Tag Archives: Pittsburgh Patent Attorneys

Pit IP Tech Blog Named Top 100 IP Blog

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

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We are pleased to announce that the Pit IP Tech Blog has been named one of the Top 100 IP blogs on the net by Feedspot. We look forward to continuing our coverage of IP and technology news and hope that you will continue to read our blog. Thanks for making us a Top 100 blog!

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Supreme Court Reverses Federal Circuit Interpretation of Patent Venue: TC Heartland Holding Overturned

Posted by:  Henry M. Sneath, Esq. – Chair of the Intellectual Property Practice Group at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®). Mr. Sneath is also an Adjunct Professor of Law at the Duquesne University School of Law teaching Trade Secret Law, Trademark Law and the Law of Unfair Competition. He may be contacted at hsneath@psmn.com or 412-288-4013. See Website www.psmn.com .

The US Supreme Court overturned the Federal Circuit’s decision in TC Heartland v.  Kraft Foods and its longstanding interpretation of the patent venue statute and has reaffirmed that a corporation is a resident of the state in which it is incorporated. It had decided that question a long time ago, but the Federal Circuit and statutory changes to the general (non-patent) venue statutes had undermined the original decision of the Supreme Court in 1957 in Fourco Glass.  The court provided this analysis in TC Heartland:

“The patent venue statute,28 U. S. C. §1400(b), provides that ‘[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.’ In Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957), this Court concluded that for purposes of §1400(b) a domestic corporation “resides” only in its State of incorporation.” 
In overturning the Fed. Cir. decision, the Court rejected the argument that 28 U.S.C. §1400 (patent venue statute) incorporates the broader definition of corporate “residence” contained in the general venue statute 28 U.S.C. 1391 as has been allowed by the Federal Circuit for years. This changes the longstanding practice of the Federal Circuit to interpret “residence” as being any state in which a defendant corporation simply conducts business. This interpretation has allowed unfettered forum shopping which generally results in shopping and filing in the Eastern District of Texas.

“We conclude that the amendments to §1391 did not modify the meaning of §1400(b) as interpreted by Fourco. We therefore hold that a domestic corporation “resides” only in its State of incorporation for purposes of the patent venue statute.” Justice Thomas authored the court’s opinion.

The big question is whether this will indeed reduce or eliminate the monopoly held by Texas on patent cases and whether it will simply shift it to Delaware where many corporations are incorporated. The court may take additional action or so too may the US Congress to prevent that simple shifting of venues from Texas to Delaware.

See the Opinion in TC Heartland v. Kraft Foods here: https://www.supremecourt.gov/opinions/16pdf/16-341_8n59.pdf

Henry Sneath 412-288-4013 and hsneath@psmn.com

Fed Circuit Reverses Finding of Indefiniteness of “Visually Negligible” Term

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

Inventors often use generalized language in patent claims when they are dealing with concepts that are not easy to quantify. This generalized language can create issues in litigation, when a defendant argues that the claims are so imprecise as to be indefinite. The Federal Circuit recently addressed such an issue in Sonic Technologies Co., Ltd. v. Publications International, Ltd. (Case No. 2016-1449). In that decision, the Court, in a unanimous opinion written by Judge Lourie, held that the trial court erred when it concluded that the term “visually negligible” rendered the claim indefinite.

Background

Sonic Technologies owned a patent that described a system and method for using a “graphical indicator” to encode information on the surface of an object that could be read by an “optical device.” Sonic recognized that such a general concept was not new–for example bar code readers have been in existence for decades–but the novel twist was that the “graphical indicator” was essentially imperceptible to the naked eye. The claims required that the “graphical indicator” be “visually negligible.”

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Defendants argued that the term “visually negligible” was too subjective and did not provide reasonable guidance on its meaning. Sonix argued that the term was sufficiently definite in light of the specification, which discussed how the “graphical indicator” did not interfere with an observer’s view of item, in contrast with a bar code, which obscures the content below it.

