Chief Judge Leads Federal Circuit in Reconsidering its Appetite for Skinny Labels

The Chief Judge of the U.S. Court of Appeals for the Federal Circuit Sharon Prost, has quipped that, with her experience in both the legislative and judicial branches of government, she is a “walking separation of powers.”¹ Prior to her appointment to the Federal Circuit in 2001, where she has presided as chief since 2014, she served as a lawyer for the Senate, including as Senator Orrin Hatch (R-Utah)’s chief counsel on the Senate Judiciary Committee. With this resume, Judge Prost has amassed decades of exposure to and expertise with IP issues affecting the pharmaceutical industry.

During her tenure on the court, and particularly during her time as chief, Judge Prost has been a leading jurisprudential voice in pharmaceutical cases, including those arising between innovator and generic drug companies under the Drug Price Competition and Patent Term Restoration Act, also known as the “Hatch-Waxman” Act—an eponymous legislative legacy of her former boss.

By the count of these authors, during her tenure as chief, Judge Prost has been on the panel for almost thirty Hatch-Waxman cases, of which she has authored at least four dissents.² As chief, she has participated in the most patent decisions of any of her colleagues over the past few years.³ Chief Judge Prost has been a commanding voice in several high-profile opinions relating to pharmaceuticals and the life sciences industry over the past few years, including Amgen Inc. v. Sanofi et al.,⁴ Enzo Life Sci. Inc. v. Roche Mol. Sys., Inc.,⁵ Idenix Pharm. LLC v. Gilead Sci. Inc.,⁶ Immunex Corp. v. Sanofi-Aventis U.S. LLC,⁷ and Takeda Pharm. USA, Inc. v. Mylan Pharm. Inc.⁸ She has also issued powerful dissents in patent cases including Vanda Pharm. Inc. v. West-Ward Pharm. Int’l Ltd.,⁹ UCB, Inc. et al. v. Accord Healthcare, Inc. et al.,¹⁰ and, most recently, GlaxoSmithKline LLC, v. Teva Pharm. USA, Inc.¹¹

By statute, Judge Prost’s seven-year term as chief expires in May 2021 with Judge Kimberly A. Moore next in the line of succession.¹² In her last months leading the court, Judge Prost has maintained her prolific pace, rarely cancelling telephonic oral arguments, and authoring among the most precedential majority decisions in patent cases, along with one key dissent.¹³ In GSK v. Teva, Chief Judge Prost authored a 33-page disagreement with the panel majority—including her successor Judge Moore—on the issue of induced infringement by a generic drug maker.

On October 2, 2020, the Federal Circuit’s majority opinion in GSK v. Teva, authored by Judge Pauline Newman, vacated the U.S. District of Delaware Chief Judge Leonard P. Stark’s grant of Judgment as a Matter of Law (JMOL) and reinstated a jury verdict of induced infringement by Teva, with a $234 million damages award to GSK. Typically, a generic drug maker induces infringement when the drug product label would lead physicians or other healthcare professionals to infringe, or the generic takes other active steps to encourage infringement.¹⁴ Judge Prost’s dissent argued that the majority decision upset the “critical balance” provided for in the Hatch-Waxman Act between promoting innovation and efficient procedures to help low-cost generic drugs enter the marketplace.¹⁵ The decision garnered significant attention within the industry as altering the landscape of induced infringement and a generic drug maker’s ability to “carve-out” patented indications from its drug product label to avoid infringement of a method-of-use patent.

Teva sought the unlikely relief of an en banc rehearing. During Judge Prost’s tenure as chief, the Federal Circuit had issued only six en banc opinions on appeals originating from district courts.¹⁶ Dozens of industry players filed amicus briefs supporting Teva’s petition for rehearing, including former Congressman Waxman. On February 9, 2021, the Federal Circuit breathed life back into Teva’s case by vacating its opinion and judgement and ordering a panel rehearing. Many industry observers took this unusual move as a sign that Judge Prost had successfully encouraged her colleagues to reconsider their majority views. The panel reheard the oral argument on February 23.

Factual Background

In this case, Teva filed an abbreviated new drug application (“ANDA”) for a generic version of GSK’s Coreg® (carvedilol) product, commonly known as a “beta blocker.” Coreg® is indicated for the treatment of hypertension, for left ventricular dysfunction following myocardial infarction (“post-MI LVD”), and congestive heart failure. At the time of Teva’s ANDA submission, GSK had three patents listed in the Orange Book for its product: (1) the ’067 patent for carvedilol, (2) the ’069 patent for a method of treatment for decreasing mortality resulting from congestive heart failure, and (3) the ’821 patent also related to a method for treating congestive heart failure.

