Home > CAFC > Ill Will Toward Cybor?

Ill Will Toward Cybor?

Today, the Federal Circuit decided Trading Techs. Int’l, Inc. v. eSpeed, Inc. [TTI v eSpeed (PDF)], in which the Court broadly affirmed the holdings of the district court regarding infringement of patents directed to commodity trading software.  Thus, the court approved of the district court’s holdings of infringement as to one product but not others, preclusion of infringement under the doctrine of equivalents, no on-sale bar under 35 U.S.C. § 102(b), no indefiniteness, and no inequitable conduct.  Yes, the parties appealed everything possible.

     There are at least two interesting aspects of this case.

     First, the court’s holding that it “may not give any deference to the trial court’s factual decisions underlying claim construction.”  The panel correctly noted that under Markman v. Westview Instruments, 517 U.S. 370 (1996), claim construction is an issue for the court, not a jury, suggesting de novo review of the district court’s conclusions.  The panel also noted that, though establishing claim construction as an issue of law, Markman was replete with references to the factual nature of the claim construction process, suggesting review of the district court’s conclusions for clear error.  Notwithstanding its recognition of this problem, the panel felt that it was compelled by the holding of Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc) to review without deference the lower court’s claim construction.  The panel in this case did not seem pleased that it had to follow Cybor:

Of course, as the Supreme Court repeatedly clarified in Markman, the trial court occupies the best vantage point and possesses the best tools to resolve those evidentiary questions:

•  “The decisionmaker vested with the task of construing the patent is in the better position to ascertain whether an expert’s proposed definition fully comports with the specification and claims and so will preserve the patent’s internal coherence.” Id. at 390.

•  “[A] jury’s capabilities to evaluate demeanor to sense the mainsprings of human conduct or to reflect community standards are much less significant than a trained ability to evaluate the testimony in relation to the overall structure of the patent.” Id. at 389-90 (citations and internal quotation marks omitted).

Despite the Supreme Court’s emphasis on the trial court’s central role for claim construction, including the evaluation of expert testimony, this court may not give any deference to the trial court’s factual decisions underlying its claim construction. (emphasis added) This court’s prior en banc decision requires a review of the district court’s claim construction without the slightest iota of deference. See Cybor, 138 F.3d at 1451.

     Second, District Judge Ron Clark (sitting by designation from the Eastern District of Texas) made a point of concurring “to respectfully suggest that the current de novo standard of review for claim construction may result in the unintended consequences of discouraging settlement, encouraging appeals, and, in some cases, multiplying the proceedings.”  It’s one thing for the judges of the Federal Circuit to have an internal debate regarding the appropriate standard of review in claim construction (see point 1, above).  It’s a different matter when a district court judge (who presumably does not enjoy this standard of review, given its tendency to promote reversals) lets his colleagues on the Federal Circuit know that they are misguided:

The de novo review standard has at least two practical results, neither of which furthers the goal of the “just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. First, rejection of settlement is encouraged, and a decision to appeal is almost compelled, where counsel believes the client’s position is valid, even if debatable, depending on the view taken of extrinsic evidence.

***

A second, although less common, consequence of the de novo review standard is the opportunity it offers to the party that presents a case with an eye toward appeal rather than the verdict. Skilled counsel who believes a client may not be well received by a jury is tempted to build error into the record by asking for construction of additional terms, and/or presenting only a skeleton argument at the claim construction stage.

     The issue is clearly debatable: The Courts of Appeals go both ways regarding whether to apply two standards to mixed questions of fact and law.  For example, the Third Circuit says that courts should “break down” a matter and apply “the appropriate standard to each component.” Meridian Bank v. Alten, 958 F.2d 1226, 1229 (3d Cir. 1992).  On the other hand, the Ninth Circuit (like the Federal Circuit) says that mixed questions of fact and law get de novo review.  Boone v. U.S., 944 F.2d 1489, 1492 (9th Cir. 1991). 

     My feeling is that there should be two standards applied, based on the two types of conclusions (factual and legal) involved in claim construction.  Trial judges are clearly in the best position to establish facts after the presentation of evidence.  Recognizing this situation, the appellate court should review the established facts with some degree of deference.

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