01/23/15

Teva Pharma. v. Sandoz: SCOTUS finds claim construction subject to de novo OR clear error standard of review


 
 
 
 By: Jesus Hernandez, Blog Editor/Contributor 
 
 
TitleTeva Pharma. USA, Inc. v. Sandoz, Inc., No. 13-854 (Jan. 20, 2015).
IssueToday’s case involves claim construction with “eviden­tiary underpinnings.” See Part III, infra. And, it requires us to determine what standard the Court of Appeals should use when it reviews a trial judge’s resolution of an underlying factual dispute. Should the Court of Appeals review the district court’s factfinding de novo as it would review a question of law? Or, should it review that fact-finding as it would review a trial judge’s factfinding in other cases, namely by taking them as correct “unless clearly erroneous?”
Teva Pharma. USA, Inc., at *1.
HoldingWe hold that the appellate court must apply a “clear error,” not a de novo, standard of review [when reviewing underlying factual disputes of claim construction, but may apply de novo review when reviewing claim construction generally].
Id. at *1-2 (text added).
 
 
Procedural HistoryThe basic dispute in this case concerns the meaning of the words “molecular weight” as those words appear in a patent claim. The petitioners, Teva Pharmaceuticals (along with related firms), own the relevant patent. The patent covers a manufacturing method for Copaxone, a drug used to treat multiple sclerosis. The drug’s active ingredient, called “copolymer-1,” is made up of molecules of varying sizes. App. 1143a. And the relevant claim describes that ingredient as having “a molecular weight of 5 to 9 kilodaltons.” Id., at 1145a. The respondents, Sandoz, Inc. (and several other firms), tried to market a generic version of Copaxone. Teva sued Sandoz for patent infringement. 810 F. Supp. 2d 578, 581 (SDNY 2011). Sandoz defended the suit by arguing that the patent was invalid. Ibid.
Teva Pharma. USA, Inc., at *2.
 
