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- Giving Deference to the Supreme Court in Teva v. Sandoz
- Teva v. Sandoz: Partial Deference in Claim Construction
- Teva v. Sandoz: Deferential Review on Factual Issues; de novo review of final question of construction
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Posted: 21 Jan 2015 02:25 AM PST
by Dennis Crouch
In Teva v. Sandoz, the Supreme Court raised the standard of appellate review of a district court's factual conclusions regarding extrinsic evidence relied upon during claim construction proceedings. Although the decision represents a relatively small change in procedural law, it is important, both because claim construction has become such a major element of patent litigation and because the Court of Appeals for the Federal Circuit has a history of reversing a high percentage of claim construction decisions. I asked a handful of patent law experts for their instant thoughts on the decision (and gave them strict word limits). Douglas Kline, Chair of Goodwin Procter’s IP Litigation Group spells out the basic first-order result of the case: From now on, when a district court resolves factual disputes concerning extrinsic evidence bearing on patent claim construction, the Federal Circuit will review those subsidiary factual findings for clear error. This should result in the Federal Circuit affirming some claim construction decisions it might have overturned under the old standard.Thinking forward about how parties will react, MBHB Partners Joshua Rich and Andrew Williams suggest higher reliance on expert testimony and thus higher litigation costs: Today's decision is likely to increase the cost and complexity of claim construction because it encourages parties to introduce extrinsic evidence, especially expert testimony, in an attempt to maximize deference to a favorable decision. And some trial courts may end up relying on that extrinsic evidence to insulate their decisions.Joshua Rich & Andrew Williams, partners at McDonnell Boehnen Hulbert & Berghoff. “At the district court level, the new standard of review will likely mean more reliance on experts in interpreting the claims.” Dominick Conde, partner at Fitzpatrick, Cella, Harper & Scinto LLP. Providing Guidance: The decision itself does a nice job of detailing the level of review for each different aspect of a claim construction ruling. Paul Hughes from Mayer Brown LLP comments that “the Court provided unusually robust prospective guidance to aid the Federal Circuit in distinguishing questions of fact from questions of law.” As usual, Professor Lefstin’s comments are both insightful and linked to historic evidence. Here, Lefstin disagrees slightly with Hughes in that some surprising aspects of claim construction should also be considered extrinsic evidence. As Justice Traynor pointed out long ago, sources of meaning such as dictionaries and the judge’s personal linguistic experience are ‘extrinsic.’ Under Justice Breyer’s holding, the act of consulting a dictionary – which is how a court might determine “the meaning of a term in the relevant art during the relevant time period” – seems entitled to deference.Jeffrey A. Lefstin, Professor of Law, UC Hastings College of Law. However, Lefstin – along with others – believes that the ultimate change in the law is too slight to make much difference. Or, perhaps more pointedly, Lefstin’s argument is that the Teva decision leaves the Federal Circuit with power to continue reviewing claim construction without deference. Ultimately it will make no difference, since the CAFC can review without deference the district court’s assignment of that meaning “in the context of the specific patent claim under review.” The opportunities for the CAFC to frame construction as a contextual inquiry are so pervasive that Teva will serve only to generate pointless disputes over the extrinsic/intrinsic and isolated/contextual
Lefstin. Recognizing this same point, Professor Liivak explains that a legal analysis is still required for claim construction which will be reviewed de novo.
There is still ample room for de facto de novo review. The district court "must" conduct a "legal analysis" on whether the factual determination is relevant in the "context of the specific patent claim under review." This is where all the maneuvering will be.
Oskar Liivak, Professor of Law, Cornell Law School. With reference to the disputed “molecular weight” claim term in this case, Liivak foresees that the Federal Circuit could fairly easily modify its opinion to satisfy the Supreme Court without changing its ultimate determination.
