Last Friday (GSK v. Teva), a split panel of the Federal Circuit (“CAFC”) may have drastically limited the effectiveness of Section viii carve-outs when it reinstated a $235 million jury verdict against Teva, concluding that substantial evidence supported the jury’s finding of induced infringement.  Patent owner GlaxoSmithKline (“GSK”) sued Teva in the District of Delaware for infringement of Reissue Patent No. RE40,000 covering a method of using carvedilol, sold under the brand name Coreg®, to treat congestive heart failure (“CHF”).  After a jury verdict that Teva willfully induced infringement, Delaware’s Chief Judge Stark granted Teva’s motion for judgement of non-infringement as a matter of law, acknowledging that Teva’s “skinny label” carved-out the CHF indication.  But GSK appealed and CAFC reversed, finding substantial evidence of inducement.

When Teva filed its ANDA in 2002 seeking to market its generic carvedilol product, it submitted a Paragraph III Certification for a compound patent, and a Paragraph IV Certification for the predecessor patent to the ’000 reissue.  GSK did not bring suit at that time, so when the compound patent expired in 2007, Teva launched its generic product.  At launch, Teva’s “skinny label” included indications for hypertension and left ventricular disfunction, but carved-out the CHF indication covered by the ’000 reissue (which issued in 2008).  But in 2011, based on some unusual circumstances, the FDA required Teva to amend its label to be “identical in content” to the Coreg® label by adding the CHF indication.  GSK filed suit for infringement of the ’000 reissue in 2014.

Teva argued at trial that because it carved-out the CHF indication from its label, it did not encourage physicians to infringe the ’000 reissue.  While the jury nevertheless found Teva liable for induced infringement and damages, the verdict was short-lived.  Judge Stark granted Teva’s motion for JMOL, finding the verdict unsupported by substantial evidence because GSK was required to prove that Teva’s own actions induced infringement, as opposed to other actions, such as those by the branded company or by independent physicians.  Judge Stark concluded that it was non-Teva actions, like dissemination of the Coreg® label and various industry guidelines, that led physicians to prescribe Teva’s carvedilol product for CHF.

On appeal, GSK argued that precedent dictates induced infringement may be shown by evidence that the accused inducer promoted the infringing use with knowledge that such use directly infringes.  CAFC agreed, citing evidence that Teva’s promotional materials referred to its carvedilol tablets as “AB rated” equivalents of the Coreg® tablets, which would lead prescribers to believe the generic is therapeutically interchangeable with Coreg® including for use as a cardiovascular agent.  Teva again argued that it could not be liable for inducement because it had deliberately omitted the CHF indication from its label.  Nevertheless, CAFC found there 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,” reversing the grant of JMOL.

Notably, the damages award encompassed sales made by Teva before the FDA forced it to add the CHF indication to its label.  So the unique circumstance of FDA later requiring the full label does not appear to have been vital to the jury’s or CAFC’s inducement determination.

In a lengthy dissent, Chief Judge Prost laid out what is sure to concern generic drug-makers: GSK v. Teva seems to eviscerate the Section viii carve-out.  Reflecting on the legislative goals behind the statutory carve-out, she reasoned that Congress had provided for skinny labels for precisely this circumstance:  to ensure that claims directed to discrete uses of a drug do not prevent companies from marketing lower cost generics for non-patented indications.  She warned that “[b]y finding inducement based on Teva’s skinny label, which was not indicated for—and did not otherwise describe—the patented method, the Majority invites a claim of inducement for almost any generic that legally enters the market with a skinny label. That is directly contrary to Congress’s intent.”  Given the seemingly grave implications of this decision, we certainly expect to see Teva move for rehearing en banc.  We will be monitoring.