Patent decisions: a clash of the courts

In October the US Supreme Court heard arguments in the closely watched appeal of Teva Pharmaceutical Industries Ltd v Sandoz, Inc from the US Court of Appeals for the Federal Circuit. The issue before the Supreme Court could fundamentally change how patent decisions are reviewed by the Federal Circuit and the deference given to district court rulings.

Teva owns a patent covering a drug used to treat multiple sclerosis. The drug, Copaxone (glatiramer acetate), is reported to bring in $4 billion a year in revenue for Teva. With the last patent set to expire in 2015, several pharmaceutical companies are looking to introduce generic formulations of the drug and cut into this revenue stream, sooner rather than later.

Sandoz and Mylan (collectively Sandoz) submitted to the US Food and Drug Administration (FDA) Abbreviated New Drug Applications (ANDAs) to develop and market generic versions of Copaxone.

In response, Teva promptly sued Sandoz for patent infringement, asserting nine patents related to the manufacture and formulation of Copaxone. The asserted patents included seven FDA Orange Book patents, one non-Orange Book patent expiring in May 2014, and one
non-Orange Book patent expiring in September 2015.

In assessing whether there was infringement, the district court was required to interpret Teva’s patent claims and decide whether the claims were sufficiently definite and, if so, what was the meaning and scope of those claims. Of particular interest in the Teva patent claims was the meaning of the phrase ‘molecular weight’.

Weighty matters

The patents included claims reciting a product called copolymer-1 and claims reciting methods of making copolymer-1. Copolymer-1, in turn, consists of four different amino acids (alanine, glutamic acid, lysine and tyrosine) combined in a certain ratio to make a polypeptide product. A sample of polymeric material such as copolymer-1 typically consists of a mixture of individual polymer molecules that have varying molecular weights. The meaning of the phrase ‘molecular weight’ was challenged by Sandoz as indefinite under 35 USC 112, paragraph 2, as the molecular weight of a compound can be determined by different approaches.

There are different ways to describe the resulting distribution of molecular weight values. One approach uses statistical measures, including the peak average molecular weight (Mp), number average molecular weight (Mn), and weight average molecular weight (Mw).

• Mp is the molecular weight of the most abundant molecule in the sample.

• Mn is the arithmetic mean, or the total mass of all the molecules in the sample divided by the total number of molecules.

• Mw is another average molecular weight measure that is calculated differently from Mp and Mn. In a typical polymer sample, Mp, Mn and Mw have different values.

A third approach describes how many molecules in a polymer sample have molecular weights that fall within an arbitrarily set range. For example, if 99% of the constituent molecules in a sample have molecular weights between 1 kilodalton (kDa) and 100 kDa, the sample may be described as having 99% of its mole fraction within the molecular weight range of 1 kDa to 100 kDa. The patents at issue contained an ambiguity with regard to which of the three average molecular weight calculations was intended.

Sandoz argued that as a result of this ambiguity the term ‘molecular weight’ was indefinite—that is, not capable of construction, and that the lack of clarity rendered the claims invalid. Specifically, Sandoz argued that molecular weight can refer to different measures, including Mp, Mw and Mn. Therefore, the scope of the claims can vary significantly depending on the measure, according to Sandoz, and a skilled artisan cannot possibly ascertain the boundaries of the claims. Teva countered that the prosecution history made it clear that ‘molecular weight’ should be construed as Mp.

After considering the patent specifications, prosecution histories, prior art and expert testimony, the district court agreed with Teva, finding that the phrase ‘molecular weight’ was not indefinite, the claims in all nine patents were valid and Sandoz’s generic drug infringed those claims.

The district court issued an injunction enjoining the FDA from approving any ANDA for generic versions of Copaxone and enjoining the defendants from making, using, offering for sale, or selling generic Copaxone until September 2015, the date of the latest expiring asserted patent.

