Friday, October 3, 2014

Teva v. Sandoz Argument Preview

On October 15, the Supreme Court will hear arguments in Teva v. Sandoz, which focuses on a seemingly simple question: What should be the standard of review for patent claim construction? (For those unfamiliar with claim construction, see Polk Wagner's introductory lecture.) The Federal Circuit reviews claim construction de novo, following its en banc decisions in Cybor (1998) and Lighting Ballast (2014). The Teva petitioners argue that claim construction involves questions of fact, and that Fed. R. Civ. P. 52(a) requires that these findings "must not be set aside unless clearly erroneous." And the de novo standard has received plenty of scholarly criticism, including in a recent article by Jonas Anderson and Peter Menell that was featured on this blog (see also their thoughtful amicus brief in Teva, with Arti Rai). Is this yet another case in which the Federal Circuit has made inappropriate patent-specific rules, or will the Supreme Court finally conclude that the specialized patent court is doing something right? And will the Court pay attention to the possibility that tinkering with deference regimes can lead to more (or fewer) deference mistakes?

The most relevant precedent—parsed closely by both parties—is the Supreme Court's 1996 Markman decision, which held that claim construction "is exclusively within the province of the court," not the jury. The Court noted that while it had spoken of the judge/jury line "as one between issues of fact and law," "the sounder course" for a "mongrel practice (like construing a term of art following receipt of evidence)" is "the historical method." But finding inconclusive historical evidence, the Court determined that it "must look elsewhere" and turned to precedent and policy considerations. The Court approvingly quoted a 1853 opinion in which it stated that figuring out "what is the thing patented … is a question of law, to be determined by the court," and concluded that later cases did not "undercut [this] authority." And the Court noted that for issues that fall "between a pristine legal standard and a simple historical fact, the fact/law distinction at times has turned on" which "actor is better positioned … to decide the issue," and that judges are better suited for claim construction. Finally, the Court stated that "treating interpretive issues as purely legal will promote … intrajurisdictional certainty." In sum, Markman states that while claim construction has "evidentiary underpinnings," it should be treated as a question of law, at least for the judge/jury allocation.

Respondents argue that Markman resolves this case: if claim construction is "purely legal," then it must be reviewed de novo. But petitioners emphasize Markman's statements that claim construction involves factual considerations and note that Rule 52(a) "draws a categorical distinction between findings of fact and conclusions of law," which is distinct from the functional judge/jury question in Markman.

Given the somewhat ambiguous language in Markman, much of the briefing from the parties and their amici focuses on the precise nature of claim construction and the underlying policy considerations. In addition to Prof. Menell et al., the amicus parties arguing for more deferential review (though perhaps only for subsidiary factual questions, or only when the district court bases its ruling on factual issues) are the United States (including the PTO) and various intellectual property law organizations. In favor of the current de novo approach are all of the operating companies: the medical technology company Fresenius Kabi and two coalitions of high-tech and service companies: Intel, EMC, Facebook, Red Hat, and Verizon, and Google, Dell, HP,, Twitter, Yahoo!, Acushnet, eBay, Kaspersky Lab, Limelight, Newegg, QVC, SAS, and Xilinx.

On the nature of claim construction, those arguing for more deferential review emphasize that claim construction often requires factfinding because the relevant meaning is the meaning to scientists at the time the claim was written, not the meaning to lawyers. As the Supreme Court stated in 1870, patents and their claims are sometimes "so interspersed with technical terms and terms of art that the testimony of scientific witnesses is indispensable to a correct understanding of its meaning." In contrast, those arguing for the current de novo approach contend that in-person evidence is of little relevance compared with the importance of providing clear notice of the patent scope based on the public record, and that any scientific evidence outside this record is merely used to determine "legislative" facts that are subject to de novo review. The Google et al. amicus brief also argues that conflicting extrinsic evidence "never drives a proper claim construction, though it may show that the claim is indefinite."

On the policy considerations, those favoring more deference argue that appellate courts are ill suited to gather scientific evidence, and that requiring claim construction to be completely relitigated at the appellate level imposes high costs on both litigants and the judiciary. Those favoring de novo review counter that greater deference could result in non-uniform interpretations of claims across jurisdictions, that no one has proposed a workable fact/law distinction, and that requiring discovery before claim construction and then fighting over which findings fall on the "fact" side of the line would increase, not decrease, litigation costs. (Figuring out who is right on the empirical question of litigation costs is difficult, but I thought it was interesting that the lawyers and the operating companies lined up on opposite sides of this question.)

My tentative guess is that the Supreme Court will adopt an approach along the lines advocated by the United States, holding that the construction of a claim is ultimately a question of law, but that construction may involve subsidiary factual issues that require deference under Rule 52(a). If so, the important question will be how "subsidiary factual issues" are defined, and hopefully the Court will provide clear guidance on how its rule should be applied rather than deciding again that it "need not labor to delimit the precise contours" of its test.

Also, as Jason Rantanen has noted, Teva v. Sandoz is actually about the standard of review for claim indefiniteness, which may be different from review of claim construction (although the parties treat them as the same). The Court addressed indefiniteness in its June Nautilus v. Biosig opinion, but it remains unclear whether the indefiniteness inquiry is at all affected by the presumption of validity for granted patents. As Jonathan Masur and I have explained, the approach suggested by Nautilus might undermine the PTO's efforts to promote claim clarity. Ideally, the Court will provide guidance on the intersecting standard of review and standard of evidence for both claim indefiniteness and claim construction—though that may be too much to hope for.

I'll be at the argument on October 15, so I'll see what the Justices seem concerned about then.


  1. My earlier comment was erased. Hard to see that an opinion by an expert rises to the level of a factual issue, subsidiary or otherwise.

  2. The Court may well decide you're right. I think experts are typically not allowed to testify on pure legal issues, but it is possible that this kind of testimony would be treated as evidence on "legislative facts" like general scientific knowledge. We'll see!

    Also, sorry to hear that you were having trouble with Blogger's comment system. There isn't an earlier comment from you in the filtered spam comments, so I don't know what happened to it.