What's Next? Some Consequences of the Teva v. Sandoz Decision

By Kevin E. Noonan --

It has escaped almost no one's notice that the Supreme Court has spent the past decade or so being much more involved in patent law than in the preceding twenty years.  Evident but perhaps less discussed is the change in the nature of how U.S. patent law is now developed as a result.  With the institution of the Federal Circuit, the law developed gradually, relatively consistently and as an organic whole (insofar as an area of law subject to disputes between private parties can).  With the advent of more frequent Supreme Court scrutiny the law is now episodic, sporadic and much less predictable, with decisions reversing thirty years of established precedent being common and such decisions having a "gotcha!" effect on U.S. patent holders.  This is particularly true because of the manner with which the Court has exercised its supervisory authority over the Circuit Court, relying on its own precedents (even those from the pre-Industrial Age) to the denigration of the body of law that had flourished under the Federal Circuit in the intervening time since its establishment in 1982.

We are at another installment of this scenario when contemplating the Court's recent partial reversal of the Federal Circuit's precedent (most clearly enunciated in Cybor v. FAS Technologies) involving the standard of review of claim construction in the district courts.  The genesis of this jurisprudence is the Supreme Court itself, which decided in Markman v. Westview Instruments that claim construction was a question of law for a district court to decide, subject to de novo review by the Federal Circuit.  While not setting out detailed instructions on how this should be accomplished (a fact that permitted Justice Breyer in the majority opinion in Teva to disavow any complicity by the Court in the purported "error" by the Federal Circuit in how it reviewed the factual underpinnings of the legal questions involved), in that opinion and at that time the Court was content to permit the Circuit Court to apply its "special expertise" in determining the most jurisprudentially effective way of performing its appellate role.  As has been clear for some time, those days are over.

Now, in its Teva decision the Court has decided that appellate review of claim construction is limited by Federal Rule of Civil Procedure 52(a)(6), wherein Federal Circuit review of "subsidiary" facts "underpinning" claim construction must be reviewed with deference to the district court and overturned only where there is clear error in the court's decisions:

In cases where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about that ex­trinsic evidence.  These are the "evidentiary underpin­nings" of claim construction that we discussed in Markman, and this subsidiary factfinding must be reviewed for clear error on appeal.

This will arise when "the district court will need to look beyond the patent's intrinsic evidence and to consult 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."  See, e.g., Seymour v. Osborne, 11 Wall. 516, 546 (1871).

Such deference is not absolute, however:  the opinion states that where the district court's construction is limited to the intrinsic evidence, i.e., the "plain meaning" of the claim language, the specification and ("when in evidence") the history of prosecution in the Patent and Trademark Office, then the appellate court's review can be plenary and give no deference to the district court's construction.  It is only when there is "extrinsic" evidence (which, up until now has been disfavored; Philips v. AWH) must the Federal Circuit tread lightly on what was decided below and adhere to the deferential standard of clear error.

To be sure there is a logic in the Court's opinion, because indeed when the district court hears expert testimony it engages its capabilities of assessing the credibility of the witnesses and its capacity to immerse itself in the technical minutiae attendant upon construing claims in the first place.  This capacity has been enhanced in some cases by some district courts with the practice of appointing "special masters," frequently academics in the appropriate technological field, to advise the court with regard to the frequently arcane subject matter before it in some patent cases.  This distinction may have been less pertinent in earlier iterations of the Federal Circuit, wherein some members have had (and in some instances still have) technical backgrounds, and even today seasoned members of the Court become comfortable with a wide swath of technology if only due to their constant immersion in it when deciding the cases that come before the Court.  But Justice Breyer is not wrong in recognizing that in some instances the exercise of the district court's experience at trial might make it more likely that its determination of the facts upon which it predicates its claim construction has a better provenance than can be had at the appellate level:

A district court judge who has presided over, and listened to, the entirety of a proceeding has a comparatively greater opportunity to gain that familiarity than an appeals court judge who must read a written transcript or perhaps just those portions to which the parties have referred.

