Claim Construction, Findings Of Fact, And Indefiniteness In The Wake Of Teva v. Sandoz

In its January 2015 decision in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., the United States Supreme Court held, contrary to the Federal Circuit's longstanding practice, that a district court's claim constructions are to be reviewed on appeal under the two-part test set forth in Federal Rule of Civil Procedure 52: Factual findings are reviewed for clear error, and legal rulings de novo. In the context of patent claim construction, therefore, the Court held that a district court's analysis of the intrinsic evidence and its ultimate determination as to the proper meaning of the claim are reviewed de novo, while its fact findings regarding extrinsic evidence are reviewed for clear error.

Teva has the potential to reshape patent litigation, although whether it actually will do so remains to be seen. Teva could increase and alter evidentiary presentations on claim construction—because of the more deferential standard of review, a district court's fact finding in matters of claim construction will now be harder to disturb on appeal, so parties and even courts may be incentivized to increase reliance on extrinsic evidence. Thus, for cases in which extrinsic evidence is (or is deemed by the Federal Circuit to be) relevant to claim construction, Teva could reduce the relatively high reversal rate at the court of appeals for claim construction determinations. At the same time, litigants—especially patentees—should exercise caution in overstating the need for fact finding. If factual findings do not go a litigant's way, it will face the higher, clear-error burden on appeal to have those findings overturned. Moreover, patentees urging reliance on extrinsic evidence could run into another recent Supreme Court decision—Nautilus, Inc. v. Biosig Instruments, Inc.—in which the Court rendered it easier to invalidate a claim for indefiniteness. The strategic tensions between Teva and Nautilus remain to be worked out.

The path to Teva also highlights the continuing dialogue between the Supreme Court and the Federal Circuit, and how that dialogue may shift given the new and changing composition of the circuit court. Teva follows the Supreme Court's now multi-decade trend of more frequent review—and reversal—of Federal Circuit judgments on certiorari and replacing patent-specific legal standards with generally applicable ones. But given the changes on the Federal Circuit bench over that time, the Supreme Court's reversal of the appellate judgment in Teva may not be unwelcome to that court, at least to the newer judges. Indeed, although at one time the majority of the Federal Circuit took the position, on the merits, that claim construction should be reviewed de novo, by the time Teva was decided, the majority of that court adhered to de novo review only as a matter of stare decisis, and the court's membership had significantly changed. How the newly constituted court (and the randomly generated three-judge panels that decide most cases) will apply Teva presents an interesting development worth following.

This White Paper explores the history of the standard of review for claim construction and how that issue arrived at the Supreme Court, the resulting Teva decision, and potential effects of the decision going forward, including any insight from recent Federal Circuit decisions applying the Teva standard.

Claim Construction Before Teva

Prior to Teva, the Federal Circuit reviewed claim construction de novo. That rule has been firmly established since at least 1998, and it arose, in part, out of a Supreme Court case. In 1996, the Supreme Court decided Markman v. Westview Instruments, Inc., a Seventh Amendment case that presented the question of whether a judge or a jury decides the meaning of a patent's claims.1 Affirming the Federal Circuit's judgment, Markman held that "the construction of a patent, including terms of art within its claim," is "exclusively" for "the court," rather than a jury, to determine.2 The judge's authority applied even where the construction of a term of art has "evidentiary underpinnings."3

Although it resolved the Seventh Amendment issue, the Supreme Court's Markman decision did not address an important question of implementation as between the district court and the appellate court: If the construction of a patent's claim involves the resolution of evidentiary issues, what is the standard for appellate review of those determinations? For that question, the Federal Circuit remained the final arbiter.

This seemingly esoteric issue of appellate review matters a great deal: De novo review means that the court of appeals gets a complete "do over" on claim construction; clear-error review means that the court of appeals may reverse a factual finding only if, after considering the entire record, it "is left with a definite and firm conviction that a mistake has been committed."4 That standard is more deferential to the district court's determination, and thus less likely to result in appellate reversal, all other things being equal.

In its own decision in Markman before that case reached the Supreme Court, the Federal Circuit had held en banc that claim construction was reviewed de novo. After the Supreme Court issued its opinion in Markman, eliciting some disparate understanding of the proper standard among its judges, the court of appeals clarified its position in 1998 in its en banc decision in Cybor Corp. v. FAS Technologies, Inc.5 Cybor adhered to the Federal Circuit's earlier rule that de novo review applied to the entirety of the claim construction issue. "Nothing" in the Supreme Court's Markman decision, said the Federal Circuit, "supports the view ... that claim construction may involve subsidiary or underlying questions of fact."6 Rather, the court announced that it would "review claim construction de novo on appeal including any allegedly fact-based questions relating to claim construction."7

In 2014, in Lighting Ballast Control LLC v. Philips Electronics North America Corp.,8 the Federal Circuit, again acting en banc, reaffirmed Cybor. Although some members of the court likely would have decided differently as an original matter, for reasons of stare decisis they adhered to Cybor: "After fifteen years of experience with Cybor, we conclude that the court should retain plenary review of claim construction, thereby providing national uniformity, consistency, and finality to the meaning and scope of patent claims."9 In short, given the court's practical view that "the totality of experience has confirmed that Cybor is an effective implementation" of the Supreme Court's decision in Markman, the court found no compelling reason for departing from its prior en banc precedent in Cybor.10

Barely a month later, the issue reached the Supreme Court, via the Teva case rather than in Lighting Ballast. Teva was a pharmaceutical case; Teva Pharmaceuticals owned a patent on a multiple-sclerosis drug, and Sandoz wished to market a generic version of it. In the infringement suit that followed, Sandoz argued that the patent was invalid for indefiniteness. The claim described a particular ingredient as having a certain "molecular weight"—a phrase that, Sandoz argued, was ambiguous. After hearing testimony from experts and crediting the testimony of Teva's expert, the district court disagreed. It concluded that, in the context of the claim, a skilled artisan at the time of the patent would have understood that "molecular weight" meant "peak average molecular weight." Applying de novo review, the Federal Circuit disagreed and found the patent invalid. "Believ[ing] it important to clarify the standard of review" that the court of appeals should apply in reviewing claim constructions, the Supreme Court granted certiorari.11

The Teva Decision

In a 7-2 opinion authored by Justice Breyer, the Supreme Court vacated the Federal Circuit's judgment and rejected the court's standard of review for claim construction. Instead of the de novo review that had prevailed over the last 20 years, findings of fact made in the context of claim construction are now to be reviewed for clear error.

Teva's opening passage leaves little doubt as to the rule adopted by the Supreme Court: "Should the Court of Appeals review the district court's fact finding de novo as it would review a question of law? Or, should it review that fact finding as it would review a trial judge's fact finding in...