At 10 a.m. Wednesday, the Supreme Court will hold one hour of oral argument on a high-stakes legal battle between a brand-name drug company and a group of companies making generic drugs — Teva Pharmaceuticals USA v. Sandoz.  Teva will be represented by William M. Jay of Goodwin Procter LLP’s Washington, D.C., office, with twenty-five  minutes of time.  Arguing for the federal government as an amicus in support of neither side will be Ginger D. Anders, an assistant to the U.S. Solicitor General, with ten minutes.  Carter G. Phillips of the Washington, D.C., office of Sidley Austin LLP, will represent the generic firms, with twenty-five minutes.

Background

The Supreme Court has a keen fascination these days with patent cases, and it is often quite skeptical of the work of the specialized court that reviews that kind of case, the U.S. Court of Appeals for the Federal Circuit.  Few cases reaching the Justices from that court have more on the line for the Federal Circuit and for patent combatants than the one set for argument this week.

The Teva Pharmaceuticals case combines a core question about how the Federal Circuit reviews trial court decisions on the scope of patents, a new examination of a key 1996 Supreme Court precedent, an unrelenting battle among companies in the pharmaceutical business, and the right to control the sale of one of the most profitable medicines ever invented.

At the center of this dispute is the drug that Teva sells under the brand name Copaxone.  The Israel-based company has taken in as much as $4 billion a year from selling that preparation, which has been highly popular for use in easing relapses in patients with multiple sclerosis or in treating patients showing symptoms of MS in their initial visits to clinics or doctors.

The Federal Circuit, however, has ruled that Teva was not entitled to a patent on Copaxone, because that court found that the key claim the company had made for the drug was too ambiguous, thus violating the Patent Act’s requirement that such claims be spelled out clearly and definitely.   The entire case, in fact, turns on the clarity or ambiguity of a single phrase that Teva used in claiming an invention — that is, that Copaxone produces less severe side effects in patients (it is less toxic to them) when the formula includes an ingredient that is kept to a “low molecular weight.”

The Supreme Court — or at least Chief Justice John G. Roberts, Jr. — is already familiar with this case.  Last November, the Chief Justice turned down Teva’s request to put the Federal Circuit’s decision against Teva on hold.  Then, last April, not long after the Court had agreed to hear the case, Roberts rejected a plea by Teva to bar its generic rivals from going to market with any substitute version of Copaxone while the case was being appealed.

Since then, no generic company has gained approval by the Food and Drug Administration to market a generic version of the drug, although the FDA in August agreed to review a new application from one of the generic firms — Momenta Pharmaceuticals, Inc. — that, if approved, probably would let that company be first to the market with its substitute for Copaxone.

At one point, Teva had nine patents on the drug, but all but one of them expired in May of this year.  The one still in effect is due to lapse at the beginning of September next year.  Teva has taken this case to the Supreme Court to protect its Copaxone monopoly until that time, but the Federal Circuit decision stands in the way.  (Although the Federal Circuit has technically put its ruling into effect, generic companies are reluctant to move quickly toward the market while facing potentially huge payments should Teva’s last patent ultimately be restored.)

As the case has developed in the Supreme Court, the Justices are being offered three clear choices: Teva wants the Federal Circuit ruling overturned and its final patent upheld, as a federal trial judge had done earlier.  The generic rivals want the Federal Circuit decision upheld, giving that court a broad range of reviewing power, and the case ended with that.  The federal government, moving into the case in the middle, wants the Justices to reverse the Federal Circuit on a specific point about that court’s power of review, but then to send it back down to apply what the government deems the correct standard.  The government, though, thinks that the result might ultimately wind up the same — no patent.

The irony of the federal government’s view, it seems, is that a return of the case to lower courts probably would mean that the case would not be resolved until after Teva’s remaining patent had lapsed, a little more than ten months from now, and the generic firms would likely be free to enter the market anyway.

And, in the meantime, no one expects Teva to stop its efforts to get new legal opportunities to market variations of Copaxone.  The company has a reputation in the industry of moving aggressively to protect its monopoly advantage, even suing the FDA at one point — unsuccessfully.

Legally speaking, the case turns on three sources of law:  a general rule of federal court procedure that limits the authority of appeals courts to review factual conclusions reached by a trial court; the Supreme Court’s 1996 decision in Markman v. Westview Instruments, in which it declared that judges, as a legal matter, should interpret what claims are made for a patent — rather than the jury as a question of fact; and the part of the Patent Act that requires inventors in seeking patents to “particularly point out” and “distinctly claim” what supposedly has been invented — a crucial test that can save or kill a patent.

