On October 15, 2014, the Supreme Court of the United States heard oral argument in Teva Pharmaceuticals USA, Inc., et al. v. Sandoz, Inc., et al., No. 13-854. At issue in this case is whether a de novo or clear error standard applies when the Court of Appeals for the Federal Circuit reviews a district court’s factual findings in support of its claim construction (i.e., Markman) decision.

Background

Teva owns several patents directed to a polypeptide called copolymer-1, which is the active ingredient in its multiple sclerosis drug Copaxone®. Teva sued Sandoz for infringement based on Sandoz’s applications seeking FDA approval to market generic versions of Copaxone®.

At issue before the district court was how to construe the term “molecular weight” in Teva’s claims, which Sandoz argued were invalid for indefiniteness. The district court construed “molecular weight” to mean peak average molecular weight based on its analysis of the specifications, prosecution histories, and extrinsic evidence including testimony from Teva’s technical expert. A Federal Circuit panel (Judges Rader, Moore, and Benson) applied a de novo review standard and reversed, holding that the term “molecular weight” was indefinite. In both this case and in its more recent en banc opinion, Lighting Ballast Control LLC v. Philips Elecs. N. Am. Corp., 744 F.3d 1272 (Fed. Cir. 2014), the Federal Circuit has upheld the de novo review standard for claim construction, previously set forth in Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998).

The Oral Argument

Teva’s Argument

Teva argued that Federal Rule of Civil Procedure 52(a) (“Rule 52(a)”) requires deferential review of fact-findings, even when a question of law rests on these fact- findings. In particular, Teva argued that fact-findings regarding the state of the art are entitled to deference. Accordingly, Teva indicated that the Federal Circuit erred in failing to defer to the trial court’s findings regarding (1) the presumed meaning of the term “average molecular weight,” (2) expert testimony regarding the import of  a figure in Teva’s patents, and (3) how a person of ordinary skill in the art would have understood Teva’s prosecution histories.

Justice Alito asked whether claim construction differs from construing terms of art used in statutes. Teva’s counsel responded that statues are to be read by the general public and determining the legal meanings of terms therein is a question of law, whereas patent claims are to be read by a specialized audience, giving rise to the need for expert testimony regarding the meaning of terms to people in the art.

Justice Ginsburg asked whether the 7th Amendment would be implicated if the trial court were addressing truly factual questions, to which Teva’s counsel responded that subsidiary fact-findings going to threshold questions for the court are similar to other fact-findings that go to pretrial judgments not made by a jury.

Both Justices Roberts and Kagan asked how to draw the line between questions of fact and law in patent claim construction. Teva’s counsel responded that expert testimony regarding the meaning of a term in the art is a subsidiary factual finding warranting deferential review, whereas interpreting terms based on the intrinsic record according to canons of claim construction is a legal interpretation subject to de novo review.

The Solicitor General’s Argument

On behalf of the government, the Solicitor General argued that factual findings entitled to deferential review are those based at least in part on evidence outside the patent and its prosecution history, whereas inferences regarding how a person skilled in the art would interpret patent claims in light of such factual findings are legal conclusions.

Justice Roberts asked about the implications if two different district courts construing the same patent claim terms were to reach different conclusions based on subsidiary factual findings, neither of which were clearly erroneous. The Solicitor General’s Office responded that pre-trial coordination and preclusion could avoid such differing results.

Sandoz’s Argument

Sandoz argued that the Supreme Court’s Markman decision implies that all factual issues pertaining to claim construction are subsumed within the ultimate legal question of how to construe patent claim terms, and therefore de novo review is appropriate. Sandoz further argued that treating interpretive issues regarding claim construction as purely legal avoids the problem of inconsistent decisions raised by Justice Roberts. Sandoz also suggested that cases in which basic scientific facts are contested are rare.

Justice Breyer asked how to draw the line between fact-finding subject to Rule 52 (a)’s clear error standard and fact-finding subject to a de novo standard, expressing concern about an appellate court overturning factual findings made by a trial court that has considered the entire record and heard live witnesses. Sandoz’s counsel noted that Markman hearings, such as the one in the case at issue, can be conducted without live testimony. Justice Breyer also asked about the rate at which the Federal Circuit reverses district court claim construction decisions. Sandoz’s counsel responded that Federal Circuit case law has provided clarity regarding claim construction methodology and brought down the reversal rate.

Justice Alito again asked about comparing patent claim construction with statutory interpretation, proposing that if claim construction is akin to statutory interpretation then it is not subject to clear error review, whereas if claim construction is akin to interpreting a deed or contract, then Rule 52(a)’s clear error standard comes into play. Sandoz’s counsel agreed, arguing that the Court’s Markman decision had already decided that claim construction ought to be carried out as a matter of law because a patent is a public document binding on third parties.

Justice Sotomayor asked whether conflicting statements made in Teva’s prosecution histories might give rise to any type of estoppel dispositive of the indefiniteness issue in the present case. Sandoz’s counsel agreed that Teva’s prosecution history was dispositive in this regard.

Conclusion

The Supreme Court’s decision in Teva may have important consequences for the manner in which the Federal Circuit reviews district courts’ claim construction decisions. It will therefore be awaited with great interest.