©2016. Published in Landslide, Vol. 9, No. 1, September/October 2016, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
Claim construction plays an important role in patent litigation, and is often a key factor in resolving the dispute. In fact, many cases settle after a claim construction order has been issued. Generally speaking, claim construction involves interpreting the meaning of the words of the patent claim, and is decided as a matter of law by the court.1 Construction of a patent claim typically requires a review of the patent’s intrinsic evidence and, where appropriate, extrinsic evidence. Intrinsic evidence includes the patent claims, specification, and prosecution history. Extrinsic evidence is any evidence external to the patent and prosecution history, such as expert and inventor testimony or dictionary definitions. Courts often rely on extrinsic evidence to understand the underlying science or the meaning of a term of art, or when the specification and prosecution history are silent on the meaning of a technical term. However, reliance on extrinsic evidence is improper where the intrinsic record unambiguously describes the scope of the patented invention.2 If a claim construction order is appealed, the Federal Circuit generally reviewed it under the de novo standard of review—until recently.
Teva Pharmaceuticals v. Sandoz
In Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., the Supreme Court clarified the standard of review the Federal Circuit must apply when reviewing claim construction orders.3 Teva Pharmaceuticals (and related firms) owns a patent that covers a manufacturing method for Copaxone, a drug used to treat multiple sclerosis. When Sandoz (and other firms) tried to market a generic version of Copaxone, Teva sued Sandoz for patent infringement.
At issue was the meaning of the claim term “molecular weight.” After considering conflicting expert evidence, the district court rejected Sandoz’s claim of indefiniteness and found the patent valid. On appeal, the Federal Circuit reviewed the district court’s claim construction under the de novo standard and reversed the district court, finding the term “molecular weight” indefinite and the patent invalid.
In reviewing the Federal Circuit’s decision, the Supreme Court found that the Federal Circuit erred in reviewing the construction of “molecular weight” under the de novo standard. The Court explained that claim construction was a practice with “evidentiary underpinnings” and district courts may have to make “credibility judgments” about witnesses.4 The Court reasoned that a district court judge who has presided over the entirety of a proceeding is in a better position to gain familiarity with the specific scientific issues involved in the patent case than an appeals court judge who has read a written transcript.5 Moreover, the Court explained that Federal Rule of Civil Procedure 52(a) sets forth the standard that a court of appeals must apply when reviewing a district court’s findings of fact.6
Thus, the Supreme Court held that the Federal Circuit must apply a clear error standard of review for claim constructions that involve factual determinations of extrinsic evidence, rather than the previously used de novo standard.7 However, for claim construction determinations that rely exclusively on intrinsic evidence, the Federal Circuit should continue to use the de novo standard of review.8
Claim Construction After Teva
After the Teva decision, many practitioners speculated that more extrinsic evidence would be presented at claim construction hearings and fewer claim construction orders would be overturned by the Federal Circuit, prompting more certainty in patent litigation. It is still too soon to determine the true impact of the Teva decision, but so far, there has been very little impact as many cases are still being reviewed under the de novo standard.
For example, after the Teva decision, the Supreme Court remanded five cases to the Federal Circuit for further consideration in light of Teva.9 In two of those cases, the Federal Circuit reached the same conclusion as it had previously. In CardSoft, LLC v. VeriFone, Inc., the court found that the case did not involve any factual findings to which it owed deference under Teva and again reversed the district court’s construction of “virtual machine.”10 Similarly, in Shire Development, LLC v. Watson Pharmaceuticals, Inc., the court reaffirmed its conclusion that the district court’s construction of the terms “inner lipophilic matrix” and “outer hydrophilic matrix” was erroneous.11 Even on remand in the Teva case, the Federal Circuit reached the same conclusion on the meaning of “molecular weight” as it did prior to the Supreme Court’s ruling. Consistent with the Teva decision, the Federal Circuit has held that the “clearly erroneous” standard is only applicable if the district court relied on extrinsic evidence; otherwise, de novo review is still appropriate for claim construction where only intrinsic evidence is considered.12
As such, the Teva decision did not change the established roles of intrinsic and extrinsic evidence. It is still good law that extrinsic evidence may not be used to contradict a claim meaning that is unambiguous in light of the intrinsic evidence.13 On remand in Teva, the Federal Circuit explained that a party cannot transform legal analysis about the meaning or significance of the intrinsic evidence into a factual question simply by having an expert testify on it.14 In another case, the Federal Circuit noted that the Supreme Court “did not hold that a deferential standard of review is triggered any time a district court hears or receives extrinsic evidence.”15 A district court also concluded that no post-Teva decision by the Federal Circuit stands for the proposition that Teva altered the established roles of intrinsic and extrinsic evidence in claim construction.16 Thus, mere submission of extrinsic evidence is not enough to mandate deference to a district court’s claim construction.17
In fact, it appears as though Teva only applies to the extent a district court engaged in fact-finding regarding extrinsic evidence and, even then, only if the intrinsic evidence is unclear. A post-Teva decision by the Federal Circuit held that “[t]o the extent the district court considered extrinsic evidence in its claim construction order . . . that evidence is ultimately immaterial to the outcome because the intrinsic record is clear.”18 These cases signal that the Teva decision is being construed rather narrowly by the Federal Circuit.
However, the Federal Circuit has applied the clear error standard post-Teva. In Lighting Ballast Control LLC v. Philips Electronics North America Corp., the Federal Circuit affirmed the district court’s claim construction, deferring to the underlying factual findings because the extrinsic evidence was “not used to contradict claim meaning that is unambiguous in light of the intrinsic evidence.”19 In particular, the district court relied on expert testimony in making its findings of fact, and the Federal Circuit found that those findings were supported by the record. Thus, the Federal Circuit will apply the clear error standard in certain cases.
