Teva Pharmaceuticals USA v. Sandoz, Inc., U.S. No. 13-854 (Jan. 20, 2015)
Answering the long debated question of what deference the Court of Appeals for the Federal Circuit should give in reviewing district court claim construction rulings, the Supreme Court recently answered the question in a 7-2 decision penned by Justice Breyer. Teva Pharmaceuticals USA v. Sandoz, Inc., U.S. No. 13-854 (Jan. 20, 2015) (J. Breyer) (Thomas, Justice dissenting, joined by Alito, Justice).
The Clear Error and De Novo Standard of Review
The Supreme Court’s answer was a hybrid review standard: it imposed a “clear error” standard of review of a district court’s subsidiary factual findings for claim construction and maintained the current standard that the ultimate question of claim construction was a question of law subject to de novo review.
Since 1998, the CAFC has reviewed all district court claim constructions rulings under the de novo standard. It adopted the de novo standard in an en banc decision in Cybor v. FAS Technology, which concluded that the Supreme Court’s decision in Markman v. Westview Instruments, required the court to treat claim construction as a matter of law. Most recently in February 2014, the CAFC affirmed its ruling in Cybor. Teva reverses the CAFC.
The Teva Case
The basic dispute in the Teva case centers around the meaning of the words “molecular weight” as those words appear in Teva’s patent claim. Teva sued Sandoz, asserting a patent that covers a manufacturing method for the drug Copaxone, used to treat multiple sclerosis. The drug’s active ingredient is made up of molecules of varying sizes which the claim described as “molecular weight of 5 to 9 kildaltons.” Sandoz, which tried to market a generic version of Copaxone, argued that the patent was invalid because the patent claim term “molecular weight of 5 to 9 kiladaltons” did not satisfy the Patent Act’s critical requirement that claims be definite because there are different ways to calculate the molecular weight.
The District Court, after taking conflicting evidence from each side’s experts, sided with Teva and found the claim term definite. In doing so, the district court made a factual finding about how a skilled artisan would understand the way in which data curves like those in figure 1 of the patent would reflect on the calculation of molecular weight, thereby crediting Teva’s expert.
On appeal, the CAFC did not accept Teva’s expert’s explanation of how a person of skill in the art would interpret the data curves and applying a de novo standard, then found the term “molecular weight” to be indefinite. And it did so without finding Teva’s explanation “clearly erroneous.” The CAFC concluded that because “molecular weight” could be calculated at least three different ways, it is not possible for a member of the public to determine whether potential infringing activity will fall within the scope of the claims, thus rendering the asserted claim indefinite.
The Supreme Court reversed. It held that when a District Court relies on a factual determination in construing the meaning of a patent claim, as the Teva court did, its findings must be reviewed for clear error. The Court said that the CAFC should have accepted the District Court’s factual finding crediting Teva’s expert unless it was “clearly erroneous.”
Recognizing that a district court’s construction of patent claims is often a mixed question of law and fact, the Court explained that factual findings are those findings that involve the need to look beyond the patent’s intrinsic evidence and to consult extrinsic evidence to understand the meaning of the claim. For example, consulting background science or the testimony of a scientific witness to understand the meaning of a term in the relevant art during the relevant period would be considered extrinsic evidence and should be reviewed for clear error.
Where the district court reviews only intrinsic evidence (i.e. patent claims, specification, and file history), its determinations will be characterized as a finding of law and the CAFC review of such a claim would be under the de novo standard.
Justice Thomas, joined by Justice Alito dissented, arguing that the majority’s characterization of factual findings “more closely resembles determinations categorized as ‘conclusions of law’ than determinations categorized as ‘findings of fact.’” With the new hybrid review standard, Justice Thomas wrote “today’s decision will result in fewer claim construction decisions receiving precedential effect, thereby injecting uncertainty into the world of invention and innovation.”
Practice Pointer: To ensure that on appeal that the CAFC will use the higher “clear error” review standard, parties should ensure all factual determinations have been preserved for appeal (typically the party who obtains the favorable claim construction ruling).
Parties who want the CAFC to review a claim construction ruling using the de novo standard should ensure that its appeal raises intrinsic evidence issues only and that all factual determinations have been resolved and/or stipulated to prior to appeal (typically the party who loses its desired claim construction).
Jennifer S. Coleman
Jedidiah L. Dooley
Gail M. Hashimoto
Allonn E. Levy
John V. Picone III