Teva v. Sandoz: The Dissent

By Kevin E. Noonan --

The recent history of Supreme Court patent cases has made the dissent a seemingly endangered species, the Court consistently deciding important patent cases by 9-0 votes and, at best, garnering concurring opinions for Justices to further set forth their views.  In the Teva v. Sandoz decision this trend came to an end, with a dissent by Justice Thomas joined by Justice Alito that challenged both the majority's decision regarding the standard of appellate review for claim construction and Justice Breyer's rationale for reaching this conclusion.

The majority had determined that claim construction was ultimately a question of law but one that could depend on "subsidiary" fact-finding by the district court.  According to Justice Breyer's majority opinion, Federal Rule of Civil Procedure 52(a)(6) mandates that an appellate court give substantial deference to district court fact finding and to contravene the lower court's factual determinations only if there was "clear error."  In addition, the Court majority asserted jurisprudential policy grounds for its decision, including that the district court was in the best position to assess (expert) witness credibility and to become familiar with the technology involved in the invention.

Justice Thomas disagreed, taking the position that while Justice Breyer and his brethren would have applied the law correctly if there were underlying facts to be determined, in the context of claim construction there are no "subsidiary facts" to be determined and that Teva and the Court misapplied the law in arriving at this conclusion.  Simply stated, in the Justice's opinion, Rule 52(a)(6) simply does not apply here.

Justice Thomas believes that the majority did not "engage the 'vexing . . . distinction between questions of fact and questions of law,'" citing Pullman-Standard v. Swint, 456 U. S. 273, 288 (1982), by going back to how the law made these distinctions when Rule 52 was adopted (1937).  He notes that the Rules are based on the common law (citing Justice Scalia's concurring and dissenting opinion in Tome v. United States, 513 U. S. 150, 168 (1995)) but finds the pre-1937 law is "inconclusive" with regard to the fact/law dichotomy in claim construction (considering of course only the Court's jurisprudence in the matter).  Citing Coupe v. Royer, 155 U. S. 565, 576 (1895); Loom Co. v. Higgins, 105 U. S. 580, 584–587 (1882); Tilghman v. Proctor, 102 U. S. 707, 729–731 (1881); and Winans v. Denmead, 15 How. 330, 339 (1854), the dissent notes that the Court gave "no apparent deference to the District Courts' findings" based on factual considerations but also did not find that any of these decisions were based on a disagreement over such "subsidiary [factual] evidence."

In the absence of determinative (or even illustrative) case law in his survey of the prior law, Justice Thomas discerns that the practice has been to treat district court determinations as "facts" when they are constrained by the issues between the parties, and for district court decisions to be more akin to legal conclusions "the more they define rules applicable beyond the parties' dispute," citing Miller v. Fenton, 474 U. S. 104, 116 (1985); Bose Corp. v. Consumers Union of United States, Inc., 466 U. S. 485 (1984); and Baumgartner v. United States, 322 U. S. 665, 671 (1944).  If we are to draw a line between these two categories of district court decisions, he believes that claim construction "fall[s] on the law side of the dividing line."

As the Court did in deciding Markman v Westview Instruments, 517 U. S. 370 (1996) two decades ago, Justice Thomas compared how patent claims are construed with how courts construe other written instruments (specifically, statutes, deeds and contracts), and notes that there is no disagreement on the Court that construing written instruments is a matter of law for courts.  In Justice Thomas's view, the closest analogy to patent claim construction is statutory construction, which while assessed for "legislative intent" remains a legal analysis (because the Court cannot be concerned about any particular Member's reasons or motivations to vote for the bill).  The Justice also sees similarities in federal land grants (property rights in Federal land) where courts are allowed to consider the historical facts in order to ascertain how to construe the statute without deference.

The reason that statutes are construed as a matter of law not dependent on legislative "facts," according to the dissent, is the scope of a statute, which extends to the public as a whole, and thus "subsidiary evidentiary findings shape legal rules that apply far beyond the boundaries of the dispute involved."  Citing The Binghamton Bridge, 3 Wall. 51, 75 (1866), Justice Thomas asserts that the public's interest has "consciously shaped" the Court's rules of statutory construction and that the public interest in patents (and the affect of claim construction on that public interest) is the decisive similarity that mandates de novo appellate review.

