SCOTUS: Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.

The case of Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. was argued on October 15, 2014 in the Untied States Supreme Court. Our best read is that the Court is leaning towards adopting a “deferential” standard on factual issues related to claim construction — although some debate was had amongst the Justices. The following summarizes the arguments presented by Teva, Sandoz, and the U.S. government as well as responses by the Justices.

1. Teva’s Arguments

Teva’s argument emphasized that (1) patents are written for a person of ordinary skill in the art (“POSA”) rather than for a judge; (2) claim terms must be interpreted in a manner that comports with how a POSA would have understood the term; and (3) determination of how a POSA would have understood a term often involves underlying factual inquiries. Because district courts have historically been entrusted with the task of factfinding, and Fed. R. Civ. P. 52 allows appellate courts to disturb these factual findings only upon a showing of clear error, Teva argued that the factual findings underpinning claim-construction rulings should be reviewed on appeal for clear error, and not de novo. Teva further noted that before the creation of the Federal Circuit, courts of appeals applied clear-error review to the factual determinations underpinning district courts’ claim-construction decisions.

Although a majority of the Justices appear to agree with Teva’s position, there were some pointed questions suggesting that the decision will not be unanimous. For example, Justice Alito pointed to a statute that contains complex terms of art, and noted that despite these complex terms, a district court’s interpretation of those terms—even if factual determinations had to be made in order to arrive at a construction—would be reviewed de novo on appeal. Additionally, Justice Sotomayor pointed out that even though the United States supports clear-error review for factual determinations, Teva and the United States cannot agree on which determinations are factual, and which ones are purely legal. Therefore, Justice Sotomayor suggested that it would make more sense to defer to the Federal Circuit. Finally, during Teva’s rebuttal argument, Chief Justice Roberts expressed concern that if the clear-error standard applied, the Federal Circuit could potentially be forced to affirm conflicting constructions of the same patent. Justice Breyer seemed to question this concern, and pointed to other areas of law where similar situations could also occur; yet clear-error review is still the prevailing standard of review.

1. The Government’s Arguments

Ginger D. Anders argued on behalf of the government. Although the government agrees that clear-error review should be the standard of review for factual determinations, the government believes that the Federal Circuit’s ultimate determination (finding the claims invalid for indefiniteness) would have been the same regardless of the standard of review. Aside from this difference, the government’s arguments were not considerably different from Teva’s. In response to the concern that different courts could potentially come to different interpretations of the same claim, the government argued that that once the patentee receives an unfavorable construction, it would be precluded from re-litigating that issue in subsequent cases.

III. Sandoz’s Arguments

Sandoz emphasized the difficulty with differentiating factual issues from legal issues, and argued that it is not worthwhile to require the Federal Circuit to go through the task of determining which issues are factual, and which are legal. Several Justices, and particularly Justice Breyer, appeared to strongly disagree with this argument. Sandoz argued that it is “very uncommon” for a claim-construction issue to turn on factual disputes, and warned that adopting a clear-error standard of review would create a “cottage industry” of attorneys litigating whether a particular issue is factual or legal.

In sum, Sandoz argued that it is not “worth the candle” to separate factual issues from legal issues. Justice Kagan responded that Rule 52 sets forth a “very blanket rule” that does not depend on whether it is “worth the candle” to parse out factual issues from legal issues. Justice Breyer made similar remarks. Further, Justice Ginsburg suggested that obviousness is a legal determination based on underlying factual findings, and that the courts in that context have not had trouble differentiating which issues are factual and which are legal.

Justices Scalia and Kennedy suggested that if claim construction were really a pure question of law, there would be no need for expert testimony in the claim-construction process. They had difficulty reconciling Sandoz’s argument with the undisputed position that expert testimony is sometimes helpful to claim-construction determinations.

* Scot Pitman, Associate at Haug Partners, helped in research of this article