Since at least 1996, the Federal Circuit has reviewed district court claim constructions de novo. This de novo standard introduced great uncertainty into patent cases: A favorable claim construction, even one supported by detailed factual findings by the district court, could be set aside by the Federal Circuit without any deference whatsoever. This situation surely made the prospect of settlement more difficult than it might have been with a more deferential standard, as a party who failed to obtain favorable claim construction would factor the opportunity to reargue challenged constructions at the Federal Circuit into its settlement calculus.
On January 20, 2015, the Supreme Court in Teva Pharms. USA, Inc. v. Sandoz, Inc., vacated and remanded the Federal Circuit’s de novo reversal of an S.D.N.Y. claim construction order finding certain claims not to be indefinite. The Supreme Court, in an opinion by Justice Breyer joined by six other Justices, held that when the Federal Circuit reviews a trial court’s resolution of a factual dispute underlying claim construction, it must do so with deference to the district court and must apply the “clearly erroneous” standard typical for the review of all fact disputes.
The Court pointed to Federal Rule of Civil Procedure 52(a)(6), which states that the court of appeals “must not . . . set aside” a district court’s “findings of fact” unless they are “clearly erroneous.” The Court clarified that its seminal 1996 decision in Markman v. Westview Instruments, Inc., 517 U.S. 381 (1996) did not create any exception to Rule 52. Rather the Court noted that while Markman held that the ultimate issue of proper construction of a claim should be treated as a question of law for the court to determine, it also recognized that subsidiary factfinding was sometimes necessary. As a practical matter, the Court also pointed to the particular importance of clear error review in patent law where cases often depend on familiarity with relevant scientific issues and where the district court judge will have had greater familiarity with all of the evidence as opposed to an appellate court.
A key policy argument advanced by counsel for Sandoz was that clear error review would bring about less uniformity in claim construction rulings. The Court rejected Sandoz’s argument and was “unconvinced” that divergent claim constructions based on different factual findings would occur “with any frequency.”
As to the case at bar, the Supreme Court held that the Federal Circuit erred by rejecting, without deference, the district court’s underlying factual findings supporting its determination that the claims were not indefinite. The challenged claims included the term “average molecular weight.” During claim construction, Sandoz argued that the term was indefinite because it was susceptible to various definitions which would result in different molecular weights. Teva argued that a person of ordinary skill reviewing the specification would understand that “average molecular weight” referred to a particular type of average molecular weight—peak average molecular weight. Crediting and relying on Teva’s expert witnesses’ testimony about why a person of ordinary skill would understand the claims to reference peak average molecular weight, the district court held that the claims were sufficiently definite. On appeal the Federal Circuit, reviewing claim construction de novo, set aside the district court’s factual findings without deference and held that the claims were indefinite. The Supreme Court vacated and remanded to the Federal Circuit, instructing the appeals court to review the district court’s factual findings underpinning its indefiniteness ruling for clear error. Justice Thomas, joined by Justice Alito, issued a dissent, arguing that claim construction does not involve any findings of fact and therefore Rule 56 does not apply. Thus, according to the dissent, the Federal Circuit did not err by reviewing the district court’s construction de novo.
It is important to note that the Court changed only the standard of review of the factual basis of claim construction. The ultimate issue of a term’s construction remains a matter of law. Further, the Court drew a distinction between subsidiary factual findings (e.g., “background science” or the “meaning of a term in the relevant art at the relevant time”), now subject to review for clear error, and determinations based on intrinsic evidence (i.e., the claims, specification, and prosecution history) which remain a legal determination subject to de novo review.
Depending on the nature of relevant claim construction disputes, this decision should provide parties with more certainty about a case after a Markman Order issues. Where the key claim constructions hinged on factual issues—e.g., expert testimony about the perspective of a person of ordinary skill—parties now have more certainty that constructions will not be modified by the Federal Circuit. This certainty should put many parties in a better position to resolve disputes post-Markman and pretrial than they were before the Supreme Court’s ruling.