Should the Federal Circuit review the construction of patent claims de novo or for clear error?
The Federal Circuit reviewed the district court’s claims construction in a patent infringement case de novo and reversed that court’s decision. The Supreme Court’s decision in this case will impact whether the interpretation of patent claim construction involves questions of law. Sandoz and amici argue that claim construction involves questions of law, and to review interpretations deferentially would cause interpretive contradictions between district courts. However, Teva and amici argue that de novo review would undermine the district courts and lead to over-litigation of issues.
Questions as Framed for the Court by the Parties
Whether a district court's factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Rule 52(a) requires.
Teva Pharmaceuticals USA, and other related companies (collectively, “Teva”), developed and obtained a patent for Copaxone, a drug used in the treatment of multiple sclerosis. Sandoz and Mylan (collectively, “Sandoz”) submitted to the Food and Drug Administration (“FDA”) Abbreviated New Drug Applications (“ANDAs”) to develop and market generic versions of Copaxone. In response, Teva brought suit in the United States District Court for the Southern District of New York in 2012 claiming patent infringement under 35 U.S.C. § 271(e)(2)(A). To determine if there was patent infringement, the district court needed to first interpret Teva’s patent through claim construction. In claim construction, a court looks through the patent’s prosecution history and plain language to determine if terms within the patent are ambiguous and to set the boundaries of the patent. Here, the district court compared the interpreted patent with the process used to make the generic drug and with the drug’s ingredients. The court also looked to expert testimony and the patent’s public record to interpret terms within the claim. The term “molecular weight” was a disputed term within the claim. Although there were at least three different ways to construe the term “molecular weight,” the district court found that Sandoz’s generic drug infringed on Teva’s patents and that Teva’s patents were valid and enforceable because the term “molecular weight” was defined.
Sandoz appealed to the Federal Circuit Court of Appeal (“Federal Circuit”) arguing that “molecular weight,” a term defined in Teva’s patent specification was indefinite. The term “molecular weight” appears in the description of the method for making Copaxone. Copolymer-1 is the active ingredient in Copaxone and is a mixture of different polymers, or large molecules, with specific molecular weights. There are three different ways to describe the specific molecular weight values—Mp as the peak average molecular weight, Mn as the number average molecular weight, and Mw as the average molecular weight. Typically, Mp, Mn, and Mw will have different values. The key issue was whether the phrase “molecular weight” was indefinite in the patent. Teva argued that the term was not ambiguous because its patent used the Size Exclusion Chromatography (“SEC”) method for determining the molecular weight in its patent, and thus the term could only mean Mp, since Mn and Mw would require further calculations from SEC data.
The Federal Circuit heard the case de novo without giving deference to the district court’s factual determinations. The Federal Circuit unanimously reversed the district court and held that the patent was invalid because the term “molecular weight” was indefinite. The Federal Circuit reasoned that Teva’s expert witness’ testimony, patent record, and plain language of the claim did not support the assertion that “molecular weight” meant Mp. Following the Federal Circuit’s decision, Teva filed a petition for writ of certiorari with the United States Supreme Court. Petition for Writ of Certiorari, Teva Pharmaceuticals USA, Inc. v. Sandoz Inc. The Supreme Court granted the petition in order to determine whether appellate courts should review the construction of patent claim terms de novo, as the Federal Circuit did in this case, or only for clear error.
To reach a decision in this case, the Supreme Court must first determine if aspects of claim construction in patent cases are purely legal or instead factual findings that warrant appellate deference. Teva contends that claim construction includes factual findings and that appellate review of such findings is limited by Rule 52(a) of the Federal Rules of Civil Procedure. Sandoz urges the Court to affirm the Federal Circuit’s finding of indefiniteness in the patent’s specifications, and to stand by the Court’s decision in Markman v. Westview Instruments to treat all aspects of claim construction as purely legal.
Once the Court determines if the aspects of claim construction are purely legal or if they can contain factual findings, the Court must decide whether the district court’s factual findings in support of a patent claim term (in this case “average molecular weight”) may be reviewed de novo, as required by the Federal Circuit, or only for clear error, as required by Rule 52(a). Teva argues that the district court’s interpretation of the term should be reviewed according to Rule 52(a) “just as the other courts of appeals apply it to every other case.” Alternatively, Sandoz urges that the Federal Circuit was correct in considering the issue of claim construction an issue of law and reviewing the term de novo. Sandoz argues that Rule 52(a), with its clear-error standard, does not apply to issues of law.
