Federal Circuit Reverses District Court Decision in Patent Delisting Counterclaim Case; All Orange Book Information is Not “Patent Information”

By Kurt R. Karst –   

Earlier this week, the U.S. Court of Appeals for the Federal Circuit issued its decision in Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories, Ltd., No. 2010-1001, interpreting the patent delisting counterclaim provisions at FDC Act §505(j)(5)(C)(ii)(I), as added by the Medicare Modernization Act (“MMA”) – and specifically addressing whether the counterclaim provisions may be used to correct or delete an Orange Book-listed patent use code.  As we previously reported, last year the U.S. District Court for the Eastern District of Michigan (Southern Division) ruled and issued an Order and Injunction requiring Novo Nordisk, Inc. (“Novo”) to change an Orange Book-listed patent use code for a patent (U.S. Patent No. 6,677,358 (“the ’358 patent”)) on its drug product, PRANDIN (repaglinide) Tablets.  Novo appealed and the Federal Circuit reversed and vacated the district court’s judgment in a 2-1 decision. 

As we noted in our previous post, this case stems from a patent infringement action Novo brought against Caraco Pharmaceutical Laboratories, Ltd. (“Caraco”) and Sun Pharmaceutical Laboratories, Ltd with respect to the ’358 patent, and two related citizen petitions Novo and Caraco initially submitted to FDA in 2008 concerning generic drug labeling carve-out and split patent certification issues.  Novo submitted a  petition to FDA after the Agency required the company to amend PRANDIN’s labeling to reflect a new Indications and Usage statement.  Specifically, FDA required a unitary indication statement stating: “PRANDIN is indicated as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus.”  (Previously, the PRANDIN Indications and Usage labeling statement discussed both monotherapy and combination therapy.)  Novo ultimately amended its Orange Book patent listing for the ’358 patent with a new use code: “U-968,” which is defined as “A METHOD FOR IMPROVING GLYCEMIC CONTROL IN ADULTS WITH TYPE 2 DIABETES MELLITUS.”   (Previously, the ’358 patent was listed in the Orange Book with a “U-546” code, which is defined as “USE OF REPAGLINIDE IN COMBINATION WITH METFORMIN TO LOWER BLOOD GLUCOSE.”)

The district court deciding the patent infringement action stated that “[a]s a result of the revised use code, the FDA will no longer permit Caraco to file a ‘section viii statement’ carving out the patented repaglinide-metformin combination therapy as a predicate for securing approval of Caraco’s ANDA to market its generic repaglinide for non-infringing uses.”  That is, FDA is apparently requiring a “full” Paragraph IV Certification from Caraco as to the ‘358 patent as a result of the use code change.

Caraco challenged Novo’s use code change in an FDC Act §505(j)(5)(C)(ii)(I)  counterclaim seeking an order from the court requiring Novo to amend the ‘358 Orange Book patent listing to revert back to the U-546 use code.  FDC Act §505(j)(5)(C)(ii)(I) states:

If an owner of the patent or the holder of the approved application under [FDC Act § 505(b)] for the drug that is claimed by the patent or a use of which is claimed by the patent brings a patent infringement action against the applicant, the applicant may assert a counterclaim seeking an order requiring the holder to correct or delete the patent information submitted by the holder under [FDC Act § 505(b)] or (c) on the ground that the patent does not claim either – (aa) the drug for which the application was approved; or (bb) an approved method of using the drug.

Under FDC Act §§ 505(b) and (c), an NDA holder must submit with its application and after NDA approval “the patent number and the expiration date of any patent which claims the drug for which the applicant submitted the application or which claims a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture use, or sale of the drug.”

The district court issued an Order and Injunction requiring Novo to submit to FDA a revised Form FDA 3542 reinstating the former U-546 listing for PRANDIN within twenty days from the date of the Order and Injunction.  Novo promptly appealed the decision to the Federal Circuit, which stayed the district court’s Order and Injunction.

In (soon-to-be Chief) Judge Rader’s April 14th majority opinion, the Court ruled that Caraco “does not have a statutory basis to assert a counterclaim requesting” a court to enter an order to replace Novo’s U-968 patent use with the former U-546 use code.  First, “the Hatch-Waxman Act authorizes a counterclaim only if the listed patent does not claim any approved methods of using the listed drug” (emphasis added).  Second, “the terms of the counterclaim provision do not authorize an order compelling the patent holder to change its use code narrative.” 

Judge Rader sets up the dispute in the case as follows:

Novo and Caraco agree that the ’358 patent claims only one of the three approved methods of using PRANDIN (i.e., repaglinide in combination with metformin).  Novo asserts that the counterclaim is available only if the ’358 patent does not claim any approved methods.  Caraco argues that it is entitled to the counterclaim because the ’358 patent does not claim two of the approved methods of PRANDIN use.  In other words, Novo reads “an approved method” in the counterclaim statute as “any approved method” while Caraco reads it as “all approved methods.”

