AuthorBell, Jonathan A.
  1. INTRODUCTION 660 II. PHARMACEUTICALS AND PATENT LAW 661 A. The Patent Bargain 661 B. The Hatch-Waxman Act's Dual Purposes 663 C. Skinny Labels 665 III. CARVEDILOL, THE PATENTS-IN-SUIT, AND TEVA'S SKINNY LABELS 667 A. Carvedilol 667 B. Patents-in-Suit 668 C. Teva's Skinny Labels 669 IV. GSK V. TEVA AT THE FEDERAL CIRCUIT 670 A. The Majority Decision 671 1. Induced Infringement 671 2. Causation 674 B. Judge Prost's Dissent 674 1. Lack of Induced Infringement 675 2. A Dire Warning 676 V. SKINNY LABELS "GONE AWRY" 677 A. Conflict with Dual Purposes of Hatch-Waxman 677 B. A Shift in Precedent 679 C. Going Forward 682 1. The FDA's Role in Induced Infringement 682 2. A Surprising Solution 683 VI. CONCLUSION 687 I. INTRODUCTION

    In July 2014, international pharmaceutical giant GlaxoSmithKline (GSK) sued the generics company Teva Pharmaceuticals (Teva) for induced infringement of patents related to the congestive heart failure drug carvedilol. (1) Following a seven-day trial, a jury found Teva had willfully induced infringement of GSK's carvedilol patent by encouraging doctors to prescribe generic carvedilol for a patented off-label use--that is, the use still covered by GSK's remaining patent. (2) The district court disagreed and found for Teva as a matter of law. (3) On appeal, the Federal Circuit reversed in a 2-1 decision. (4) However, the opinion was met with sharp backlash, including media criticism, (5) several amicus briefs, (6) and ultimately a petition for rehearing. (7)

    On rehearing, the same Federal Circuit panel once again found for GSK, but issued a new decision aimed at tempering the backlash the original received. (8) The majority panel was unsuccessful in their endeavor to calm concerns. (9) Amici, legal commentators, and academics decried the new opinion as an existential threat to the entire generic pharmaceutical market. (10) Despite these concerns, a majority of the Federal Circuit denied Teva's petition for rehearing en banc. (11) The case is currently on remand to the District of Delaware. (12) The district court must decide a pending equitable estoppel defense--a theory of the case the majority of the Federal Circuit appears to view favorably. (13)

    This Note seeks to explore this revised decision and its implications for the continued existence of the generics pharmaceutical market in the United States. Part II of this paper overviews the Hatch-Waxman Act and previews the concept of "skinny labeling." Part III overviews the factual background of the case, including the patenting, labeling, and marketing of carvedilol. Part IV then details the rationale of the Federal Circuit panel, as well as the dissenting opinion of Judge Prost. Finally, Part V argues that this decision, despite the alarm it produced, is the inevitable result of a subtle but consistent shift in Federal Circuit jurisprudence over the past decade. Part V then proposes a new "carveout" to induced infringement liability for generic pharmaceuticals more aligned with the dual purposes of the Hatch-Waxman Act.


    1. The Patent Bargain

      Any inventor who "invents or discovers any new and useful process" (14) that satisfies statutory requirements of patentable subject matter, (15) utility, (16) novelty, (17) nonobviousness, (18) and who enables "any person skilled in the art to which it pertains" to understand their patent, (19) is granted "the right to exclude others from making, using, or selling the invention throughout the United States" for a period of 20 years. (20) This exchange--exclusivity for disclosure--embodies the "carefully crafted bargain" of patent law. (21)

      The pharmaceutical industry as we know it would not exist without this patent bargain. (22) "Due to the high costs of researching diseases, developing treatments, and traversing the FDA approval process, patents are thought to be necessary to encourage pharmaceutical companies to develop and commercialize new therapies." (23) Patent protections following these research, development, and regulatory costs are arguably necessary incentives for pharmaceutical companies to bring a drug to market and disclose their inventions to the public. (24) The belief that patent incentives drive innovation is inherent to patent law itself. (25) The monopoly granted by the patent is thought to provide the motivation for an inventor to invent in the first place.