Teva filed its ANDA for carvedilol in 2002. Teva certified under Paragraph III of the Hatch Waxman Act that it would not launch its product before the carvedilol ’067 patent expired in 2007. Teva certified under Paragraph IV of the Hatch-Waxman Act that the ’069 and ’821 patents were invalid, unenforceable, or not infringed. GSK did not sue Teva for infringement of the ’821 or ’069 patents and instead sought reissue of the ’069 patent, which issued as the ’000 patent on January 8, 2008, and expired June 7, 2015. Teva launched its generic carvedilol product in 2007 when GSK's ’067 patent expired.

When Teva launched its generic product in 2007, it utilized a provision of the Hatch-Waxman Act to “carve-out” from its label the use of its product for treatment of congestive heart failure, in an attempt to avoid liability for infringing the ’069/’000 patent—a practice commonly referred to as “skinny labeling."¹⁷ Here, Teva’s label carved-out congestive heart failure until 2011, when the FDA required Teva to amend its label to be identical to GSK’s label for Coreg®. GSK sued Teva in 2014 for inducing infringement of the ’000 patent.

The Trial, Jury Verdict and District Court Decision

At trial, Teva argued that it could not be liable for induced infringement at all, or at least until 2011 when the FDA required Teva to amend its label to include congestive heart failure. GSK argued that Teva induced infringement of the ’000 patent, both before and after the 2011 label change, by leaving in the post-MI LVD indication, therefore not completely carving out treatment for congestive heart failure, and by representing its generic as an exact equivalent to Coreg®. GSK pointed to Teva’s marketing materials and press releases, including a press release from 2004 where Teva announced that its product had received tentative approval and touted its product as “AB” rated or therapeutically equivalent to Coreg® and indicated to treat heart failure and hypertension (Teva later carved-out the indication for heart failure before the FDA granted final approval). The evidence at trial showed that some of these materials remained on Teva’s website through 2015. GSK presented additional testimony from experts that, because of its AB-rating, pharmacies would automatically substitute Teva’s generic product for Coreg® prescriptions unless the prescribing doctor expressly indicated otherwise on the script. Hearing this evidence, the jury concluded that Teva induced infringement over the life of the ’000 patent and awarded GSK $234 million in lost profits plus $1.4 million in royalties on the Teva sales.

Chief Judge Stark then granted Teva’s motion for JMOL, finding that the verdict was not supported by substantial evidence because GSK had failed to prove by a preponderance of the evidence that Teva’s alleged inducement caused physicians to prescribe generic carvedilol to treat congestive heart failure, as opposed to other factors such as GSK’s labeling and marketing and the existing knowledge of cardiologists in the field. Judge Stark’s grant of JMOL eliminated the jury’s damages awarded for infringement during both the carve-out and full label periods.

The Federal Circuit Decision and J. Prost’s Dissent

Over a year after the original oral argument, the Federal Circuit vacated Judge Stark’s grant of JMOL in a split decision. In so doing, the majority started off pointing to the high burden for overturning a jury verdict. The panel then concluded that the district court applied an incorrect legal standard because “precedent makes clear that when the provider of an identical product knows of and markets the same product for intended direct infringing activity, the criteria of induced infringement are met.”¹⁸ Turning to the evidence of promotional materials, press releases, product catalogs, and FDA labels that GSK presented to the jury, the Federal Circuit held that there was substantial evidence supporting the verdict.¹⁹

Judge Prost issued a vigorous dissent, thrice as long as the majority opinion, supporting Judge Stark’s reasoning that GSK failed to show that Teva caused doctors to prescribe generic carvedilol according to the patented method.²⁰ She argued that “the district court got it right” and that the majority opinion failed to distinguish between the skinny label and full label periods of Teva’s product, stating: “This holding is no small matter: it nullifies Congress’s statutory provision for skinny labels—creating liability for inducement where there should be none.”²¹

Federal Circuit Rehearing Argument

Teva moved for en banc rehearing, arguing that the decision spells the end of skinny labeling provided by Congress in the Hatch-Waxman Act and cited subsequent lawsuits in the wake of this decision as evidence of the result.²² In its swiftly invited response, GSK presented the decision as a run of the mill case of applying the proper substantial evidence standard to a jury verdict.

Amicus briefs poured in—predominately on the generic side echoing Judge Prost’s dissent—fearing that the panel decision, read broadly, could create induced infringement liability for a generic drug manufacturer that uses a skinny label to carve-out a patented indication, but accurately describes its AB-rated product as therapeutically equivalent to the branded drug. The Federal Circuit ordered a rare panel rehearing telephonic oral argument limited to the issue of whether substantial evidence supported the jury’s verdict of induced infringement from the date of ’000 patent’s issuance through to when the FDA required Teva to amend its label to include congestive heart failure.

