Opinion analysis: Court moves to rein in Federal Circuit control over district court claim construction
on Jan 20, 2015 at 1:51 pm
You had to know that the result was foreordained when the first page of Justice Stephen Breyer’s opinion in Teva Pharmaceuticals USA v. Sandoz summarized the question presented as whether the Federal Circuit should review fact findings that a trial judge makes in the course of construing the claims of a patent under a de novo standard, as it does questions of law, or for clear error, as it does with other findings of fact. So there is little suspense reading on to the end of the opinion explaining that the Federal Circuit should stop reviewing factual findings de novo and start reviewing them for clear error.
As a matter of argument, the Justices divide on the question whether a patent is more like a contract or more like a statute. Writing for the majority of seven Justices, Justice Breyer argues that a patent is more like a contract – they are drafted by a small group of private parties and administrators to resolve relatively specific and localized disputes, as compared to statutes, which are drafted by legislatures and addressed to the general public. In dissent, Justice Clarence Thomas (joined by Justice Samuel Alito) argues that patents are more like statutes, emphasizing their role in setting the bounds of the monopoly that the patent grants.
The reason this dispute matters is that there is a great mass of cases firmly distinguishing between construction of a contract itself (a question of law for the judge) and “subsidiary” findings of fact – elements of trade usage or the course of performance that might inform the court’s understanding of the terms used in the contract. In the case of a statute, by contrast, there is little or no precedent supporting the idea of factual findings subject to review only for clear error. My reaction to the debate is that the cases related to statutes probably are wrong. It is easy to imagine specific factual questions relevant to the interpretation of a statute – think of the medical facts that always are relevant to an understanding of statutes that regulate abortion – and a district court’s finding on those presumably should be reviewed only for clear error.
The first reaction to Teva is to situate it as the most recent (although probably not the last) in a continuing line of Supreme Court rejections of “patent only” doctrines that the Federal Circuit has articulated, all of which have had the general effect of increasing the Federal Circuit’s control – trial judges might say micro-management – of the course of patent litigation, and most of which had the effect of increasing the rights of patentees. Here we might include (among others) Gunn v. Minton (rejecting Federal Circuit jurisdiction over malpractice claims related to patents), MedImmune v. Genentech and MedTronic v. Mirowski Family Ventures (rejecting a Federal Circuit rule that bars a claim of invalidity by a licensee), and of course eBay v. MercExchange (rejecting a rule effectively calling for automatic injunctions in cases of patent infringement). And however simplistic that pigeonholing might seem, the tone of Justice Breyer’s opinion suggests that there is some truth to that perspective – much of the opinion consists of statements about how obviously sensible it is for trial-court fact findings to be reviewed for clear error.
Having said that, it is not at all clear that counsel for Sandoz are walking away disconsolate. Because the Court refused to grant a stay of the decision of the Federal Circuit pending its review, Sandoz has been free during the last several months to move forward with the marketing of a generic substitute to Teva’s branded pharmaceutical. Because Teva’s last patent on the branded pharmaceutical expires in September, the only way a victory by Teva in this case will slow Sandoz down is if Teva gets a final decision in its favor before September. For that reason, Teva had strongly urged the Court to apply any new rule it articulated in this case, rather than sending it back for further consideration by the Federal Circuit. Unfortunately for Teva (and doubtless to Sandoz’s delight), the Court did just that: it applied its new rule for illustrative purposes to one of the parties’ three factual disputes, but left the other two for reconsideration by the Federal Circuit. Given the normal pace of judicial process, the likelihood of a final decision by the Federal Circuit before September seems slight. Certainly not a “winner take all” outcome for Teva.
In Plain English:
The question in this case is how an appellate court reviews a district court decision deciding what the claims in a patent mean (“claim construction”). The Federal Circuit (the appellate court that hears all patent cases) had ruled that deciding what a patent means is a legal problem, so it gave no deference to anything the trial court says about it. The Supreme Court disagreed. The Justices ruled that a trial court will often have to decide factual questions if it wants to understand a patent. If a trial court decides those questions, the Federal Circuit should reject them only if they are clearly wrong.