Supremes end Federal Circuit love affair with de novo review

By Gene Quinn
January 20, 2015

justice-stephen-breyer_200-200

Justice Breyer delivered the opinion for the Court in Teva v. Sandoz, a 7-2 majority decision.

Earlier today the United States Supreme Court issued a decision in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. Any Supreme Court decision in the patent space is one of great importance, particularly given that despite the activity of the Court in this space over the last several years they still only take a small handful of patent cases each year. Having said that, the decision in Teva has the potential to be one of the most important decisions in recent memory.

The United States Court of Appeals for the Federal Circuit has had a very long love affair with de novo review, a standard whereby the reviewing appellate court can simply do whatever they want without giving any deference to the district court judge or the jury. De novo review is supposed to be limited to questions of law, but the Federal Circuit has applied the standard when reviewing matters that are undeniably factual in nature. It isn’t much of an exaggeration to say that the Federal Circuit does what they want, when they want, how they want, and they have rarely let the standard of review get in the way. That was until today. Assuming the Federal Circuit follows the Teva decision as they are supposed to and as they have mindlessly followed other recent Supreme Court decisions in Myriad, Mayo and Alice, the Federal Circuit’s application of the de novo review standard to everything will come to an abrupt end.

The decision of the Supreme Court was not unanimous, with Justice Thomas writing a dissent that was joined by Justice Alito. Justice Breyer delivered the opinion for the rest of the Court and succinctly explained the genesis of the legal question and the Court’s holding in the first two paragraphs of the decision:

In Markman v. Westview Instruments, Inc., 517 U. S. 370 (1996), we explained that a patent claim is that “por­tion of the patent document that defines the scope of the patentee’s rights.” Id., at 372. We held that “the con­struction of a patent, including terms of art within its claim,” is not for a jury but “exclusively” for “the court” to determine. Ibid. That is so even where the construction of a term of art has “evidentiary underpinnings.” Id., at 390.

Today’s case involves claim construction with “eviden­tiary underpinnings.” See Part III, infra. And, it requires us to determine what standard the Court of Appeals should use when it reviews a trial judge’s resolution of an underlying factual dispute. Should the Court of Appeals review the district court’s factfinding de novo as it would review a question of law? Or, should it review that fact-finding as it would review a trial judge’s factfinding in other cases, namely by taking them as correct “unless clearly erroneous?” See Fed. Rule Civ. Proc. 52(a)(6). We hold that the appellate court must apply a “clear error,” not a de novo, standard of review.

On a factual level the case turned on the meaning of molecular weight. Sandoz, who was sued by Teva for patent infringement, argued that the term “molecular weight” in a patent claim owned by Teva was indefinite because the patent was silent as to how the molecular weight was calculated. Sandoz offered three different possible definitions for the term “molecular weight,” in scientific terms these corresponded to “peak average molecular weight,” “number average molecular weight,” and “weight average molecular weight.” After accepting evidence, including expert testimony, the district court determined that the usage of “molecular weight” in the patent claim referred to “peak average molecular weight,” finding no ambiguity based on what one of skill in the art would understand after reading the patent and the patent claim.

[Patent-Litigation]

The Federal Circuit disregarded the district court’s finding of fact on this issue and because they applied a de novo standard simply supplanted the factual findings of the district court with their own preferential factual findings. This is problematic for many reasons. First, well-established law has always forbid an appellate court from disregarding findings of fact. In fact, Federal Rule of Civil Procedure 52(a) specifically says that appellate courts must not… set aside findings of fact from a district court unless they are “clearly erroneous.” Second, an appellate court is not supposed to accept evidence not in the record, they do not hear testimony, and the job of an appellate court is to accept facts unless they are clearly erroneous. Finally, it is not the role of an appellate court to second guess the finder of fact, and it is not the role of an appellate court to decide matters in the first instance. As a reviewing court an appellate court is supposed to review the record, accept findings of fact and largely limit themselves to making sure the law was correctly applied to the findings of fact from the tribunal of first instance.

