Teva Pharmaceuticals v. Sandoz: Supreme Court Changes Standard of Review in Claim Construction Case
Yesterday, the United States Supreme Court reversed the Federal Circuit and established a new split standard of review of District Courts’ claim construction rulings. Since Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), the Federal Circuit has applied a de novo standard of review to all portions of district courts’ claim construction rulings, meaning the Federal Circuit reviewed “anew” the district court’s entire ruling, including the lower courts’ factual findings. Yesterday, in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., No.13-854, slip op., 574 U.S. ___ (2015) the Supreme Court ruled that the de novo standard alone is improper and instead, the Federal Circuit must apply a “clear error” standard of review on “subsidiary factual disputes” resolved by district courts in construing a patent’s claims.
In Teva, Plaintiff Teva had sued several defendants, including Sandoz, for patent infringement relating to their marketing of a generic version of a multiple sclerosis drug. Defendants argued that the patent-in-suit was invalid because the claim term of “a molecular weight of 5-9 kilodaltons” was indefinite under 35 U.S.C. § 112 ¶2. The district court rejected that argument after considering expert evidence regarding the meaning of the term. Specifically, the district court concluded that a person of ordinary skill in the art would understand that molecular weight as used by the patent-in-suit referred to the weight as calculated by a particular method. On appeal to the Federal Circuit, the appellate court reversed, finding that the term “molecular weight” was indefinite, and as a result, the patent was invalid. See Teva Pharma. USA, Inc. v. Sandoz, Inc., 723 F.3d 1363, 1369 (Fed. Cir. 2013). The Federal Circuit’s analysis was based upon a de novo review of all aspects of the District Court’s claim construction ruling, including the District Court’s determination that Teva’s expert’s reasoning about how one skilled in the art would understand “molecular weight” was the right description of the term. Thus, the Federal Circuit had not given any deference to the District Court’s determination of “subsidiary facts.” Id. at 2-3, 574 U.S. ___.
The Plaintiff appealed to the United States Supreme Court, arguing that the Federal Circuit applied the wrong standard of review in not giving deference to the District Court’s factual determinations. The Supreme Court agreed, reversing the Federal Circuit. The Supreme Court in Teva concluded that while Markman determined that the issue of claim construction is a question of law, Markman also recognized that “subsidiary factfinding is sometimes necessary” during claim construction. Id. at 6, 574 U.S. ____. Federal Rule of Civil Procedure 52(a)(6) required that courts of appeal not set aside a district court’s findings of fact unless they are “clearly erroneous.” Based upon Rule 52, as well as additional precedent, the clearly erroneous standard applied to District Courts’ factual findings used in proper construction of a patent claim. The Supreme Court also relied on the fact that “practical considerations favor clear error review.” In particular, patent law frequently requires knowledge of specific scientific problems and principles that are “not usually contained in the general storehouse of knowledge and experience.” Id. at 7, 574 U.S. ____, (citing Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605, 610 (1950)). The Teva Court noted that a district court judge who has presided over a proceeding has a “comparatively greater opportunity to gain” more familiarity with the specific scientific problems and principles than an appeals court judge.
Based on this reasoning the Supreme Court held: while the ultimate issue of the proper construction of a claim remains a question of law that the Federal Circuit reviews de novo, any subsidiary factual disputes resolved by the District Court, including those that may be dispositive to the proper construction of a claim, must be reviewed under Rule 52’s “clearly erroneous” standard.
The Supreme Court also provided an explanation for how to make sure the federal courts properly applied this change in the standard of review. The Court explained that when the District Court’s claim construction required it to review only evidence intrinsic to a patent, that is, only the patent claims and the specification, along with the prosecution history, the District Court’s determination would be solely a question of law, and thus, subject to de novo review. Conversely, where the District Court is forced to look beyond the patent’s intrinsic evidence and consider extrinsic evidence in constructing a patent’s claims the clear error standard must apply. Thus, for example, where a District Court considers opposing testimony of experts and makes a factual finding, that determination is subject to clear error review, but the ultimate construction based upon that factual underpinning remains subject to de novo review.
In Teva, application of the new split standard to the facts required reversal of the Federal Circuit’s determination. The Supreme Court found that the Federal Circuit erred in not accepting the District Court’s determination that the Plaintiffs expert’s explanation was correct in analyzing how to determine molecular weight. The Supreme Court reversed and remanded to the Federal Circuit to consider the appeal in light of the new standard.
Finally, Justices Thomas and Alito dissented from the majority decision. Writing for the dissent, Justice Thomas argued that the District Court’s “subsidiary findings” made in the course of constructing the patent’s claims were not “factual findings” that fall within the purview of Rule 52. Instead, according to the dissent, the subsidiary findings associated with construing claim language is more closely related to the findings associated with construing a statute and thus, according to the dissent, de novo review should be applied.