Judges: Rader (author), Clevenger (concurring), Dyk (dissenting) [Appealed from E.D. Mich., Senior Judge Cohn]

In Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories, Ltd., No. 10-1001 (Fed. Cir. Apr. 14, 2010), the Federal Circuit reversed and vacated the district court’s injunction ordering plaintiffs to replace the current Orange Book use code of a pharmaceutical product with its former use code listing.

Novo Nordisk A/S and Novo Nordisk, Inc. (collectively “Novo”) market and distribute the drug repaglinide under the brand name Prandin® as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes (noninsulin dependent diabetes mellitus). The FDA has approved Prandin® for three uses: (1) repaglinide by itself (i.e., monotherapy); (2) repaglinide in combination with metformin; and (3) repaglinide in combination with thiazolidinediones (“TZDs”).

As part of the NDA approval process, Novo identified two patents that claimed repaglinide or a method for its use: U.S. Patent No. RE 37,035 (“the ’035 patent”), which is directed to the chemical composition of repaglinide; and U.S. Patent No. 6,677,358 (“the ’358 patent”), which is directed to repaglinide in combination with metformin, one of the FDA-approved uses. Novo does not own patents claiming the other two approved methods of using repaglinide to treat type 2 diabetes.

To obtain approval from the FDA for the ’358 patent, Novo was required to submit, in addition to the patent number and expiration date, a description, called a “use code narrative,” of the claimed method of use of repaglinide. The FDA then assigned a unique number, known as a “use code,” to that description for inclusion in the Orange Book. The FDA initially assigned the ’358 patent the use code “U-546–Use of repaglinide in combination with metformin to lower blood glucose” and approved the Prandin® NDA.

In 2005, Caraco Pharmaceutical Laboratories, Ltd. (“Caraco”) filed an ANDA to obtain approval to market generic repaglinide. As part of the ANDA process, Caraco was required under 21 U.S.C. § 355(j)(2)(A)(vii) to make a certification to the FDA addressing each patent identified in the Orange Book pertaining to Prandin®. Caraco initially provided a “Paragraph III” certification for the ’035 patent stating that the patent is set to expire on a certain date and a “Paragraph IV” certification for the ’358 patent stating that the patent is invalid or will not be infringed by the manufacture, use, or sale of the generic drug. Novo initiated an infringement action against Caraco.

In 2008, Caraco stipulated that its ANDA would infringe the ’358 patent if it included a label that discussed the combination of repaglinide and metformin. At around the same time, Caraco submitted an amended ANDA with a Paragraph IV certification for the ’358 patent. Caraco also submitted, under 21 U.S.C. § 355(j)(2)(A)(viii), a “section viii statement” declaring that it was not seeking approval for the repaglinide-metformin combination therapy, but only approval for a use not covered by a method-of-use patent for repaglinide. Caraco also submitted a proposed “carve-out” label to the FDA that did not contain the patented method of using repaglinide.

When considering approval of requests for a use not covered by a patent, the FDA relies on the applicable patent’s use code narrative to determine the scope of the patented method. “The FDA approves the section viii statement only where there is no overlap between the proposed carve-out label submitted by the generic manufacturer and the use code narrative submitted by the pioneering manufacturer.” Slip op. at 4. Based on the use code originally assigned to the ’358 patent in its Orange Book listing for Prandin®, U-546, the FDA initially indicated that it would approve Caraco’s proposed carve-out label. Novo moved for reconsideration.

In 2009, as explained in Judge Dyk’s concurring opinion, the FDA requested a change to the approved indications for Prandin®, which required Novo to use the FDA’s new approved labeling. The change in labeling permitted Novo to revise its use code narrative for the ’358 patent to match the new Prandin® indication. Based on Novo’s revised use code narrative for the ’358 patent, the FDA removed the use code U-546 from the Orange Book for Prandin® and replaced it with use code “U-968–A method for improving glycemic control in adults with type 2 diabetes mellitus.” The new use code was no longer limited to repaglinide in combination with metformin. As a result, the FDA disallowed Caraco’s section viii statement because its proposed carve-out label overlapped with the new use code U-968 for the ’358 patent. The FDA also denied Novo’s request for reconsideration as moot in light of the new use code. Caraco’s current label now includes the repaglinide-metformin combination therapy.

In response, Caraco amended its answer and counterclaim in the ongoing infringement action. Caraco added a counterclaim under 21 U.S.C. § 355(j)(5)(C)(ii) and requested an order requiring Novo to change the use code for the ’358 patent in reference to Prandin® from U-968 back to U-546. Caraco claimed that the use code U-968 was overbroad because it incorrectly suggested that the ’358 patent covered all three approved methods of using repaglinide even though it claimed only one approved method. Caraco also added a patent misuse defense, asserting that Novo misrepresented the scope of the ’358 patent in its use code narrative.