Since 1995, when the Markman case was before the Federal Circuit, it has ruled that it would treat every aspect of interpreting patent claims as a legal question, even if that question was keyed to facts, and it would decide this independently of anything that the trial court had found, even as a fact.  In other words, it would essentially start over in reviewing the whole case on a patent’s validity.

The usual scope of review by a federal appeals court, of course, is that analysis of factual conclusions by a trial court is limited to weighing them for “clear error.”  When the Markman case went to the Supreme Court the following year, the Justices did not clarify the standard of review by the Federal Circuit, confining itself to the ruling that claim interpretation was a task for the judge, not the jury.

The Federal Circuit has never backed away from its approach, although there have been vigorous dissents on the point within that court, and it reaffirmed its view as recently as last February — although the judges did split six to four.

That is the situation that had prevailed when the Copaxone case went to the Federal Circuit in Teva’s patent infringement case against a group of genetic firms.  Teva had won in a federal district court in New York, with the trial judge ruling in favor of the key Teva patent, finding the “low molecular weight” claim behind the invention to be sufficiently clear and definite.

Applying its searching “de novo” review approach, the Federal Circuit refused to defer to the factual findings of the trial judge, instead agreeing with the generic companies’ argument that the claim was “insolubly ambiguous,” and therefore there was no patent.

Teva moved on to the Supreme Court, raising the single question whether Rule 52(a) of the Federal Rules of Appellate Procedure protects factual findings by a trial judge about a patent claim from all but “clear error” review by the Federal Circuit.  The Supreme Court granted review on March 31.

Briefs on the merits

In its brief on the merits, Teva focused tightly on the standard of review used by the Federal Circuit, arguing that procedural rules do not make an exception which would allow that court to judge for itself any facts that are key to the validity of a patent.  “The obligation to review facts deferentially,” Teva contended, “does not evaporate just because the fact-finding lays the groundwork for a legal conclusion that the appellate court will review de novo.”

“The Federal Circuit,” it added, “cannot dodge that rule by calling a factual question a legal one.”

The divided February decision by the Federal Circuit to reaffirm its reviewing power was “conspicuously not defending its approach on the merits,” but simply following a prior precedent, the brief said.

By undertaking independent review of the facts of this case, Teva said, the Federal Circuit misunderstood the science behind Teva’s Copaxone invention, which then led it to misread the patent.

“The ultimate scope of the patent’s claims may be a legal question, but (as is common) the answer to that legal question will often depend directly on resolving questions whose answers lie outside the four corners of the patent” and on what the inventor tells the Patent Office in applying for and defending a patent application, Teva argued.

“Patents,” the company went on, “are not written primarily to be read by judges and lawyers.  Rather, they are scientific texts designed to be read and used by specialists in the relevant field. . . .  Judges often need to take factual evidence, such as expert testimony, to enable them to understand patent claims.”

Teva also contended that the Federal Circuit has misunderstood the scope and meaning of the Supreme Court’s principal precedent on court interpretation of patent claims — the Markman decision.  “The question presented here turns not on who shall decide, but on what is to be decided: only a question of law, or subsidiary questions of fact as well?  The Court did not answer that question in Markman.”

In their own merits brief, the generic companies — Sandoz Inc., Momenta Pharmaceuticals Inc., Mylan Pharmaceuticals Inc., and Natco Pharm Ltd. — offered a firm defense of de novo review by the Federal Circuit, finding that the Markman decision approved that approach.

In that 1996 decision, this brief argued, “this Court concluded that all interpretive issues in claim construction are ‘purely legal,’ including those involving consideration of evidence outside the four corners of the patent and its prosecution history.  De novo appellate review follows from that finding.”

Turning to a fundamental point, the generic companies’ brief reminded the Court that the claims made by an inventor, the specifics of how the invention came about and is to be used, and the defense of those claims before the Patent Office make up “the public record of the monopoly bestowed on the patentee by the United States.”  The grant, it noted, is a legal one, and should be analyzed as just that.

If the Federal Circuit defers to a trial judge as to any facts in a patent case, the firms’ filing contended, that must not include “any interpretation of the patent at issue and its prosecution history. . . .  A contrary ruling would eviscerate Markman.”

