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Claim Construction's Journey in the 9 Months Since Teva

Over the past decade, the U.S. Supreme Court has shown a historically high level of interest in patent cases — addressing issues ranging from patentable subject matter, to invalidity standards, to patent remedies. Among those cases, the Supreme Court’s decision in Teva Pharmaceuticals USA Inc. v. Sandoz Inc., 135 S. Ct. 831 (2015), received particular notoriety because it addressed a fundamental issue arising in almost every patent case — claim construction. With the Supreme Court back in session and granting certiorari in its first set of patent cases for the new term, now is a good time to look back on Teva and see what effect that decision is having on claim construction some nine months on.

The Supreme Court in Teva considered whether, in reviewing “claim construction with ‘evidentiary underpinnings,’” the Federal Circuit should “review the district court’s factfinding de novo as it would review a question of law,” or whether it should “review that factfinding as it would review a trial judge’s factfinding in other cases, namely by taking them as correct ‘unless clearly erroneous.’” Id. at 835. In those circumstances, it held that “the appellate court must apply a ‘clear error,’ not a de novo, standard of review.” Id. In so doing, it observed that “[i]n 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,” while in other 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.” Id. at 841-42. Either way, factual findings are reviewed for clear error, but “the ultimate question of construction ... remain[s] a legal question.” Id. at 842. Thus, “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.” Id. at 841.

When the Teva decision was announced nine months ago, some commentators believed it represented a “major departure” from the status quo, could have a “significant impact” on how parties litigated claim construction in the district courts, and could “increase the probability that district court results in patent cases will stand up on appeal.” See Lawyers Weigh In On High Court Claim Construction Ruling, Law360 (Jan. 20, 2015). Others were skeptical it would have much “practical effect,” and thought the impact would be “minimal.” Id. So far, the latter view seems to have been largely proven correct by the Federal Circuit. But, as discussed below, it may still be too soon to tell. That will in part depend on whether district courts feel empowered by Teva to engage in fact-finding and believe the Federal Circuit will defer to their findings.

To date, with a few exceptions, the Federal Circuit has continued to apply de novo review in assessing claim constructions in the wake of Teva. There are several reasons for this.

First, in a large number of cases that have come up since Teva was decided, claim construction was decided on the intrinsic record, and there simply were no underlying factual findings to review for clear error. See Southco Inc. v. Fivetech Tech. Inc., 611 F. App’x 681, 683, 685-86 (Fed. Cir. 2015) (“[W]e review the district court’s claim constructions de novo because the intrinsic evidence determines the proper construction. ... The district court did not rely on extrinsic evidence in construing the claims.”); In re Papst Licensing Digital Camera Patent Litig., 778 F.3d 1255, 1261 (Fed. Cir. 2015) (similar). That’s not particularly surprising. After all, prior to Teva, claim construction was reviewed entirely de novo, and the use of extrinsic evidence — particularly experts — in support of claim construction was relatively rare, perhaps in part because it was entitled to no deference. More fundamentally, under Phillips v. AWH Corp., 415 F.3d 1303, 1318 (Fed. Cir. 2005) (en banc), a court may not even have a reason to consider extrinsic evidence if the claims, specification, and prosecution history resolve the issue.

Second, there have been cases in which the Federal Circuit has held any fact-finding was simply beside the point because the intrinsic record controls. In Eidos Display LLC v. AU Optronics Corp., 779 F.3d 1360 (Fed. Cir. 2015), the Federal Circuit held that, “[t]o the extent the district court considered extrinsic evidence in its claim construction order or summary judgment order, that evidence is ultimately immaterial to the outcome because the intrinsic record is clear.” Id. at 1365. In reaching that conclusion, the Federal Circuit relied on the hierarchy set forth in Phillips, which held that “[a] court should discount any expert testimony that is clearly at odds with the claim construction mandated by the claims themselves, the written description, and the prosecution history, in other words, with the written record of the patent.” Id. (quoting Phillips, 415 F.3d at 1318). Similarly, in Enzo Biochem Inc. v. Applera Corp., 780 F.3d 1149 (Fed. Cir. 2015), the court concluded that the “sole factual finding does not override our analysis of the totality of the specification,” and reversed the district court’s claim construction. Id. at 1156.