In the ruling today the Supreme Court explained that when they decided Markman and declared that ultimately the construction of patent claims is a question of law they did not intend to create an exception to the well established rule that factual matters are reviewed under the “clear error” standard set forth in Federal Rule of Civil Procedure 52(a). Justice Breyer directly explained: “A conclusion that an issue is for the judge does not indicate that Rule 52(a) is inapplicable.”

After deciding that the Federal Circuit can no longer apply the de novo standard to review findings of fact, Justice Breyer endeavored to explain how this would work in practice. Justice Breyer explained the process of looking first to intrinsic evidence within the patent and then also, in some cases, looking to extrinsic evidence from outside the patent. Justice Breyer then explained that even if the factual findings are dispositive the nature of the question does not change to become a question of law reviewed de novo. The opinion explains:

The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them. This ultimate interpretation is a legal con­clusion. The appellate court can still review the district court’s ultimate construction of the claim de novo. But, to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual findings, has made a clear error. Fed. Rule Civ. Proc. 52(a)(6).

In some instances, a factual finding will play only a small role in a judge’s ultimate legal conclusion about the meaning of the patent term. But in some instances, a factual finding may be close to dispositive of the ultimate legal question of the proper meaning of the term in the context of the patent. Nonetheless, the ultimate question of construction will remain a legal question. Simply be­cause a factual finding may be nearly dispositive does not render the subsidiary question a legal one.

Ultimately, the Supreme Court reversed the Federal Circuit, vacated the earlier Federal Circuit decision and remanded the case for further proceedings. Teva had argued that the Federal Circuit similarly disregarded factual findings in other instances, which the Supreme Court explained the Federal Circuit would reconsider in light of the ruling today.

Justice Thomas, writing for himself and Justice Alito, made the rather specious argument that there are no findings of fact made when one construes a patent claim, analogizing to statutory construction where courts look for legislative intent, which Thomas said is an inquiry that is “analytically  legal.” Justice Thomas would go on to say that “not all subsidiary inquiries that a court makes in the course of construing contracts amount to findings of fact.” He would then explain that the search for the mythical “hypothetical person” is a conclusion of law, not a factual inquiry.

Thankfully, the legal fiction represented in Justice Thomas’ dissent did not prevail.

Markman v. Westview itself explicitly recognizes that claim construction is in part a legal determination and in part a factual determination. Indeed, this fact/law distinction or dichotomy was at the heart of the entire decision. That patent law has so long accepted the reality that construing claims is in part a legal question and in part a factual question makes it all the more remarkable that anyone could assert that there are no factual findings necessary to construe patent claims. It is this complete lack of understanding of the patent laws that is evidence of why at least some Supreme Court Justices are wholly incapable of handling patent matters.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 8 Comments comments.

  1. step back January 20, 2015 5:58 pm

    It kills me to say this, but for once the Olympians got something right.

    (Of course the broken clock also gets it right once or twice a day.)

  2. Gene Quinn January 20, 2015 6:52 pm

    Step-

    Yes, they did seem to get this one right. I love what you wrote about a broken clock being right twice a day. And even a blind squirrel finds a nut every now and again.

    Beggars can’t be choosers though. Even when the case is a lay-up there is no guarantee that SCOTUS will get it right. Kudos to them here.

    -Gene

  3. Anon January 20, 2015 7:32 pm

    Gentlemen,

    I am afraid that I cannot join you in celebrating this case.

    While indeed correctly decided, I remain unsettled by at least two things.

    First I am appalled at the writing of Justice Thomas. Whatever happened to the words of Congress that patents shall have the attributes of personal property? Did we have yet another attempt by the Court to hand wave away direct words of Congress?

    Further, while not discussed here in this case, the Supreme Court themselves seem to want to kick a lower level appellate court in the teeth for that court’s treatment of facts – and yet holds itself to a different standard when it comes to facts such as the stipulations in the Alice case that the statutory category aspect of 101 had been met. Can someone explain how – given that fact – a claim can be to both a machine and yet be “abstract” (whatever that undefined term means)?

