Federal Circuit Denies En Banc Review in GlaxoSmithKline LLC v. Teva Pharmaceuticals USA

By Kevin E. Noonan —

The 2020 decision by a divided Federal Circuit panel in GlaxoSmithKline LLC v. Teva Pharmaceuticals USA regarding the extent to which an ANDA applicant who obtained regulatory approval under the Section viii carve-out provisions of the statute could be liable for inducement of infringement under 35 U.S.C. § 271(b) caused something of an uproar, leading to a panel rehearing on the matter but ultimately coming to the same conclusion.  Both decisions were issued in the face of a strong dissent by Judge Prost, in the first decision while she was Chief Judge.  Last Friday, the Court decided not to rehear the matter en banc, over the dissenting opinions of three of the judges (including Judge Prost).

The matter arose in litigation over GSK's Coreg^® product (carvedilol) for treatment of hypertension (the initial approved indication; U.S. Patent No. 4,503,067), congestive heart failure (CHF) (the subject of U.S. Patent No. 5,760,069), and left ventricular dysfunction following myocardial infarction (LVD-MI).  The '069 patent recites a method of treating CHF with a combination of carvedilol and "one or more of an angiotensin-converting enzyme ("ACE") inhibitor, a diuretic, and digoxin."

Teva's ANDA was filed with a Paragraph III certification over the '067 patent and a Paragraph IV certification over the '069 patent.  The FDA tentatively approved Teva's generic product for "treatment of hypertension and heart failure" which Teva launched on expiration of the '067 patent.  Teva's label indicated that the product was approved for treatment of LVD-MI and hypertension and announced that the FDA had given its product an "AB rating" (which the opinion explained "allow[s] users to determine quickly whether the Agency has evaluated a particular approved product as therapeutically equivalent to other pharmaceutically equivalent products").  Thereafter, the FDA required Teva to amend its label to be identical to the GSK label for Coreg®, which introduced treatment of heart failure into the approved treatments recited in Teva's label.

GSK filed for reissue of the '069 patent which was duly granted by the U.S. Patent and Trademark Office as Reissue Patent No. RE40,000; claim 1 is representative of the invention as claimed in the '000 reissue patent:

1.  A method of decreasing mortality caused by congestive heart failure in a patient in need thereof which comprises administering a therapeutically acceptable amount of carvedilol in conjunction with one or more other therapeutic agents, said agents being selected from the group consisting of an angiotensin converting enzyme inhibitor (ACE), a diuretic, and digoxin,
    wherein the administering comprises administering to said patient daily maintenance dosages for a maintenance period to decrease a risk of mortality caused by congestive heart failure, and said maintenance period is greater than six months.

(Where the italicized portion of the claim represents the modifications introduced in prosecution of the reissue application.)

GSK filed suit against Teva for inducement of infringement based on the Teva label, based on direct infringement by physicians prescribing the drug for the label indications.  Teva argued that it had "carved out" the indication for CHF pursuant to 21 U.S.C. § 355(j)(2)(A)(viii), resulting in a "skinny label" with regard to this indication.  Thereafter, the FDA compelled Teva to amend its label to include that indication.  In addition, Teva argued that it could be liable for inducement only if GSK could show that Teva had "directly communicated with the direct infringers and 'caused' them to directly infringe the method in the '000 patent."  In a jury instruction, the District Court informed the jury that circumstantial evidence could be used to satisfy this burden.

The jury found that Teva induced infringement of the '000 reissue patent both before and after the label amendment (albeit infringing several claims after but not before that change).  The District Court granted Teva's motion for judgment as a matter of law (JMOL) on the basis that GSK had not "caused" physicians to prescribe their product for the infringing uses.  Because proof of such causation was required, according to the District Court, its absence precluded the jury from basing its decision on substantial evidence.  The Court relied on the "many sources of information available to prescribing physicians" other than Teva's label (including paradoxically GSK's label and promotion of its Coreg® product) in finding this evidentiary deficiency.  Also, the Court based its decision on physician testimony that their prescribing behavior relied on "guidelines and research, as well as their own experience" and not Teva's label.  "In sum," the Court said, "substantial evidence [did] not support the jury's finding on causation, and therefore [did] not support its verdict that Teva is liable for induced infringement, during both the skinny and full label periods."