Liivak. The question – in Professor David Berry’s mind is whether the CAFC will “flex its muscles” on the issue. If not, we can “look for more expert testimony, especially on the crucial question of what the claim meant to those in the art. That finding frequently will be dispositive, and may insulate the whole construction from de novo review.” Professor David C. Berry, Western Michigan University – Cooley Law School.On remand as to this claim term, a very few words have to change but the outcome need not: the factual determination about SEC is quite plausibly irrelevant to interpretation of the intrinsic evidence in Fig. 1. Fallacy of Predictability: One of the key policy goals of deference is to provide predictability – at least once the district court construes the claims. Professor Mark Janis sees the potential that this particular outcome will, unfortunately, not aid that goal. Still, Janis has some optimism. He writes: A long-overdue ruling. But it's one that leaves CAFC judges ample room to defer (or not) in any given case. The CAFC's challenge is to demonstrate that it can implement Teva in the service of better predictability – which may require some CAFC judges to set aside cherished views about who really gets to call the shots in claim construction.Mark D. Janis, Robert A. Lucas Chair of Law, Center for Intellectual Property Research, Indiana Univ. Maurer School of Law. I agree with the fallacy of predictability given by deference, but at an even deeper level. If I may quote myself: My problem with the decision is that giving deference on review only masks the major problem that claim scope is not well understood until decided by a court. Claim scope should be clearly understood at the time of issuance.Dennis Crouch, Professor at the University of Missouri School of Law. Who Benefits?: Erich Spangenberg is the CEO of nXn Partners and founder and former CEO of IPNav. He has been on the patent-owner side of a very large number of patent lawsuits and he tends to provide insight that is spot on. In my prior article on Teva, I suggested that patentees will prefer the new rule and Spangenberg agrees, with caveats: The appellate reversal rate was too high and created far too much uncertainty. If what Teva means is that we are going to have greater certainty, faster resolution as a result of fewer reversals and the occasional district court decision that gets it wrong—I am in favor. My enthusiasm is tempered by the likelihood that there are a few years of disputes as the new boundaries are defined—but longer term, this is a positive.Erich Spangenberg. Professor Roger Ford recognizes that “who benefits” may well depend upon the case: How [Teva] will play out is unclear, since litigants don't always know, before construction, what review standard they'd prefer. Optimistic parties may prefer deferential review, assuming they'll win; risk-averse ones may prefer having two chances to win.Roger Ford is Assistant Professor of Law at the University of New Hampshire School of Law. Evidentiary Hearings: Few courts conduct evidentiary hearings as part of claim construction. Going against the tide, Michael Risch doesn’t foresee any change in that reality: A key question after Teva will be whether District Courts are more likely to hear extrinsic evidence just because findings get deference. Given likely reversal if the intrinsic evidence is clear, I don't see why they would waste their time that way.Michael Risch, Professor of Law, Villanova University School of Law. Implicit in Professor Risch’s remarks is the conclusion that the Phillips “intrinsic first” approach continues to reign. Dean Holbrook believes that conclusion is correct: The Federal Circuit will continue to use the Phillips hierarchy, turning to extrinsic evidence only when the intrinsic evidence is ambiguous. I think, in the main, the Federal Circuit will view the intrinsic evidence as determinative, retaining de novo review in the vast majority of cases.Timothy R. Holbrook, Associate Dean of Faculty and Professor of Law, Emory University School of Law. Changing Claim Construction: Dean Holbrook’s conclusion is not universally supported. Professor Jason Rantanen argues instead that Teva may have more generally changed the nature of claim construction: As I read Teva, the Court endorses a claim construction process where the judge begins with the extrinisic evidence about a claim term, decides what the extrinsic evidence establishes for that term and then determines whether the way the patent uses the term is inconsistent with the established ordinary meaning of the term. This approach is more consistent with Texas Digital than Phillips.Jason Rantanen, Associate Professor of Law, University of Iowa College of Law. Rantanen does fully agree with others that significant power is now in the Federal Circuit’s hands — in particular, he “fully expects the Federal Circuit to disagree with [his] reading” of the case. Eileen M. Herlihy, a da Vinci Fellow at George Mason CPIP, recognizes a particular evidentiary focus here – the person having ordinary skill in the art. She notes that the court once again “reemphasizes the patent law specific importance of the PHOSITA, thereby