Supreme Court strips more power from controversial patent court

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Credit: flickr / dbking

The Supreme Court issued a ruling Tuesday that will have a significant impact on the patent system by limiting the ability of the Federal Circuit, a specialized court that hears patent appeals, to review key findings by lower court judges.

The 7-2 patent decision, which came the same day as a high profile ruling by the Supreme Court on prisoner beards, concerns an esoteric dispute between two pharmaceutical companies, Teva and Sandoz, over the right way to describe the molecule weight of a multiple sclerosis drug.

The Justices of the Supreme Court, however, appears to have taken the case in part because it presented another opportunity to check the power of the Federal Circuit, which has been subject to a recent series of 9-0 reversals and which some regard as a “rogue court” responsible for distorting the U.S. patent system.

As for the legal decision on Tuesday, it turned on the question of whether the Federal Circuit judges can review patent claim findings as they please (“de novo”) or only in cases where they has been serious error. Writing for the majority, Justice Stephen Breyer concluded that the Federal Circuit could not second guess how lower courts interpret those claims (a process called “claim construction”) except on rare occasions.

Since claim construction is an important first step in deciding whether a patent has been infringed, this means that federal district judges throughout the country — rather than the Washington, D.C.-based appeals court judges — will have the final say in far more patent cases:

The ruling may also have implications for the tech industry, which has been frustrated by the Federal Circuit’s willingness to disregard the findings of highly respected jurists, such as Justice Richard Posner’s interpretation of “tap” and “swipe,” and Justice Alex Kozinski’s interpretation of navigation and Google Street View.

(Update: As Brian in the comments points out, Google and other tech companies submitted a friend-of-the-court brief in favor of preserving the Federal Circuit’s de novo review power. And on Twitter, some have suggested — here and here — that the ruling could benefit patent holders).

For the Federal Circuit, the ruling is another blow to its prestige and authority following an ethics scandal that last year led to the resignation of its Chief Justice.

Overall, the Supreme Court ruling also comes at a time when all three branches of government appear to be skeptical about the current state of the patent system. This includes Congress, which is expected to propose a law next month to reform abuses by patent trolls.

For those curious about the details of Tuesday’s decision, I’ve pasted a couple key paragraphs below (emphasis mine). The full majority opinion, from which Justices Thomas and Alito dissented, is further down.

Indeed, we referred to claim construction as a practice with “evidentiary underpinnings,” a practice that “falls somewhere between a pristine legal standard and a simple historical fact.” 517 U. S., at 378, 388, 390. We added that sometimes courts may have to make “credibility judgments” about witnesses. Id., at 389. In other words, we recognized that courts may have to resolve subsidiary factual disputes. […]

Finally, practical considerations favor clear error review. We have previously pointed out that clear error review is “particularly” important where patent law is at issue because patent law is “a field where so much depends upon familiarity with specific scientific problems and principles not usually contained in the general storehouse of knowledge and experience.” Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U. S. 605, 610 (1950). A district court judge who has presided over, and listened to, the entirety of a proceeding has a comparatively greater opportunity to gain that familiarity than an appeals court judge who must read a written transcript or perhaps just those portions to which the parties have referred. Cf. Lighting Ballast, 744 F. 3d, at 1311 (O’Malley, J., dissenting) (Federal Circuit judges “lack the tools that district courts have available to resolve factual disputes fairly and accurately,” such as questioning the experts, examining the invention in operation, or appointing a court-appointed expert)

 

Teva v Sandoz Fed Circuit Smackdown

5 Comments

Richard Falk

I need to correct my comment. The Supreme Court did not rule that claim constructions could not be reviewed de novo — they still can. They only ruled that disputes such as those regarding extrinsic evidence are findings of fact and can only be reviewed with the clear error standard. As Justice Thomas noted in his dissent, this could cause Plaintiffs to try and create such disputes and increase the costs of litigation. There is already the issue of dualing experts where a Judge can be fooled by seemingly neutralizing arguments that aren’t really balanced but where a technical expert is required to truly understand. We’ll see…

Richard Falk

This ruling is a double-edged sword. For most court districts it will be reasonable, but for some districts such as the East District of Texas (EDTX) it may be problematic since claim constructions are more often not done properly in that district. The same is true for avoidance of making a summary judgment ruling. Nevertheless, flawed claim constructions could still be appealed for clear error though that is a higher hurdle/burden to overcome.

Jeff John Roberts

Thanks for the comment, Brian. I’ve updated the story and cited your comment to reflect this. It still seems that diminishing the Fed Circuit will help the tech industry but, on the other hand, maybe it will put them more at the mercy of East Texas judges (?)

Brian

Jeff it depends on what you mean by “help the tech industry” Today Google has multiple avenues to defeat the patent holder (inventor, failed start-up, university, troll, or a competitor)

1. Intimidate with it size / power / influence that you will never win, if you go against Google in the judicial system.

2. PTAB: relatively new and cheap avenue to invalidate patents used by big tech companies against any patent holder with 85% success rate of killing the patent. Using 102 or 103. (2 Years)

3. In the District Court with the help of the Top law firm on claim construction, evidence and dis crediting the patent holder. (3 Years)

4. If they Lose in district court Appeal the validity, damages awarded, claim construction de novo at the Federal circuit court. (2 Years)

5. If you still lose in the Federal circuit court then appeal to the Supreme Court. (2 years)

If you are a patent holder, and you and can make it thru all the five steps, then after 9 years you may see a dime from Google. (Hence the first point … better not sue Google)

In an “alternate universe” Microsoft and Yahoo would have copied “Page Rank” and told Larry to go thru the 5 step process and that Larry and Stanford are being a Troll and are a Huge Tax on Innovation and they are stopping America innovation from happening.

As they say …follow the money .. see the lobbying and PR efforts of Google to paint Patent Holders as you know what.

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