January 22, 2015

By: Frank H. Stoy

The Supreme Court has shifted the balance of power in patent cases back to the district courts.  On January 20, 2015, the United States Supreme Court held that a district court’s determination of subsidiary facts underpinning claim construction in patent cases is entitled to deference on review. The case, Teva Pharmaceuticals, USA, Inc. v. Sandoz, Inc., has the potential to significantly enhance a district court’s control over the claim construction process by limiting the scope of the Federal Circuit’s appellate review.

Prior to the Teva decision, the Federal Circuit had applied a de novo standard of review to all aspects of a district court’s claim construction, including its findings of fact with respect to evidentiary issues. This allowed the Federal Circuit to overrule the district court’s resolution of inherently factual issues such as credibility of witnesses and extrinsic evidence concerning the meaning of technical words and phrases even where there was no indication that the district court had committed error.

In light of the Supreme Court’s ruling in Teva, the Federal Circuit must now show deference to the district court’s determination of subsidiary facts unless the district court has committed “clear error.” The Supreme Court’s rationale for applying the clearly erroneous standard was an adherence to Federal Rule of Civil Procedure 52(a) in patent cases as well as the fact that a trial court is better equipped to evaluate factual issues given its familiarity with the evidence, witnesses, and parties. Accordingly, where a factual dispute exists, a district court will resolve the dispute and then interpret the patent claim in light of the facts as it has found them. Therefore, although the district court’s ultimate decision with respect to claim construction remains a question of law subject to de novo review, its findings of fact now must be upheld absent clear error.

The Teva decision will have wide ranging effect on all patent cases by placing a heightened importance on factual disputes during claim construction and limiting the Federal Circuit’s ability to second-guess the factual determinations of district courts.