adds to recent Supreme Court cases asserting this perspective.” Although Rantanen in his claim-construction-shift compares precedent, Professor Shubha Ghosh encourages creative lawyering in suggesting alternative “styles of claim construction” Teva teaches that patent claims consist of law, reviewed de novo, and evidence, reviewed for clear error. Unanswered is what mix of law and evidence forms the basis for claim construction. The Federal Circuit's and rulings favored strict constuction. The Court's decision here opens the floodgates for experimentation by advocates and judges in different styles of claim construction.Shubha Ghosh, Vilas Research Fellow and George Young Bascom Professor of Intellectual Property and Business Law, University of Wisconsin, Madison, Law School. One theme of Supreme Court patent cases over the past decade is that patent law need not always be so exceptional – i.e., different from other areas of law. Rather, when traditional principles apply across doctrines, then they should apply to patent law as well. Referencing eBay, an early case in this trend, Professor Clifford writes: Patent law is not unique when balancing must be done before granting equitable relief. Now, as is required for other legal documents such as contracts, we must separate interpretation of the words used (a matter of fact) from the meaning and effect they have (a matter of law). Indefiniteness and ambiguity have been important topics in recent patent law cases. Profesor Laakmann reminds us that the setup for the Teva case is not so-much claim construction but instead the lower court determination that the claim was unduly ambiguous and therefore invalid as indefinite. The case turns on whether there is cognizable distinction between a claim term being factually ambiguous (and thus amenable to extrinsic evidence under a "clearly erroneous" standard of review) and legally indefinite (and thus invalid under 112 under a de novo standard of review). This is the crux of the disagreement between the majority and the dissent – the majority says "yes" and the dissent says "no."Anna Laakmann is an Assistant Professor at Lewis and Clark Law School. On remand, an important feature of the case is that the lower courts will also now need to work-in the new standard of indefiniteness from Nautilus. At the PTO: For the most part, we’re talking about patent litigation. However, Professor Joe Miller thinks that there may be a broader impact on USPTO practice as well: Justice Breyer, speaking for a split Court's majority, set aside a Federal Circuit patent validity determination. According to the Court, the Federal Circuit had not reviewed the lower tribunal's key factual findings with the greater deference the controlling rule requires. Today's decision in Teva v. Sandoz? Sure. But also 1999's Dickinson v. Zurko, 527 U.S. 150 (1999). Teva's main effects may well be felt at the PTO.Joe Miller, Professor, University of Georgia Law School. Although there are differing perspectives here, the overarching thought is that we’ll have to wait to see what the Federal Circuit does — which is exactly the result deference is supposed to avoid. – Dennis * Thanks to my colleagues for providing their interesting input on this article.  |
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Posted: 20 Jan 2015 10:06 AM PST
by Dennis Crouch
As President Clinton taught, the meaning of words is always up for debate. In the patent realm, actual claim scope often depends upon the particular meaning given to the individual words and terms. We have seen that claim construction can vary widely – easily flipping the outcome of cases. Litigators know the construction is only ‘probabilistic’ until decided by the court. And, district courts know that their decisions are likely to be overturned – at least partially because claim construction is a question of law reviewed de novo and without deference on appeal In Teva v. Sandoz, the US Supreme Court has changed the litigation game – holding that factual conclusions that underpin claim construction rulings must be reviewed for “clear error” – i.e., given substantial deference on appeal. Up-to-now, many litigants have not worried much about the fact/law divide because all aspects of a claim construction decision were to be reviewed de novo in the eventual appeal. More-so, district court litigants have likely shaded toward arguments asking for legal conclusion because those conclusions do not require the same level of evidentiary support as factual conclusions. I expect for (some) litigants and district courts to shift their behavior and focus much more on evidentiary aspects of the case — such as the understanding of a person having ordinary skill in the art at the time of the patent. The traditional approach is for plaintiffs to focus more on facts so that the case will end if they win at the district court level and for defendants to focus more on legal issues that – in case of a loss – are more easily appealable. Thus, on balance, the outcome here likely favors patentees as compared to the prior full de novo review system. Under the new rule, determinations regarding evidence “intrinsic to the patent” will continue