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Supreme Court in Teva v. Sandoz Holds That Claim Construction Facts Must Be Reviewed Under Clear Error Standard On Appeal

Posted on Jan 20, 2015 in Blog

On Tuesday, January 20, 2015, in Teva Pharmaceuticals USA Inc. et al. v. Sandoz Inc. et al., case number 13-854, the United States Supreme Court, in a 7-2 decision by Justice Breyer abolished the CAFC’s en banc practice that claim construction rulings of the district court be reviewed de novo. Instead, the Court ruled that these ruling must be entitled to deference of the district court’s factual findings as Teva had requested in a dispute regarding its highly profitable Copaxone product for multiple sclerosis. The Court held that since these rulings involving factual findings the district court is more familiar with, especially in regards to scientific principles, they should be entitled to deference and reviewed under the “clear error” standard.

The Supreme Court thus vacated the CAFC’s prior decision invalidating Teva’s patents and remanded for further proceedings consistent with its opinion.

Teva had sued a number of generics hoping to market a generic version of Copaxone. Sandoz had argued that the patent was invalid because the claim for the active ingredient requiring it to have “a molecular weight of 5-9 kilodatons” was indefinite under 35 U.S.C. ¶112, §2 because it failed to state which of three methods of calculation were to be used to arrive at the molecular weight: (1) the weight of the most prevalent molecule; (2) the weight as calculated by the average weight of all molecules; or (3) the weight as calculated by an average in which the heavier molecules count for more.

The district court considered conflicting extrinsic evidence and held that the claim was sufficiently definite and thus the patent was valid. The district court had found that a person of ordinary skill in the art would understand the term “molecular weight” to refer to molecular weight as calculated by the first method.

In contrast, the Federal Circuit found the term indefinite and invalidated the patent on appeal having reviewed the term de novo, along with the court’s determination of subsidiary facts.

Federal Rule of Civil Procedure 52(a)(6) states that a court of appeals “must not … set aside” a district court’s “[f]indings of fact” unless they are “clearly erroneous.” The Court held that this Rule applies to both subsidiary and ultimate findings and that the appeal’s court function reviewing the findings of a district court sitting without a jury is not to decide factual issues de novo. The Court further held that even if there were exceptions to the Rule, no convincing ground for creating them existed here, citing Markman v. Westview Instruments, Inc., 517 U.S. 370. In discussing Markman, the Supreme Court said that judges, in construing patent claims, are engaged in much the same task as a judge would be in construing other written instruments such as deeds, contracts, etc. The Court held that construction of written instruments often is a question “solely of law” at least when the words are used in their ordinary meaning. The Court further held that if the words were not being used as commonly understood in the instrument, it could create a factual dispute and thus, extrinsic evidence may help to “establish a usage of trade or locality “ and thus the “determination of the matter of fact” will “preced[e] the “function of construction,” citing Great Northern R. Co. v. Merchants Elevator Co., 259 U.S. 285.

The Supreme Court, citing Markman, noted that sometimes courts must resolve subsidiary factual disputes in patent construction and Rule 52 requires a “clearly erroneous” standard. The Court noted that clear error review is “particularly” important in patent cases because the district court has presided over and listened to the entire proceeding and has a comparatively greater opportunity to gain the necessary “familiarity with specific scientific problems and principles” citing Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605,610, rather than an appeals judge who merely reviews a written transcript.

Sandoz failed to convince the Court that separating factual from legal issues may be difficult. The Supreme Court noted that appeals courts have long been able to do so.

Importantly, the Court ruled that in applying the new standard, in reviewing subsidiary fact finding in claim construction, if the district court reviews only intrinsic evidence, the judge’s decision is solely one of law and the appeals court will still apply the de novo standard. However, if disputed extrinsic evidence is considered, the court will need to make subsidiary factual findings on the extrinsic evidence and then interpret the patent claim. 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 appeals court must find the judge made a clear error.

The Teva Supreme Court noted the district court considered conflicting expert testimony and credited Teva’s expert on the issue of molecular weight. Based on those facts, the court reached a legal conclusion supporting Teva’s position on claim construction. On appeal, the CAFC reviewed the district corut’s decision, but did not accept Teva’s expert opinion and failed to accept that explanation without finding the district court’s contrary determination to be “clearly erroneous.” The Court held that the CAFC erred by failing to considering this factual finding only for clear error.

Justices Thomas and Alito dissented.

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