A good portion of the generic companies’ brief is devoted to criticism of Teva’s claims, and of the allegedly meandering way Teva had defended its invention.  The companies also noted, in passing, that the basic ingredient of Copaxone “is not new; its use to treat multiple sclerosis was discovered in 1971.”

As to Teva’s specific claim to the use of an ingredient at a supposedly specific “molecular weight,” the challengers argued that the phrase is “ambiguous on its face,” because it can be described in several ways.  “The precise measure of molecular weight,” it said, “is critical in defining the claimed drug. . . .  Without knowing the weight, the scope of the claims is indiscernible.”

As an alternative argument, the generic firms said that, if the Court were to conclude that interpretation of the scope of patent claims may include trial court factual findings that deserve deference by the appeals court, the Court “must carefully draw the line between fact and law.”  Issues in patent cases are not for the experts, but for the courts to decide, they concluded.

The merits brief for the federal government, filed by lawyers for the Justice Department and for the Patent Office, straddled the arguments made by the two sides.  On Teva’s side, the federal government agreed that the Federal Circuit had used the wrong standard, but — on the generics’ side — it argued that the Teva patent could probably not survive even if the correct approach were taken.

But it splits with both sides in arguing that, once the Supreme Court clarifies the scope of the Federal Circuit’s power of review, it should not itself run this case by the proper standard.  Instead, it should let the Federal Circuit go back over the Teva patent for “clear error” in the trial court’s decision.

If courts in patent cases can resolve disputes over how to interpret a patent’s claims by consulting the patent itself — its claims and its specifications — and the history of how it was defended at the Patent Office, then that is strictly a legal matter, not in any way factual, the government contended.

But if it is necessary to gather other evidence, to understand “the relevant science and the technical terms used in the patent,” then a trial court will need to turn to expert witnesses and scientific articles, the government suggested.   For an appeals court reviewing a trial court decision on what that evidence shows factually about a patent’s validity, this filing said, it must use only a “clear error” approach, confined to evidence outside the patent and its prosecution history.

The government urged the Justices to embrace an analytical approach to deciding what in the record is factual, and thus deserves deference on appeal, by applying two criteria.  First, a finding of the trial court is factual if it is “based at least in part on evidence outside the patent and its prosecution history,” and, second, “the finding must concern a matter that is in some sense distinct from the meaning or validity of a patent claim.”

The government provided an illustration:  “When a district court based on expert testimony finds that a skilled practitioner would understand a term to have a particular meaning when it is used in the relevant field, the court has made a finding of fact.  But if the court then determines that the term bears the same meaning in the claim as it does in the field, the court has rendered a legal conclusion.”

The ultimate decision on how to interpret a patent claim, the government argued, “remains one of law because it reflects the court’s construction of a legal instrument [the patent] in light of the document as a whole.”

In applying this approach, the government went on, the appeals court would be required to use clear-error analysis only “relatively infrequently,” because legal questions tend to predominate.  In addition, this filing said, if the Federal Circuit had properly confined its clear-error review to factual findings of the kind described by the government, that likely would not have altered the outcome of its judgment about whether the Teva patent claims were fatally ambiguous.

Most of the Federal Circuit’s work on the indefiniteness issue in this case was consistent with proper limitations on its reviewing power, the government said, so it should be given the opportunity to take another look at where it did deviate from the correct approach.

In a footnote at the end of its brief, the government conceded that sending the case back to the Federal Circuit Court “could have the effect” of depriving the generic companies of “any practical benefit” from a decision that Teva’s remaining patent is invalid, because of the September 2015 expiration date.  It may be, it said, that remand proceedings would not be concluded by that point.

Seven amicus briefs have been filed in the case, with each claiming that it is supporting neither party.  One quite clearly argued against denying the Federal Circuit a continued opportunity to weigh patent validity appeals on the basis of independent review, while the others put forth one or more variations of the theme that the Federal Circuit should use a hybrid approach that seemed to follow fairly closely the approach suggested by the government.

 

 

Posted in Teva Pharmaceuticals USA v. Sandoz, Featured, Merits Cases

Recommended Citation: Lyle Denniston, Argument preview: Trimming a specialized court’s power?, SCOTUSblog (Oct. 13, 2014, 12:01 PM), http://www.scotusblog.com/2014/10/argument-preview-trimming-a-specialized-courts-power/