Client Alerts
January 21, 2015

Supreme Court makes it harder to overturn patent cases on appeal

Stites & Harbison Client Alert, January 21, 2015

The Supreme Court has clarified how an appellate court should review the trial court’s determination of what patent claims mean. In some cases, this decision will make it more difficult for a party that loses at trial to have that result reversed on appeal.

The Supreme Court rendered its decision in the case, Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., on Tuesday, January 20, 2015. The issue involved the “standard of review,” which dictates whether the appellate court must give deference to the trial court’s decision. The trial court’s determination of factual matters is normally entitled to deference – factual determinations are accepted unless the appellate court finds “clear error,” meaning that the reviewing court has a “definite and firm conviction” than an error has been committed. The appellate court gives no deference to the trial court’s decision on issues of law, which it reviews for error (so-called de novo review).

Prior Supreme Court precedent made it clear that determination of the meaning of the patent claims is a matter of law, similar to interpretation of a contract or a statute. But the issue in Teva was what standard to apply to issues of fact that the trial court has to resolve before it gets to interpreting the claims. The Supreme Court held that those incidental factual determinations are to be reviewed on the deferential “clear error” standard.

These underlying factual issues commonly arise in patent cases because the determination of what the patent means must be made in light of what someone of ordinary skill in the art would have understood the patent’s language to mean at the time the patent application was filed. That commonly leads to disputes, with one party’s expert testifying that the disputed term means one thing and the other party’s expert saying it means something else. The trial court has to determine the state of the art at the relevant time – a factual question – before it can decide what the terms of the patent mean. Similar issues arise when the defendant argues that a patent is invalid because the patented technology would have been obvious when the application was filed.

In Teva, Sandoz’s defense to Teva’s infringement claim was that the patent was invalid because, while it specified a molecular weight of the active compound in the patented pharmaceutical, it did not specify under which of three possible methods that molecular weight was to be determined. Sandoz argued that that ambiguity made the patent indefinite and therefore invalid. Based on expert testimony, the district court held that a person skilled in the art would have understood which method to use to determine the molecular weight, so the patent was sufficiently definite. The U.S. Court of Appeals for the Federal Circuit (which hears all patent appeals) disagreed and reversed after reviewing the trial court’s determination under the non-deferential de novo standard.

The Supreme Court held that was error. Rule 52(a)(6) of the Federal Rules of Civil Procedure provides that findings of fact are not to be set aside on appeal unless they are clearly erroneous. That Rule has no exceptions and so applies to both "subsidiary" and "ultimate" facts. In its 1996 case Markman v. Westview Instruments, the Supreme Court held that patent claim construction is "exclusively within the province of the court" rather than the jury, and while the ultimate question of proper construction is a question of law, the meaning of technical words or phrases not commonly understood may present issues of fact which the court must decide before it gets to the claim construction. Determinations of those underlying factual issues are reviewed for clear error. The court commented that this conclusion is supported both by precedent and by practicality: the trial judge is in a better position to resolve the factual issues because of greater familiarity with the case and ability to assess credibility.

Where the district court construes the patent based solely on a review of evidence contained in the patent file – so-called “intrinsic” evidence – that determination is one of law, which the Court of Appeals will review de novo. It is when the court must venture outside that intrinsic evidence to resolve subsidiary factual disputes – such as by hearing testimony about the background science or the meaning of a term in the relevant art at the relevant time – that the clear error standard of review applies. Having made those preliminary determinations of fact, the district court interprets the claim in light of those facts, and that ultimate interpretation of the patent’s meaning is a legal conclusion to be reviewed de novo.

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