The trial court agreed with defendants and found that the term “visually negligible” was indefinite and the claims were invalid. Sonic appealed to the Federal Circuit, which reversed, finding that the term was sufficiently definite.

indefiniteness standard

Under 35 U.S.C. § 112, ¶ 2, the claims of a patent must particularly point out and distinctly claim the subject matter of the invention. Supreme Court precedent requires that “a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty.” (citing Nautilus v. Biosig Instruments, Inc., 134 S.Ct. 2120 (2014)) Because, absolute precision is not required to meet this standard, courts frequently have allowed more generalized language, especially where the specification provides guidance in interpreting the language.

The Federal Circuit looked at the prior cases and concluded that “visually negligible” was not so uncertain as to render the claims indefinite. It contrasted other cases that dealt with terms that were purely subjective, such as “aesthetically pleasing,” with this one. The specification indicated that an indicator was “visually negligible” when it could not readily be seen by the naked eye and provided examples of such indicators. This specificity was sufficient in the Federal Circuit eyes. Moreover, the Court looked to the extension prosecution history (with multiple reexaminations), which indicated that the Patent Office was able to determine the meaning and scope of the term without issue.

The Court ultimately concluded:

Our holding in this case does not mean that the existence of examples in the written description will always render a claim definite, or that listing requirements always provide sufficient certainty. Neither does the fact that an expert has applied a contested claim term without difficulty render a claim immune from an indefiniteness challenge. As always, whether a claim is indefinite must be judged “in light of the specification and prosecution history” of the patent in which it appears. . . . We simply hold that “visually negligible” is not a purely subjective term and that, on this record, the written description and prosecution history provide sufficient support to inform with reasonable certainty those skilled in the art of the scope of the invention. The examiner’s knowing allowance of claims based on the term that is now questioned, plus the acceptance of the term by both parties’ experts, force us to the conclusion that the term “visually negligible” is not indefinite. Accordingly, we reverse the district court’s conclusion that the asserted claims are invalid as indefinite.

En Banc Federal Circuit Clarifies On Sale Bar Standard

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

Federal CircuitIn The Medicines Co. v. Hospira, Inc. (Nos. 2014-1469 and 2014-1504), the Federal Circuit issued an en banc decision clarifying when a product made pursuant to a “product-by-process” claim is on sale for purposes of 35 U.S.C. § 102(b) under the pre-AIA standards. In a decision written by Judge O’Malley, the Court held that to be on-sale, the product must have been the subject of a commercial sale or offer for sale that bears the “general hallmarks” of a sale under § 2-106 of the UCC.

Background

The case involved an Abbreviated New Drug Application in which Hospira sought FDA approval to sell a generic drug before expiration of two of the patents-in-suit, which claim pH-adjusted pharmaceutical batches of a drug product used to prevent blood from clotting. The patents arose out research involving a similar drug not covered by the patents.

In late 2006 MedCo paid a company (Ben Venue) to manufacture three batches of the drug according to the patented process. The three batches were manufactured by the end of 2006 and had a value of over $20 million (even though it cost substantially less to manufacture them). The three batches were placed in quarantine pending FDA approval. The batches were finally released from quarantine in August 2007, which was after the July 27, 2007 critical date.

Hospira claimed that the patents were invalid under § 102(b) for being on-sale prior to the critical date because of the contract between MedCo and Ben Venue to manufacture the three batches. The district court disagreed, finding that the MedCo-Ben Venue sale was a contract for manufacturing services, and not a commercial sale under § 102(b).

The three-judge panel of the Federal Circuit reversed, finding that the contract did trigger the on-sale bar. The entire Federal Circuit then took up the issue en banc to clarify the on-sale bar standard. The en banc Federal Circuit determined that there was no invalidating prior sale for purposes of § 102(b).

Federal Circuit Clarifies On-Sale Bar Standard

Whether the on-sale bar applies is a question of law based on factual findings, so the lower court’s factual findings were reviewed with deference, but the ultimate legal question was reviewed de novo by the Federal Circuit.

The Court traced the history of the on-sale bar and how it was first codified in the Patent Act of 1836, before its final incarnation (for purposes of these patents) in the Patent Act of 1952. Under § 102(b) an inventor is not entitled to a patent if the invention was on sale in the United States more than one year prior to the date of the patent application.

In Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), the Supreme Court clarified the proper analysis of the on-sale bar, and held that courts should employ a two-part test: (1) was the claimed invention the subject of a commercial offer for sale, and (2) was it ready for patenting at that time? Ready for patenting means either it was reduced to practice or there were sufficient drawings or descriptions to allow one or ordinary skill in the art to practice the invention.

The en banc Federal Circuit focused on the first prong of the Pfaff test–was the invention the subject of a commercial offer for sale? The Court determined that it must answer this question by looking what those in the commercial community would understand as being a sale or offer for sale, and that the UCC was a good resource for answering that question.

Under the UCC, “[a] sale is a contract between parties to give and to pass rights of property for consideration which the buyer pays or promises to pay the seller for the thing bought or sold.” Under this standard, the Federal Circuit did not consider MedCo’s contract with Ben Venue to be a commercial sale because (1) only manufacturing services were sold to MedCo, not the invention, (2) the inventor retained title to the invention and Ben Venue was not entitled to sell the product to others, and (3) stockpiling standing alone does not trigger the on-sale bar.

Here, the patents claimed a product by process, not the process itself. So, the contract to manufacturing the drug was not a contract to purchase the product itself. The Court also found meaningful that Ben Venue lacked title to the batches–MedCo always maintained title in them. Without a transfer a title, the Court was disinclined to find that a sale of a product had occurred. In addition, MedCo and Ben Venue had a confidentiality agreement. While not conclusive, this factor also weighed in favor of the Court finding that a sale had not occurred. Finally, the Court did not find that stockpiling a product was sufficient activity to trigger the on-sale bar because that activity fell into the category of actions that amount to preparations for sales.

Conclusion

Taken together, the Federal Circuit found that there was no commercial offer for sale or sale for purposes of § 102(b) under the pre-AIA standard. This decision will provide some additional clarity and direction for what constitutes a potentially invalidating sale of goods.

VENUE: Will Texas Lose its Dominance as a Patent Venue? Fed. Circuit Tackles Venue in the “Heartland” Case

 

FEDERAL CIRCUIT HEARS ORAL ARGUMENT IN “HEARTLAND” CASE ON MAJOR VENUE ISSUE

Posted by Henry M. Sneath, Esq. – Chair of the Intellectual Property Group at Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®) in Pittsburgh, Pa. He may be contacted at hsneath@psmn.com or 412-288-4013. Website www.psmn.com or www.psmn.law

Federal CircuitYesterday the Federal Circuit heard oral argument on the mandamus petition filed by TC Heartland in an underlying case lodged in the District Court of Delaware ( The underlying case is Kraft Foods Group Brands LLC v. TC Heartland LLC, case number 1:14-cv-00028, in the U.S. District Court for the District of Delaware). The outcome could either keep the status quo where Texas is the venue of choice for an inordinately large number of patent infringement filings, or force courts to adopt a different standard for evaluating proper venue. Texas, Delaware and the Northern District of California receive the majority of patent case filings, but Texas gets over 40% of all filings alone. Heartland, as sued by Kraft Foods, is headquartered in Indiana and believes that the case should be lodged in their home jurisdiction and not where they have little or no business contact in Delaware – beyond sales of product. On a challenge to venue, the District Court used the currently applied standard finding “venue is appropriate for a defendant in a patent infringement case where personal jurisdiction exists.” Heartland argues that the Federal Courts Jurisdiction and Venue Clarification Act of 2011 effectively repealed the Federal Circuit’s 1990 ruling in VE Holding v. Johnson Gas Appliance that patent suits can be brought anywhere a defendant makes sales. In other words, that personal jurisdiction and venue are essentially the same. Heartland, in its mandamus petition ( https://www.eff.org/files/2015/10/28/in_re_tc_heartland.pdf ) has asked the Federal Circuit to reevaluate the VE Holding case along with certain Congressional venue legislation and the overall venue issue.