Having drawn these judicial lines, the question for patent practitioners and judges, at all levels, is to decide how to implement them.  It is clear that the principal concern for those who advocated that de novo review was both necessary and appropriate was dismissed categorically in Justice Breyer's opinion:  that sometimes (and perhaps more often than that) the "factual" determination of what a claim term means will be dispositive of the legal question, the Court stating that "the ultimate question of construction will remain a legal question" and that "be­cause a factual finding may be nearly dispositive does not render the subsidiary question a legal one."  But there are other foreseeable consequences that implicate not only the frequency with which district court claim construction determinations will be overturned on appeal but the behavior of the parties (particularly accused infringers) as a result of the Court's Teva opinion.

For example, and particularly when considered in view of the Court's Nautilis v. Biosig decision last term, patentees can be expected to attempt to forestall the need for expert testimony regarding the meaning of claim terms by including express definitions of such terms, such as with glossaries.  Concerns about the meaning of claim terms (and that these could be manipulated by "bad actor" patentees) was embodied in the Court's Biosig decision and efforts by the White House to improve then quality of U.S. patents, and the Patent and Trademark Office instituted a pilot program last year to encourage patent applicants to include glossaries in applications submitted to Art Units in certain technological areas.  However, glossaries cannot be the entire answer (particularly for patents already in force) and they are also not panaceas even for applications filed after the Teva decision.  A good example of the limitations of setting out express definitions in a patent specification is the claim construction outcome in Promega v. Hoffman-LaRoche for the following claim:

Purified thermostable Thermus aquaticus DNA polymerase that migrates on a denaturing polyacrylamide gel faster than phosphorylase B and more slowly than does bovine serum albumin and has an estimated molecular weight of 86,000-90,000 daltons when compared with a phosphorylase B standard assigned a molecular weight of 92,500 daltons.  U.S. Patent No. 4,889,818

As might be imagined, the specification contained express definitions and examples for the terms "thermostable," "Thermus aquaticus,"  "DNA polymerase," "denaturing polyacrylamide gel," "phosphorylase B," "bovine serum albumin," and "molecular weight."  But what was not expressly defined was the term "purified" and upon construction of that term hinged the validity of the patent claim.  This is because there was a reference, a Ph.D. thesis (reminiscent of the factual situation in the In re Hall case) from the 1970's (half a decade before Kary Mullis invented the polymerase chain reaction that motivated Randi Saiki to isolate Taq polymerase for use in that method) wherein the DNA polymerase from Thermus aquaticus was studied in crude extracts which were, compared to their native state, "purified."  When the district court construed the term (not otherwise defined, expressly or inherently) to include preparations at this level of impurity as being "purified," the thesis was properly a reference and the validity of the claim fatally impacted.

The moral:  no patent practitioner can ever know what terms must be expressly defined, and the only alternative is to accept a "zone of uncertainty" regarding the scope or validity of patent claims or to burden every specification with every definition of every term that could possibly be relevant in future.  In short, both an impractical and impossible standard to hold either patents or patent practitioners to satisfy.

Additionally, the reality is that, expressly defined or not the claim terms will be construed by a district court judge generally without any scientific training or ability.  The lay judge will not be in any position to understand, from her own experience, the "ordinary and customary" meaning of claim terms in the claims she must construe, and even definitions may present a challenge if (the specification being directed to those of ordinary skill in the art) the very language used is foreign to her experience.  Dictionaries, treatises and expert witnesses may be appropriate and indeed should be encouraged under such circumstances as aids to the court in coming to a construction fair to both the patentee and the public.  (And perhaps sources such as dictionaries and treatises may be sufficiently outside the need for weighing of credibility as to be treated for evidentiary purposes as intrinsic evidence and thus fall outside the "clearly erroneous" standard of review, insofar as they can be understood as well by an appellate panel as by a district court judge.)  But a district court hearing from one or several experts will then engage in the activities that provided the Supreme Court with its rationale for invoking Rule 52(a)(6) as mandating deferential review before the Federal Circuit.  This circumstance is sure to provide motivation for at least one party to wish to avoid having the district court hear such testimony.