ARE ALL ASPECTS OF PATENT CLAIM CONSTRUCTION PURELY LEGAL?
Teva asserts that patent claim construction often requires fact-finding, specifically noting that receiving factual evidence such as expert testimony and resolving disputes between expert and other witnesses is classic fact-finding. As a result, Teva argues that these factual findings should be reviewed deferentially, regardless of whether the findings are used for “determining probable cause, interpreting an ambiguous contract, or construing a patent.”
Sandoz, however, distinguishes between legislative facts and adjudicative facts, asserting that any factual underpinnings to claim construction are legislative facts that should be reviewed de novo, as would any question of law. Sandoz explains that legislative facts transcend particular disputes and guide a court’s decisions and formation of legal principles and are therefore exclusive to the court—those facts lay the foundation of the patent claim and are determinative in infringement suits. Adjudicative facts assist in solving a dispute in a specific case between immediate parties (e.g. who, what, where, when, how, etc.). Sandoz asserts that distinguishing between legislative and adjudicative facts is in line with the Court’s conclusion in Markman where the Court determined that what appears factual should be treated as purely legal for purposes of claim construction. Sandoz adds that Markman recognizes that legislative facts are not specific to the dispute between the parties but instead help delineate the patent grant’s scope.
DE NOVO OR RULE 52(A)’S CLEAR ERROR REVIEW?
De novo review occurs when a court decides to hear a case without referencing the legal determinations made by the previous court on the same case. Essentially, the appellate court will hear the case as if it were new. The appeals court reviewing a case de novo will usually give deference to the lower court’s findings of fact but will make separate legal determinations. Alternatively, Rule 52(a) of the Federal Rules of Civil Procedure forecloses a court’s ability to set aside factual findings unless those findings are clearly erroneous. In this way, Rule 52(a) supports deference to lower court factual findings.
Teva argues that Rule 52(a) is binding on every circuit and precludes reversal of factual findings made by the lower court unless the findings are clearly erroneous. Teva explains that the rule prevents appellate courts from “second-guessing” the factual findings made in the district courts. Additionally, Teva claims that the factual findings that underlie claim construction are no different than the factual findings in any other context. Teva indicates that the process of finding a decision is thorough in the lower courts, where experts are permitted to testify and the judges have experience and familiarity with the subject matter of a particular case. Allowing Rule 52(a) to control, Teva argues, maintains the judicial integrity of the lower courts and promotes efficiency, respect for the judiciary, and finality.
In opposition, Sandoz argues that de novo review is the correct approach and is supported by what it calls the “functional advantages of appellate courts” and by Markman and prior cases. Claim construction, according to Sandoz, “involves delineating the legal boundaries of a federal grant.” Sandoz suggests that the Markman Court found that the overriding consideration in such cases is to determine “which judicial actor can best produce the proper interpretation of the patent.” Sandoz claims that an appellate court’s ability to derive the correct legal principle—the meaning of the patent—is more significant than the district court’s evidence-gathering abilities. The district court, Sandoz claims, serves to amass evidence and develop a record, while appellate courts utilize a collaborative judicial process to produce more accurate decisions. Additionally, Sandoz argues that appellate courts are better able to derive the correct meaning of the patent because of the focused nature of claim construction.
This case provides the Supreme Court with the opportunity to establish a clear guideline for appellate review of claim construction in patent cases. Teva argues that claim construction in patent cases involves factual findings and the district court’s findings must be reviewed only for clear error. In opposition, Sandoz contends that claim construction is a question of law, which should be reviewed de novo. The case will ultimately affect how power should be allocated between the district and appellate courts in patent interpretation.
