Teva v. Sandoz Puts Patent Claim Construction in the Spotlight—Again

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   On October 15, 2014, the Supreme Court will hear oral argument in Teva Pharmaceuticals USA, Inc. v. Sandoz Inc.[1] The case involves claims regarding generic versions of Teva’s multiple sclerosis drug, Copaxone®.

   The Court’s ultimate decision in Teva v. Sandoz will address an issue long-debated in patent law circles:  whether the Federal Circuit should give any deference to a district court’s fact finding when reviewing patent claim construction.

Patent claim construction today

   Fundamentally, a patent is a property right that allows its owner to stop someone else from using the patented invention without permission. The words in a patent’s claims define the extent of an owner’s exclusionary right, as those words define the actual scope of the invention. But words don’t always have the precision necessary to clearly draw a line around an invention involving complex technology. Even “ordinary” words in a claim may have a different meaning in the patent claim as it would otherwise have in another context.

   During prosecution, the U.S. Patent and Trademark Office (“USPTO”) evaluates claims for patentability according to the claims’ “broadest reasonable interpretation.” But to determine whether an accused product or process infringes a patent claim, a court must define the claims. This litigation-based claim construction—not USPTO issuance—actually determines the enforcement rights of a patent owner.

   In Markman v. Westview Instruments, Inc.,[2] the Supreme Court heldthat the district court judge-and not a jury—must evaluate the facts and law relating to the meaning of certain words and phrases in a patent claim because a patent is a legal instrument. District courts hold hearings supported by extensive briefing, technical presentations, and expert witness testimony to evaluate the litigating parties’ competing claim interpretations.

   The Federal Circuit interpreted Markman in 1998 in Cybor Corp. v. FAS Techs, Inc.[3]   In Cybor, the Federal Circuit determined that Markman defined claim construction as a pure issue of law—not fact. As a result, the court concluded that, on appeal, it could review a district court’s claim construction de novo without any deference to “allegedly fact-based questions relating to claim construction.” 

   Ever since Cybor, the patent community has debated the propriety of de novo review of a district court’s claim construction. Many argue the ability of the Federal Circuit to upend judgments obtained at the district court has contributed to that court’s “high reversal rate” for patent cases. As it considers the status quo in Teva v. Sandoz, the Supreme Court’s decision has the potential to significantly impact patent litigation strategy.

The potential outcomes of Teva v. Sandoz

    At one end of the spectrum, the Court may choose to affirm the Federal Circuit’s current practice of de novo review without deference.[4] Many observers believe that outcome seems unlikely, given the district courts’ traditional factfinding role, especially as it relates to assessing the credibility of competing expert witnesses. In fact, the Court recognized this key fact finding function in its Markman decision, and charged district court judges with making those factual determinations necessary to construe claims.

   At the other end, the Court may require deferential treatment of all findings of fact by a district court judge regarding claim construction, reviewable only for clear error consistent with Fed. R. Civ. P. 52(a). But this outcome seems somewhat unlikely given the need for some degree of consistency for claim construction rules that broadly apply to patents in all technologies.

   Some amici proposed a viable middle ground for the Court’s consideration that tracks with the Federal Circuit’s analytical framework for claim construction.[5]  Under this rule, fact-finding relating to the patent’s disclosure or its prosecution before the USPTO (“intrinsic evidence”) is “non-deferential” and subject to de novo Federal Circuit review. On the other hand, fact-finding relating to other relevant facts, including expert testimony (“extrinsic evidence”) or disclosures in material unrelated to the patent, may warrant a clear error standard of review.


     Regardless of the outcome in this case, the Court will almost certainly confirm the vital role factual conclusions play in patent claim construction. Until a decision issues, parties to a patent litigation are well-advised to devote the resources needed to develop the best factual record possible during a claim construction proceeding. And in general, patent owners should recognize the necessity to critically assess those facts supporting claim constructions a court is likely to order to understand the true enforcement value of a patent.

[1] No. 13-854

[2] Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996)

[3] Cybor Corp. v. FAS Techs, Inc., 138 F.3d 1448, 1456 (1998).

[4] A narrow majority of Federal Circuit judges reached this result earlier this year in Lighting Ballast Control LLC v. Philips Elecs. N. Am. Corp., 744 F.3d 1272, 1276-77, 1292 (Fed. Cir. 2014) (en banc).

[5] See Phillips v. AWH Corp, 415 F.3d 1303, 1314-17 (Fed. Cir. 2005) (en banc).

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