Here are a couple of resources to assist you in following this case. The great blog at Patently-O has written on Heartland: http://patentlyo.com/patent/2015/10/defendant-jurisdictional-infringement.html

See also a fascinating study of what would happen to patent case filings if the Federal Circuit changed the venue standard: From Patently-O: Guest Post: What Would Happen to Patent Cases if They Couldn’t all be Filed in Texas? March 11, 2016 PatentJasonRantanen by Colleen Chien, Santa Clara University Law School and Michael Risch, Villanova University Charles Widger School of Law

Sneath Headshot  Henry M. Sneath, Esq.

 

                        

 

Federal Circuit Recognizes Patent Agent Privilege

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

Federal CircuitThe Federal Circuit recently decided an interesting case about whether there should be a patent agent-client privilege. In In re: Queen’s University at Kingston (Case No. 14-145), the Federal Circuit concluded that there should be such a privilege in a 2-1 decision written by Judge O’Malley (Judge Lourie joined the decision, and Judge Reyna dissented).

Background

Queen’s University in Kingston, Ontario, Canada filed a patent infringement lawsuit against Samsung Electronics Co., Ltd. in the Eastern District of Texas. During discovery, Samsung sought to discovery certain communications between Queen’s University employees and its registered patent agents. The district court granted a motion to compel, finding, in part, that there was no patent agent privilege. Queen’s University filed a petition for writ of mandamus with the Federal Circuit challenging the order.

Analysis

The Federal Circuit first determined that its law, and not the law of the regional circuits or state law should apply to determine whether a patent agent privilege might exist because the issue relates to patent-specific subject matter. It also noted that the issue was one of first impression at the Federal Circuit, but was one where there is conflicting authority at the district court level.

The Court then decided that it was appropriate to consider the writ given that once the documents were produced, there would be no easy way to undo the damage if a privilege existed. The Court also noted that the district court split on the subject favored it providing some clarity on the issue. The Federal Circuit then turned to the issue of whether it should recognize a patent agent privilege.

The Court found that Rule 501 of the Federal Rules of Evidence authorizes federal courts, in appropriate circumstances, to recognize new privileges. It further noted that it did so with some caution, as privileges restrict the flow of information and should not be created lightly.

The Court then looked to the Supreme Court’s decision in Sperry v. State of Florida ex rel. Florida Bar, 373 U.S. 379 (1963), in which the Supreme Court recognized that patent agents perform acts that constitute the practice of law and that the regulation of patent agents is solely governed by the US Patent and Trademark Office.

In looking at the Supreme Court’s analysis in that case, the Court traced the history of patent agents and the nature of their work before concluding that a limited patent agent privilege is appropriate.

The Court next turned to what the scope of that privilege should be. Not all communications with a patent agent can be privileged.

Communications between non-attorney patent agents and their clients that are in furtherance of the performance of these tasks, or “which are reasonably necessary and incident to the preparation and prosecution of patent applications or other proceeding before the Office involving a patent application or patent in which the practitioner is authorized to participate” receive the benefit of the patent-agent privilege.
Communications that are not reasonably necessary and incident to the prosecution of patents before the Patent Office fall outside the scope of the patent-agent privilege. For instance, communications with a patent agent who is offering an opinion on the validity of another party’s patent in contemplation of litigation or for the sale or purchase of a patent, or on infringement, are not “reasonably necessary and incident to the preparation and prosecution of patent applications or other proceeding before the Office.”

Based on the recognition of this new privilege, the Court grant the petition for a writ of mandamus, vacated the district court’s order on the motion to compel, and remanded for further consideration.