to be reviewed de novo on appeal. This intrinsic evidence includes both the patent document and the prosecution history of record. The change, is that conclusions regarding other evidence considered – so called “extrinsic evidence” – are subject to the ordinary fact-finding rules of court and will be reviewed with deference on appeal. Finally, the Supreme Court was also clear that application of the extrinsic evidence to the patent-in-question will also be seen as an issue of law reviewed de novo. A major open question is the extent that the decision here modifies the standard approach to claim construction that has been explained by the Federal Circuit in Phillips v. AWH Corp - namely the rule that extrinsic evidence is of secondary importance and perhaps should not be considered absent ambiguity in the intrinsic evidence. In my view, that approach is contrary to the rule that the interpretation should be based upon the contemporary understanding of a person having ordinary skill in the art. At the prosecution level there is a bit of a logical conundrum – parties that present factual evidence during prosecution may get the USPTO to make factual conclusions and agree with that construction. However, if the case later goes into litigation that evidence and those conclusions will be seen as purely intrinsic evidence and thus given no deference in a Federal Circuit appeal. It will be interesting to see how this works on a contemporary basis for the administrative post-issuance review proceedings where any testimony or extrinsic evidence presented instantly becomes part of the prosecution history record. The 7-2 majority opinion was penned by Justice Breyer and joined by Chief Justice Roberts and Justices Scalia, Kennedy, Ginsburg, Sotomayor, and Kagen. Justice Thomas wrote in dissent an was joined by Justice Alito. Statute vs Contract: In his dissenting opinion, Justice Thomas drew an analogy between claim construction and statutory construction and found that neither involve “finding of facts” even when conclusions are drawn from extrinsic evidence. At least at a rhetoric level, this argument makes tremendous sense – the word “patent” itself references a publicly documented grant by a sovereign – something that seems awfully close to a statute. Replying to the dissent, Justice Breyer argues for stare decisis — pointing to the fact that the Court already ruled in Markman that claim construction can have “evidentiary underpinnings.” Rather, the majority links claim construction to that of a deed or contract where factual conclusions are sometimes needed. Federal Circuit Exceptionalism: A theme running through most recent Supreme Court patent cases is that, when applicable, common-law patent doctrines should follow the common law approach rather than some specialized patent rule. Here, one aspect of the majority opinion is that the process of patent claim construction should look like the process of construing a deed or contract. As Professor Ouellette wrote this morning: “Today’s opinion joins a long line of Supreme Court decisions rebuking the Federal Circuit for patent law exceptionalism.” Of course, the link to deeds and contracts only goes so-far because with claim construction we’re not really looking to figure out what the patentee intended by the words but rather what is the proper public understanding of the words (as J. Scalia noted). Nevertheless, it will be interesting to see how district courts fare with that analogy and the extent to which the Federal Circuit is accepting. Cybor No Longer Subject to Challenge: The Federal Circuit’s decision in Cybor has long been subject to renewed efforts for en-banc review. This happened most recently in Lighting Ballast Control LLC v. Philips Electronics N.A. Corp. (Fed. Cir. 2014) (En banc). Although the Supreme Court here modified Cybor and Lighting Ballast, it also foreclosed future challenges to increase the level of deference. Rather, the Court is clear in Teva that – apart from factual conclusions regarding extrinsic evidence – that no deference should be given on appeal. Masking the Problem of Claim Ambiguity: My problem with the decision is that giving deference on appellate review only masks the major problem that claim scope is not well understood until decided by a court. Claim scope should be clearly understood at the time of issuance rather than years later following an expensive litigation effort.  |
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Posted: 20 Jan 2015 08:48 AM PST
By Jason Rantanen
Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (2015) Download Opinion Breyer (author), joined by Roberts, Scalia, Kennedy, Ginsburg, Sotomayor, and Kagan; Thomas (dissenting) joined by Alito. One (or both) of us will certainly write more on this very important opinion. The Court holds that subsidiary factual issues are reviewed for clear error while legal determinations continue to be reviewed de novo. From the Court’s syllabus:
Held: When reviewing a district court's resolution of subsidiary factual matters made in the course of its construction of a patent claim, the Federal Circuit must apply a "clear error," not a de novo, standard of review. Pp. 4–16.