 
Legal Reasoning (Breyer for the Court)
Ascertaining the "clear error" standard
subsidiary and ultimate factsFederal Rule of Civil Procedure 52(a)(6) states that a court of appeals “must not . . . set aside” a district court’s “[f]indings of fact” unless they are “clearly erroneous.” In our view, this rule and the standard it sets forth must apply when a court of appeals reviews a district court’s resolution of subsidiary factual matters made in the course of its construction of a patent claim. We have made clear that the Rule sets forth a “clear command.” Anderson v. Bessemer City, 470 U. S. 564, 574 (1985). “It does not make exceptions or purport to exclude certain catego­ ries of factual findings from the obligation of a court of appeals to accept a district court’s findings unless clearly erroneous.” Pullman-Standard v. Swint, 456 U. S. 273, 287 (1982). Accordingly, the Rule applies to both subsidi­ary and ultimate facts. Ibid.
Teva Pharma. USA, Inc., at *4.
claim construction: question of law with underling factsWhen describing claim construction we concluded that it was proper to treat the ultimate question of the proper construction of the patent as a question of law in the way that we treat document construction as a question of law. Id., at 388–391. But this does not imply an exception to Rule 52(a) for underlying factual disputes. We used the term “question of law” while pointing out that a judge, in construing a patent claim, is engaged in much the same task as the judge would be in construing other written instruments, such as deeds, contracts, or tariffs. [...] 
Id. at *5 (internal citations omitted).
Addressing Markman Decision
Accordingly, when we held in Markman that the ulti­ mate question of claim construction is for the judge and not the jury, we did not create an exception from the ordi­ nary rule governing appellate review of factual matters. Markman no more creates an exception to Rule 52(a) than would a holding that judges, not juries, determine equit­ able claims, such as requests for injunctions.
Id. at *6.
While we held in Markman that the ultimate issue of the proper construction of a claim should be treated as a question of law, we also recognized that in patent con­struction, subsidiary factfinding is sometimes necessary. Indeed, we referred to claim construction as a practice with “evidentiary underpinnings,” a practice that “falls somewhere between a pristine legal standard and a simple historical fact.” 517 U. S., at 378, 388, 390. We added that sometimes courts may have to make “credibility judgments” about witnesses. Id., at 389. In other words, we recognized that courts may have to resolve subsidiary factual disputes. And, as explained above, the Rule re­ quires appellate courts to review all such subsidiary fac­tual findings under the “clearly erroneous” standard.
Id. at *6-7.
District Court in Better Position to Gauge MeaningWe have previously pointed out that clear error review is “particularly” important where patent law is at issue because patent law is “a field where so much de­ pends upon familiarity with specific scientific problems and principles not usually contained in the general store­ house of knowledge and experience.” Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U. S. 605, 610 (1950). 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. Cf. Lighting Ballast, 744 F. 3d, at 1311 (O’Malley, J., dissent­ ing) (Federal Circuit judges “lack the tools that district courts have available to resolve factual disputes fairly and accurately,” such as questioning the experts, examining the invention in operation, or appointing a court-appointed expert); Anderson, 470 U. S., at 574 (“The trial judge’s major role is the determination of fact, and with experi­ence in fulfilling that role comes expertise”).
Id. at *7-8.
Separating factual and legal aspects of claim contractionSandoz argues that claim construction mostly consists of construing a set of written documents that do not give rise to subsidiary factual disputes. Tr. of Oral Arg. 39. It adds that separating “factual” from “legal” questions is often difficult. […] we would not find this argument convincing. Courts of appeals have long found it possible to separate factual from legal matters. See, e.g., First Options of Chicago, Inc. v. Kaplan, 514 U. S. 938, 947–948 (1995) (review of factual findings for clear error and legal conclu­ sions de novo is the “ordinary” standard for courts of ap­ peals). At the same time, the Federal Circuit’s efforts to treat factual findings and legal conclusions similarly have brought with them their own complexities. See e.g., Cybor Corp. v. FAS Technologies, Inc., 138 F. 3d 1448, 1454 (CA Fed. 1998) (en banc) (claim construction does not involve “factual evidentiary findings” (citation and internal quota­ tion marks omitted)); Lighting Ballast, supra, at 1284 (claim construction has “arguably factual aspects”); Dow Jones & Co. v. Ablaise Ltd., 606 F. 3d 1338, 1344–1345 (CA Fed. 2010) (“[T]his court,” while reviewing claim construction without deference, “takes into account the views of the trial judge”); Nazomi Communications Inc., v. Arm Holdings, PLC, 403 F. 3d 1364, 1371 (CA Fed. 2005) (“[C]ommon sense dictates that the trial judge’s view will carry weight” (citation and internal quotation marks omitted)); Lightning Ballast, supra, at 1294 (Lourie, J., concurring) (we should “rarely” overturn district court’s true subsidiary factfinding; “we should, and do, give proper informal deference to the work of judges of a subordinate tribunal”); Cybor, supra, at 1480 (opinion of Newman, J.) (“By continuing the fiction that there are no facts to be found in claim interpretations, we confound rather than ease the litigation process”); see also Anderson, supra, at 575 (the parties “have already been forced to concentrate their energies and resources on persuading the trial judge that their account of the facts is the correct one; requiring them to persuade three more judges at the appellate level is requiring too much”); Brief for Peter S. Menell et al. as Amici Curiae 5 (Federal Circuit overturns district court claim construction at unusually high rate).
