On Tuesday, a 7-2 decision of the Supreme Court held that the Federal Circuit must apply a “clear error” standard when reviewing subsidiary factual findings underlying a district court’s claim construction.[1]  This is a departure from the Federal Circuit’s longstanding use of de novo review to review the entirety of a lower court’s claim construction decision.  The decision decreases the likelihood of reversal on appeal, elevates the importance of expert testimony about the meaning of claim language, and gives district courts incentive to protect their claim construction decisions with more fact-finding and extrinsic evidence.

Before the district court, the parties disputed the construction of the term “molecular weight” as it related to the active ingredient of a drug used to treat multiple sclerosis.  Sandoz asserted that Teva’s patent was invalid because the claim limitation “molecular weight of 5 to 9 kilodaltons” was indefinite.[2]  Sandoz argued that in the context of the claim, “molecular weight” could refer to any of three different methods for measuring molecular weight.[3]  After hearing conflicting expert testimony, the district court credited Teva’s expert and found that, in context, a person of ordinary skill would understand the term “molecular weight” to be calculated using Teva’s proposed method.[4]  The Federal Circuit reviewed the district court’s claim construction de novo, decided “molecular weight” was indefinite, and reversed.[5] 

The central focus of the Supreme Court’s opinion was Federal Rule of Civil Procedure 52(a)(6), which states that an appellate court must not set aside a district court’s factual findings unless they are “clearly erroneous.”[6]  District courts may need to make factual findings regarding extrinsic evidence addressing the background science or the meaning of a term in the relevant art during the claim construction process.[7]  This includes, for example, resolution of conflicting expert testimony regarding the knowledge of one of ordinary skill in the art.[8]  Writing for the majority, Justice Breyer explained “we cannot find any convincing ground for creating an exception” to Rule 52(a)(6) in cases of claim construction.[9]  Justice Breyer noted that this conclusion was not inconsistent with the Court’s seminal decision in Markman v. Westview Instruments, Inc.,[10] which treated the ultimate question of the proper construction of a claim term as a question of law.[11]  Markman recognized that this ultimate question may have “evidentiary underpinnings.”[12]

The Court also pointed to several other indicators that clear error review for factual findings is proper.  For example, early precedent from the Second Circuit, before the advent of the Federal Circuit, provided that the subsidiary factual issue of how a term is understood in the art should be reviewed for clear error.[13]  The Court also noted that its own precedent subjects subsidiary factual issues to this standard of review in other areas of patent law, such as obviousness.[14]  The Court also noted that practical considerations dictate a clear error standard.  Patent law requires a familiarity with “specific scientific problems and principles not usually contained in the general storehouse of knowledge and experience.”[15]  Because the district court judge has a greater opportunity to become familiar with the scientific matters in the case, deference to his or her factual findings is appropriate.[16]

Some claim construction decisions will still be reviewed de novo.  The Court acknowledged that many claim construction decisions do not rely on subsidiary fact findings.[17]  In particular, the Court noted that district court claim constructions based solely on the intrinsic evidence “is solely a determination of law” reviewed de novo.[18]  Intrinsic evidence includes the patent at issue and its prosecution history.[19]

The Supreme Court concluded that the district court in this case had made an evidentiary finding in crediting Teva’s expert testimony about how an ordinarily skilled artisan would interpret the term “molecular weight” over that proffered by Sandoz.[20]  The district court then drew the legal conclusion that the factual finding did not undermine Teva’s proposed construction.[21] On appeal, the Federal Circuit failed to apply a clear error standard of review and rejected Teva’s expert testimony based on its de novo assessment.[22]  The Supreme Court held that Federal Circuit erred in failing to give proper deference to the district court’s factual determination, and remanded the case for further review of the factual determination under the clearly erroneous standard.[23]

Teva Pharms. USA, Inc. v. Sandoz, Inc. changes the way claim construction appeals will be decided.  District court determinations regarding extrinsic evidence are now to be afforded deference on appeal.  Though the Supreme Court remarked that “subsidiary fact-finding is unlikely to loom large in the universe of litigated claim construction,”[24] appellants with unfavorable extrinsic evidence findings will now face a steeper hill to climb at the Federal Circuit.

The decision also means litigants should reevaluate strategic considerations related to Markman hearings at the district court.  If they urge a claim construction based solely on intrinsic evidence, they will increase the likelihood that a favorable district court construction will be closely reviewed on appeal.  If, on the other hand, they induce reliance on extrinsic evidence, and the district court issues an unfavorable construction based on such evidence, obtaining a reversal of such a decision is now more difficult.