Sandoz appealed to the Federal Circuit, arguing again that the phrase ‘molecular weight’ was indefinite and that the claims were invalid. The Federal Circuit expressly heard the case de novo (afresh) without giving deference to the district court’s factual determinations. The Federal Circuit unanimously reversed the district court and held that the patent was invalid because the term ‘molecular weight’ was indefinite.

In doing so, the Federal Circuit reviewed again all of the evidence before the district court and came to the opposite conclusion. As a result of the Federal Circuit’s decision, the important Teva patents are invalid and Sandoz can enter the marketplace a year before the patent would have expired.

Appealing to a higher court

Following the Federal Circuit’s decision, Teva filed a petition for writ of certiorari with the US Supreme Court. The Supreme Court granted the petition in order to determine whether the Federal Circuit should review the construction of patent claim terms de novo, as the Federal Circuit did in this case, or only for clear error.

The general question before the Supreme Court is what level of deference, if any, the Federal Circuit should accord to district court judges who have made rulings on the scope and meaning of the claims in the patents. For years, the Federal Circuit has reviewed the decisions on a de novo basis—that is with no deference.

Teva is challenging the standard of review and contending that more deference is due to district court judges who invest time in hearing all of the evidence and the arguments. Absent a reversal by the Supreme Court, the Teva patent will stand as invalidated, with Teva losing its exclusive position now rather than in 2015.

The specific question before the Supreme Court suggests that close attention will be paid to what the Federal Circuit considers a legal or factual question and whether the review afforded to that question is appropriate. Rule 52(a) of the Federal Rules of Civil Procedure provides that in matters tried to district court, the court’s “findings of fact ... must not be set aside unless clearly erroneous”.

With this point of reference, the Supreme Court granted certiorari to determine: “Whether a district court’s factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as rule 52(a) requires.”

"The Federal Circuit decision was based on long-standing precedent and was driven by its goal of ensuring uniform claim construction."

The arguments showed a Supreme Court that appears split on the issue, with several judges, including Chief Justice Roberts and Justice Alito, appearing disinclined to change the system of review that has been in place for some time. Justices Kagan and Breyer, however, appear to lean in favour of giving deference to the decisions of district court judges as is done in many other areas of federal law.

Justice Breyer posits the notion that at least in technical cases, a district judge is the one who “sat there the whole time and listened to these experts talking ... And that, I think, is a very powerful reason for saying, in a technical case, don’t overturn the judge’s factual findings” (unless they are clearly in error).

A ruling is expected no later than the end of June 2015. It is possible that the Supreme Court will affirm the de novo review standard for claim construction, which has been used by the Federal Circuit for many years. With the recent spate of high-profile Supreme Court reversals of the Federal Circuit in the 2013/2014 term, it would appear unlikely that the Teva decision will be simply affirmed. The Federal Circuit decision was based on long-standing precedent and was driven by its goal of ensuring uniform claim construction. There would be no need for the Supreme Court to affirm what it has permitted for many years.

Alternatively, the Supreme Court could hold that claim construction is a question of fact, not law, and that the ‘clear error’ standard of review should apply. Perhaps the most likely decision may be that claim construction decisions are a mixed question of law and fact, and that the ‘clear error’ standard will apply to factual determinations and de novo reviews will be afforded to legal questions. Implementing a mixed review standard would likely be difficult.

If the standard of review does change, there could be significant changes in the manner in which patent litigation is conducted. The elimination of de novo review would take away the ‘second bite of the apple’ previously guaranteed to the party whose claim construction and related infringement and validity arguments were rejected by the district court. With no ‘do-over’, parties may expend significantly more funds upfront to win at the district court.

With new deference accorded to district courts, the Federal Circuit’s role would also become more analogous to that of other appellate courts, with a narrower focus on the decisions made. This is contrary to the very reason the Federal Circuit was created: a court with expertise in patent law and the universal application of that law.

The nature of the change, if any, will depend heavily on what the Supreme Court decides and what direction the Supreme Court gives for implementation of the review standard.

Felicia Boyd is a partner at Barnes & Thornburg. She can be contacted at: felicia.boyd@btlaw.com