Id. at *8-9.
How to Apply New Standard
when to apply “de novo”As all parties agree, when the district court reviews only evidence intrinsic to the patent (the patent claims and specifications, along with the patent’s prosecution history), the judge’s determination will amount solely to a determina­tion of law, and the Court of Appeals will review that construction de novo. See Brief for Petitioners 27, Reply Brief 16; Brief for Respondents 43; see also Brief for United States as Amicus Curiae 12–13.
Teva Pharma. USA, Inc., at *11-12.
when to apply “clear error”In some cases, however, 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 rele­ vant art during the relevant time period. See, e.g., Seymour v. Osborne, 11 Wall. 516, 546 (1871) (a patent may be “so interspersed with technical terms and terms of art that the testimony of scientific witnesses is indispensable to a correct understanding of its meaning”). In cases where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about that ex­ trinsic evidence. These are the “evidentiary underpin­ nings” of claim construction that we discussed in Mark- man, and this subsidiary factfinding must be reviewed for clear error on appeal.
Id. at *12.
on dispositive factsIn some instances, a factual finding will play only a small role in a judge’s ultimate legal conclusion about the meaning of the patent term. But in some instances, a factual finding may be close to dispositive of the ultimate legal question of the proper meaning of the term in the context of the patent. Nonetheless, the ultimate question of construction will remain a legal question. Simply be­ cause a factual finding may be nearly dispositive does not render the subsidiary question a legal one. “[A]n issue does not lose its factual character merely because its resolution is dispositive of the ultimate” legal question. Miller v. Fenton, 474 U. S. 104, 113 (1985).
Id. at *13.
Analysis
 Recall that Teva’s patent claim specifies an active ingredient with a “molecular weight of about 5 to 9 kilodaltons.” Recall Sandoz’s basic argument, namely that the term “molecular weight” is indefinite or ambiguous. The term might refer to the weight of the most numerous molecule, it might refer to weight as calculated by the average weight of all molecules, or it might refer to weight as calculated by an average in which heavier molecules count for more. The claim, Sandoz argues, does not tell us which way we should calculate weight. See Part I, supra.
Teva Pharma. USA, Inc., at *14.
[I]magine we have a sample of copolymer-1 (the active ingredient) made up of 10 molecules: 4 weigh 6 kilodaltons each, 3 weigh 8 kilodaltons each, and 3 weigh 9 kilodaltons each. Using the first method of calculation, the “molecular weight” would be 6 kilodaltons, the weight of the most prevalent molecule. Using the second method, the molecular weight would be 7.5 (total weight, 75, divided by the number of molecules, 10). Using the third method, the molecular weight would be more than 8, depending upon how much extra weight we gave to the heavier molecules. For example, the figure’s legend says that the first sample’s “molecular weight” is 7.7. According to Teva, that should mean that molecules weighing 7.7 kilo­ daltons were the most prevalent molecules in the sample. But, look at the curve, said Sandoz. It shows that the most prevalent molecule weighed, not 7.7 kilodaltons, but slightly less than 7.7 (about 6.8) kilodaltons. See App. 138a–139a. After all, the peak of the first molecular weight distribution curve (the solid curve in the figure) is not at precisely 7.7 kilodaltons, but at a point just before 7.7. Thus, argued Sandoz, the figure shows that the pa­ tent claim term “molecular weight” did not mean molecu­ lar weight calculated by the first method. It must mean something else. It is indefinite. 810 F. Supp. 2d, at 590. The District Court did not accept Sandoz’s argument. Teva’s expert testified that a skilled artisan would under­ stand that converting data from a chromatogram to mo­ lecular weight distribution curves like those in figure 1 would cause the peak on each curve to shift slightly; this could explain the difference between the value indicated by the peak of the curve (about 6.8) and the value in the figure’s legend (7.7).
Id. at *15.
When the Federal Circuit reviewed the District Court’s decision, it recognized that the peak of the curve did not match the 7.7 kilodaltons listed in the legend of figure 1. 723 F. 3d, at 1369. But the Federal Circuit did not accept Teva’s expert’s explanation as to how a skilled artisan would expect the peaks of the curves to shift. And it failed to accept that explanation without finding that the Dis­ trict Court’s contrary determination was “clearly errone­ ous.” See ibid. The Federal Circuit should have accepted the District Court’s finding unless it was “clearly errone­ ous.” Our holding today makes clear that, in failing to do so, the Federal Circuit was wrong.
Id. at *16.
Conclusion
We vacate the Federal Circuit’s judgment, and we re­mand the case for further proceedings consistent with this opinion.
Teva Pharma. USA, Inc., at *16.
 