Further, two cases that were remanded from the Supreme Court in light of Teva — Lighting Ballast Control LLC v. Philips Electronics North America Corp. and the Teva remand itself (Teva II) — show some disagreement over how to apply Teva even when factual findings appear to drive the district court’s analysis. In Lighting Ballast, one panel of the Federal Circuit unanimously reversed its previous decision based on the application of deference, whereas in Teva II, a different — and divided — panel ultimately concluded that no deference was required under the circumstances.

In Lighting Ballast the Federal Circuit relied on fact-finding to affirm the conclusion that certain claim terms were not governed by 35 U.S.C. § 112 ¶ 6 (now § 112(f)). Quoting Phillips, the court found that, “[u]nder the circumstances, it was not legal error for the district court to rely on extrinsic evidence, because the extrinsic evidence was ‘not used to contradict claim meaning that is unambiguous in light of the intrinsic evidence.’” 790 F.3d 1329, 1338 (Fed. Cir. 2015) (quoting Phillips, 415 F.3d at 1324). The court ultimately relied on the factual finding that, “the language following ‘voltage source means’ in the claim — ‘providing a constant or variable magnitude DC voltage between the DC input terminals’ — ‘when read by one familiar with the use and function of a lighting ballast ... would understand a rectifier is, at least in common uses, the only structure that would provide “a constant or variable magnitude DC voltage.”’” Id. at 1338-39. Significantly, that ruling flipped the outcome of the case.

By contrast, the Teva II majority found that a number of factual determinations made by the district court were not clearly erroneous, but nonetheless reversed the district court’s finding of no indefiniteness. It found that the district court’s factual determinations were not dispositive. The majority instead ruled that a statement in the prosecution history controlled the indefiniteness inquiry, regardless of whether that statement contained a scientific error, and regardless of whether — as the district court had found — a person of ordinary skill in the art would recognize it was an error. In the majority’s view, because the question was one of interpreting the intrinsic evidence (the statement in the prosecution history), the fact-finding was, in effect, irrelevant: “Determining the meaning or significance to ascribe to the legal writings which constitute the intrinsic record is legal analysis,” as is “[d]etermining the significance of disclosures in the specification or prosecution history.” 789 F.3d 1335, 1342 (Fed. Cir. 2015).

Whether the Federal Circuit will continue to take a narrow approach to applying clear error review to claim construction issues remains to be seen. Indeed, it will largely depend on whether and to what extent district courts rely on fact-finding in construing claims. Only if the Federal Circuit is confronted with recurring cases in which a district court’s analysis depends principally on factual findings, will it likely have to grapple with the tension in Teva II and Lighting Ballast. But to date there have been few cases the Federal Circuit has reviewed in which factual findings actually drove the district court’s claim construction analysis. And given the typical timeline for an appeal (let alone the time from claim construction to an appealable judgment), few if any Markman rulings conducted since Teva have even had a chance to percolate to an appellate decision.

What will be interesting to observe is whether litigants expand their reliance on extrinsic evidence, such as expert opinions, in Markman proceedings, and what weight district courts will give such evidence under the rubric of Phillips. Even after Teva, it may still prove to be the rare case where a district court finds that claim construction depends on factual disputes. Indeed, many of the district court judges that routinely hear patent cases have well-established practices in approaching claim construction — practices developed over the 17 years since Cybor Corp. v. FAS Technologies Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), held that claim construction was subject to de novo review on appeal and overruled Metaullics Systems Co. v. Cooper, 100 F.3d 938, 939 (Fed. Cir. 1996) (which had held, as Teva would nearly two decades later, that Federal Rule of Civil Procedure 52 requires deference to district court fact-finding even when made as part of claim construction).

To perhaps state the obvious, if inertia holds and district courts do not generally engage in fact-finding as part of claim construction, there will be little for which the Federal Circuit could even possibly apply clear error review on appeal. And it may well be that only when a new generation of jurists, not colored by 17 years of Cybor, take a different approach, that the Federal Circuit will have to decide the metes and bounds of when deference applies. In short, it may still be years from now before we know the true impact of Teva.