The Federal Circuit has affirmed once again—this time in a sharply divided en banc decision—that it will subject a district court’s claim construction to de novo review on appeal. The case is Lighting Ballast Control v. Philips, and the appeal was the latest challenge to the standard of review set by the Federal Circuit over 15 years ago in Cybor Corp. v. FAS Technologies, Inc.
On the surface, this question of patent procedural law seems innocuous enough, but a glance at the title pages of the numerous amicus briefs (filed by an impressive roster of academic commentators and industry heavyweights) shows otherwise. The question of the appropriate standard of review for claim construction rulings is of immense importance to the patent bar.
At stake in Lighting Ballast was the Federal Circuit’s ruling 15 years ago in Cybor, that claim construction is subject to de novo review at the appellate level, despite the fact that the interpretation of patent terms often has factual underpinnings, a domain where trial judges are usually given a wide berth and significant deference. As the Supreme Court recognized in its landmark decision in Markman v. Westview Instruments, decided in 1996 shortly before Cybor, claim construction is a “mongrel practice” of both law and fact that often involves “construing a term of art following receipt of evidence.”
Cybor has been criticized both by Federal Circuit judges and by outside commentators, with most critics deriding Cybor’s blindness to the factual issues that are often implicit in the interpretation of what a patent means. While the question can sometimes be answered by reference to the terms of the patent alone—a traditional legal inquiry—it oftentimes also requires extrinsic evidence and the opinions of dueling experts on the state of the art and the technology in question—factual issues traditionally left alone absent “clear error.”
While the Lighting Ballast majority upheld the Cybor standard, even Judge Newman, who penned the opinion, seemed to recognize that the decision was on shaky legal footing, relying heavily on stare decisis and the fact that Cybor has been the law for over a decade in sustaining the rule. The majority stated, “the court is not now deciding whether to adopt a de novo standard in 1998. Today we decide whether to cast aside the standard that has been in place for fifteen years.”
Opponents of the de novo standard of review in claim construction cases, as set forth in Cybor, might still have another day in court. The Federal Circuit’s ruling could be taken up by the United States Supreme Court next term, especially if the Solicitor General recommends granting the petition for certiorari that is sure to arrive at the Court in the next few months. In a prior case, Retractable Technologies v. Becton, Dickinson, and Co., the Solicitor General recommended to the Supreme Court that “in an appropriate case, this Court’s intervention might be warranted to determine the proper standard of appellate review of district court factual determinations that bear on the interpretation of disputed patent claims.”
Here’s a look at the three basic arguments made to the Federal Circuit, and that would likely be made again before the Supreme Court, should it decide to hear the case.
Argument #1: Cybor should stand
The prevailing argument in Lighting Ballast, advanced by the defendant, was that the Cybor rule should continue to be followed for three reasons: 1) the scope of the exclusionary patent right is ultimately a legal issue for the judge to resolve, 2) de novo review by the Federal Circuit promotes uniformity in the law, and 3) Cybor has been relied on by patent practitioners and the courts for 15 years.
While the Court cited authority for the proposition that claim construction is a legal determination, the truth is that the interpretation of ambiguous terms in a patent, just as with a contract, may require the resolution of factual issues outside the four corners of the document. For this reason, the Lighting Ballast majority placed primary weight on policy, and specifically whether there was a sound practical reason to depart from Cybor’s rule. In support of its decision, the majority observed that “all of the technology industries” that offered advice to the Court urged retention of the Cybor standard, including companies such as Google and Amazon.com. Those amici supported retention of the standard on the grounds that de novo review promoted uniformity in the law, and did not thwart settlement or materially increase the costs of litigation, especially given that only a small percentage of patent cases ever make it to the Federal Circuit.
While that might be so, the reality is that cases are tried in the shadow of appeals, and the lack of finality on threshold issues of claim construction—even when they are dominated by factual findings—has a profound impact on litigants’ conduct in the trial court. De novo review also is a club that is primarily wielded by patent defendants who can threaten plaintiffs that even a loss at trial won’t be the last straw. For this reason, it is unsurprising that the loudest voices in favor of retaining Cybor’s standard were industry behemoths such as Google and Microsoft, who more often than not appear as patent defendants.
