Introduction
By statute, the Court of Appeals for the Federal Circuit has appellate jurisdiction over appeals from the administrative boards of the Patent & Trademark Office (appeals from the Patent Board and the Trademark Board) and the various district courts. The Federal Circuit also has appellate jurisdiction over other subjects such as the Court of International Trade and the Merit Systems Protection Board. But we will limit this article to patent law issues.
The appeal is filed by a “losing” party. We don’t use that term pejoratively; rather that a losing party at trial or the Board instigates the appeal, as an appellant. And as a losing party, it examines the underlying decision and determine if the decision is an appealable decision (i.e., is it a final decision except for an accounting of damages) but most importantly determine what issues can be appealed. Naturally a losing party simply thinks the judge, jury, or Board just got it wrong and the Federal Circuit must step in to correct that wrong. Though the feeling may be strong, the Federal Circuit is not a court of first instance and the appellant cannot hope to re-try the case on appeal. Kearns v. Chrysler Corp., 32 F.3d 1541, 1548 (Fed. Cir. 1994)(“An appeal, however, is not to be used as a means of retrying a case.”). The Court noted that trials (and presumably Board decisions) need not be perfect but must be fair. Newell Companies, Inc. v. Kenney Mfg. Co., 864 F.2d 757, 765 (Fed. Cir. 1988). And because of this, the Federal Circuit also has a “harmless error” standard. This means that despite any errors, the errors do not affect the parties’ substantive rights, such as whether the error affected the outcome of the case; or there was some substantial injustice. Unless the error was harmful, a harmless error will not result in reversal or a remand.
So what recourse exists for an appellant to obtain a reversal? This is where the standards of review matter and are critical to determine the best strategy on appeal. By knowing the applicable standard of review, the party may not even choose to appeal. If the party appeals, the appellant will want to frame issues to use the standards of review to his advantage. Typically this means the appellant wants less deference given to the trial judge (or Board) whereas the appellee wants more deference.
Just what is a standard of review? The standard of review generally means the strictness or intensity that the Federal Circuit will evaluate the underlying decision. Some will accuse appellate judges that standards of review don’t really matter because the appellate judge will just make statements that purportedly satisfy the standard of review. Some will say that the standards of review actually matter and skilled appellate attorneys will tailor briefs to show why, despite the underlying opinion otherwise, a mistake was made that requires reversal. The underlying opinion quality also matters. A well-written trial court opinion is every appellant’s worst enemy and every appellee’s best friend. It creates its own presumption of correctness by the force of its reasoning and the quality of its examination of law and precedent.
Standards of Review Under Federal Circuit Patent Law
The standards of review run the gamut from the most highly deferential or most respect for the underlying opinion to the least deferential. The standard of review may also depend on whether the underlying opinion was through a trial judge bench trial, Board opinion, or a jury verdict.
De novo Or Plenary Standard of Review
The least deferential standard is the so-called “de novo” or “plenary” review. This standard has also been called a full and independent review. It is the least deferential to the underlying tribunal because no deference is required at all. The Federal Circuit’s review is independent of any conclusion reached by the tribunal. This means it doesn’t matter if the issue was decided by a trial judge, a Board, or a jury. No deference is given. This also means that if the issue is case dispositive, the Federal Circuit can: (i) affirm in its entirety; (ii) reverse and remand back to the tribunal; or (iii) outright reverse and render a verdict to the other side. It is beyond the scope of this article to delineate the issues that are subject to de novo review. Issues such as statutory construction, claim construction, legal determinations and other “questions of law.”
Abuse of Discretion Standard of Review
On the other end of spectrum is the “abuse of discretion” standard. This is the most deferential standard of review. An abuse of discretion is found when: (1) the court’s decision is clearly unreasonable, arbitrary or fanciful; (2) the decision is based on an erroneous construction of the law; (3) the factual findings are clearly erroneous; or (4) the record contains no evidence upon which the district court rationally could have based its decision. As the name implies, there are times where the tribunal exercises discretion to do something or not do something. There are countless mini-decisions that take place during a trial process. For example, one is whether the judge sets a long or short schedule and a party considers that schedule impracticable. Another is where the trial judge sets the number of trial days and one party thinks that it is not enough time. These seem more benign or trivial. Other decisions include the inclusion or exclusion of a witness or other evidence at trial, or whether a case is exceptional under Section 285. The abuse of discretion standard is the worst for an appellant and best for the appellee. This is because the presumption is that the underlying issue was correctly decided and the Federal Circuit has to point to something that can undo the discretion. This also means that a Federal Circuit judge cannot simply call something an abuse of discretion because he or she would have done something differently (or made a different call on the issue) at trial. Indeed many Federal Circuit judges will sit in designation over a trial, and that presumably inculcates a respect for the process of the trial judge.
