The Supreme Court recently decided a patent case involving a significant procedural issue. In Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 135 S.Ct. 831 (1/20/15), the question before the Court was whether the Federal Circuit Court of Appeals should review a district court’s factfindings in its claim construction decision under a de novo or a “clearly erroneous” standard. The Court held that the proper standard of review, under Federal Rule of Civil Procedure 52(a)(6), is “clearly erroneous.” The case establishes a two-part standard of review of a district court’s claim construction decision: a clearly erroneous standard for subsidiary facts and a de novo standard for the question of law.
The case involved Teva Pharmaceuticals’ patent for a method of making a drug to treat multiple sclerosis. Sandoz began to sell a generic version of the drug. Teva Pharmaceuticals sued Sandoz for patent infringement. The claim at issue referred to a polymer having a specific molecular weight. Sandoz argued that Teva Pharmaceuticals’ patent was invalid because the term “molecular weight” was indefinite. Sandoz contended that there were three possible meanings of “molecular weight,” and that the patent did not explain which one was to be used.
The district court held that the patent was valid, based on expert testimony, finding that the term “molecular weight” was definite to a person skilled in the art.
Sandoz appealed. The Federal Circuit Court of Appeals reversed, holding the patent invalid. The appellate court reviewed the district court’s claim construction decision under a de novo standard of review, including the district court’s findings on the subsidiary facts.
The Supreme Court reversed the Federal Circuit’s decision. Because the Federal Circuit reviews all district court decisions in patent infringement cases, and because the Federal Circuit has applied the de novostandard of review in all of its decisions, it was necessary for the Supreme Court to address the issue. The Court explained that Rule 52(a)(6) provides that an appellate court cannot set aside a district court’s findings of fact unless those findings are clearly erroneous. The Court held that this rule applies to the Federal Circuit’s review of a district court’s decision on subsidiary factual matters in its claim construction decision. The Court said that there are no exceptions to the Rule – an appellate court cannot review findings of fact de novo.
The Court discussed its landmark claim construction decision, Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996). There, the Court had held that claim construction was strictly a question of law for the court, reasoning that the construction of written instruments (such as contracts and deeds to real property) is better performed by a judge than a jury. The Court explained that its holding in Markman that the ultimate issue of claim construction was a question of law did not mean that there was an exception to Rule 52(a)’s requirement that appellate courts should review factual matters under a “clearly erroneous” standard. In some patent cases, district courts must determine disputes over subsidiary facts, and Rule 52(a) requires that all such findings must be reviewed under the “clearly erroneous” standard.
The Court explained its rationale – the appellate court should employ a “clearly erroneous” standard to subsidiary facts in patent cases because such cases often involve scientific principles and facts and expert witnesses. The trial judge is in a much better position to evaluate expert testimony, observe the invention, or appoint an expert for the court, and therefore, to resolve disputes over the underlying facts.
Then the court set forth how the appellate court should apply the two standards of review, at 841:
“. . . when the district court reviews only evidence intrinsic to the patent (the patent claims and specifications, along with the patent’s prosecution history), the judge’s determination will amount solely to a determination of law, and the Court of Appeals will review that construction de novo . . . In some cases, however, the district court will need to look beyond the patent’s intrinsic evidence and to consult extrinsic evidence in order to understand, for example, the background science or the meaning of at term in the relevant art during the relevant time period. . . . In cases where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about that extrinsic evidence. These are the “evidentiary underpinning” of claim construction that we discussed in Markman, and this subsidiary factfinding must be reviewed for clear error on appeal.”
The practical application of the Court’s holding, at id., is that:
“The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them. This ultimate interpretation is a legal conclusion. The appellate court can still review the district court’s ultimate construction of the claim de novo. But, to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual findings, has made a clear error.”
The Court emphasized that, sometimes, the resolution of subsidiary facts may determine the outcome of the question of law of claim construction, but that, in all cases, the ultimate question of claim construction remains a question of law.