The district court granted Caraco’s motion for SJ on the counterclaim and declined to address the patent misuse defense. The district court found that Novo had improperly filed an overbroad use code narrative for the ’358 patent and entered an injunction requiring Novo to submit to the FDA an amended use code narrative that reinstates its former U-546 use code listing for Prandin®. Novo filed a motion for an expedited appeal. The Federal Circuit stayed the injunction pending disposition of the expedited appeal.

On appeal, the Federal Circuit first addressed whether the Hatch-Waxman Act authorized Caraco to assert a counterclaim seeking to reinstate the original use code listing for Prandin®. The Act authorizes the generic manufacturer, Caraco, to assert a counterclaim “on the ground that the patent does not claim either (aa) the drug for which the application was approved; or (bb) an approved method of using the drug.” Id. at 9 (emphases omitted) (citing 21 U.S.C. § 355(j)(5)(C)(ii)(I)). The Court found no ambiguity in the statutory language and concluded that, on its face, the Act authorizes a counterclaim “only if the listed patent does not claim any approved methods of using the listed drug.” Id. at 10. The Court further examined the legislative history of the Act and confirmed that it does not contain any clear intent to the contrary.

“[T]he Hatch-Waxman Act authorizes a counterclaim only if the listed patent does not claim any approved methods of using the listed drug.” Slip op. at 10.

There was no dispute that the ’358 patent claims one of the three approved methods of using Prandin®. The Court also noted that, in the context of this case, the statutory language “an approved method of using the drug” cannot refer to the methods of using Caraco’s generic drug, because the FDA has not yet approved Caraco’s ANDA. The Court concluded that because the ’358 patent asserted an approved method of use, Caraco was precluded from asserting a counterclaim under the Hatch-Waxman Act.

The Court further addressed the relationship between section viii and the counterclaim provision. The Court recognized that a broad use code covering all uses of a pharmaceutical could require generic manufacturers to prove, through a Paragraph IV lawsuit, that their use will not overlap with and infringe the patented use. The generic manufacturer will need to alleviate the risk of infringement or induced infringement in a proceeding that fully tests for infringement and its implications, including potential health and safety risks. The Court stated that requiring such a showing will ensure that a generic drug for nonpatented purposes will not be used for patented purposes via a simple section viii certification. The Court further noted that had it not been for the FDA’s regulatory action, Caraco could have asserted in a Paragraph IV lawsuit that its proposed labeling did not infringe the ’358 patent.

The Court also further addressed whether the Hatch-Waxman counterclaim provision authorizing an order compelling the patent holder to correct or delete the “patent information” submitted by the holder authorized an order compelling the patent holder to change its use code narrative. The Court found that the term “patent information” is defined under the Act as the patent number and the expiration date. The Court noted that although an FDA regulation appeared to include the use code narrative under the broad heading of “patent information,” it did not change the meaning of the statutory use of the term “patent information.” The Court stated that it owes no deference to agency interpretations at odds with the plain language of the statute itself, and found that the legislative history did not add any clarity to the meaning of “patent information.” Moreover, in the Court’s view, applying a broader definition of “patent information” would “upset the careful balance that requires a full resolution of the potential infringement issues involved in overlapping patented and unpatented uses.” Id. at 14. The Court concluded that the counterclaim provision only authorizes suits to correct or delete an erroneous patent number or expiration date and does not extend to the use code narrative.

Finally, Caraco sought, in the alternative, affirmance of the district court’s injunction under the doctrine of patent misuse. The Court noted that the district court expressly declined to address the doctrine of patent misuse, and declined to adjudicate the issue in the first instance. The Court reversed the district court’s grant of SJ on Caraco’s counterclaim and vacated the injunction ordering Novo to correct its use code for the ’358 patent listed in the Orange Book for Prandin®.

In a dissenting opinion, Judge Dyk found “the majority’s crabbed view of the [Hatch-Waxman Act] sanctions an unjustified manipulation of the Orange Book.” Dyk Dissent at 27. In Judge Dyk’s view, the Act plainly contemplates that “patent information” includes information that describes the scope of the patent and that relates the patent to the drug or method of use, that all Orange Book information is “patent information,” and that the FDA’s regulatory interpretation of “patent information” is entitled to deference.

Judge Dyk also found that the change in labeling for Prandin® required by the FDA did not require Novo to revise its use code narrative and noted that Novo conceded at oral argument that the decision to change the use code was in part a response to the section viii ruling from the FDA concerning Caraco’s proposed carve-out label. Judge Dyk concluded that the Court’s decision “strikingly limits the [Hatch-Waxman] counterclaim provision with the consequence that, in all likelihood, the ANDA applicant is left without any remedy to correct an erroneous Orange Book listing with respect to a method of use patent” and suggests that this cannot be what Congress intended. Id.