CLAIM CONSTRUCTION UNIFORMITY AMONGST DISTRICT COURTS
Teva argues that uniformity in claim construction cannot be the main goal of appellate review because then the Federal Circuit could essentially review all patent claims de novo. Teva further argues that Congress created the Federal Circuit to promote uniformity on legal matters, not factual issues. Because claim construction involves factual elements, it is not always uniform, and allowing the Federal Circuit to review claims de novo would filter out the factual issues for the sake of uniformity. Teva contends that Congress did not create the Federal Circuit to review fact-dependent determinations of the district courts over individual patents, but rather to ensure uniformity in patent law. Teva also argues that leaving decisions to district courts would foster uniformity within a jurisdiction because claim construction is fully reasoned and publicly accessible. Teva asserts these factors can have a stare decisis effect because judges within the same jurisdiction could follow each other’s claim constructions on claims not yet submitted to the Federal Circuit.
Intel, in support of Sandoz, counters that de novo review by the Federal Circuit is essential to uniformity in claim construction between district courts. Intel further argues that if the Federal Circuit reviewed the district court’s findings deferentially, the Federal Circuit would be limited to finding if there was clear error and could not fix inconsistent claim constructions, thus allowing the adoption of conflicting claim constructions. In addition, Google argues that allowing the Federal Circuit to review claim constructions de novo would foster uniformity amongst patent claims because the Federal Circuit reviews claim constructions by all of the district courts.
JUDICIAL INTEGRITY OF THE LOWER COURTS
Teva argues that allowing the Federal Circuit to review the case de novo is contrary to judicial stability and economy and stability. Teva claims that settling facts at the district court level promotes efficiency, respect for the judiciary, and finality. Teva argues that though centralizing decision-making before one entity would produce the best results if that entity produced better decisions than the various lower courts, the lower court as the trier of facts is in a better position to search for the truth. Additionally, Teva points to “alarming” levels of appellate reversals and warns that reversals can demoralize district court judges and lead to negative outcomes, such as judges providing little or no reasoning for their claim constructions because they fear the Federal Circuit will promptly discard their reasoning. Teva further contends that duplicating the trial judge’s efforts would be a waste of judicial resources. The Houston Intellectual Property Law Association supports this claim by arguing that de novo review would increase litigation costs through an increased number of appeals and retrials following reversals.
Sandoz counters that the Court’s review of this case is an opportunity to provide “concrete” guidance to the lower courts to better distinguish between questions of fact and law. Sandoz claims that guidance will be critical because claim construction disputes arise so often in patent cases. Google further argues that if lowering the rate of appellate reversals were the goal, having the Federal Circuit review claim constructions deferentially would lead to an arbitrary reduction of appellate reversals where only the most clearly erroneous claim constructions are reviewed. Google also claims that the indefiniteness in claim construction would lead to increased uncertainty and litigation costs. Additionally, Google argues that classifying claim construction as partially factual would lead the district court to push claim construction until after the close of discovery, when more facts have come to surface, instead of resolving the claims at the outset of the case. Google argues that pushing claim construction until after discovery would force parties to file pre-judgment motions with their own interpretations of the claim leading to increased litigation and overall costs.
In this case, the Supreme Court will decide whether claim construction in patent cases is a question of law, a question of fact, or a hybrid of both. The Court will also decide whether appellate courts should review claim construction issues de novo or give deference to the district court’s findings. If the Court holds that claim construction concerns mainly factual questions, the Federal Circuit will be governed by Rule 52(a) and should review the district court’s factual findings deferentially using the clear error standard. Sandoz and amici argue that claim construction involves questions of law and to review interpretations deferentially would cause interpretive contradictions between district courts. If the Court finds that claim construction is purely a question of law, the district court’s patent interpretations should be reviewed de novo. Teva and amici argue that de novo review would undermine the district courts and lead to over-litigation of issues. The Supreme Court’s decision will ultimately decide how power should be allocated between the district courts and the Federal Circuit for patent interpretation, how much litigation patent applicants may face, and the ultimate cost of researching and protecting their investment through patents.
The authors would like to thank Professor Oskar Liivak for his insights into this case.
- Gabriella Khorasanee: Supreme Court Grants Cert. in Teva v. Sandoz Patent Case, FindLaw (Apr. 2, 2014).
- Andrew Williams: Supreme Court Grants Certiorari in Teva Pharmaceuticals v. Sandoz, Patent Docs (Mar. 31, 2014).