On appeal the Federal Circuit reversed, in an opinion by Judge Newman joined by Judge Moore; Chief Judge Prost provided a lengthy, comprehensive dissent.  The panel majority relied on the Supreme Court's decision in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011), that copying is evidence of inducement, and also found compelling evidence from Teva's website regarding its product's AB rating with GSK's Coreg® product and other promotional content, as well as testimony from GSK's witnesses regarding physician reliance on information from generic drug makers.

The panel majority opined that the District Court erred in applying the incorrect legal standard, stating that "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."  Considering this precedent, the majority held that "[t]here was ample record evidence of promotional materials, press releases, product catalogs, the FDA labels, and testimony of witnesses from both sides, to support the jury verdict of inducement to infringe the designated claims for the period of the '000 reissue patent."

Then-Chief Judge Prost dissented based on her objections to the quanta of evidence adduced and policy consequences should the majority's position be sustained.  In the then-Chief's view, the majority's decision undermined the policy goals, embodied in the provisions of the law regarding skinny labels, for balance between the incentives patents provide for pharmaceutical innovation and the public's need for access to that innovation once the patent term has expired.  In her view, the majority's decision undermined these policy goals by finding Teva induced infringement by marketing its generic drug produce for unpatented uses (emphasis in dissent) using its skinny label.  The dissent not only disagreed with the majority's decision, but apprehended it to "nullify[y] Congress's statutory provision for skinny labels—creating liability for inducement where there should be none," contrary to Congressional intent and "slowing, rather than speeding, the introduction of low-cost generics."

The original majority opinion occasioned an outpouring of outrage from industry groups (particularly generic ones) who latched onto the then-Chief Judge's rhetoric in her dissent to the effect that the opinion eviscerated the congressional sanctioning of skinny labels.  The Court granted panel rehearing in February that resulted in the second opinion that was the subject of the Court's denial of en banc review.

The outcome did not change in that second opinion (although the explication of the process aspects of the majority, per curiam opinion were perhaps more explicit).  After reciting the procedural posture of this decision (as a panel rehearing), the majority addressed amici's concerns (amply represented in eleven amicus briefs, including a brief by one of the architects of the generic's law former Representative Henry Waxman).  The opinion recited with approval the behavioral distinctions underpinning the majority's decision based on the law with regard to skinny labels:

Generics could be held liable for actively inducing infringement if they marketed a drug with a label describing a patented therapeutic use or if they took active steps to encourage doctors or patients to use the drug in an infringing manner.  But generics could not be held liable for merely marketing and selling under a 'skinny' label omitting all patented indications, or for merely noting (without mentioning any infringing uses) that FDA had rated a product as therapeutically equivalent to a brand-name drug [emphasis in original].

Stating that the panel (or at least the majority) agreed to rehear arguments "to make clear how the facts of this case place it clearly outside the boundaries of the concerns expressed by amici, the opinion stated that the basis for their decision that the jury correctly found Teva liable for inducing infringement was "by marketing a drug with a label encouraging a patented therapeutic use (emphasis in opinion).  The opinion also stated more precisely the procedural basis for their opinion:  "[t]his is a case in which substantial evidence supports a jury finding that the patented use was on the generic label at all relevant times and that, therefore, Teva failed to carve out all patented indications."  The majority also emphasized that their decision was a "narrow, case-specific review of substantial evidence [that] does not upset the careful balance struck by the Hatch-Waxman Act regarding section viii carve-outs."  The remainder of the majority opinion set forth (extensively) the evidentiary basis for their opinion that there was sufficient evidence (including expert testimony and marketing efforts occurring both before and after FDA-mandated changes to Teva's label) to satisfy the substantiality standard, and that the District Court erred in granting Teva JMOL to the contrary (inter alia including specific errors in treating factual questions as legal ones that the majority state were "not this court or the district court, to resolve").

Former Chief Judge Prost remained unconvinced, in large part because this outcome (in her view) undermined the congressionally sanctioned skinny label regime (if only by rendering it much more case- and fact-specific than she perceived Congress intended).  The outcome-based philosophy of the dissent was presaged in its first sentence, where Judge Prost reminded the reader that "GSK's patent on carvediol expired in 2007" followed by the statement that "[b]ecause the FDA cannot authorize a generic version of a drug that would infringe a patent, this one remaining patented use could have prevented a less-expensive, generic carvedilol from coming to market altogether—even though the drug itself and other uses of it were unpatented."  The skinny label regime was Congress's solution to the "problem" it "saw coming" in Judge Prost's view.  The majority's decision thwarted this intent, according to Judge Prost, based on evidence of inducement that was "thin to nonexistent."  The District Court had properly exercised its supervisory role in remedying a situation where a jury came to the wrong conclusion Judge Prost concluded, based on her evaluation of the evidence before it.  The Judge sets forth her motivation for writing (once again) in dissent (and that the majority's attempt to provide a comforting standard falls short in her opinion):

