By Andrew Williams --
The Supreme Court will begin its 2014-2015 term next Monday. Last year, the Court heard a record number of patent law cases, at least for recent history. Nevertheless, it is scheduled to hear another one on October 15. Teva Pharmaceuticals USA, Inc. v. Sandoz Inc. will address whether appellate courts should afford any deference to a trial court's claim construction determination. This issue stems from the holding of the Supreme Court's 1996 Markman decision, although the Court did not address the standard of review in that decision. And even though the Teva case is familiar to readers of this weblog, as it arose under the Hatch-Waxman statute of 35 U.S.C. § 271(e), any pronouncement by the Supreme Court will certainly have implications for nearly all patent cases. This post will preview the upcoming argument by providing an overview of the Teva decision and the cases leading up to it.
Teva at the District Court and the Federal Circuit
The Teva case arose from Sandoz's ANDA application to market and sell Teva's multiple sclerosis drug Copaxone®. However, unlike small molecule drug products, the active ingredient of Copaxone® is copolymer-1 (or glatiramer acetate) -- a mixture of polypeptides molecules. Specifically, the copolymer-1 polypeptides contain four different amino acids (alanine, glutamic acid, lysine, and tyrosine), but vary in their arrangement and number. Because the composition is not uniform, it is often expressed in terms of "average molecular weight." The District Court was therefore required to construe the term "molecular weight."
Statistically speaking, there are at least three ways to calculate average molecular weight: peak average molecular weight (Mp), number average molecular weight (Mn), and weight average molecular weight (Mw). These three values can be determined from the common method for measuring "molecular weight" -- Size Exclusion Chromatography ("SEC"). A simplistic way to think about SEC is as a technique that utilizes a column "sieve" that allows different size (or weight) molecules to leave (elute) the column at different times. After the column is calibrated, the size or weight of the molecules in question can be determined depending on when they elute from the column. The patents at issue contained an ambiguity with regard to which of the average molecular weight calculation was intended. The District Court listened to the testimony of Teva's expert, Dr. Grant, and reviewed the specification and prosecution history, and based on that evidence, construed the term as "peak average molecular weight (Mp)." Mp is the molecular weight of the most abundant molecule in the sample, which occurs as the highest peak in an elution profile. Correspondingly, because the Court found that the term was not insolubly ambiguous, it held that the claims containing the term were not invalid as indefinite.
The Federal Circuit did not agree. Specifically noting the standard of review, the Court held that "[o]n de novo review of the district court's indefiniteness holding, we conclude that Dr. Grant's testimony does not save [a particular subset of claims] from indefiniteness." Teva Pharmaceuticals USA, Inc. v. Sandoz Inc., 723 F.3d 1363, 1369 (Fed. Cir. 2013). Instead, the appellate court appeared to give more credibility to the testimony of Appellants' experts. Moreover, the Federal Circuit also reviewed the specification and prosecution history and found them not to be as clear as did the District Court. The Federal Circuit, however, gave no indication whether the outcome would have been different under a different standard of appellate review.
The Question Presented at the Supreme Court
The sole issue on appeal to the Supreme Court was encapsulated by the question presented:
Rule 52(a) of the Federal Rules of Civil Procedure provides that in matters tried to district court, the court's "[f]indings of fact ... must not be set aside unless clearly erroneous."
The question presented is as follows:
Whether 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.
One wonders if the phrasing of the question presumes the answer. The grant of certiorari came on the heels of the Federal Circuit's en banc decision in Lighting Ballast Control LLC. v. Philips Electronics N.A. Corp. on February 21, 2014. That case reconsidered, and affirmed, the holding in Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), which itself established the standard of appellate review for claim construction decisions after the Supreme Court's Markman II decision. Therefore, to truly appreciate the issues in Teva, it is necessary to understand these cases as well.
Markman v. Westview Instruments (Markman II)
The Supreme Court, in its seminal case Markman II, held "that the construction of a patent, including terms of art within its claim, is exclusively within the province of the court." Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996). In so doing, it affirmed the Federal Circuit's determination that claim construction is an issue for the judge, not the jury, but was silent with regard to that court's determination that it should review a district court's construction de novo on appeal.
To resolve who has responsibility for construing claim terms, the Supreme Court analyzed Seventh Amendment jurisprudence to determine if it was proper to remove claim construction from the province of the jury. In so doing, it repeatedly noted the factual components involved. See, e.g., id. at 378 ("But the sounder course, when available, is to classify a mongrel practice (like construing a term of art following receipt of evidence) by using the historical method . . . ."); id. at 388 ("when an issue 'falls somewhere between a pristine legal standard and a simple historical fact, the fact/law distinction at times has turned on a determination that . . . one judicial actor is better positioned than another to decide the issue in question.'" (citing Miller v. Fenton, 474 U.S. 104 (1985)). Nevertheless, the Court found "sufficient reason to treat construction of terms of art like many other responsibilities that we cede to a judge in the normal course of trial, notwithstanding its evidentiary underpinnings." Id. at 390. The public policy of uniformity was an important consideration for the Court, because "treating interpretive issues as purely legal will promote (though it will not guarantee) interjurisdictional certainty through the application of stare decisis on those questions not yet subject to interjurisdictional uniformity under the authority of the single appeals court." Id. at 391.
Cybor Corporation v. FAS Technologies, Inc.
After the Supreme Court's pronouncement in Markman II, the Federal Circuit inconsistently applied different standards of appellate review for claim construction determinations. Therefore, the Court sua sponte ordered that the issue be decided en banc in the case that issued as Cybor Corporation v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998). The majority concluded that the proper standard is de novo review, "including any allegedly fact-based questions relating to claim construction." Id. at 1456. The Court relied heavily on the fact that the Supreme Court affirmed Markman I, which itself used the de novo standard of review.
