May/June 2014
IP Litigator
By Jason E. Stach; C. Brandon Rash
Authored by C. Brandon Rash and Jason E. Stach
A district court judgment has limited value if it cannot be upheld on appeal, but parties often focus so completely on winning in the district court that they lose sight of their ultimate appellate audience. A number of factors can lead to this focus on winning the battle as opposed to the war, including the all-consuming nature of trial, which can leave little time to focus on anything beyond the immediate needs of the case, and inexperience litigating judgments through appeal. Whatever the reason, the cost of losing on appeal is too high to avoid thoroughly analyzing how an appellate court will review the findings below. A key to this analysis is understanding the appellate standards of review and how they can make or break a case. Understanding these standards and evaluating them early will help trial attorneys formulate their arguments to give the best chance of succeeding on appeal.
The Court of Appeals for the Federal Circuit applies a wide range of standards of review, but in appeals from district courts, the most common are de novo, clearly erroneous, substantial evidence, and abuse of discretion. For issues that are not unique to patent law, such as the standard applied to requests for a new trial, evidentiary rulings, or judgments as a matter of law, the Federal Circuit will apply regional circuit law.1 The standard may vary from circuit to circuit, so one must be cautious in citing Federal Circuit precedent in these areas if a case arose from a circuit different from the one on appeal. This concern does not apply to issues unique to patent law, however, as the Federal Circuit will apply its own law and standards of review to these issues, such as claim construction and infringement.
"De Novo" Standard of Review
De novo review gives no deference to the trial court. The appellate court is free to write on a clean slate, so appellants desire this form of review over all others. Appellees, on the other hand, will do their best to frame issues in a way that avoids this nondeferential standard of review.
The Federal Circuit applies de novo review to questions of law,2 such as statutory interpretations, patent claim constructions, and grants or denials of judgment as a matter of law.3 It also reviews de novo the legal aspects of patent validity, including the ultimate conclusion of obviousness and whether a claim is directed to statutory subject matter, lacks enablement, or is indefinite.4 However, when the legal conclusion rests on factual underpinnings, the Federal Circuit will review those factual underpinnings under the clearly erroneous standard or the substantial evidence standard, discussed below.5
When a trial judge finds facts, such as in a bench trial, Federal Rule of Civil Procedure 52(a)(6) dictates that the Federal Circuit may not set aside those findings unless they are "clearly erroneous."6 A finding is "clearly erroneous" when, although there is evidence to support it, the entire record leaves the reviewing court with a definite and firm conviction that a mistake was made.7 The reviewing court cannot reverse the trial judge's account of the evidence if it is plausible in light of the entire record, even if the reviewing court is convinced that it would have weighed the evidence differently.8 Although the same "clearly erroneous" standard applies to findings based on documentary evidence as to those based on oral testimony, in practice, the Federal Circuit often gives special deference to the trial judge's credibility determinations.
While the Federal Circuit applies the "clearly erroneous" standard to a trial judge's findings of fact, the court applies the "substantial evidence" standard to a jury's factual findings.9 Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.10 Substantial evidence requires more than a "scintilla of evidence," but something less than the weight of the evidence, which means that the possibility of drawing two inconsistent conclusions from the evidence does not prevent a finding from being supported by substantial evidence.11 As with a trial judge's credibility findings, the Federal Circuit gives the jury's credibility determinations especially great deference.12
The Federal Circuit will apply the most deferential standard, "abuse of discretion," for equitable issues, such as inequitable conduct, injunctions, or attorney fees, and for other issues generally left to the discretion of the trial judge, such as issues involving discovery and trial management.13 Under this standard, the Federal Circuit will affirm unless the decision rests on a misinterpretation of the law or a clearly erroneous finding of fact, or manifests a clear error of judgment, which suggests some overlap with the other standards of review.14 Although a decision may be discretionary, the trial judge still must explain the reasoning behind the decision in sufficient detail that the Federal Circuit can evaluate whether the court considered any relevant factors.15
In view of the standards above, there are several things trial counsel can do at the district court to improve chances of success on appeal.
1. Preserve the issue. Analyzing an issue in light of the above standards of review is useless if the party does not properly preserve the issue for appeal. This requires raising the issue in the district court at the appropriate time in the proceeding, and it will sometimes require raising the issue multiple times throughout a case. Failing to do so can result in waiver. The Federal Circuit has found waiver in a number of situations, including failing to move for judgment as a matter of law after the close of evidence and failing to dispute an incorrect portion of a jury instruction. District court counsel should become familiar with the waiver standards applied by the Federal Circuit and the regional circuit in which the case is tried to ensure that all necessary issues are preserved for appeal.
2. Seek to exclude the opposition's faulty evidence. Exclusion of evidence often is reviewed under the abuse of discretion standard, making it difficult to overturn the exclusion on appeal. If a party succeeds in excluding key portions of an adversary's case, the excluding party stands a much greater chance of success on appeal, particularly if it also prevailed on the merits below. In that situation, the losing party would need to convince the appellate court that the district court abused its discretion in excluding the evidence, and may separately need to demonstrate that the exclusion was not a harmless error that did not affect the result below. This is a significant obstacle to overcome, and in many cases it will be insurmountable.
3. Focus on credibility. The Federal Circuit rarely will overturn credibility determinations—good or bad— making it critical for trial counsel to win on credibility. Patent litigation issues often turn on the credibility of dueling experts, so maintaining the credibility of one's own expert and pointing out reasons to doubt the credibility of the opposition's expert should be a top priority. Most district court counsel already apply this principle, as it is one of the best ways to win the case below. The deferential standard of review provides yet another reason why credibility is of paramount concern.