Argument #2: Cybor should be discarded
Opponents of the Cybor standard argue that the Supreme Court’s Markman ruling decided only the question of who should determine the meaning of key terms in the patent claim: judge or jury. By answering, “judge,” the Court did not change the traditional distinction between questions of law and questions of fact. Therefore, Cybor opponents argue, the preliminary claim construction inquiry is more easily categorized as one of fact, as to which the judge’s decision should be afforded deference on appeal. As the Lighting Ballast dissent observed, the Supreme Court in Markman acknowledged claim construction can have factual components. For example, a judge could be asked to choose, based on credibility alone, between two experts who have presented differing testimony.
Judge Kathleen O’Malley, who joined the dissent in Lighting Ballast, has spoken out against the practical implications of the Cybor rule. A former district court judge, Judge O’Malley had this to say in a dissent written in Retractable Techs. Inc. v. Becton, Dickinson and Co.:
Post-Markman, district judges have been trained to — and do — engage in detailed and thoughtful analysis of the claim construction issues presented to them. They conduct live hearings with argument and testimony, sometimes covering several days, and certainly always extending beyond the mere minutes that courts of appeals have to devote to live exchanges with counsel. Simply, the trial court has tools to acquire and evaluate evidence that this court lacks.
Discarding de novo review altogether overlooks the fact that claim construction, while it may have factual components, is still focused primarily on the “ordinary and customary” meaning of the words in the patents. And as the Federal Circuit in Phillips v. AWH Corp. made clear, the patent itself is the most important evidence in figuring out that meaning. Where the district court’s decision focuses on the patent itself, and does not make any factual findings based on extrinsic evidence, it’s hard to see the difference between claim construction and normal statutory or contract interpretation, which are reviewed de novo. Aside from the policy interest in finality (which is a worthy policy and certainly would be furthered by a more deferential standard), there isn’t a strong doctrinal basis to discard de novo review altogether.
Argument #3: The United States’ Hybrid Approach
The United States in Lighting Ballast acknowledged that while the scope of patent is at bottom a legal issue, the district court will often resolve factual disputes on the road to resolving that issue. As the Solicitor General observed in Retractable Technologies, the district court may make findings on what “the content of the prior art [was] on a particular date,” “the accepted meaning of specialized terms in a particular industry,” or “the level of ‘ordinary skill’ in the relevant field at the time of the invention.”
There is no doctrinal reason why these underlying factual findings should not be afforded any deference on appeal. The primary argument against adoption of the United States’ “hybrid” approach is that it would not be workable in practice. But it is unclear why this would be so, given that the United States’ approach is consistent with the traditional way in which appellate courts review trial courts’ decisions.
In fact, adoption of the United States’ proposal may promote further clarity in the law by causing district courts to clearly identify the factual findings they are relying on so that those subsidiary findings will be afforded deference on appeal. And as some commentators have observed, the primary focus of claim construction is now the patent itself, and many (if not most) district court decisions would still be subject to de novo review. It is unclear that adoption of the United States’ proposal, while adding coherency to the law, would cause a tremendous stir.
Honesty is the Best Policy
As the raging debate over patent reform shows, there are many policy interests at stake in defining the rules of patent litigation, and billions of dollars hanging in the balance. While a fierce battle will be fought if Lighting Ballast makes its way to the Supreme Court, the “hybrid” approach to claim construction is the most honest way to approach the question. Especially where convincing policy arguments can be made in either direction, there is no good reason to depart from the traditional rules of appellate review to questions of law and findings of fact.
About the Author
Arun Subramanian is a partner in the New York office of Susman Godfrey LLP. He has successfully represented both plaintiffs and defendants in a wide variety of high-stakes commercial cases, including intellectual property, trade secrets, antitrust, breach of contract, bankruptcy, and fraud litigation. He has served as a law clerk at every level of the federal judiciary, including the Supreme Court of the United States. He can be reached at email@example.com or 212-471-8346.