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The New Hybrid Standard for Appellate Review in Claim Construction
The Federal Circuit has long maintained that it is entitled to review a claim construction decision de novo, without deference to the district court. See, e.g., Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1475 (Fed. Cir. 1998) (en banc). Over the years, this approach has led to a notably high reversal rate of district court claim construction decisions, peaking at 44% in 2004. Although the reversal rate has decreased since then (e.g., dipping to 16.5% in 2009), this “two bites at the apple” approach remained controversial. Many criticized the methodology as judicially inefficient, creating unpredictability and uncertainty, and thus deterring litigants from settling earlier. However, on Jan. 20, 2015, the Supreme Court rejected this blanket policy of de novo review in favor of a hybrid approach. Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831 (2015).
What didn't change? Analogous to the interpretation of a contract, de novo review will still apply if a claim term is construed based solely on intrinsic evidence (i.e., the four corners of the patent and its file history).
What did change? Going forward, the Federal Circuit will have to give the district court more deference when the construction involves underlying issues of disputed fact. Justice Breyer, who authored the 7-2 Teva opinion, held that when the claim construction involves subsidiary factual findings based on extrinsic evidence (such as prior art and/or expert testimony), the Federal Circuit can only reverse upon a finding of “clear error” by the district court under Fed. R. Civ. P. 52. This article focuses on the potential ramifications of this new framework for litigants.
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