Law \ Legal

Inducing Infringement with the Skinny Label

Hypo: Copycat would like to copy Competitor’s product. The patent covering the product expired as have patents covering some methods-of-use, but Competitor still has one method-of-use patent in force.  The question–when you sell its product, how careful does Copycat need to be to avoid inducing infringement?

This hypothetical situation gets trickier when we are talking about FDA regulated drugs because the FDA dictates labeling content for generic (ANDA) filers.  And, for the most part, the content of the generic label is derived directly from the brand-patentee’s label.

An important drug case involving this situation is pending on petition for certiorari before the Supreme Court. Teva Pharms. USA, Inc. v. GlaxoSmithKline LLC, SCT Docket No. 22-37 (2022).  Teva has petitioned its “skinny label” induced infringement loss to the Supreme Court–seeking a ruling that the FDA-approved process creates a limited safe harbor for its label content.

Once a brand drug is no longer patented, the fact that some of the drug’s uses remain patented “will not foreclose marketing a generic drug for other unpatented [uses].” Caraco (2012). Instead, a generic manufacturer can sell its product with a “skinny label” that “carves out” any patented uses found in the brand drug’s labeling—and thereby avoid inducing infringement of the brand manufacturer’s patent rights. See 21 U.S.C. § 355(j)(2)(A)(viii). To aid in this process, brand manufacturers must provide a sworn statement to FDA identifying “the specific section(s)” of their labeling “that describes the method of use” claimed by their patents. 21 C.F.R. § 314.53(c)(2)(i)(O)(2), (c)(2)(i)(P)(2). Those are the sections that generic manufacturers then carve out of their labeling in order to obtain FDA approval despite the brand manufacturer’s remaining patents.

The question presented is:

If a generic drug’s FDA-approved label carves out all of the language that the brand manufacturer has identified 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?

Teva Pharms. USA, Inc. v. GlaxoSmithKline LLC, SCT Docket No. 22-37 (2022).

Background: The drug carvedilol (a beta blocker) was patented, but those patents have expired.  GSK sells the drug with FDA approved labelling for treatment of three different cardiac-related problems: (1) congestive heart failure; (2) hypertension; and (3) left ventricular disfunction following myocardial infarction.  GSK had patent rights covering all three uses, but by 2007 the patents covering uses (2) and (3) had expired.  Teva obtained FDA approval to begin selling and marketing a generic version of the drug, but with a “skinny label” that doesn’t mention the still-patented method of use for congestive heart failure.  As you might expect, folks paying the bills in American healthcare immediately realized that Teva’s much cheaper drug was therapeutically equivalent to GSK’s branded ver$ion and began substituting the generic to treat congestive heart failure as well.  GSK sued Teva for inducing infringement and won a jury verdict for $235 million, but the district court rejected the verdict on JMOL. (Judge Stark, now at the Federal Circuit). On appeal, the Federal Circuit reinstated the jury verdict–critically finding that the FDA-required label on Teva’s generic drugs encouraged doctors to prescribe the drug.  The basic problem was that a medical professional could examine the label information about how the drug works for the non-patented uses and gain an understanding that it also works for congestive heart failure.  The majority opinion from Chief Judge Moore and Judge Newman was per curium.  Judge Prost filed a strong dissent in the case:

GSK’s sworn FDA filings identified just one use as patented. So Teva carved out that use and came to market with its “skinny” label. It played by the rules, exactly as Congress intended.

Prost in dissent. Beyond the label itself, GSK also presented evidence of a limited amount of Teva advertising that its version was “indicated for treatment of heart failure and hypertension” and was a “generic equivalent” of GSK’s branded drug.  That evidence helped the Federal Circuit reinstate the jury verdict.  But, the majority still relied upon language from the label itself in finding inducement.  The majority in the case also noted that on remand the district court might still decide the case in Teva’s favor on the theory of equitable estoppel based upon GSK’s statements to the FDA that were relied upon by Teva (to its detriment).

The petition provides two reasons for granting the writ:”

The divided panel’s controversial opinion upends the legal rules facing the modern prescription-drug marketplace, wreaking doctrinal havoc in two equally troubling ways. Such a radical transformation warrants this Court’s intervention now.

First, the decision below eviscerates the key element of inducement liability: the requirement that a plaintiff prove “active steps taken to encourage direct infringement.” Grokster. Actively encouraging or instructing an infringing use has always been required to support inducement, and merely “mentioning” or “describing” an infringing use has always been legally insufficient. Now, however, that difference has disappeared, leaving would-be defendants who sell off-patent products labeled for unpatented uses in the dark about whether and when they will face massive infringement verdicts.

Second, the decision below effectively nullifies a Congressional enactment created specifically to encourage precisely what Teva did here: bring a low-cost generic drug to market labeled for unpatented uses. For decades, the skinny-label statute has worked as intended by providing generic manufacturers with the predictability they need to bring low-cost generic drugs to market labeled for unpatented uses. If they carved out the portions of the labeling that brandname manufacturers themselves identified as covered by method-of-treatment patents, they could launch without risk of infringement liability. But now, every skinny-label launch is an at-risk launch—and patients, FDA, and the healthcare system will suffer the consequences.

Petition. The petition was filed by highly regarded Supreme Court litigator William Jay (Goodwin) on July 11, 2022.  This is a case that I would ordinary expect to see a CVSG from the Supreme Court. We’ll see.

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