Teva’s Effect on Review of PTAB Rulings
Claim construction is also important in post-grant proceedings before the Patent Trial and Appeal Board (PTAB). Unlike district courts, which construe claims according to their plain and ordinary meaning, the PTAB construes claims using their broadest reasonable interpretation.20 After the Teva decision, it was unclear as to what effect, if any, the decision would have on appeals stemming from the PTAB. Indeed, the Federal Circuit noted this uncertainty in a post-Teva decision; however, because the PTAB only considered intrinsic evidence in its construction in that case, the court did not consider whether Teva applies to appeals from the PTAB.21 In another case, the Federal Circuit stated that it reviews the PTAB’s claim constructions de novo and the underlying factual determinations concerning extrinsic evidence for substantial evidence, consistent with Teva.22 However, like its review of district court decisions, the Federal Circuit has generally found no issues as to extrinsic evidence and reviewed PTAB claim constructions de novo in its post-Teva decisions.23 Thus, for both district court decisions and PTAB rulings, the distinction between intrinsic and extrinsic evidence is key. The chart illustrates the various claim construction scenarios and when the Teva decision may or may not apply.
In general, the Teva decision emphasizes the distinction between intrinsic and extrinsic evidence and may only affect cases in which the district court engaged in some fact-finding during claim construction. Even then, as explained above, the Federal Circuit may still default to a de novo review by relying only on intrinsic evidence in reviewing the district court’s claim construction. Thus, the majority of claim construction appeals will likely remain subject to de novo review. Nonetheless, the Teva decision does prompt important strategy considerations. For instance, parties may now have incentive to introduce extrinsic evidence during claim construction to potentially reduce the risk for reversal on appeal, particularly in highly specialized fields like chemistry, biology, or pharmaceuticals. However, it is also important to consider the extent to which district courts rely on extrinsic evidence in the claim construction process. Until the Federal Circuit reviews more claim construction orders, it remains to be seen how this “new” standard will affect patent litigation.
When Does Teva Apply?
1. See Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996).
2. See Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1583 (Fed. Cir. 1996).
3. 135 S. Ct. 831 (2015).
4. Id. at 838.
5. Id. at 838–39.
6. Id. at 836–37.
7. Id. at 839.
8. Id. at 841.
9. See CardSoft, LLC v. VeriFone, Inc., 135 S. Ct. 2891 (2015); CSR PLC v. Azure Networks, LLC, 135 S. Ct. 1846 (2015); Shire Dev., LLC v. Watson Pharm., Inc., 135 S. Ct. 1174 (2015); Lighting Ballast Control LLC v. Universal Lighting Techs., Inc., 135 S. Ct. 1173 (2015); Gevo, Inc. v. Butamax Advanced Biofuels LLC, 135 S. Ct. 1173 (2015).
10. 807 F.3d 1346 (Fed. Cir. 2015).
11. 787 F.3d 1359 (Fed. Cir. 2015).
12. See Pacing Techs., LLC v. Garmin Int’l, Inc., 778 F.3d 1021, 1023 (Fed. Cir. 2015) (“Because the only evidence at issue on appeal and presented to the district court in this claim construction was intrinsic, our review of the constructions is de novo.”); see also Avid Tech., Inc. v. Harmonic, Inc., 812 F.3d 1040, 1044–45 (Fed. Cir. 2016); Shire Dev., 787 F.3d at 1364; Ethicon Endo-Surgery, Inc. v. Covidien, Inc., 796 F.3d 1312, 1323 (Fed. Cir. 2015); Teva Pharm. USA, Inc. v. Sandoz, Inc., 789 F.3d 1335, 1342 (Fed. Cir. 2015); Cadence Pharm. Inc. v Exela PharmSci Inc., 780 F.3d 1364, 1368 (Fed. Cir. 2015); MobileMedia Ideas LLC v. Apple Inc., 780 F.3d 1159, 1169 (Fed. Cir. 2015); Fenner Invs., Ltd. v. Cellco P’ship, 778 F.3d 1320, 1322 (Fed. Cir. 2015); In re Papst Licensing Digital Camera Patent Litig., 778 F.3d 1255, 1261 (Fed. Cir. 2015).
13. See Phillips v. AWH Corp., 415 F.3d 1303, 1324 (Fed. Cir. 2005).
14. See Teva, 789 F.3d at 1342.
15. See Shire Dev., 787 F.3d at 1368.
16. See Roxane Labs., Inc. v. Camber Pharm. Inc., No. 14-4042 (SRC), 2015 U.S. Dist. LEXIS 92248 (D.N.J. July 15, 2015).
17. See CardSoft, LLC v. VeriFone, Inc., 807 F.3d 1346, 1351 (Fed. Cir. 2015).
18. See Eidos Display, LLC v. AU Optronics Corp., 779 F.3d 1360, 1364–65 (Fed. Cir. 2015).
19. See 790 F.3d 1329, 1338 (Fed. Cir. 2015).
20. In early 2016, the Supreme Court granted a petition for writ of certiorari to review whether the PTAB is entitled to use the broadest reasonable interpretation. See Cuozzo Speed Techs. v. Lee, 136 S. Ct. 890 (2016).
21. Oracle Am., Inc. v. Google, Inc., 606 F. App’x 990, 993 n.1 (Fed. Cir. 2015) (nonprecedential).
22. In re Cuozzo Speed Techs., LLC, 778 F.3d 1271, 1282–83 (Fed. Cir. 2015).
23. See, e.g., Nike, Inc. v. Adidas AG, 812 F.3d 1326 (Fed. Cir. 2016); Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292 (Fed. Cir. 2015); In re Imes, 778 F.3d 1250, 1252 (Fed. Cir. 2015).