Huge CMU v. Marvell Patent Infringement Case Settled in Pittsburgh

 

Posted by Henry M. Sneath, Esq. – Chair of the Intellectual Property Group at Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®) in Pittsburgh, Pa. He may be contacted at hsneath@psmn.com or 412-288-4013. Website www.psmn.com or www.psmn.law

marvell_chipFrom “ars technica“* publication: One of the largest patent verdict cases ever was obtained by Carnegie Mellon University (CMU) in Pittsburgh Federal District Court in 2012 in the courtroom of the Hon. Nora Barry Fischer as presiding judge. CMU won a $1.17 billion jury verdict in 2012 and the court enhanced the verdict to $1.54 Billion.  The Federal Circuit cut the win significantly, by reducing the damages and eliminating the enhanced damages award, but kept the main verdict intact. The case was just settled here in Pittsburgh for $750 Million. It will allegedly be the second largest payment ever in a technology patent case. A thorough article on the matter with good links to the case history appears at web publication ars technica*(http://tinyurl.com/zwb26wg ).

*ars technica is a copyrighted publication and the references and links herein are from the website of ars technica (© Ars Technica 1998-2016)

Henry M. Sneath

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Supreme Court Upholds Brulotte Rule Preventing Post-Expiration Patent Royalties

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

In a 6-3 decision authored by Justice Kagan, the United States Supreme Court in Kimble v. Marvel Entertainment, LLC (No. 13-720) upheld the long-standing rule previously announced in Brulotte v. Thys Co., 379 U. S. 29 (1964), that patentees cannot charge royalties for the use of an invention after the patent covering the invention has expired. Justice Alito, joined by Chief Justice Roberts and Justice Thomas, dissented and would have abolished the rule announced in Brulotte.

We previously discussed the Ninth Circuit’s decision in this case here.

Background

Web BlasterIn 1990, Kimble developed a web-shooting toy that allowed children to shoot foam strings from their hands like Spider-Man. He obtained a patent (U.S. Pat. No. 5,072,856) on his invention and offered it to Marvel Entertainment. Marvel declined, but soon afterwards came out with a similar toy. Kimble sued Marvel for patent infringement, and the parties ultimately settled the case. As part of the settlement, the parties entered into a license agreement that provided an up-front lump sum payment to Kimble along with a perpetual 3% royalty.

Some time later, Marvel discovered the Brulotte decision, which neither side was aware of during the settlement discussions, and moved for a declaration that its obligation to pay royalties expired when the patent expired. The district court, citing Brulotte, sided with Marvel, as did the Ninth Circuit. The Ninth Circuit, however, criticized the rationale of Brulotte, and the Supreme Court took up the case.

Analysis

The patent statute provides that patent owners have exclusive rights to the use and sale of their inventions for a limited period of time. Once that time expires, the invention falls into the public domain and can be used freely by anyone in this country.

The rule in Brulotte was announced as a way of preventing patent owners from extending their exclusive rights beyond the lifetime of the patent. The concern was that patent owners could use license agreements to force others to pay royalties long after the patent expired, which would artificially extent the lifetime of the patent.

Recently, economists have challenged the anti-competitive basis for the Brulotte ruling and noted that in some instances, allowing post-expiration royalties allows the user to obtain lower royalty rates (albeit spread out of a longer time), which can be pro-competitive behavior.

Justice Kagan, writing for the majority, ultimately decided that the principle of stare decisis controlled the outcome of the case. Brulotte was decided back in 1964 and represented the Court’s interpretation of the patent statute. In the case of statutory construction issues, the Court is disinclined to reverse itself without a significant reason for doing so. She noted that in the more than 50 years since the decision, Congress has not chosen to use its legislative powers to overrule this decision. She also noted that the economic concerns were far from conclusive.

The majority also noted that there were several ways that parties can construct license agreements that meet the limitations of Brulotte. For instance, parties can agree to spread out payments after the expiration of the patent, as long as the use/sale giving rise to the royalty occurred before the patent expired. Parties can also create hybrid agreements that include royalties for other intellectual property (such as trade secrets) if the royalty amount decreases after expiration of the patent.

In the end, the majority felt that there was not a sufficient reason to overrule Brulotte. Therefore, it affirmed the lower court’s rulings that the post-expiration royalties were barred.

The Dissent

The dissent took a different view. They felt that the economic rationale behind Brulotte was flawed and did not deserve deference. They also questioned the notion that Brulotte was decided by construing the patent statute. Instead, they felt that the decision was improper policymaking that should be overruled.

