Teva v. Sandoz

By: Justin Crotty & Andreas Baltatzis  |   January 27, 2015

The Supreme Court has redefined the structure of appellate review in patent cases in a way which enhances the role of district courts, diminishes the discretion of the Federal Circuit and has important but uncertain implications for all intellectual property practitioners. Teva Pharmaceuticals U.S.A., Inc., et al. v. Sandoz, Inc. et al. considers the standard of review on appeal when issues in claim construction have evidentiary underpinnings. No. 13-854, slip op. at 1, (January 20, 2015). These evidentiary underpinnings are factual findings, typically about the meaning of technical terms or the basic science surrounding a patent claim. They are often at issue in the most hard fought or high stakes patent litigation and in a substantial number of these cases factual findings during claim construction are dispositive to the ultimate outcome. The question is whether courts of appeal should review a district court’s fact finding de novo as is typical for other issues of claim construction or whether these findings should be reviewed for clear error under Fed. Rule Civ. Proc. 52(a)(6). Id.

Teva holds a patent which covers a manufacturing method for copaxone, a drug used to treat multiple sclerosis. Id., at 2. The drug’s active ingredient is typically referred to as “copolymer-1” and is made up of molecules of varying sizes. Id. The disputed claim term is the phrase “molecular weight of 5 to 9 kilodaltons”. Id. The defendants argued that the claim was indefinite and therefore invalid. Id. at 2. The crux of the defendant’s argument is that because there are three methods for calculating molecular weight that would be reasonable in the context of the patent claim: the molecular weight of the molecule that is most prevalent, the average molecular weight of all the molecules in the mixture and calculating the average molecular weight while placing more emphasis on larger molecules, and a person of skill in the art would not know which method to use. Id. at 2-3. This argument is easier to sustain in light of another recent Supreme Court case which lowered the standard required to show that a claim is invalid for indefiniteness under 35 U.S.C. § 112 from “insolubly ambiguous” to “reasonable certainty”. See Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014). The District Court heard experts provided by both Teva and the defendants and determined that a person of skill in the art would know to use the first method, therefore the claims are sufficiently definite. Teva Pharmaceuticals U.S.A., Inc., et al. No. 13-854, slip op. at 2-3. On appeal, the Federal Circuit disagreed and held the patent invalid. Id. at 3.

The Supreme Court held that Fed. Rule Civ. Proc. 52(a)(6) is controlling here and the District Court’s finding must be reviewed under the clearly erroneous standard, saying “[e]ven if exceptions to the rule were permissible, we cannot find any convincing ground for creating an exception to that Rule here.” Id. at 4. When reviewing exclusively intrinsic evidence, i.e. the claims and specification along with the prosecution history, the Court of Appeals will review de novo. Id. at 11-12. However, in some cases (arguably most) the district court will need to consult extrinsic evidence in order to understand, for example, the relevant background science or the meaning of a term in the relevant art during the relevant time period. Id. at 12. These findings are the “evidentiary underpinnings” which must be reviewed for clear error on appeal. Id. Even in cases where extrinsic evidence plays a significant role, the ultimate question of construction will remain a legal question which will be reviewed de novo.

The Supreme Court’s holding raises the importance of district court litigation in cases where extrinsic evidence will play a role because these findings will be relatively harder to reverse on appeal. This in turn may incrementally increase the variability in outcome depending on venue and worsen problems of forum shopping. Because an adverse finding of fact will be more damaging than under a regime of de novo review, it may be more important than ever to minimize the chance that courts will resort to extrinsic sources during claim construction. Going forward practitioners may try to avoid this issue through careful drafting of specifications, perhaps explicitly defining terms that might previously have been assumed to be interpreted according to their plain meaning. Alternatively, patentees seeking broad and ambiguous claims may view this as an opportunity to increase litigation costs, as intrinsically ambiguous claims will require extrinsic evidence to interpret, which in turn will be reviewable only by the more deferential standard.