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(c) This leaves the question of how the clear error standard should be applied when reviewing subsidiary factfinding in patent claim construction. When the district court reviews only evidence intrinsic to the patent, the judge's determination is solely a determination of law, and the court of appeals will review that construction de novo. However, where the district court needs to consult extrinsic evidence in order to understand, for example, the background science or the meaning of a term in the relevant art during the relevant time period, and where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about the extrinsic evidence. The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them. The ultimate construction of the claim is a legal conclusion that the appellate court can review de novo. But to overturn the judge's resolution of an underlying factual dispute, the appellate court must find that the judge, in respect to those factual findings, has made a clear error. Pp. 11–14.
(d) Here, for example, the District Court made a factual finding, crediting Teva's expert's account, and thereby rejecting Sandoz's expert's contrary explanation, about how a skilled artisan would understand the way in which a curve created from chromatogram data reflects molecular weights. Based on that factual finding, the District Court reached the legal conclusion that figure 1 did not undermine Teva's argument that molecular weight referred to the first method of calculating molecular weight. When the Federal Circuit reviewed the District Court's decision, it did not accept Teva's expert's explanation, and it failed to accept that explanation without finding that the District Court's contrary determination was "clearly erroneous." The Federal Circuit erred in failing to review this factual finding only for clear error. Teva asserts that there are two additional instances in which the Federal Circuit rejected the District Court's factual findings without concluding that they were clearly erroneous; those matters are left for the Federal Circuit to consider on remand. Pp. 14– 16.
The Court provides a few examples of how this new standard is to be applied:
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 a term in the relevant art during the relevant time period. See, e.g., Seymour v. Osborne, 11 Wall. 516, 546 (1871) (a patent may be "so interspersed with technical terms and terms of art that the testimony of scientific witnesses is indispensable to a correct understanding of its meaning"). 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 underpinnings" of claim construction that we discussed in Mark-man, and this subsidiary factfinding must be reviewed for clear error on appeal.
For example, if a district court resolves a dispute between experts and makes a factual finding that, in general, a certain term of art had a particular meaning to a person of ordinary skill in the art at the time of the invention, the district court must then conduct a legal analysis: whether a skilled artisan would ascribe that same meaning to that term in the context of the specific patent claim under review. That is because "[e]xperts may be examined to explain terms of art, and the state of the art, at any given time," but they cannot be used to prove "the proper or legal construction of any instrument of writing." Winans v. New York & Erie R. Co., 21 How. 88, 100–101 (1859); see also Markman, supra, at 388 ("'Where technical terms are used, or where the qualities of substances . . . or any similar data necessary to the comprehension of the language of the patent are unknown to the judge, the testimony of witnesses may be received upon these subjects, and any other means of information be employed. But in the actual interpretation of the patent the court proceeds upon its own responsibility, as an arbiter of the law, giving to the patent its true and final character and force'" (quoting 2 W. Robinson, Law of Patents §732, pp. 482–483 (1890); emphasis in original)).
Accordingly, the question we have answered here concerns review of the district court's resolution of a subsidiary factual dispute that helps that court determine the proper interpretation of the written patent claim. 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. Fed. Rule Civ. Proc. 52(a)(6).
The full discussion of the Teva example makes a similar point, finding that the Federal Circuit erred because it should have determined whether the district court’s acceptance of Teva’s expert’s explanation of figure 1 in the patent was “clearly erroneous.” |
