On January 20th, 2015 the Supreme Court of the United States in a 7-2 decision overturned the Federal Circuit’s de novo standard of review for claim construction decisions, holding “[w]hen 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 ‘clear error,’ not a de novo, standard of review.”
Background
Since nearly its inception, the Federal Circuit wrestled with the question of whether claim construction was a purely legal issue or a mixed issue of law and fact. Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995) (en banc) (“Markman I”). Along one line of cases, the Federal Circuit held claim construction may be “factual or mixed issue.” Markman I at 976 (citations omitted). An opposite line of cases held that claim construction was strictly a matter of law. Id. (citations omitted). These two irreconcilable lines of cases resulted in inconsistent rulings and unpredictability in claim construction practice. Id.
In 1995, the Federal Circuit sought to resolve “inconsistencies in [its] precedent.” Markman I at 979. Sitting en banc, the court ruled that claim construction is “properly viewed solely as a question of law” for the court, and on appeal “the construction given the claims is reviewed de novo.” Markman I at 979, 983-84. The Supreme Court upheld this decision, but did not directly address the standard of review. Markman v. Westview Instruments, Inc., 517 U.S. 370, 378, 388 (1996) (“Markman II”)
Two years later, the Federal Circuit re-affirmed its holding regarding the standard of review in Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc). Then, in 2013, the Federal Circuit revisited the appellate standard of review in Lighting Ballast Control LLC v. Philips Electronics North America Corp. et al., Nos. 2012-1014, 2014 WL 667449 (Fed. Cir. Feb. 21, 2014). There, the Federal Circuit affirmed Cybor, and refused to modify de novo review of claim construction. But on March 31, 2014, the Supreme Court decided to hear this very issue in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., et al., (No.13-854) 2014 WL 199529 (March 31, 2014).
In Teva Pharmaceuticals USA, the primary issue before the district court was to construe the term “average molecular weight.” Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 723 F.3d 1363, at 1367-69 (Fed. Cir. 2013). Both sides agreed the term had various potential meanings, including: (1) peak average molecular weight; (2) weight average molecular weight; and (3) number average molecular weight. Because the patent and prosecution history did not specify how “average molecular Page 1 of 3 1/20/2015 weight” should be calculated, the district court relied on expert testimony. In particular, the district court credited Teva’s expert to conclude that a person of ordinary skill in the art would understand the term meant “peak average molecular weight,” and found the term sufficiently definite. Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., et al., 810 F.Supp.2d 578, 587-96 (S.D.N.Y. Aug. 29, 2011). On appeal, the Federal Circuit reversed, finding the term indefinite because the patents did not resolve the ambiguity in its meaning. Teva Pharmaceuticals USA, 723 F.3d 1363, at 1369. The Federal Circuit, in accordance with Cybor, gave no deference to the district court’s findings of fact relating to a person of skill in the art. Id. at *1368-69.
Supreme Court Decision
The issue before the Court was “[w]hether 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.” Writing for the majority, Justice Breyer held the Federal Circuit “must apply a ‘clear error,’ not a de novo, standard of review” to subsidiary factual findings made by district court’s claim constructions. The Court premised its decision on four points.
First
The Court found Rule 52(a) sets forth a “clear command,” stating “[i]n our view, this rule and the standard it sets forth must apply when a court of appeals reviews a district court’s resolution of subsidiary factual matters made in the course of its construction of a patent claim.” The Rule “applies to both subsidiary and ultimate facts.”
Second
The Court stated that its decision in Markman II “neither created, nor argued for, an exception to Rule 52(a).” The Court clarified that Markman II concerned whether “a judge or jury [should] construe patent claims,” and found that “that task is better matched to a judge’s skills.” The Court noted that, while Markman II held the final construction of patent claims was a question of law, construing patent claims was more akin to construing terms of a contract than interpreting the text of a statute.
Third
The Court explained that pre-Federal Circuit precedent and current Supreme Court precedent in other areas of patent law, namely obviousness, supported clear error review.
Fourth
The Court found that “practical considerations” favored clear error review: “A district court judge who has presided over, and listened to, the entirety of a proceeding has a comparatively greater opportunity to gain that familiarity than an appeals court judge who must read a written transcript or perhaps just those portions to which the parties have referred.”
Following this analysis, the Court set out to clarify how the clear error standard should be applied. In the most simple scenario, “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.” However, if a district court needs to look beyond the intrinsic record and 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,” in those cases “the courts will need to make subsidiary factual findings about the extrinsic evidence” and this “subsidiary factfinding must be reviewed for clear error.” Page 2 of 3 1/20/2015 After a district court has made subsidiary factfindings based on the extrinsic record they “will then interpret the patent claim in light of the facts as he has found them.” The Court noted “in some instances, a factual finding may be close to dispositive of the ultimate legal question of the proper meaning of the term in the context of the patent . . . [however] [s]imply because a factual finding may be nearly dispositive does not render the subsidiary question a legal one.”
The Court did not address the factual merits of Teva’s appeal, but instead vacated the Federal Circuit’s decision and remanded for reconsideration.