On Jan. 20, 2015, the U.S. Supreme Court issued a decision setting forth a new standard for appellate review of a district court’s claim construction ruling.  Teva Pharmas. USA, Inc. v. Sandoz, Inc., No. 13-854, slip op., 574 U.S. __ (2015).  Prior to this decision, a district court’s claim construction ruling was reviewed de novo (from scratch) by the Federal Circuit. The Supreme Court held, by a 7-2 majority authored by Justice Breyer, that factual issues decided by a district court are to be reviewed for “clear error”, while all other aspects of a claim construction ruling continue to be reviewed de novo.

In Teva, the dispute was over the meaning of the term “molecular weight.”  Sandoz argued that the patent at issue was invalid because the term “molecular weight” was indefinite under 35 U.S.C. §112 ¶2 since it could have one of three meanings based on the specification.  The District Court, after taking evidence from experts, concluded that the patent claim was not indefinite.  It found that a person of ordinary skill in the art would understand the term “molecular weight” to refer to one of the three possible meanings.  On appeal, the Federal Circuit reviewed the claim construction de novo and reversed, holding that the term “molecular weight” was indefinite.

The majority opinion in Teva focused on Federal Rule of Civil Procedure 52(a)(6), which 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 must apply when the Federal Circuit reviews a district court’s resolution of a factual matters made in the course of its claim construction, even though claim construction is an issue of law.  According to the majority, a district court judge who presided over and listened to the case has a greater understanding of the facts at issue as opposed to a Federal Circuit judge who must read a written transcript (there are no live witnesses during a Federal Circuit appeal, only attorney argument based on legal briefs).  According to the majority, the underlining factual findings, and therefore the Teva standard, should have little impact on litigated claim constructions.

After specifying which standard applies, the Supreme Court’s majority opinion went on to provide guidance on how the standard should be applied.  Specifically, the majority said that when the district court reviews only intrinsic evidence (the patent claim and specification, along with the patent prosecution history) that is a determination of law to be reviewed de novo.  However, in some cases, the district court will need to look beyond the intrinsic evidence and consult extrinsic evidence.  For example, a court, based on expert testimony and other extrinsic evidence, may need to understand the background science or  may need to make a factual finding that a term of art has a particular meaning to one of ordinary skill in the art at the time of the invention.  Such factual findings are subject to the “clear error” standard and should only be disturbed by the Federal Circuit if the district court’s findings are clearly erroneous.

In the Teva case, the experts disagreed over an interpretation of a figure with respect to the term “molecular weight”.  The District Court credited Teva’s expert’s interpretation over that of Sandoz’s expert.  The District Court’s conclusion on this issue was a factual finding about how a skilled artisan would understand the figure and this factual finding, according to the majority, should have been reviewed for clear error.  Since the Federal Circuit reviewed the entire claim construction, including this factual issue, de novo, the Supreme Court reversed the Federal Circuit’s decision and remanded for further proceedings under this Teva standard.

The dissenting opinion was written by Justice Thomas and joined by Justice Alito.  The dissent argues that claim construction is a pure legal issue and therefore Rule 52(a)(6) does not apply.  According to the dissent, fact finding in claim construction more closely resembles fact finding underlying the construction of statutes or contracts and deeds, which are considered pure issues of law.  The dissent is concerned that the majority’s decision will disturb the uniformity of claim construction and, contrary to the majority statement, will “loom large” in litigated claim construction. Specifically, the dissent is concerned that a party who prevails in a district court on a claim construction will argue on appeal that the district court’s construction is based upon findings of fact and therefore should stand absent clear error.  The dissent is also concerned that there would be fewer precedential claim construction decisions by the Federal Circuit based on the new standard of review.

It remains to be seen what impact, the Teva decision will have on future litigation.  Specifically, litigants may be encouraged to add factual arguments (based on extrinsic evidence) to their intrinsic arguments in support of their claim construction positions so that, in the event they prevail, there is less of a likelihood that the district court’s decision will be reversed by the federal circuit. This may lead to a heavier reliance on expert testimony and, as a result, increased costs and complexity with the claim construction proceeding.  Similarly, it remains to be seen whether district court judges will write their opinions in a way to rely more heavily on factual findings in order to reduce the chance of being reversed on appeal.  In this connection, a district court judge may have an evidentiary hearing as part of the claim construction process in order to resolve factual disputes.  If so, and if the construction hinges on factual findings, those findings would be reviewed for clear error under the new Teva standard.  As for the Federal Circuit, it will be interesting to see whether it will attempt to sidestep the Teva decision by focusing its review of a district court’s claim construction on the non-factual aspects of the construction so that the clear error standard will not apply.  Post-Teva, the Federal Circuit must still consider the intrinsic and extrinsic evidence in reaching its claim construction as a matter of law.  However, the Federal Circuit might discount and effectively override the district court’s extrinsic factual findings if it believes they are outweighed by the intrinsic evidence.

In short, it appears that the Teva decision provides opportunities for litigants, district courts, and the Federal Circuit, to support their claim construction positions in a way that increases the likelihood of success.  Thus, it will be interesting to see how the Teva decision plays out in future litigation.