is purely legal and will continue to be reviewed de novo.  Id. at 11-12.  However, when extrinsic evidence is at issue, a district court’s findings as to the “evidentiary underpinnings,” such as disagreements between experts, will be given deference.  Id. at 13.   Regardless of how critical a factual finding is to interpretation of a patent term, though, “the ultimate question of construction will remain a legal question” subject to de novo review.  Id.

In dissent, Justice Thomas, joined by Justice Alito, argued that Rule 52(a)(6) does not apply to claim construction because no fact-finding is involved or, if it is, claim construction fact-finding is akin to statutory interpretation, which is routinely considered a matter of law to be reviewed de novo.  Teva, 574 U.S. ___, at 3 (Thomas, J., dissenting).  The majority dismissed this argument as contrary to Markman, which recognized that, unlike statutory interpretation, “claim construction has ‘evidentiary underpinnings’ and that courts construing patent claims must sometimes make ‘credibility judgments’ about witnesses.”  Teva, 574 U.S. ___, at 10-11 (Breyer, J.) (quoting Markman, 517 U.S. at 389-90). 

This decision is of great importance to clients and businesses facing patent litigation, as it places more weight and confidence in the district courts to rule on what often amounts to case-dispositive issues.  Claim construction often hinges on the resolution of disputed factual issues that are presented through extrinsic evidence such as expert testimony.  Resolution of these factual issues will therefore often drive settlement negotiations.  Knowing that deference will be given in these instances, parties may be more inclined to resolve their disputes after claim construction rulings since the district court’s role as the fact finder will not be so easily disturbed on appeal.  This stability should give patent litigants added confidence (if the Markman ruling is favorable) or urgency (if it is not) to resolve disputes following the construction of the disputed claim terms.

Interestingly, the Supreme Court’s decision in Teva is yet another example of the Supreme Court under Chief Justice Roberts taking a much more active role than previous Courts in shaping our nation’s patent laws.  In the first twenty-five years after the Federal Circuit was formed in 1982, the Supreme Court decided a total of eight patent cases.  Since Chief Justice Roberts took the bench, the Supreme Court has decided twenty-one cases in less than ten years, reversing the Federal Circuit eleven times, vacating its decision four times, and affirming but changing the applicable standard twice.