But the abuse of discretion is not unfettered. Trial judges do make mistakes on the underlying law and/or application of the facts to the law. On appeal, sometimes the abuse of discretion is implicated when the underlying opinion is scant on reasonings and rationale, and thus the opinion fails to explain itself. In many instances, the factors to consider in the abuse of discretion test is based on the underlying regional court of appeal law. That is, even though the Federal Circuit is handling the appeal, the Federal Circuit looks to the regional circuit law for guidance. In general, an abuse of discretion can be found when the tribunal (1) applies an incorrect legal standard; (2) follows improper procedures in making the determination; or (3) makes findings of fact that are clearly erroneous. Said another way, an abuse of discretion exists when the trial court’s decision is clearly unreasonable, arbitrary or fanciful, or is based on clearly erroneous findings of fact or erroneous conclusions of law.
Because of the high level of deference afforded, as the above factors indicate, appellants often will seek to undermine the discretionary decision by arguing that the underlying decision was based on an incorrect legal standard. That is, the factual or discretionary determinations made were predicated on wrong legal standards and the house of cards collapses. If the basis of the appeal is the failure to adequately explain the decisions, even a remand may be a hollow victory because the trial court on remand may simply fill the gaps and still arrive at the same conclusion.
Clear Error and Substantial Evidence Standards of Review
In between the de novo and abuse of discretion standards are the “clear error” and “substantial evidence” standards. The clear error standard is based on appeals from a trial court/bench trial fact finding; that is a non-jury case. The substantial evidence standard is based on appeals from a jury fact finding.
Per the Supreme Court, clear error occurs when although there is evidence to support it, the appellate court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. This standard plainly does not entitle the Federal Circuit to reverse the finding of the trial judge simply because it is convinced that it would have decided the case differently. The Federal Circuit cannot duplicate the role of the trial court. In applying the clearly erroneous standard to the findings of a district court sitting without a jury, the Federal Circuit must constantly have in mind that its function is not to decide factual issues de novo.
Factors to consider in the clear error review include if the district court’s account of the evidence is plausible considering the record viewed in its entirety (even if the Federal Circuit judges were sitting as the trier of fact, it would have weighed the evidence differently). Another factor to consider is that where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous. Clear error may be more readily found when the fact finding is based dominantly on documents and less readily found when the fact finding is predicated on witness testimony. Of course, all these recitations don’t really help create a calculus or formula as to when an error is clear. The Seventh Circuit helped with a pungent example. It said that to “be clearly erroneous, a decision must strike us [the appellate court] as more than just maybe or probably wrong; it must, as one member of this court recently stated during oral argument, strike us as wrong with the force of a five-week-old, unrefrigerated dead fish.”
A practical concern for appellants is how to characterize the decision if the standard is clear error. First, it goes without saying that simply disagreeing with the trial judge as to a fact is not enough. If there are range of possibilities, there is no clear error if the trial judge picks something within the range. As such, among the plausible findings, it is not clear error for the judge to pick one. Second, the trial judge is not required to catalog every piece of evidence considered for and against the conclusions made. The appellant should not appeal simply based on the absence of verbiage in the ruling by arguing that the judge failed to consider something because there is no verbiage to that effect. Third, an appellant may get more headway if the underlying facts can be directed to documents, as that may engender a de novo review of the documents. No credibility determinations are made in document review. Fourth, the clear error standard means that the factual determination need not be clearly correct because the requirement is to show why the determination is clearly erroneous. So even if the factual determination is not clearly correct, that may not be enough. Finally, if the fact finding involves credibility determinations, then the Federal Circuit may find such determinations unreviewable.
The “substantial evidence” standard is similar to the clear error standard, but differs in the source of the underlying conclusion. The clear error standard is closer to the de novo standard; the substantial evidence is closer to the abuse of discretion standard. The substantial evidence standard stems from jury conclusions. The Supreme Court stated that “substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Mere uncorroborated hearsay or rumor does not constitute substantial evidence.”