4. Present alternative evidence. Alternative evidence will allow the Federal Circuit to find in a party's favor even if it concludes that the district court should have excluded other evidence supporting that party. The alternative evidence would remain in the case and, for example, could constitute substantial evidence to support a judgment entered on a jury verdict. It also may lead the Federal Circuit to conclude that the district court's erroneous decision to admit the excluded evidence was a harmless error. Because trials need only be fair, not perfect, the Federal Circuit will disregard errors that do not affect the substantial rights of the parties.16 As long as the erroneously admitted evidence was not unduly prejudicial, the Federal Circuit may rely on the alternative evidence to uphold a party's victory on an issue. District court counsel should try to present alternative evidence whenever possible, but it should focus especially on presenting alternative evidence where the opposition challenges admissibility on evidentiary grounds, such as by challenging its relevance or authenticity, or by seeking to exclude the evidence as hearsay.
5. Present alternative theories. As with presenting alternative evidence, presenting alternative theories on a single issue is another way to increase the likelihood of success on appeal. For example, there are several methods to compute damages that the Federal Circuit has deemed acceptable. Analyzing damages using two or more of those methods will give the Federal Circuit additional ways to affirm, even if it takes issue with one of the computation methods.
6. Frame the issue for the desired standard of review. Many issues contain mixed questions of law, fact, or discretion. Depending on the desired standard of review, a party may frame the issue as focusing on one of these aspects over the others. For example, the Federal Circuit reviews for substantial evidence a judgment entered on a jury verdict finding anticipation. A party could frame that same issue as one of claim construction subject to de novo review, contending that the issue is whether the claim is properly interpreted in a way that covers the features disclosed in the prior art. While this flexibility can be helpful, a party often does not know which standard of review is desirable until learning whether it wins or loses. In these uncertain circumstances, trial counsel may want to frame the issue in a flexible way that will allow them to argue either standard on appeal. In instances where the result is more predictable, such as when a trial court has a proclivity for either invalidating patents or rarely invalidating them, a party may choose to frame the issue based on the likely result.
Knowing how an appellate court will review the decisions below can inform trial counsel's strategy and best position a party for obtaining the ultimate prize, victory on appeal. Because winning on appeal begins in the trial court, trial counsel should consider appellate issues as an integral part of their case strategy. The above primer addresses a subset of the issues likely to arise in patent cases, but this area of law is nuanced and can be complex. Because of this, a party should consider hiring trial counsel with significant appellate experience or separately retaining appellate counsel who can work with trial counsel to ensure the best chance of success on appeal.
Endnotes
1 See, e.g., Verizon Servs. Corp. v. Cox Fibernet Va., Inc., 602 F.3d 1325, 1331 (Fed. Cir. 2010).
2 Sciele Pharma Inc. v. Lupin Ltd., 684 F.3d 1253, 1259 (Fed. Cir. 2012).
3 See, e.g., Lighting Ballast Control LLC v. Philips Elecs. N. Am. Corp., No. 2012-1014, slip op. at 7 (Fed. Cir. Feb. 21, 2014) (claim construction); Volkswagon of Am., Inc. v. United States, 532 F.3d 1365, 1369 (Fed. Cir. 2008) (statutory interpretation and summary judgment); Mycogen Plant Science v. Monsanto Co., 243 F.3d 1316, 1325 (Fed. Cir. 2001) (judgment as a matter of law).
4 Biosig Instruments, Inc. v. Nautilus, Inc., 715 F.3d 891, 897 (Fed. Cir. 2013) (indefiniteness); In re Bilski, 545 F.3d 943, 951 (Fed. Cir. 2008) (statutory subject matter); In re Cortright, 165 F.3d 1353, 1356 (Fed. Cir. 1999) (enablement); Panduit Corp. v. Dennison Mfg. Co., 810 F.3d 1561, 1566-68 (Fed. Cir. 1987) (obviousness).
5 In re Cortright, 165 F.3d at 1356 (utility); Kolmes v. World Fibers Corp., 107F.3d 1534, 1539 (Fed. Cir. 1997) (written description); Glaverbel Societe Anonyme v. Northlake Mktg. & Supply, Inc., 45 F.3d 1550, 1554 (Fed. Cir. 1995) (anticipation).
6 Daiichi Sankyo Co. v. Matrix Labs., Ltd., 619 F.3d 1346, 1352 (Fed. Cir. 2010).
7 See id.
8 Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573-574 (1985).
9 Integrated Tech. Corp. v. Rudolph Techs., Inc., 734 F.3d 1352, 1360 (Fed. Cir. 2009).
10 Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984).
11Id.
12 See, e.g., Baxter Healthcare Corp. v. Spectramed, Inc., 49 F.3d 1575, 1584 (Fed. Cir. 1995) ("'the jury's assessment of . . . character and credibility is entitled to great deference,'" quoting Modine Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 541 (Fed. Cir. 1990)).
13 See, e.g., Amazon.com, Inc. v. Barnesandnoble.com, 239 F.3d 1343, 1350 (Fed. Cir. 2001) (preliminary injunction).
14 Id. at 1350.
15 Fromson v. W. Litho Plate & Supply Co., 853 F.2d 1568, 1573 (Fed. Cir. 1988).
16 See, e.g., Walter Kidde Portable Equip., Inc. v. Universal Sec. Instruments, Inc., 479 F.3d 1330, 1340-1341 (Fed. Cir. 2007); Fed. R. Civ. P. 61 ("At every stage of the proceeding, the court must disregard all errors and defects that do not affect any party's substantial rights.").
Reprinted with permission from the IP Litigator, published by Aspen Law and Business. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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