Recent Supreme Court Decision: Teva v. Sandoz and Claim Construction Appellate Review

A patent’s value is in the ability to exclude others from practicing the invention. What you can exclude others from doing is set forth in the claims of the patent. The claims spell out, element by element, exactly what others cannot do. If someone practices every element in one of the claims, they are an infringer. This why the interpretation of the claims is so important in patent litigation. Infringement hangs on the meaning of the claim terms.

Claim terms are most often construed first in light of the patent specification, or what the patent discloses. If there are any ambiguities or uncertainties, the claims may be construed in light of other evidence, such as expert testimony or other extrinsic evidence.

While a patent holder may do their best to define claims, the scope of the claims is not always clear until the claims are construed by a district court. And to make matters worse, after the claims are construed by a district court, the losing party often appeals to the Court of Appeals for the Federal Circuit (CAFC) to construe the claims. Until recently, the CAFC gave no deference to a district court’s ruling. This very often led to a district court ruling for one party, and then an appeal with the CAFC ruling for the other party. This type of unpredictability is a major point of contention in the United State’s current patent laws.

The Supreme Court recently tried to correct this problem, if only in a small way. In Teva v. Sandoz, the Supreme Court raised the standard of review of a district court’s factual conclusions relied upon during claim construction proceedings. Now the CAFC must defer to these factual conclusions and reverse them only if there is “clear error.” Although this is a relatively small change in procedural law, it is important because claim construction is a major element of patent litigation. Many commentators hope this new standard will reduce the high percentage of claim construction decisions that the CAFC reverses on appeal.

How might this decision affect you? If you are a patent holder and find yourself in a claim construction proceeding, you may want to put forth more extrinsic evidence to support your claim construction, because that extrinsic evidence cannot be reversed unless there is clear error (which is difficult to find). District courts may rely on this evidence to protect their decisions from being reversed by the CAFC. Of course, this may increase the litigation costs at the district court level, such as fees for expert witnesses. But if it serves to reduce the number of appeals, it may serve to decrease the overall costs of litigation.