On Tuesday, the U.S. Supreme Court rewrote almost 20 years of Federal Circuit precedent in its opinion in Teva Pharmaceuticals USA, Inc., et al. v. Sandoz, Inc., et al. Claim construction decisions involving factual findings are no longer reviewed de novo by the Federal Circuit. Rather, evidentiary underpinnings of claim construction decisions should be reviewed for "clear error." The 7-2 decision abrogates Federal Circuit precedent that afforded no deference to district court claim construction decisions.
The case involves Teva's allegations that competitors infringe its patents covering manufacturing methods for Teva's popular multiple sclerosis drug, Copaxone®. No. 13-854, slip op. at 2 (U.S. Jan. 20, 2015). The basic dispute in the case concerns the meaning of the term "molecular weight" as it appears in an asserted patent claim. The District Court, after taking evidence from experts, concluded that the asserted patent was sufficiently definite, and consequently valid, because the term "molecular weight" would be understood to be calculated a certain way by a skilled artisan at the time of the patent application. Id. at 3. In May 2013, the Federal Circuit reviewed de novo all aspects of the District Court's claim construction and found that the term "molecular weight" was indefinite. The Supreme Court granted certiorari to determine the appropriate appellate standard of review for claim construction. Id. at 1.
Under Federal Rule of Civil Procedure 52(a), appellate courts may not set aside a district court's findings of fact "unless clearly erroneous." Id. at 1, 4 (citing Fed. R. Civ. P. 52(a)(6)). Questions of law, on the other hand, are reviewed de novo on appeal. Id. at 1. Relying on Rule 52(a), the majority held that the Federal Circuit must review a district court's resolution of subsidiary factual matters made in the course of claim construction for clear error, with deference given to the district court. The majority noted, however, that the Federal Circuit will continue to review de novo the district court's ultimate interpretation of patent claims. Id. at 9.
Given the inevitable ambiguity between findings of fact and conclusions of law in the claim construction context, the Supreme Court attempted to explain how the new rules of review should be applied. For patent cases in which a district court reviews only intrinsic evidence (limited to the patent claims, specifications, and prosecution history), the trial judge's claim constructions amount to determinations of law to be reviewed de novo on appeal. Id. at 11-12. For patent cases in which the trial judge needs to consult extrinsic evidence (including, for example, expert testimony), subsidiary factual findings about disputed extrinsic evidence are entitled to deference by the appellate court and reviewed for clear error. Id. at 12.
Due to the significance of claim construction on the outcome of patent cases, patent litigants can expect the next wave of (collateral) litigation to involve challenges to the standard of review applied by the Federal Circuit. In the wake of Teva, litigants embroiled in patent disputes will need to be prepared to litigate the line between the ultimate interpretation of the patent claims and the subsidiary factual findings of a district court. Early predictions are that the Teva decision is likely to result in less uniformity of claim construction and increased importance of expert testimony during claim construction.
Throughout the 2015 term, our firm's Intellectual Property and Technology team will continue to monitor decisions impacting the IP industry.