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IP Alert: Supreme Court Requires Deference to District Court's Fact-Finding on Claim Construction

January 22, 2015

The U.S. Supreme Court’s decision in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. alters the framework the Federal Circuit must apply when reviewing district court claim construction decisions. The Federal Circuit has traditionally applied a de novo standard of review, under which it considers the claim construction issues anew and has broad discretion to substitute its view for that of the district court. In Teva, the Court confirmed that the Federal Circuit should review ultimate conclusions regarding patent claim meaning under the de novo standard. But Teva instructs that when the district court resolves factual matters in connection with the claim construction analysis, those factual findings are entitled to more deference and should not be overturned on appeal unless shown to have been clearly erroneous. This decision should have its greatest impact where the patent and its prosecution file history do not sufficiently clarify the intended meaning of ambiguous claim language, leaving the district court to rely more heavily on external evidence in construing the claim. 

The case involves Teva’s patents covering a method for manufacturing the multiple sclerosis drug Copaxone. The parties disputed the meaning of the term “molecular weight” in several of the patent claims at issue. Defendant Sandoz asserted that a claim limitation calling for “a molecular weight of 5 to 9 kilodaltons” was indefinite under 35 U.S.C. 112, second paragraph, and rendered the claims of several patents invalid because it does not specify which of three available methods should be used to determine the molecular weight. 

After considering expert testimony on the issue, the district court concluded that the claim was sufficiently definite. It found that a person of skill in the art would have understood that the molecular weight should be calculated using the first of the three possible methods. The parties’ experts disputed how a skilled artisan would interpret certain data presented in the patents and what the data teaches regarding molecular weight. The district court accepted the opinion of Teva’s expert on that subsidiary factual issue, and rejected the competing opinion of Sandoz’s expert. Based on that factual finding, the district court held as a matter of law that “molecular weight” referred to molecular weight calculated according to the first method, and determined that the claims therefore were not indefinite. 

On appeal, the Federal Circuit reversed. Reviewing all aspects of the district court’s claim construction de novo, the court held that the molecular weight claim limitations of several of the patents were indefinite because a person skilled in the art could not discern the boundaries of the claims. The Federal Circuit did not accept the opinion of Teva’s expert, but made no findings that the district court’s reliance on that evidence was “clearly erroneous.” 

Teva sought and obtained Supreme Court review on the question of whether the Federal Circuit should have accepted the factual determinations made by the district court. In a 7-2 opinion, the Supreme Court reversed, and held that appellate courts should accept a district court’s determination of subsidiary facts when not clearly erroneous. The majority opinion emphasizes that Rule 52(a) of the Federal Rules of Civil Procedure precludes an appellate court from setting aside findings of fact made below unless they are clearly erroneous. While the Court’s seminal decision Markman v. Westview Instruments, Inc. held that the ultimate question of the proper construction of patent claims is a question of law for the court, and not the jury, to determine, Markman did not create an exception to Rule 52(a). The majority opinion explains that "[a] district court judge who has presided over, and listened to, the entirety of a proceeding has a comparatively greater opportunity to gain that familiarity than an appeals court judge who must read a written transcript or perhaps just those portions to which the parties have referred.” Applying this reasoning to the case at issue, the majority concluded that the Federal Circuit did not give proper deference to the district court’s factual findings. It vacated the Federal Circuit’s judgment of invalidity and remanded the case to the Federal Circuit for reconsideration in light of the newly announced standard.

The effects of the Teva decision on district court patent litigation and Federal Circuit appellate practice will become clearer over time. However, the opinion seems to suggest that the majority believes it will have minimal impact in many patent cases. The Court reiterated that the interpretation of patent claims is fundamentally a legal conclusion that the Federal Circuit can review de novo. Thus, when a district court’s construction is based on evidence intrinsic to the patent, i.e., the claims themselves, the patent specification, and its prosecution history, the Federal Circuit will continue to apply the less deferential de novo standard of review. The Federal Circuit has long emphasized the importance of the claim language and the specification in claim construction. Indeed, its en banc Phillips v. AWH Corporation decision teaches that the specification is usually dispositive, and “is the single best guide to the meaning of a disputed term.” The Teva decision did not disturb the Phillips analysis. After Phillips, most claim construction disputes have been resolved primarily based on intrinsic evidence. The Teva decision should not affect appellate practice in those circumstances. 

Under Teva, the more deferential “clearly erroneous” standard of review applies only when the district court relies on evidence extrinsic to the patent, such as evidence regarding how a technical term is commonly understood in the relevant industry or background science regarding the subject matter of the patent. Justice Breyer wrote that the impact of such "subsidiary factfinding is unlikely to loom large in the universe of litigated claim construction.” The opinion explains that when a district court makes a subsidiary factual finding regarding the meaning of a technical term to a person in the relevant field at the time of the invention, the claim construction analysis does not end there. The district court must still determine as a matter of law “whether a skilled artisan would ascribe that same meaning to that term in the context of the specific patent claim under review.” That is a legal conclusion that will continue to be reviewed under the de novo standard on appeal. Teva also reaffirmed the longstanding rule that expert testimony may not be used as a substitute for the district court’s obligation to construe the ultimate meaning of patent claims as a matter of law. 

The Teva decision may provide greater incentive to rely on extrinsic evidence of claim meaning, such as expert testimony, where the asserted patent claims include terms whose meaning cannot be readily determined from the intrinsic record. In the author’s view, those circumstances are seldom presented. But when they are, a win in the district court based on effectively presented extrinsic evidence should now be easier to defend at the Federal Circuit.  

For more information, please contact Fitch Even partner Timothy P. Maloney, the author of this alert.

 

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