Teva Gets Knocked Down, But It Gets Up Again—and Petitions SCOTUS

Teva may be down, but it’s not out yet.  By now, the ongoing Teva v. GSK litigation— concerning induced infringement of patents covering the use of carvedilol in decreasing mortality caused by congestive heart failure in a patient—is well-worn territory (see our multiple posts on it here, here, here, and here).  Filed initially in 2014, the case has been through an unusual procedural history: Teva initially lost in the District Court of Delaware but the District Court overturned the jury verdict on a Judgment as a Matter of Law; the Court of Appeals for the Federal Circuit overturned the Judgment as a Matter of Law and reinstated the jury verdict; Teva petitioned for a rehearing, and, after a rehearing by the same panel, the Federal Circuit affirmed its earlier decision to overturn the Judgment as a Matter of Law.  Ultimately, the Federal Circuit panel rehearing decision was based on a “narrow, case-specific review” of evidence as to whether Teva sufficiently carved-out the protected use from its labeling (notwithstanding that the labeling carved out the use code GSK listed in the Orange Book) so that the remaining language did not encourage infringement of the patent.  Spoiler alert: The Federal Circuit rehearing panel determined that Teva failed to execute a “true section viii carve-out” and therefore its labeling is evidence of inducement.  The Federal Circuit declined to address whether the practice of skinny-labeling itself induces infringement but instead called for a fact-specific analysis of any allegedly infringement-inducing skinny-label.

On the heels of the Federal Circuit’s rehearing loss, Teva, unsurprisingly, has appealed the case to the Supreme Court.  Appeal of this decision is important because the Federal Circuit’s rehearing decision raises concerns as to the future of the carve-out due to the potential for induced infringement litigation—particularly because the Federal Circuit left no clues as to the standard for a “true section viii carve-out.”  To Teva, the question presented is simple: “If a generic drug’s FDA-approved label carves out all of the language that the brand manufacturer has identified [in its patent use code listed in the Orange Book] as covering its patented uses, can the generic manufacturer be held liable on a theory that its label still intentionally encourages infringement of those carved-out uses?”  Of course, GSK would frame it a little differently, questioning whether labeling language that doesn’t fully carve out the patented use should be protected from induced infringement liability.  Each has its own policy concerns based in the construct that governs the entirety of the Hatch Waxman compromise, which implemented the carve-out provisions: Access and affordability weighed against the reward for innovation.  Right now, however, Teva’s side of the story is front and center as Teva asks the Supreme Court to dive into the very important conflict of law.

Two fundamental takeaways underlie Teva’s Petition for Certiorari.  First, and emphasized heavily throughout the Petition, is the uncertainty that this decision creates in the generic industry.  The lack of predictability in the safe usage of the carve-out is a serious problem that could lead generic drug manufacturers to stop relying on the practice; after all, if you can’t tell whether a carve-out is a true carve-out (or you can’t do a true carve-out due to the listed use code), you’re launching at risk of induced infringement litigation.  Should generic drug manufacturers abandon the practice, method-of-use patents covering one indication would effectively extend coverage over a second, non-patent protected indication.  Such a scenario, if it happens, could delay generic entry for any and all indications thereby undercutting the government’s drug pricing initiatives and attempts at addressing tactics used to delay competition, which are issues that the government has raised over and over again.

The second point the Petition raises is that “[t]he carve-out statute cannot function if every carve-out leads to a jury trial.”  And that’s exactly the system that the Federal Circuit has set up here.  By availing brand sponsors of the “induced infringement” argument based only on a highly “fact-specific” inquiry, the Federal Circuit has set up a vague standard that fundamentally requires examination by a judge to assess the adequacy of a carve-out.  There are no guidelines upon which a generic manufacturer can assess a carve-out, and there’s little disincentive for a brand sponsor (with means to sue) to ask a court to weigh in even where a patented use may be completely carved-out.  Thus, brand manufacturers can roll the dice and see what the district courts, and eventually the appellate courts, have to say about any given carve-out.  While a brand sponsor may not always be successful, litigation is expensive—as are $235 million verdicts— and the threat alone may be enough to deter use of the carve-out for generic companies that lack the funding for protracted litigation

Notably, the Federal Circuit rehearing decision leaves room to exploit FDA’s reliance on the use code to dictate a permissible carve-out.  The rehearing decision emphasizes that use codes are not substitutes for the ANDA applicant’s review of the patent, and thus it is up to the generic sponsors to carve-out information in accordance with the patent.  While it is true that the use code is not intended to replace review of the patent, the problem here is that FDA only permits the carve-out of labeling information in accordance with the use code.  The Federal Circuit rehearing decision, if it stands, can be read to encourage brand sponsors to write narrow use codes; because the use code governs the information that FDA permits generic sponsors to carve out of the labeling, a narrow use code would require that information covered by the patent but not covered by the use code remain in the labeling, ultimately rendering the “true section viii carve-out” impossible.  Now, not only could a too-broad use code block carve-outs, a too-narrow use code would set-up an induced infringement suit—yet another  mechanism of “gaming” the system.  In turn, if the Federal Circuit’s rehearing decision stands, it points to the necessity for reform of the carve-out administration with a bigger role for FDA—or contribution by the PTO—to examine and assess use codes.  As the Petition says, the Federal Circuit rehearing decision essentially makes more work for FDA (or the PTO).

The skinny label may be a bad thing for brand companies, but it’s a system that Congress set up and codified, and neither of the Federal Circuit decisions really addressed the conflict of law.  It was decided as a patent case—and it is a patent case—but the problem here is the reverberation across the FDC Act, which does not seem to be a consideration for the majority.  Instead, both Federal Circuit majority opinions (initial and rehearing) ignore the conflict between patent law and the statutory section viii carve-out.  This is a serious problem because the Federal Circuit’s interpretation of the induced infringement statutory provisions is diametrically opposed to the language in the FDC Act; ultimately—and implicitly—the Federal Circuit has determined that patent law trumps the FDC Act without consideration of the impact on regulated industry.  And while the impact on industry should not necessarily be a factor in a court’s decision, the impact on the interpretation of existing and related statutory provisions should be.  Thus, the statutory conflict is a huge element of the case that should have been considered.  In other words, it’s not just a patent case—the patent laws must be looked at in the larger context of the entire U.S. Code.

It’s now up to the Supreme Court to address this major issue, and if the Supreme Court won’t do it, it’s up to Congress.  Otherwise, Teva and other generic manufacturers will really be knocked down—and the skinny label may never get back up again.

GSK makes its case to the Supreme Court—presumably asking the Court to reject Teva’s Petition for Certiorari—on September 12, 2022.