SCOTUS Teva Ruling: Big Splash with Little Impact

bookBy Miriam Swedlow

Despite overruling the Federal Circuit’s prior practice of reviewing all aspects of patent claim construction de novo, the Supreme Court’s ruling in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. has not dramatically changed the standard of review for patent claims. Instead, it imparts a sub-category of analysis in cases where the district court relies upon extrinsic evidence to clarify ambiguous or complicated facts needed for proper claim construction. The court first considers whether the district court relied upon extrinsic evidence and if so, whether it needed to in order to properly construe the claim. As predicted by the Supreme Court, only a small number of cases have required clear error review of fact finding in the months following the Teva decision. Ultimately, clear error review of fact-finding from extrinsic evidence simply adds one step prior to the traditional de novo review applied to patent claim construction. 

A. Teva’s Impact on Standard of Review for Patent Claim Construction

The Supreme Court’s ruling in Teva outlines the scope of review for patent claim construction. It held the Federal Circuit erred in applying a de novo standard of review to the district court’s factual findings. Appellate courts are prohibited from setting aside district court “[f]indings of fact” unless they are “clearly erroneous.” The Court explained that the Markman ruling does not create an exception to Rule 52(a)(6) and the standard of review for fact findings remains clear error.

A district court’s patent claim construction that is based solely on the intrinsic record is “a determination of law and the Court of Appeals will review that construction de novo.” The Supreme Court emphasizes that district courts are frequently able to construe patent claims without needing to resolve underlying factual disputes. But if a court looks “beyond the patent’s intrinsic evidence and [] consult[s] 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” this constitutes a subsidiary fact determination that is “reviewed for clear error on appeal.”

Courts analyze extrinsic evidence to solve ambiguity in the language of a patent claim separately from patent claim construction. Resolution of subsidiary fact disputes precedes and helps with the “proper interpretation of the written patent claim.” “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’s factual findings constitute clear error.”

B. Federal Circuit Implementation of Teva Standard

The Teva ruling only impacts cases where the district court reviews extrinsic evidence in determining patent claim construction. Since Teva, the Federal Circuit initially considers whether the district court solely relied upon the intrinsic record to determine the claim construction. If only intrinsic evidence was consulted, the court applies de novo review no differently than prior to the Teva decision. The vast majority of cases fall within this standard.

If the district court relies on extrinsic evidence, the Federal Circuit applies clear error review to those fact findings if necessary to properly determine the claim construction. But the use of extrinsic evidence by a district court does not always result in clear error review. If the Federal Circuit determines that the claim construction is clear based upon the intrinsic record alone, it may not consider the extrinsic evidence on review. Furthermore, as evidenced by the Federal Circuit’s ruling in Teva on remand, clear error review of a district court’s fact finding may not ultimately change the legal conclusion of the claim construction.

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