Supreme Court Mandates Deference to District Court Factual Findings When Reviewing Claim Construction

The U.S. Supreme Court issued a landmark decision today in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (No. 13-854), altering the standard used by the Federal Circuit since 1998 to review claim construction determinations on appeal. This ruling is the latest in a series of recent Supreme Court decisions reversing practices previously established by the Federal Circuit.

By a vote of 7-2 (with Justice Thomas, joined by Justice Alito, dissenting), the Court held that the Federal Circuit must now apply a “clear error” standard when reviewing a district court’s resolution of “subsidiary factual matters” relating to claim construction. This is a departure for the traditional de novo standard of review previously applied by the Federal Circuit to all aspects of claim construction.

The dispute in Teva related to the district court’s conclusion that the term “molecular weight” satisfied the definiteness requirement of 35 U.S.C. § 112, ¶ 2. The district court rejected Sandoz’s indefiniteness argument after hearing evidence from experts from both sides. Crediting Teva’s expert over Sandoz’s, the court found that one of ordinary skill in the art would understand “molecular weight” to mean a “peak average molecular weight.”

Applying de novo review, the Federal Circuit reversed, finding that the disputed term rendered the patent invalid for indefiniteness. Notably, and in contrast to the District Court’s credibility determination, the Federal Circuit did not accept Teva’s expert’s testimony supporting Teva’s proposed construction.

Justice Breyer, writing for the majority, began his opinion by noting that, pursuant to Federal Rule of Civil Procedure 52(a)(6), a court of appeals “must not … set aside” a district court’s findings of fact unless they are “clearly erroneous.” The Supreme Court has consistently interpreted Rule 52 as “set[ing] forth a ‘clear command’” and that the Rule “does not make exceptions or purport to exclude certain categories of factual findings from the obligation of a court of appeals to accept a district court’s findings unless clearly erroneous.”

The majority went on to confirm that its landmark decision in Markman v. Westview Instruments, where it held that claim construction issues are “exclusively” the province of the courts, did not alter the requirements of—nor provide an exception to—Rule 52. Analogizing claim construction to construction of “other written instruments,” the Court noted that other precedent supported a firm adherence to Rule 52:

Construction of written instruments often presents a “question solely of law,” at least when the words in those instruments are “used in their ordinary meaning.” But if a written instrument uses “technical words or phrases not commonly understood,” those words may give rise to a factual dispute. If so, extrinsic evidence may help to “establish a usage of trade or locality.” And in that circumstance, the “determination of the matter of fact” will “preced[e]” the “function of construction.”

Having determined that clear error review is appropriate for disputes of subsidiary factual issues, the majority turned next towards the application of the rule. Here, the Court set out an apparent bright-line distinction between the application of de novo and deferential review. According to the Supreme Court, where the district court considers only the intrinsic evidence of a patent in resolving claim construction issues, it makes a purely legal determination, and de novo review must be used. But where the presentation of extrinsic evidence results in factual disputes between the parties (such as expert credibility determinations), the resulting factual findings must be reviewed for clear error.

A final caveat by the majority may ultimately provide the Federal Circuit with considerable discretion regarding the standard of review it uses. Notwithstanding the Supreme Court’s pronouncements regarding subsidiary factual issues, its ruling confirmed that the “ultimate interpretation” of a claim term remains a legal conclusion.Thus, de novo review still applies to the ultimate construction of the claim reached by the district court.

Turning to the facts of the case at bar, the Supreme Court ruled that the Federal Circuit failed to determine whether the district court clearly erred in accepting the explanation of Teva’s expert regarding definiteness. The case was remanded back to the Federal Circuit for further proceedings consistent with the decision.