Ready for a Patented Supreme Court Smackdown?
When is a court not like court? The answer to this riddle is: When it’s the U.S. Court of Appeals for the Federal Circuit. This special court was imbued with special powers when it was created by Congress in 1982, including the authority to hear appeals from the federal district courts in essentially all patent cases.
Such is the uniqueness of the Federal Circuit that, even though appeals courts are supposed to defer to lower courts’ factual findings, the court reviews the interpretation of patents from scratch, granting no deference. The Supreme Court -- which drubbed the federal circuit last term -- is now poised to decide whether the appeals court has exceeded its authority by adopting this unique practice.
Real money is riding on the outcome of the case, Teva Pharmaceuticals v. Sandoz. Teva makes Copaxone, a leading treatment for multiple sclerosis. Most of its Copaxone-related patents were scheduled to expire in May 2014, although one patent -- covering a long-lasting 40-milligram dose -- doesn't sunset until next September. Teva sued Sandoz (a division of the Swiss multinational Novartis) and several other big pharmaceutical firms that were making 20-milligram generic versions for infringing its patents. A federal district court decided in favor of Teva, and ordered that potentially infringing uses remain barred until the later date of September 2015. Sandoz naturally appealed.
The Federal Circuit saw things differently than the lower court judges. As is its practice, it reviewed the patents “de novo” -- law Latin for “afresh,” meaning without deference to the factual determination of the district court about the true meaning and content of the patents. It held in favor of Sandoz, and allowed the allegedly infringing uses to go forward.
It’s easy to see why the Federal Circuit prefers not to rely on lower courts’ factual analysis of patent claims. Its judges have very substantial collective experience reviewing patent claims, whereas district court judges often have little individual expertise or knowledge of technical-scientific facts involved in such cases The Federal Circuit views itself as authorized to get patent law right, and to make it uniform. De novo review makes that goal more attainable.
There’s just one small problem: no written law formally authorizes the Federal Circuit's standard of review. To the contrary, the Federal Rules of Civil Procedure (Rule 52, if you’re keeping score at home) state explicitly that findings of fact made by a district court may be reversed by an appellate body only if they are “clearly erroneous.” Deference, in other words, is mandated by law -- assuming that the Federal Rules of Civil Procedure actually have legal effect.
But wait, you say: How could the Federal Circuit have ignored such an explicit law? Because, in the topsy-turvy world of federal jurisprudence, there is a plausible basis for its position -- and it’s derived from U.S. Supreme Court precedent. In the 1996 case Markman v. Westview Instruments, the Supreme Court tried to take technical patent questions out of the hands of ignorant jurors and hand them over to federal judges. The court did so by declaring that because patents are legal documents, what it called the “construction of a patent” belongs entirely to the judges.
Applying the logic of the Markman decision, the Federal Circuit reasoned that if patent construction is a job for judges, it must be wholly a matter of legal interpretation. And when it comes to questions of law, rather than fact, appellate courts owe no deference at all to the courts below them. The Federal Circuit is therefore not acting outrageously when it claims the authority to review patent cases de novo. Indeed, it could plausibly say that it was following the Supreme Court’s lead.
By taking the Teva case on appeal, the Supreme Court sent a signal that it was preparing to smack down the Federal Circuit yet again. Sandoz urged the court not to take the case, arguing among other things that the Federal Circuit, sitting en banc, was poised to consider the question of the correct standard of review in a separate case. The court didn’t buy the argument. It was apparently in a rush to tell the federal circuit that the Rules of Civil Procedure apply to it, whatever special privileges it may think it has.
The Department of Justice has even offered the high court a road map of how it could instruct the Federal Circuit. In a friend of the court brief, the solicitor general proposes that although patent construction may be essentially legal, rather than factual, there nevertheless may arise “subsidiary” factual issues that must be determined by the district court. According to the solicitor general, these should be treated with deference and overturned by the federal circuit only if they are clearly erroneous.
Oddly, none of this may help Teva: The solicitor general's office has also advised the Supreme Court justices that the appeals court’s ultimate decision was based more on its interpretation of the law that its non-deferential determination of the facts, and thus that their intervention may make no practical difference. The solicitor general clearly knows the court’s main interest is not to resolve the case in favor of Teva, but to show the Federal Circuit who’s boss -- a result the solicitor general is willing to embrace.
Last year’s patent decisions revealed a strong preference by the Supreme Court to tell the Federal Circuit that it should stop thinking of itself as Lord of the Patents, and that "supreme” means just what it sounds like. Look for the court to continue pushing that message this year. The Federal Circuit may be special -- but the Supreme Court is more special. Just ask the justices.
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