As with the clear error standard, the Federal Circuit upholds a jury’s verdict if it is supported by substantial evidence, which is evidence adequate to support the jury’s conclusion, even if it is also possible to draw a contrary conclusion. Because of the 7th Amendment requirement, the Federal Circuit should guard the deference afforded to the jury because the jury assessed the character and credibility of the witnesses and thoughtfully evaluated the evidence. But jury verdicts are usually general verdicts (black box verdicts) and juries do not write out opinions on the facts considered and rejected. Therefore, in practice overturning the jury verdict on appeal is difficult. On appeal, it may have been easier to overturn the jury verdict if the jury had Rule 49 special verdicts or general verdicts with questions. But that is of no help on appeal if Rule 49 procedures were not done in the first instance. In the absence of a detailed jury verdict, the Federal Circuit will assume that if there is a black box jury verdict the jury necessarily resolved the facts in favor of the verdict winner and will leave those findings undisturbed if supported by substantial evidence.
As mentioned above, from a practical perspective, appellants face an uphill battle. Even if the jury issued a special verdict, the underlying factual disputes are still considered deferentially. Appellants often will characterize the factual disputes as lacking substantiality, as if there is some numerical quantity in play. Perhaps the substantial evidence standard is misleading nomenclature as if to imply there is a quantitative amount of evidence. The dictionary suggests “substantial” may mean ample or having a considerable amount… implying a quantity. But the courts define the standard to mean whether a reasonable mind might accept the evidence to support the conclusion. So perhaps a better nomenclature may mean the “evidence of substance.”
With respect to Patent Office Board decisions, the Federal Circuit will review legal conclusions de novo and the fact findings for substantial evidence.
Federal Circuit Precedent
Though not a pure standard of review, we often see appellants citing to case law suggesting that it is inconsistent with precedent. The goal, so it would appear, is that if the case law cited in the trial court was wrong, then any factual applications to the (wrong) case law can be overturned. The Federal Circuit was created in 1982 by the merger of the CCPA and the Court of Claims. Because certain patent appeals erupted from the CCPA and that the CCPA always sat en banc, each CCPA decision was precedential. Later CCPA rulings overturned prior CCPA rulings. Upon the Federal Circuit’s creation in 1982, it adopted all prior CCPA decisions as binding precedent. South Corp. v. United States, 690 F.2d 1368, 1369 (Fed.Cir.1982) (en banc). Federal Circuit cases are typically conducted in 3-judge panels. As such, appellants and appellees need to remember certain rules of precedent. First, CCPA decisions are binding precedent until overturned by the Federal Circuit en banc or by the Supreme Court. Second, Federal Circuit panel decisions cannot overrule prior CCPA or CAFC panel decisions because a later 3-judge panel cannot overrule the CCPA or a prior 3-judge panel. Federal Circuit panel decisions are overruled only the Federal Circuit en banc or by the Supreme Court. Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305, 1316 (Fed.Cir.2013) (en banc). As such, generally “older” cases are good to cite because they are binding until overturned. Parties should therefore carefully consider briefs that suggest that a certain Federal Circuit panel overruled prior precedent.
Practical Considerations
It’s always tough to lose a case at the lower level. But standards of review are important because the tough loss may not be overturned. As a trial attorney, knowing how standards of review apply on appeal may shape the trial strategy. Issues pursued on appeal need to be preserved in the trial record, irrespective of a perspective that preserving an issue on appeal may antagonize the trial court judge. A failure to preserve the issue may tank the later appeal. If a party thinks, either due to the nature of the case or a particular predilection of a trial judge that the trial will be tough, the party may consider presenting as much documentary evidence as possible so that the appellate court may more freely review the evidence on appeal.
When the losing party scrutinizes the ruling, it will need to find the relevant issues that engender the most favorable standard of review. For example, if defendant loses an infringement case through a jury verdict, it will be tough to overturn that verdict on the infringement issue. The defendant may challenge the claim construction, which is reviewed de novo on appeal, arguing that the factual determination of the infringement was predicated on the wrong claim construction. Conversely, the appellee will argue that the appellant is mischaracterizing the trial record; it is simply attempting to re-try the case on appeal; hasn’t pointed out why the errors are clear error or otherwise unsupported; or the appellant is simply upset that amongst reasonable choices the fact finder picked the wrong one.
On another note, it is tempting for appellants to characterize the issues on appeal as a parade of horribles or that a certain industry will be gutted unless corrected on appeal. This is most evident when an appellant files a petition for rehearing en banc or certiorari petition to the Supreme Court. The best approach is to apply the proper standards of review, why the rulings require reversal, but avoid the parade of horribles. The same considerations apply with any en banc petitions.
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