Supreme Court Decides Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.

On January 20, 2015, the U.S. Supreme Court decided Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., No. 13-854, holding that the Federal Circuit must review a district court’s subsidiary factual findings made in the course of the construction of a patent claim for clear error, rather than applying the de novo standard of review.

Teva Pharmaceuticals sued Sandoz when Sandoz tried to market a generic version of a drug that Teva claims is covered by Teva’s patent. Sandoz argued that Teva’s patent was fatally indefinite and therefore invalid because the patent’s description of the molecular weight of the drug’s active ingredient could be understood to have three different meanings. The district court received conflicting expert testimony on the issue, agreed with Teva’s expert’s explanation, and concluded that the claim was sufficiently definite and the patent was valid. On appeal, the Federal Circuit came to the opposite conclusion — holding that the term “molecular weight” as used in the patent was indefinite and the patent was invalid. In reaching its conclusion, the Federal Circuit reviewed de novo all aspects of the district court’s claim construction, including the district court’s determination of facts subsidiary to the claim construction.

The Supreme Court vacated and remanded the Federal Circuit’s decision, holding by a 7-2 vote that the Federal Circuit erred by applying a de novo standard of review to all aspects of the district court’s construction of the patent claim, rather than applying the “clear error” standard to the district court’s subsidiary factual findings. Federal Rule of Civil Procedure 52(a)(6) requires that a court of appeals must not “set aside” a district court’s “[f]indings of fact” unless they are “clearly erroneous.”

The Court explained that its earlier decision in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), holding that “the ultimate question of claim construction is for the judge and not the jury… did not create an exception from the ordinary rule governing appellate review of factual matters” for clear error. The Court explained that when a “district court reviews only evidence intrinsic to the patent (the patent claims and specifications, along with the patent’s prosecution history),” the Federal Circuit will review the claim construction de novo because the district court “judge’s determination will amount solely to a determination of law.” But when the district court “need[s] 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 the term in the relevant art during the relevant time period,” the district court’s “subsidiary fact-finding must be reviewed for clear error on appeal.” In summarizing its holding, the Court clarified that because the “ultimate interpretation is a legal conclusion,” the “appellate court can still review the district court’s ultimate construction of the claim de novo[, b]ut, to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual findings, has made a clear error.”

The Court held that the district court’s finding based on Teva’s expert’s explanation about “how a skilled artisan would understand the way in which a curve created from a chromatogram data reflects molecular weights” was a factual finding. The Federal Circuit erred because it “failed to accept [Teva’s expert’s] explanation” of the subsidiary factual issue without finding that “the District Court’s contrary determination was ‘clearly erroneous.’”  

The Court vacated the Federal Circuit’s opinion and remanded for further proceedings.

Justice Breyer delivered the opinion of the Court, in which Chief Justice Roberts and Justices Scalia, Kennedy, Ginsburg, Sotomayor, and Kagan joined. Justice Thomas dissented, joined by Justice Alito.

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