Another consequence of the Court's decision in the Teva case is that it will disproportionately affect different areas of technology.  Unlike the Federal Circuit practice of attempting to establish technology-independent legal principles, the Teva decision will disproportionately affect more technology-intensive arts, including biotechnology, pharmaceuticals and the high technology sector.  This is because in these arts it is even more likely that there will be "ordinary and customary" meaning of the terms that will be understood by the judge and the judge will need to rely more heavily on the type of extrinsic evidence the Supreme Court considers to be involved in determining the "subsidiary facts" entitled to deferential review by the Federal Circuit.

Finally, it is clear that the Teva decision will alter behavior of patentees and patent litigants, either by motivating applicants to attempt to immunize their claims from the effects of the decision with more extensive definitions or, in litigation, for the party that believes there is a technologically relevant term that can be defined to its benefit by expert testimony to make sure that the district court hears that testimony, whether proffered in an expert report or by live testimony.  Being litigants, once one party submits such a report or proffers such testimony the other party will be obligated to follow suit, again setting up precisely the situation where the district court's determination of "subsidiary facts" will raise the deference standard of appellate review mandated by Rule 52(a)(6).

The Court's decision in Teva is another example of the Supreme Court applying its view of patent law on the Federal Circuit, which is of course entirely within their purview in our Constitutional system.  The propriety of its wisdom in doing so, on the other hand, is much less certain, and once again introduces uncertainty in an area of the law that most (but not, seemingly, the Court itself) understand can least afford it.

Comments

[Dan Feigelson]

Kevin, as usual, an excellent analysis. In the case where the defendant has deep pockets, I think this decision will put patentees in a no-win situation insofar as litigation costs go: if you haven't been careful to define your claim terms (and as you posit, perfect prescience is not plausibly possible), then the status quo holds, meaning that at the very least you're going to have to spend big bucks getting experts to opine on the meaning of those terms. But under Teva, even if you've been careful to define your claim terms, then the defendant has nothing to lose and everything to gain by trying to dispute the meaning of one or more of those terms through expert testimony - because the district court *could* side with the defendant and that part of the decision is now less susceptible to reversal by the CAFC.

More generally, you're right about SCOTUS making a bloody mess of patent law. I think of the difference in development under the CAFC versus that under SCOTUS as the difference between a river gradually carving out the landscape and Mt. St. Helens blowing its top.

[Skeptical]

Dr. Noonan states "in that opinion and at that time the Court was content to permit the Circuit Court to apply its "special expertise" in determining the most jurisprudentially effective way of performing its appellate role. As has been clear for some time, those days are over."

I would disagree - but only in the Dilberteque, pointy-haired boss manner of not deciding - but only constantly telling the underling "No, not that way."

Prime example: the (missing) definition of "abstract."

This goes to the power-hugging tactic of NOT setting clear lines, thus requiring (excuse the metaphor) the ever present fingers of the Supreme Court in the policy determining wax nose of patent law.

It is NOT an oversight that the Court does not provide clear (and final) direction on these matters.

2nd point:

As to "Having drawn these judicial lines, the question for patent practitioners and judges, at all levels, is to decide how to implement them." - I would agree that such is a starting point, as we must continue to represent our clients, no matter what the legal terrain being sculpted provides. But by no means is that - nor should that - be the stopping point of our actions, should that be the final question for all of us.

(a further note to the drawback of glossaries is that the next logical step will be debating the meaning of the words used in the glossaries themselves - shall we need a glossary for the glossary? - as they say, "turtles all the way down")

[EG]

"With the advent of more frequent Supreme Court scrutiny the law is now episodic, sporadic and much less predictable."

Hey Kevin,

Or as Dan F. said, a chaotic mess has been created by Our Judicial Mount Olympus.

As I also noted on your other post, we will likely witness, once again, in litigation the "dueling dictionary" situation we had prior to Phillips. As you indicate in your post, after Phillips, "extrinsic evidence" such as dictionaries, was disfavored by the Federal Circuit. But it looks like Breyer's majority opinion opens up the "dueling dictionary" debate again in litigation, and that will truly increase the litigation expense. Or to put it differently, the Royal Nine has no "common sense" when it comes to what will likely happen in litigation.