Teva Pharmaceuticals v. Sandoz–Supreme Court Changes Appellate Review of Claim Constructions

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. (Robert Wagner on G+)

Yesterday, the Supreme Court issued another opinion in the patent arena in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (No. 13-854). In this decision, the Court  considered what deference, if any, that appellate courts should have when reviewing a district court’s claim construction. In a 7–2 opinion authored by Justice Breyer (Justices Thomas and Alito dissenting), the Court reaffirmed that appellate courts review claim constructions de novo, but held that underlying factual determinations made by a district court should be reviewed under a clear error standard. Thus, this is somewhat of a mixed bag decision whose practical importance is unclear.

Reasoning of the Court

The Court started off by reaffirming its determination in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) that claim construction is a question of law for the courts, even when it may require evidentiary determinations. The Court then noted that Federal Rule of Civil Procedure 52(a) sets the framework for an appellate court’s review of findings of fact made by a district court. Under Rule 52(a)(6), a court of appeals must not set aside a district court’s findings of fact unless they are clearly erroneous. Under the Court’s precedent, this standard applies to all types of factual findings made by a district court, including findings relating to subsidiary and ultimate facts. The Court then found that there was no exception to Rule 52(a) for patent cases, either by statute or based on its case law. Based on this determination, the Court concluded that appellate courts must review factual findings made by a district court during the claim construction process under a clear error standard of review, and not a de novo standard.

Unlike many Supreme Court decisions, the Court then went on and attempted to clarify how appellate courts should review claim constructions from district courts. When a court considers intrinsic evidence to the patent (the patent claims, specification, drawings, and prosecution history) when determining its construction, appellate courts are to review those determinations using a de novo standard of review. However, when a district court considers extrinsic evidence (such as expert testimony), any factual findings related to that extrinsic evidence must be reviewed on a clear error basis. Finally, the ultimate construction is still to be reviewed on a de novo basis, even if it contains issues of fact.

Consequences of the Decision

As with any decision, it is sometimes hard to predict the consequences immediately after the decision issues. But, there are some take-aways from this decision. First, district courts will likely have to do some more work, especially when they are making factual determinations relating to claim construction. District courts will now have to make those findings explicit if they expect the Federal Circuit to give the findings deference.

Second, parties will have to consider whether introducing more extrinsic types of evidence will be beneficial or harmful to their cases. It may be that in certain circumstances a party will feel so confident of its position before a district court that it will want as many factual determinations as possible to support its hoped-for ruling by the district court. On the other hand, if it ultimately loses on construction, those factual findings will make it harder for to argue for reversal. So, parties will need to be careful in thinking about what makes the most sense in their particular circumstance.

Third, it will be interesting to see what the Federal Circuit does. The Supreme Court confirmed that the ultimate decision is still made on a de novo basis. This means that the Federal Circuit may simply accentuate or minimize the factual findings as needed to affirm or reverse based on its own interpretation, which may make little practical difference in the outcomes of cases.

Many claim constructions do not turn on factual findings relating to extrinsic evidence, so this decision is unlikely to radically change how patents are litigated. In the margins, where factual determinations and understandings are truly important, it likely makes sense to give deference to the district court, especially when it had the chance to hear live testimony by experts on disputed issues and to weigh issues of credibility.

For some further initial impressions of the Court’s decision, check on this article on the Patently-O blog, in which Professor Crouch talked with a number of patent law experts for their impressions.