I write in this case because far from being a disagreement among reasonable minds about the individual facts, this case signals that our law on this issue has gone awry.  I am particularly concerned with three aspects of the majority's analysis.  First, even setting aside the majority's willingness to glean intentional encouragement from a label specifically designed to avoid encouragement, the majority further weakens the intentional-encouragement prong of inducement by effectively eliminating the demarcation between describing an infringing use and encouraging that use in a label.  Second, the majority defies basic tort law by eviscerating the causation prong of inducement.  The upshot of these two moves is that a plaintiff now has to show very little for a jury to speculate as to the rest.  Third, the majority creates confusion for generics, leaving them in the dark about what might expose them to liability.  These missteps throw a wrench into Congress's design for enabling quick public access to generic versions of unpatented drugs with unpatented uses.

The decision by the full Court was announced in a simple Order to that effect, noting that Judges Lourie and Cunningham did not participate in the decision.  The Order was accompanied by three written dissents:  one by Judge Prost, joined by Judges Dyk and Reyna; another by Judge Dyk writing alone, and the third by Judge Reyna.  The majority of Chief Judge Moore and Judges Newman (who was the third member of the original panels), O'Malley, Taranto, Chen, and Stoll.  Judge Prost's dissent calls the decision not to rehear the case en banc "disappointing," insofar as the issues "affect[] millions of Americans," and she terms the Court's refusal to rehear en banc an "abdication of [the] responsibility [to review issues at the intersection of patent law and pharmaceutical regulation]."  The dissent characterizes the majority's treatment of the regulatory and statutory processes involved in obtaining skinny label regulatory approval as "quite unsatisfactory," saying the majority "refuses to confront the obvious question:  how could this label, which faithfully followed what the brand said about its own patents and which the FDA required Teva to use, itself be evidence that Teva intentionally encouraged something it knew would infringe?"  As a consequence of the majority decision, "no skinny-label generic is safe" in Judge Prost's view.  This is because "most skinny labels contain language that (with clever expert testimony) could be pieced together to satisfy a patent claim," as asserted by several amici (one of whom, Mylan Pharmaceuticals, termed this the "Where's Waldo" approach).  This outcome is contrary to Congressional intent, in Judge Prost's view, which was for generic companies to avoid inducement liability under skinny-label circumstances (emphasis in dissent).  Generic drug companies who follow FDA guidelines for skinny labels are "play[ing] by the skinny-label rules" she writes, and "[e]ven if remaining label language might be pieced together to 'meet' the elements of a patent claim, the extent to which that's true is an unreliable gauge of a generic's 'intent' in this highly regulated area; it can't meaningfully separate the liable from the lawful."  And she notes the consequences stemming from the generic drug maker's economic model by illustration:  Teva's revenues ("having made no profit," which is a bit curious), according to the dissent, were $74 million but the judgement below for inducing infringement was $234 million.  Under these circumstances, "generics simply won't play."  Judge Prost concludes her dissent by addressing what she considers inaccuracies in the majority's concurrence regarding arguments she believes were made but that the concurrence asserts were not, and its characterizations of her concerns to be fairness, when Judge Prost maintains those concerns are based on "what inducement law permits in view of the Hatch-Waxman Act.

Judge Dyk's dissent writes "to further elaborate why there cannot be infringement liability for using a label required by the FDA during the partial label period at issue in this case."  These elaborations are based on the extent to which Teva was obligated under law to accept the label mandated by the FDA in making it's Section viii carve-out which is did (". . . FDA provided Teva with a redline for its skinny label, carving out the patented indication for congestive heart failure from GSK's branded label and keeping the remaining uses in the label").  Judge Dyk points out that, "[i]n In similar circumstances where states have sought to impose tort liability on generic drug manufacturers for using the label required under federal law, the Supreme Court has made clear that federal law preempts tort liability on the part of the manufacturers," citing Mutual Pharm. Co. v. Bartlett, 570 U.S. 472, 476 (2013), and PLIVA, Inc. v. Mensing, 564 U.S. 604, 609 (2011).  There is, in Judge Dyk's view a conflict between "FDA-required labeling" and the law of infringement, and using "[c]anons of statutory construction" concludes that the "more specific and later-enacted provisions of the Hatch-Waxman Act override the general infringement provisions of the Patent Act," citing United States v. Estate of Romani, 523 U.S. 517, 532 (1998); Morton v. Mancari, 417 U.S. 535, 550–51 (1974); Bulova Watch Co. v. United States, 365 U.S. 753, 758 (1961); and Rodgers v. United States, 185 U.S. 83, 87–89 (1902).  And Judge Dyk disagrees with the concurrence substantially along the same lines as Judge Prost does in her dissent.