 
 
 
JUSTICE THOMAS, with whom JUSTICE ALITO joins, dissenting. Teva Pharma. USA, Inc., J. Thomas Op., at *1.
general grounds for dissentI agree with the Court’s conclusion that there is no special exception to Federal Rule of Civil Procedure 52(a)(6) for claim construction. But that is not the ques­ tion in this case. Because Rule 52(a)(6) provides for clear error review only of “findings of fact” and “does not apply to conclusions of law,” Pullman-Standard v. Swint, 456 U. S. 273, 287 (1982), the question here is whether claim construction involves findings of fact.1 Because it does not, Rule 52(a)(6) does not apply, and the Court of Appeals properly applied a de novo standard of review.
Teva Pharma. USA, Inc., J. Thomas Op., at *1.
Claim construction solely legal determinationIn general, we have treated district-court determinations as “analytically more akin to a fact” the more they pertain to a simple historical fact of the case, and as “analytically more akin to . . . a legal conclusion” the more they define rules appli­ cable beyond the parties’ dispute. Miller v. Fenton, 474 U. S. 104, 116 (1985); see also Bose Corp. v. Consumers Union of United States, Inc., 466 U. S. 485 (1984); Baum- gartner v. United States, 322 U. S. 665, 671 (1944). Under this approach, determinations underlying claim construc­ tion fall on the law side of the dividing line.
Id. at *2-3.
claim construction like statute construction
The classic case of a written instrument whose construc­ tion does not involve subsidiary findings of fact is a stat­ ute. Our treatment of subsidiary evidentiary findings underlying statutory construction as conclusions of law makes sense for two reasons. First, although statutory construction may demand some inquiry into legislative “intent,” that inquiry is an- alytically legal: The meaning of a statute does not turn on what an individual lawmaker intended as a matter of fact, but only on what intent has been enacted into law through the constitutionally defined channels of bicamer­ alism and presentment. […] Second, statutes govern the rights and duties of the public as a whole, so subsidiary evidentiary findings shape legal rules that apply far beyond the boundaries of the dispute involved. Our rules of construction for legislative acts have long been consciously shaped by the public’s stake in those acts. See, e.g., The Binghamton Bridge, 3 Wall. 51, 75 (1866) (describing a rule of construction bor­ rowed from English common law and reflected in the decisions of the several States). The construction of contracts and deeds, by contrast, sometimes involves subsidiary findings of fact. Our treatment of subsidiary evidentiary findings as findings of fact in this context makes sense because, in construing contracts and deeds, “the avowed purpose and primary function of the court is to ascertain the intention of the parties.”
Id. at *3-4.
Because they are governmental dispositions and provide rules that bind the public at large, patent claims resemble statutes. The scope of a patent holder’s monopoly right is defined by claims legally actualized through the proce­ dures established by Congress pursuant to its patent power. Thus, a patent holder’s actual intentions have effect only to the extent that they are expressed in the public record. […] Moreover, because the ultimate meaning of a patent claim, like the ultimate meaning of a statute, binds the public at large, it should not depend on the specific evi­ dence presented in a particular infringement case. Al­ though the party presentations shape even statutory construction, de novo review on appeal helps to ensure that the construction is not skewed by the specific evidence presented in a given case.
Id. at *7 (internal citations omitted).
On uniformityThe majority attempts to downplay the effect its deci­ sion will have on uniformity by pointing out that “prior cases [construing the same claim] will sometimes be bind­ ing because of issue preclusion, and sometimes will serve as persuasive authority.” […] Perhaps the majority is correct that “subsidiary factfind­ ing is unlikely to loom large in the universe of litigated claim construction.” Ante, at 10. But I doubt it. If this case proves anything, it is that the line between fact and law is an uncertain one—made all the more uncertain by the majority’s failure to identify sound principles for the lines it draws. 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 in­ volved 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. We generally avoid any rule of judicial administration that “results in a substantial expenditure of scarce judicial resources on difficult ques­ tions that have no effect on the outcome of the case,” Pearson v. Callahan, 555 U. S. 223, 236–237 (2009), and there is no reason to embrace one here. 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.
Id. at *14-15.
 
 
 
 
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