The dissent then contrasts review under the de novo statutory construction standard with how deeds and contracts are construed, being private matters where subsidiary facts can be at issue -- based on the need to understand the "intention of the [private] parties," citing Reed v. Proprietors of Locks and Canals on Merrimac River, 8 How. 274, 288– 289 (1850).  In those circumstances intent is a factual matter because, according to the Justice, it depends on "real intentions [] embodied in an actual meeting of minds or an actual conveyance of a physical parcel of land -- that have an existence outside the written instrument and that the instrument merely rec­ords" (and even these findings are not always factual).  Accordingly:

The question we must ask, then, is whether the subsidi­ary findings underlying claim construction more closely resemble the subsidiary findings underlying the construc­tion of statutes or those underlying the construction of contracts and deeds that are treated as findings of fact.  This, in turn, depends on whether patent claims are more like statutes or more like contracts and deeds.

In answering this question the dissent provides a brief history of patents as "an official document reflecting a grant by a sovereign that is made public, or 'patent,'" Marvin M. Brandt Revocable Trust v. United States, 572 U. S. ___, ___ (2014), and explains that originally patents were royal prerogatives, limited ultimately in England by the Statute of Monopolies in 1624.  While the patent grant is implemented much differently in the U.S. -- being a power of Congress enumerated in Article I of the Constitution -- a patent remains a grant from the sovereign and thus implicates concerns for the public interest inherent in any such grant.

Looking at patents another way, the dissent notes that patents are ultimately regulatory in nature, by restraining others from "manufacturing, using, selling, offering to sell or importing the patented article,' citing Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502, 510 (1917).  Because the exclusionary patent right is defined by the claims, any "subsidiary findings" district courts make in construing claims "contribute to rules that limit conduct by the public at large."  And in this way patents resemble statutes, according to the dissent, being "governmental dispositions" that "provide rules that bind the public at large."  The patentees "intentions" (so relevant to construing deeds and contracts) regarding the scope of her invention are not relevant to this aspect of patenting at all, except "to the extent that they are expressed in the public record," citing Keystone Bridge Co. v. Phoenix Iron Co., 95 U. S. 274, 279 (1877), and Goodyear Dental Vulcanite Co. v. Davis, 102 U. S. 222, 227 (1880).  Because of this public effect, having a circuit court perform de novo review of a district court's claim construction "helps to ensure that the construction is not skewed by the specific evidence presented in a given case" and this consistency inures to the public benefit not counterbalanced by any private interest on the part of the patentee.

Continuing in this line of reasoning, Justice Thomas notes that contracts and deeds are less like patents and statutes due to their private nature that does not implicate the public interest in the same way.  Unlike a contract, for example, "[a] patent is perhaps better characterized as a reward for feats already accom­plished -- that is, innovation and public disclosure -- than as a mutual exchange of executory promises," citing Motion Picture Patents Co., supra, at 513; Seymour v. Osborne, 11 Wall. 516, 533–534 (1871); Grant v. Raymond, 6 Pet. 218, 242 (1832); and Markman v. Westview Instruments, Inc., 52 F. 3d 967, 985, n. 14 (CA Fed. 1995), aff 'd 517 U. S. 370 (1996).  And, insofar as patents resemble deeds ("describing rights that the owner holds against the world," citing Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 162 (1989)), they should be analogized to land grants rather than private conveyances, as being "sovereign dispositions," citing Leo Sheep Co. v. United States, 440 U. S. 668, 680–682 (1979); Missouri, K. & T. R. Co. v. Kansas Pacific R. Co., 97 U. S. 491, 497 (1878); and Leavenworth, L. & G. R. Co. v. United States, 92 U. S. 733, 740–741 (1876).

The dissent also maintains that the nature of the "subsidiary facts" involved in patents versus contract and deeds "differ substantially."  With patents, any such "subsidiary facts" are not "historical facts" ("such as what the parties agreed to do or how a given parcel of land is situated"), illustrating this point by stating that how a skilled artisan would understand a term of art is a "legal fiction" used to construe claims and "[having] no existence independent of the claim construction process."  Unlike parties to a contract, according to the Justice, the difference between contracts and patent is that there is no "skilled artisan" -- she is a hypothetical construct not an "omniscient factfinder":

Neither is the skilled artisan's understanding a proxy for some external fact that, could the court know it, would supply the meaning of a patent claim.  Whatever the scope of the inventor's right under the patent before the introduction of claims, the law has limited that right to the claims as written in the patent [citing Markman].

Accordingly:

Because the skilled artisan inquiry in claim construction more closely resembles determinations categorized as "conclusions of law" than determinations categorized as "findings of fact," I would hold that it falls outside the scope of Rule 52(a)(6) and is subject to de novo review.

Regarding the majority opinion, Justice Thomas cites the majority's reliance on Great Northern R. Co. v. Merchants Elevator Co., 259 U. S. 285, 292 (1922), which involved a determination on the scope of a railway tariff.  There, the factual question was referred to the Interstate Commerce Commission, the administrative agency that set the tariff.  This was not a case involving the proper judicial actor to best decide the "subsidiary facts" involved as between the district court and an appellate court; "the distinction the Court drew pertains more to an emerging rule of administrative deference than to a definitive classification of judicial determinations."