  4. Gene Quinn January 20, 2015 8:02 pm

    Anon-

    A claim can be both a machine and abstract all at the same time because the Supremes really know what it is that we are trying to protect and look beyond the language of the claim in order to render the innovation patent ineligible. Post hoc reasoning at its worst.

    But thanks for raining on our parade and bringing us back to reality. I still hope the CAFC follows this decision, although I have my suspicions some will do so more in language than in spirit.

    -Gene

  5. step back January 21, 2015 4:10 am

    Anon,

    To my mind this is a case of compounded audacities.

    The CAFC is audacious in thinking it can de novo obliterate all the detailed fact-finding that has gone in the tribunals below it (e.g. PTAB and District court).

    On the other hand, the dissent by Justices Thomas and Alito are equally audacious in thinking that “the question here is whether claim construction involves findings of fact.[ft.1] Because it does not, Rule 52(a)(6) does not apply, and the Court of Appeals properly applied a de novo standard of review.”

    Of course it involves questions of fact. Calling those issues “subsidiary” does not make them go away.

    Thomas/Alito ask “The question we must ask, then, is whether the subsidiary findings underlying claim construction more closelyresemble the subsidiary findings underlying the construction of statutes or those underlying the construction of contracts and deeds that are treated as findings of fact.”

    They answer their own rhetoric with the factless conclusion that “because the ultimate meaning of a patent claim, like the ultimate meaning of a statute, binds the public at large, it should not depend on the specific evidence presented in a particular infringement case.”

  6. Damir Isanbirdin January 21, 2015 5:23 am

    What happens with the cases like I/p Engine v AOL (Your Article “Federal Circuit Ignores Jury Finding of Non-Obviousness” http://www.ipwatchdog.com/2014/08/21/federal-circuit-ignores-jury-finding-of-non-obviousness/id=50839/) ? Still §101 or CAFC must rewrite the decision to respect jury/district court findings ? Or completely reversed ?

  7. Paul Cole January 21, 2015 7:20 am

    Molecular weight is a well-known problematic term to those who practice in the chemical arts.

    In a case that I was handling some years ago, molecular distribution within a claimed polymer was such that there was no overlap between say 15,000 weight average molecular weight and 15,000 number average molecular weight – apart from the fact that the polymerized units were the same the materials covered by the respective definitions were different.

    It seems that the case before the Supreme Court was not quite so severe, insofar as that the difference that the molecular weight basis used made a lesser difference in the population of molecules covered by the claim. Nevertheless, interpretation of the claim is primarily what a skilled chemist reading the specification would have inferred and that is both technical fact-sensitive and context-sensitive.

    Standing alone the term is insolubly ambiguous, and it can only be given meaning by expert interpretation. No amount of lawyering on its own will help since molecular weights and their interpretation are not on the syllabus of most law schools.

    In UK, it is nowadays extremely different to displace the findings of a first instance tribunal on issues of primary fact. It seems by this opinion that in patent law the US is moving in much the same direction. The effect, so far as the UK is concerned, has been to make many first instance decisions virtually un-appealable with undue deference being given to the primary fact finder. While not being an enthusiast for completely rewriting decisions at the appellate level, undue deference to the first instance has its own problems.

  8. American Cowboy January 21, 2015 10:01 am

    The need for the appellate courts to accept District Court fact findings that are subsidiary to legal conclusions will also apply to subsidiary facts in obviousness determinations. As Scotus taught us about 50 years ago in Graham v John Deere, although patentability is a matter of law, the Court held that §103 required a determination of the following questions of fact to resolve the issue of obviousness:
    1.the scope and content of the prior art;
    2.the differences between the claimed invention and the prior art; and
    3.the level of ordinary skill in the prior art.

    In addition, the Court mentioned “secondary considerations” which could serve as evidence of nonobviousness. They include:
    1.commercial success;
    2.long felt but unsolved needs; and
    3.failure of others.

    Let’s hope the Fed.Cir. and Scotus see this truism.