Detecting “no ambiguity in the statutory language,” Judge Rader notes that “when an indefinite article is preceded and qualified by a negative, standard grammar generally provides that ‘a’ means ‘any.’”  As such, for a counterclaim to be available, the Orange Book-listed patent cannot claim any approved methods of using the drug.  Judge Rader goes on to note that:

a broad use code covering all uses of a pharmaceutical could require generic manufacturers to prove specifically that their use will not overlap with and infringe the patented use.  This proof, under Hatch-Waxman procedures, will take the form of a Paragraph IV lawsuit.  In that context, the generic may provide proof that their use will not cause infringement of the patented use.  This court perceives that the Hatch-Waxman Act will thus ensure that a generic drug for non-patented purposes will not be used for patented purposes via a simple section viii certification.  Instead, the generic manufacturer will need to alleviate the risk of infringement or induced infringement in a proceeding that fully tests for infringement and its implications, including potential health and safety risks.  Thus, the Act again facilitates efficient resolution of disputes concerning potential overlapping of protected and unprotected uses.  The Act seeks to strike a balance of the pioneering and generic manufacturers’ interests.

To be sure, Judge Rader states that “the terms of the counterclaim provision do not authorize an order compelling the patent holder to change its use code narrative.”  The counterclaim provision refers to “patent information” submitted by the NDA holder under FDC Act § 505(b) or § 505(c).  And both of these provisions refer only to “the patent number and the expiration date of any patent . . . which claims a method of using such drug” (emphasis added).  Thus, “the counterclaim provision only authorizes suits to correct or delete an erroneous patent number or expiration date.  The authorization does not extend to the use code narrative.”  This “careful use of language” suggests to Judge Rader that the Hatch-Waxman Act “facilitates efficient resolution of disputes over the potential overlap of patented and unpatented uses in the form of a Paragraph IV suit.”

Judge Clevenger, who agreed with Judge Rader’s analysis, filed a concurring opinion expressing skepticism that “the ongoing Paragraph IV litigation will cleanly resolve the dispute between the parties.”  He also fingered FDA as the culprit for for complicating the PRANDIN patent infringement litigation:

If not for FDA’s request that Novo change its labeling to the present broad indication, everything would have worked properly under the relevant statutes. . . .  Caraco was [] set to get FDA approval to bring its generic drug to market and to defend itself in Novo's Paragraph IV suit.

But FDA, acting independently, gummed up the works.  By requiring a single broad indication for repaglinide as part of the approved labeling, FDA created a situation where Caraco can no longer assert that its proposed labeling does not infringe the '358 patent.  It remains to be seen what impact FDA's action will have on Caraco's ability to defend itself in the ongoing Paragraph IV litigation, but FDA's regulatory action threatens to impair Caraco's ability to disprove infringement.  FDA thus may have inadvertently upset the careful balance of interests represented by the efficient dispute resolution mechanism Congress created in the Hatch-Waxman Act.

According to Judge Dyk, who lodged a 28-page dissent, “the majority’s crabbed view of the statute sanctions an unjustified manipulation of the Orange Book.” 

The statute does not require the listing of patent numbers and expiration dates in the abstract.  It contemplates the description of the scope of the patent and of the relationship between the patent and the drug or the method of use; the description of that scope and relationship is itself “patent information” . . . .  Other provisions of the statute also contemplate that the ANDA filer will be able to understand the scope of the patent and to relate the patent information to the drug or drugs being claimed and the method or methods of use being claimed. [(emphasis in original)]

The statute thus must allow correction of a misdescription of patent scope that includes a drug not covered by the patent and erroneous information about the relationship between the patent and the drug, even if the patent is properly listed elsewhere in the Orange Book.  In other words the scope of the patent and its relationship to the drug must be “patent information” . . . .

There is no basis in the statutory language or statutory purpose for distinguishing between drug information and method of use information. Either both must be “patent information,” or neither must be patent information.  In my view, all Orange Book information is “patent information.”

Judge Dyk’s dissent harkens back to the recent decision in Teva Pharms USA, Inc. v. Sebelius, 595 F.3d 1303 (D.C. Cir. 2010), in which the D.C. Circuit was convinced by Teva’s structural argument that the patent delisting counterclaim provision at FDC Act § 505(j)(5)(C)(ii)(I) must be read together with the patent delisting 180-day exclusivity forfeiture provision at FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC).  In Teva, the Court stated that FDA was unable to offer “a single cogent reason why Congress might have permitted brand manufacturers to trigger [FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC)] by withdrawing a challenged patent, outside the counterclaim scenario identified by Teva,” and ruled that there is “no reason to conclude that the 2003 addition of forfeiture provisions meant to give the brand manufacturer a right to unilaterally vitiate a generic’s exclusivity.” 

The import of the Teva decision is no lost on Judge Dyk:

In holding that the counterclaim provision is unavailable, the majority’s approach is notably inconsistent with the approach adopted by our sister circuit in another recent Hatch-Waxman Act case, [Teva]. . . .  Here the majority reaches a result that is unsupported by any cogent reason for leaving an ANDA applicant without a remedy to correct an erroneous Orange Book listing with respect to a method of use patent, and is directly contrary to the congressional purpose.

It is unclear whether Caraco will seek a review of the decision.  In the meantime, it will be interesting to see what effects the Federal Circuit’s decision might have on other related litigation – namely, in another patent infringement action concerning PRANDIN, and with respect to a patent delisting counterclaim recently filed in patent infringement litigation concerning ACTOS (pioglitazone) (here and here), but that does not concern patent use codes – and whether Congress will take interest in the issue and further amend the Hatch-Waxman Amendments.