Curiously, the outcome in the Cybor case was not affected by the standard of review -- even under de novo review, the majority affirmed the lower court's claim construction determination. As such, the judges not joining the opinion filed concurrences-in-judgment, but a vocal minority expressed their disagreement with the articulated appellate review standard. Then-Chief Judge Mayer stressed that the Supreme Court stopped short of requiring de novo review of evidentiary disputes where the lower court did not commit clear error. Judge Rader pointed to the district court judges as being in a better position to make these evidentiary determinations. Finally, Judge Newman noted that the Supreme Court's goal of promoting stability in the application of patent law had already been diminished by the Federal Circuit's use of the de novo standard. She pointed to three areas that have disappointed expectations: (1) the Federal Circuit's refusal to accept certified questions related to claim construction, (2) the Court's creative claim interpretations in some cases, and (3) the failure of the Court to be bound by stare decisis with regard to the same claims. This last point was exemplified by the CVI/Beta Ventures, Inc. v. Tura LP, 112 F. 3d 1146 (Fed. Cir. 1997) case, in which the Court concluded that a lower court erred in claim construction, even though it relied on "the Federal Circuit's claim interpretation in a separate infringement action involving the same patent." Cybor, 138 F.3d at 1477 (Rader, J., dissenting in part, joining in part, and concurring in the judgment).
Lighting Ballast Control LLC v. Philips Electronics N.A. Corp.
Because of the continued criticisms of the Cybor decision, the Federal Circuit recently took up the issue of what standard of review was appropriate for claim construction determinations. The majority in the Lighting Ballast en banc case, this time authored by Judge Newman, applied the principals of stare decisis in affirming the standard articulated in Cybor. Otherwise, the majority opinion included very little analysis supporting the Cybor decision itself. Instead, the Court found that the reasons asserted for departing from fifteen years of the de novo review were not compelling.
The two other possible standards expressed by Lighting Ballast and amici curiae were that either the entire claim construction determination should be reviewed for clear error, or that review should be a hybrid of de novo and deferential review. With regard to the former, Lighting Ballast had argued that the Supreme Court's Markman decision was only concerned with whether claim construction could be heard by a jury or whether it was solely within the purview of the judge. In so doing, it made no pronouncement related to the standard of review. Because construing patent claims often involves expert testimony and documentary evidence, Lighting Ballast asserted that the deferential standard of clear error should apply. In contrast, several amici curiae advocated a hybrid approach, including most notably the United States. This approach would maintain the ultimate determination of claim construction as a "purely legal" matter, but would acknowledge that there are factual aspects to any determination.
A vigorous dissent was filed by Judge O'Malley, joined by three other judges including then-Chief Judge Rader. This dissent stressed the requirements of Federal Rule of Civil Procedure 52(a)(6), which requires that all "findings of fact . . . must not be set aside unless clearly erroneous." The dissent pointed repeatedly to Supreme Court's analysis in Markman II, in which it highlighted the factual nature of claim construction determinations. In criticizing the Lighting Ballast holding, the dissent pointed out that stare decisis is not an inexorable command. Rather, case law can be abrogated in at least three circumstances, when it was originally wrongly decided, when it is at odds with congressional directives, and when it have negative consequences. Not surprising, the dissent found all three to be present with regard to this issue. In support of the proposition that Cybor has resulted in negative consequences, the dissent pointed to the high reversal rate with respect to claim interpretation by district courts, coupled with the fact that entire trials are held premised on these constructions.
The Look Ahead
There remain some important questions to consider. First, in view of the fact that the Federal Circuit has been applying the de novo standard of review to claim construction determinations for over fifteen years, should the Supreme Court give any weight to the patent community's many years of experience with this standard? In fact, a close reading of Lighting Ballast suggests that the outcome might have been different if the Federal Circuit were considering the issue as one of first impression. And, of course, the Supreme Court is not limited by the same concerns of stare decisis. Another question involves the Supreme Court's articulated goal in Markman (II) of "interjurisdictional uniformity." Should the Supreme Court overlook the factual nature of claim construction determinations in order to further this goal? Increasingly, the same patent is being asserted against multiple defendants, often in different jurisdictions. If required to adopt a more deferential standard of appellate review, the Federal Circuit will likely be forced to affirm conflicting constructions of the same claim terms from the same patents. This, in turn, could lead to heightened forum shopping by patent owners. Finally, the Supreme Court's articulated "Question Presented" in the Teva appeal would appear to suggest that it will apply Rule 52(a) to the factual findings in support of the construction of patent claim terms. Should the Supreme Court adopt such a hybrid approach, and if so, what criteria should be used to differentiate issues of fact from issues of law?
Ten amicus briefs were filed in the Teva case. Only three of these represented the opinions of operating companies, but there were 20 companies represented: (1) Intel, EMC, Facebook, Red Hat, and Verizon; (2) Google, Dell, Hewlett-Packard, Salesforce.com, Twitter, Yahoo!, Acushnet, Ebay, Kaspersky Lab, Limelight Networks, Newegg, QVC, SAS, and Xilinx; and (3) Fresenius Kabi USA. Interestingly, each of these briefs advocated for maintaining the de novo standard. The United States also submitted a brief, and advocated for this hybrid deferential/de novo standard of review. We will provide some of the highlights of all of the briefing, including these amicus briefs, in the upcoming weeks.