      Due to "[l]engthy development times, extensive clinical trials and regulatory requirements, and the low probability of success," pharmaceutical companies regard patent protection as a necessary and proper tool for recuperating research and development costs within the industry. (26) Thus, pharmaceutical companies must be profit-motivated in order to deliver life-saving medication. (27) However, these high costs and patent-granted monopolies create a conflict with the consumer/patient: while drugs may be available for consumption, they are often inaccessible due to price. (28) This problem is particularly pronounced in the United States, where brand-name drug prices are often 30-40% higher than in other developed countries. (29) This problem is only compounded when considering Americans' lower rate of drug insurance. (30) To help rebalance this conflict between innovation and access, Congress enacted the Hatch-Waxman Act. (31)

    2. The Hatch-Waxman Act's Dual Purposes

      The Drug Price Competition and Patent Term Restoration Act of 1984, (32) commonly known as the Hatch-Waxman Act, struck "a balance between two competing policy interests: (1) inducing pioneering research and development of new drugs and (2) enabling competitors to bring low-cost, generic copies of those drugs to market." (33) The Act specifically sought to strike that balance "at the close of a patent term," thus ensuring a branded drug enjoys the full length of its patent term while allowing a generic drug to quickly enter the market upon that patent's expiration. (34) To strike this balance, the Act created an expedited pathway for generic drug approval, a statutory "safe harbor" to shield generic drug manufacturers from allegations of patent infringement, and patent term extensions for pioneer drugs. (35)

      The Hatch-Waxman Act established the Abbreviated New Drug Application (ANDA), a new process for seeking market approval for a drug. (36) A generic pharmaceutical company may file an ANDA for a generic drug if the active ingredient of the drug is "bioequivalent" to the listed or reference product. (37) Further, "[a]n ANDA allows a generic drug manufacturer to rely on safety and efficacy data developed by the original manufacturer" when obtaining its approval. (38)

      In an ANDA, a generic manufacturer must make one of four certifications to the Food and Drug Administration (FDA) regarding patents for the reference brand-name product: (1) that no such patent exists, (2) that such patent has expired, (3) that such patent will expire by a specified date, or (4) "that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted." (39) These certifications are referred to as paragraph I, II, III, and IV certifications, respectively. (40)

      The filing of an ANDA with a paragraph IV certification constitutes a "somewhat artificial" act of patent infringement. (41) The Hatch-Waxman Act specifically requires the generic manufacturer to notify the branded patent owner of the patents that are the subject of a paragraph IV certification. (42) The patent owner may then sue an ANDA applicant for infringement in a federal district court. (43) This process is aimed at providing "sufficient time [for the parties] to resolve their patent dispute before the ANDA applicant introduce[s] its generic product to the market." (44)

      Alternatively, an ANDA applicant may seek approval through a section viii "carve-out" statement. (45) Through ANDA, a generic drug applicant may seek a limited approval of some methods of use that are not patent-protected--and are not listed in the "Orange Book." (46) The Orange Book is the name commonly used to refer to the FDA's list of approved drugs, published as Approved Drug Products with Therapeutic Equivalence Evaluations. (47) The Orange Book, in theory, should list all patents related to an approved drug, including both composition (48) and method of use patents. (49)

      Essentially, section viii statements allow a generic ANDA applicant to remove or "carve out" specified, patent-protected indications for a new drug. (50) A section viii statement will explain that the ANDA applicant does not seek approval for a patent-protected use and that the uses for which it does seek approval are not currently protected by a patent. (51) After still-patented uses are "carved out," what remains is a skinny label. (52) Together patent term extensions and multiple paths to an ANDA satisfy the dual purposes of the Hatch-Waxman Act: patent extensions incentivize brand-name pharmaceuticals to develop and pioneer new drug discoveries, and ANDA pathways incentivize generic pharmaceutical companies to bring cheap alternative drugs to market. (53)

    3. Skinny Labels

      Briefly, before discussing the principal case, an explanation of "skinny labels" is necessary. Drug labels constitute the printed information packaged with any drug product and are highly regulated by the FDA. (54) A drug label includes a description of the drug, its indications (approved uses), warnings, adverse events, dosage and administration information, clinical safety data, and more. (55) Method patents often, but not always, protect the indications listed on a drug label following clinical development by a brand-name pharmaceutical company. (56) When that method patent expires, a generic company will often begin the process of bringing a generic drug equivalent to market, and in the process create a skinny label. (57) This borrowed hypothetical is illustrative:

      Suppose a hypothetical brand-name...

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