The oral argument focused primarily on the issue that drew the most consternation from the amici—Teva’s infringement during the skinny label period and whether the decision could effectively end the practice of skinny labeling. Judge Moore stated strongly that she could not imagine a stronger case for induced infringement during the full label period. With respect to the skinny label period, Judge Prost focused on the lack of any direct evidence that physicians relied on Teva’s skinny label itself in making prescribing decisions, whereas Judge Moore maintained her view that the press releases were enough for the jury to find inducement, noting that the 2004 press release announcing tentative approval stated that Teva’s equivalent product would be indicated for heart failure, and that Teva never renounced that statement in its later press releases.

The Future of Skinny Labeling

The rehearing argument did not portend a clear direction for a new opinion. Rather, the argument proceeded similarly to the original September 2019 argument, with little indication that any of the panel’s opinions had shifted substantially. GSK attempted to offer an exit ramp to the panel by arguing that Teva improperly framed the case on the premise that Teva had adequately carved-out congestive heart failure when it had not; thus, this was not a “true” skinny label case. A new majority decision could limit the scope of the ruling to make clear that something more is required to find induced infringement than marketing an AB-rated generic drug with a fully carved-out patented indication. Whether such a holding would allay industry concerns over the effectiveness of skinny labeling and whether Judge Prost will write separately as one of her final acts as chief judge remains to be seen. A new opinion could also provoke an en banc rehearing or other order from the full court, acting on Teva’s original en banc petition.²³

The implications for the pharmaceutical industry are significant. On the brand side, the new opinion could impact an innovator company’s strategies to make a potential carve-out more difficult for a generic to execute. It also may shift the importance of which types of evidence to use to prove induced infringement even when there is a skinny label at play. In GSK v. Teva, Teva’s press releases played a large role in the case. Going forward, the marketing teams within a generic company may need to collaborate more closely with the attorneys when planning to proceed with a skinny label. We will closely follow future developments in this case and provide further updates on these considerations and others once we have a ruling.

Footnotes

1. Intellectual Property Owners Education Foundation, Innovator Insights, Sharon Prost, Chief Judge, U.S. Court of Appeals for the Federal Circuit (Sept. 23, 2015), available at https://www.ipoef.org/sharon-prost-chief-judge-u-s-court-of-appeals-for-the-federal-circuit/
2. For a broader context, she has penned nearly 400 opinions in patent cases and has authored or joined slightly less than a hundred dissents during her tenure on the Federal Circuit.
3. See Dan Bagatell, Fed. Circ.’s Patent Decisions in 2020: An Empirical Review, Law360 (Jan. 11, 2021)
   (reporting that, as usual, Chief Judge Prost participated in the most patent decisions in 2020, with 114), https://www.law360.com/articles/1341846. For prior recent years' statistics, see Dan Bagatell, Fed. Circ.’s Patent Decisions in 2019: An Empirical Review, Law60 (Jan. 9, 2020), https://www.law360.com/articles/1232623; Dan Bagatell, Fed. Circ.’s Patent Decisions in 2018: An Empirical Review, Law360 (Jan. 3, 2019), Dan Bagatell, Fed. Circ.’s 2017 Patent Decisions: A Statistical Analysis, Law360 (Jan. 5, 2018).
4. 872 F.3d 1367 (Fed. Cir. 2017).
5. 928 F.3d 1340 (Fed. Cir. 2019).
6. 941 F.3d 1149 (Fed. Cir. 2019).
7. 977 F.3d 1212 (Fed. Cir. 2020).
8. 967 F.3d 1339 (Fed. Cir. 2020).
9. 887 F.3d 1117 (Fed. Cir. 2018).
10. 890 F.3d 1313 (Fed. Cir. 2018).
11. 976 F.3d 1347 (Fed. Cir. 2020).
12. 28 U.S.C. § 45.
13. Judges Prost and Newman cancelled telephonic arguments the least, and Judge Prost, together with Judge Lourie, authored the most precedential majority opinions in patent cases in 2020, with 16 each. See supra, FN3. https://www.law360.com/articles/1341846.
14. 35 U.S.C. § 271(b) states that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” See, e.g., See Eli Lilly & Co. v. Teva Parentaral Meds., Inc., 845 F.3d 1357, 1369 (Fed. Cir. 2017); AstraZeneca LP v. Apotex, Inc. 633 F.3d 1042, 1060 (Fed. Cir. 2010).
15. Glaxo, 976 F.3d at 1357.
16. The Compendium of Federal Circuit Decisions, https://fedcircuit.shinyapps.io/federalcompendium (last visited 3-2-2021).
17. 21 U.S.C. § 355(j)(2)(A)(viii).
18. Glaxo, 976 F.3d at 1355.
19. Id.
20. Id. at 1363-64.
21. Id. at 1358.
22. See, e.g., Amarin Pharma, Inc. v. Hikma Pharm. USA Inc., No. 20-cv-1630, D.I. 1 (D. Del. Nov. 30, 2020). 
23. Pursuant to Federal Circuit rules and practice, the full court may issue an order acting on the original en banc petition simultaneously with the issuance of a new panel opinion. See Internal Operating Procedure 14(2).