The dissent then summarizes the legal principle Justice Thomas would apply, that "the nature of the legal instrument dictates our treatment of subsidiary findings."  "[A]lthough terms in statutes and regulations frequently have technical meanings unknown outside the specialized community they are meant to regulate, we treat the inquiry into those meanings as involving only conclusions of law,' citing Norfolk & Western R. Co. v. Hiles, 516 U. S. 400, 401–407, 413–414 (1996), and Aluminum Co. of America v. Central Lincoln Peoples' Util. Dist., 467 U. S. 380, 390 (1984).  The dissent illustrates the implications (and limitations) of the majority's reasoning by stating that "[i]f claim construc­tion involves subsidiary questions of technical meaning or usage that are indistinguishable from those questions submitted to the jury in the contract context, [] then one might wonder why such issues are not submitted to the jury in the patent and statute con­texts, too."

Justice Thomas also addressed the majority's analogizing of the fact/law dichotomy in claim construction with how the Court has analyzed obviousness:  "[b]ut this analogy is even further off the mark because obviousness turns on historical facts about the circum­stances of the invention, rather than on the construction of a written instrument."

Having discussed the legal bases for his dissent, the Justice turned to policy considerations, the most germane of which is that appellate courts are better situated to promote uniformity in the law while district courts are better suited to assessing testimony and evidence (witness credibility, etc.):

To the extent that the construction of a patent claim turns on testimony of expert witnesses, especially live testimony, there is no denying that it falls within the bounds of a district court's special competence.   [But, t]he arguments favoring allocation to the district court, dimin­ished by the majority's own prediction [that this will rarely make a difference], are outweighed by the remaining rule-of-law and uniformity considerations that factored into our allocation in Markman.

These principles, for Justice Thomas, are at the root of what judicial review means:  "when a judge construes a patent, he is, in a very real sense, 'say[ing] what the law is,'" citing Marbury v. Madison, 1 Cranch 137, 177 (1803), "not just for the parties to the dispute, but for the public at large."  Deferring to factual determinations made by a district court in the context of a specific dispute between particular parties implicate the policy consideration that the specific facts of each case can influence the scope of the patent grant against the public.  And this can harm the uniformity (in patent law, and in the construction given to claims in particular patents) that de novo appellate review provides:

"Uniformity is a critical fea­ture of our patent system because '[t]he limits of a patent must be known for the protection of the patentee, the encouragement of the inventive genius of others and the assurance that the subject of the patent will be dedicated ultimately to the public.'" Markman, 517 U. S., at 390.

"If the boundaries of the patent right could shift from case to case, then the result would be "a 'zone of uncertainty which enterprise and experimentation may enter only at the risk of infringement,'" citing Markman and Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U. S. 722, 731 (2002). So damaging is this unpredictability that we identified uniformity as an 'independent ' justify­ing our allocation of claim construction to the court" in Markman, supra, at 390.

These considerations lead to the following predictions for the consequences of the majority's decision:

The majority's rule provides litigants who prevail in district court a significant opportunity and incentive to take advantage of this uncertainty by arguing on appeal that the district court's claim construction in­volved subsidiary findings of fact.  At best, today's holding will spawn costly -- and, if the majority is correct about the frequency with which these evidentiary determinations make a difference, meritless -- collateral litigation over the line between law and fact.

But I fear worse:  that today's decision will result in fewer claim construction decisions receiving precedential effect, thereby injecting uncertainty into the world of invention and innovation.

These and other predictions regarding likely consequences of the majority's opinion will appear in future posts.

Comments

[Skeptical]

Does the fact that gravity affects the public, make it a "public fact" in the vein of Justice Thomas?

I realize that the Justices tend to see a distorted world, but the words of Galileo come to mind with this wanting to force facts to be something other than what they simply are:

Eppur si muove

http://en.wikipedia.org/wiki/And_yet_it_moves

[EG]

Hey Kevin,

Could one of those "consequences" you allude to be the "dueling dictionary" situation we had prior to Phillips? After Phillips, the primary determiner of what the claim terms meant was the "intrinsic evidence" such as the words of the claims themselves, the patent specification, and prosecution file history; the "extrinsic evidence" such as dictionaries was to be a "last resort" under Phillips if the "intrinsic evidence" was insufficient. But it looks like Breyer's majority opinion may open up the "dueling dictionary" debate again in litigation, and that will truly increase the litigation expense.