Finally, Judge Reyna in a brief dissent asserts that "the briefs, the majority opinion, the dissent, and the number of amicus briefs filed to date" satisfy the provisions of the Court's Internal Operating Procedure No. 13(2)(b) for rehearing en banc issues of "exceptional importance."

Chief Judge Moore's concurring opinion illustrates an interpretation of Judge Prost's dissent that the majority and the dissenting judges interpreted very differently what had gone on below and before the Federal Circuit in the two prior appearances before the panel.  Judge Moore begins by the simple assertion that the dissent's basis for en banc review were "legal positions that Teva has not asserted or developed," reciting a litany.  The argument, according to the Chief, was simply "whether, considering all the facts, substantial evidence supports the jury's verdict that Teva actively encouraged infringement."  But Chief Judge Moore affirmatively asserts that "Teva never argued that there was a conflict between the FDA regulatory framework and patent law (as the dissents now claim); nor did it argue that the partial label was not evidence relevant to or otherwise impermissible for deciding inducement (as the dissents now suggest).  She characterizes the majority's opinion as being "narrow and fact dependent," supported by how one district court has interpreted the opinion, see Amarin Pharma, Inc. v. Hikma Pharma. USA Inc., No. 1:20-cv-1630 (D. Del. Jan. 4, 2022).  But the "cobbling together" argument made in Judge Prost's dissent was considered by the panel because Teva made that argument, which in a footnote the Chief terms "a non-starter" based on instances where the Court "regularly allow claim elements to be found in different portions of a label" and citing as an example  Sanofi v. Watson Lab'ys Inc., 875 F.3d 636, 646 (Fed. Cir. 2017).  The concurrence apprehends the dissents arguments to be grounded in fairness (a characterization Judge Prost's dissent directly rejects), based on the label not supporting the intent required by the statute (quoting extensively from Judge Prost's rhetoric about "playing by the skinny-label rules").  While expressing concern that "GSK's representations to the FDA are at odds with its enforcement efforts in this case" and "[i]t would be troubling to hold Teva liable for relying on GSK's representations to the FDA," "that concern does not readily fit the standards governing inducement."  The concurrence sees a possible solution in the doctrine of equitable estoppel, which provides a possible remedy on remand in the Chief's view.  And while Judge Prost thinks little of this use of equitable estoppel in this or any skinny-label instance, Chief Judge Moore asserts that the principles of equitable estoppel ("misleading conduct, reliance, and prejudice") "track this three-element framework precisely" and provide an analysis of this argument (saying "[t]his theory fits the textbook structure of an  equitable estoppel argument").  Chief Judge Moore believes it better to permit this argument to be asserted on remand and then, under appropriate circumstances, return to the Court for review.

These considerations on remand suggest that for the parties it isn't over.  And to the extent that the Chief is correct that district courts (albeit using a N=1) have interpreted the panel decision parsimoniously perhaps Judge Prost's concerns about the effect the panel opinion will have on generic manufacturers' use of skinny labels are overblown.  And perhaps also these sentiments, although not binding will help define the contours of the District Court's application of the opinion and its effect on skinny-label practices.  Provided the panel decision does not significantly inhibit skinny-label practice these issues are sure to recur and be the subject of additional Federal Circuit decisions which will make the consequences of this decision, and the Federal Circuit's decision not to review the panel opinion en banc, more evident.

GlaxoSmithKline LLC v. Teva Pharmnaceuticals USA (Fed. Cir. 2022)
Per curiam order
Chief Judge Moore, joined by Circuit Judges Newman, O'Malley, Taranto, Chen, and Stoll, concurs in denial of petition for rehearing en banc; Circuit Judge Prost, joined by Circuit Judges Dyk and Reyna, dissents from denial of petition for rehearing en banc; Circuit Judge Dyk dissents from denial of petition for rehearing en banc; Circuit Judge Reyna dissents from denial of petition for rehearing en banc