With respect to the particulars of the this case, they were concerned that the parties negotiated a resolution being unaware of the Brulotte rule, only to have Marvel come in afterwards and upset the prior agreed arrangement once it learned of Brulotte. Had the parties been aware of Brulotte during negotiations, they might have reached a different arrangement.

Conclusion

The Kimble decision does not change the state of the law. In a rather unusual move for the Supreme Court in the patent arena, they have maintained the bright-line rule that patent royalties based on actions that occur after a patent expires are not enforceable. Practitioners should be aware of this rule when crafting royalty agreements to structure them in a way to avoid this issue.

No Good Faith Invalidity Defense to Induced Infringement, Supreme Court Holds

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

SupremeCourtImage_1The Supreme Court issued another patent law opinion today; this time focusing on whether a good-faith belief that a patent is invalid can be a defense to a claim of induced infringement. In Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896), the Court concluded in a 6-2 decision that the answer is no, reversing the Federal Circuit. Justice Kennedy delivered the opinion for the Court, and Justices Scalia and Roberts dissented. (Justice Breyer took no part in the decision.)

Background

Commil holds a patent relating to short-range wireless networks (Patent No. 6,430,395). It sued Cisco under direct and in6430395 Imageduced infringement theories, contending that Cisco directly infringed by making and using network equipment and induced others to infringe by selling them the network equipment that they used in an infringing manner. Eventually, after significant motion practice, a reexamination at the Patent Office, and multiple trials, Commil prevail on both theories. The Federal Circuit reversed on two grounds. First, it found an error in the jury instructions regarding induced infringement that would have allowed a finding in Commil’s favor based on negligence, instead of actual knowledge. And, second, it found that the district court improperly barred Cisco from arguing as a defense that it had a good-faith belief that the patent was invalid.

The first point was not at issue before the Supreme Court. Only the second issue, whether a good-faith (but ultimately incorrect) belief that a patent is invalid is a defense to a claim of induced infringement. The Supreme Court found that it is not a defense.

Holding

The Court first looked at the induced infringement statute, 35 U.S.C. § 271(b), which provides that “[w]hoever actively induces infringement of a patent
shall be liable as an infringer.” Citing its previous decision in Global-Tech Appliances, Inc. v. SEB S. A., 563 U. S. ___ (2011), the Court stated that to be liable for induced infringement, a patentee must show that the defendant knew both of the patent and that the induced acts constituted infringement of the patent.

Before considering the good-faith defense, the Court took time to specifically reject Commil and the government’s position that induced infringement only requires knowledge of the patent. Under Global-Tech, induced infringement requires both the knowledge of the patent and the knowledge that the induced acts infringe the patent. Therefore, a good-faith belief that there was not infringement can be a defense to induced infringement.

Having dispensed with that argument, the Court next turned to the heart of the matter–whether a good-faith belief that the patent is invalid can be a defense. The Court started with the language of the statute, which only is concerned with infringement, and it noted that patent infringement and invalidity are separate issues. It further considered the effect that allowing such a defense might have on patent owners. Under the Patent Act, all issued patents are presumed valid and to allow such a defense would undermine that presumption and its effect. The Court noted that an invalidity defense is not a defense to infringement; it is a defense to liability (although it did note the truism that an invalid patent cannot be infringed). Finally, the Court was concerned that allowing such a defense would only increase the burdens of litigation.

Taken together, it concluded that knowledge or intent regarding invalidity was not relevant to whether someone induced another to infringe.

Dissent

Justice Scalia, joined by Chief Justice Roberts, dissented. First, they agreed with the majority’s opinion relating to the Global-Tech decision and that induced infringement requires proof that the defendant knew of the patent and knew that the induced acts infringed the patent. They disagreed over the central issue in the case and would have found that a good-faith belief that the patent was invalid is a defense to a claim of induced infringement.

The dissent rejected the majority’s analysis based primarily on the truism that only valid patents can be infringed. If a defendant has a good-faith belief that the patent is invalid, then it would have a good-faith belief that the acts were not causing infringement of a valid patent.

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. ()

SupremeCourtImage_1Yesterday, 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.