Supreme Court Update: Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S (10-844), Mohamad v. Palestinian Authority (11-88) and Order List

April 25, 2012 Supreme Court Update

Greetings, Court fans!

The unanimous decisions continued last week with Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S (10-844), holding that a generic drug manufacturer may bring a counterclaim against a brand-name drug manufacturer for providing an inaccurate description of the brand's patent, and Mohamad v. Palestinian Authority (11-88), holding that the Torture Victims Protection Act of 1991 authorizes suits only against natural persons.

In Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S (10-844), the Court held that if a generic drug manufacturer is sued for patent infringement by a brand-name drug manufacturer, the generic manufacturer has a statutory right to bring a counterclaim to force the brand manufacturer to correct an inaccurate "use code" – i.e., a description of the brand's patent as covering a particular method of using the drug – that the brand manufacturer has submitted to the FDA. By way of background, before marketing a new drug, a brand manufacturer must submit a detailed application to the FDA describing the drug's components and documenting its safety and efficacy. Once the FDA has approved a brand-name drug, other manufacturers may seek to market generic versions by filing abbreviated applications showing that the generic drug has the same ingredients as the brand-name drug, without providing independent evidence of its safety and efficacy. A generic manufacturer generally can't piggy-back on a brand manufacturer's work right away, however – the brand manufacturer will hold patents protecting the drug compound and/or a particular method-of-use for some time. To facilitate the approval of generic drugs as soon as patents allow, brand manufacturers are required to submit the patent number and expiration date of any claimed patents. FDA regulations further require brand manufacturers to submit a description, known as a "use code," for any method-of-use patents. The FDA does not verify – and claims it lacks the expertise and authority to verify – the accuracy of brand manufacturers' submitted use codes. The FDA simply publishes the use codes, along with their patent numbers and expiration dates, in a "fat, brightly hued volume called the Orange Book (less colorfully but more officially denominated Approved Drug Products with Therapeutic Equivalence Evaluations)."

Where a patent allegedly covers a brand name drug, a manufacturer seeking FDA approval to market a generic version of the drug must either (1) submit a "section viii" statement demonstrating that its proposed use is not covered by any of the brand's patents, or (2) file a "paragraph IV certification" challenging the validity of the patent. The patent statute treats the filing of a paragraph IV certification as an act of infringement itself, giving the brand an immediate right to sue. If the brand sues, it can generally prevent the FDA from approving the generic for 30 months or until a court finds the patent invalid or not infringed. In the late 1990's, the Federal Trade Commission reported that some brands were submitting inaccurate patent information – which they knew the FDA would accept at face value – to prevent or delay the marketing of generic drugs. Congress responded by giving generic manufacturers sued for patent infringement the right to assert a counterclaim to require the brand to "correct or delete" its submitted patent information "on the ground that the patent does not claim either (aa) the drug for which the [brand's application] was approved; or (bb) an approved method of using the drug."

In this case, Respondent Novo manufactured a brand-name version of the diabetes drug repaglinide. The FDA had approved the use of repaglinide alone, repaglinide with metformin, and repaglinide with another drug (thiazolidinidiones, if you must know). For the purposes of this case, Novo's only relevant patent was for the repaglinide with metformin method-of-use. When Petitioner Caraco sought to market its generic drug, it filed a paragraph IV certification stating that Novo's patent was "invalid or [would] not be infringed." Novo predictably brought suit. At the time, Novo's use code described its patent as covering "[u]se of repaglinide in combination with metformin to lower blood glucose." The FDA told Caraco that as long as it didn't seek to market repaglinide with metformin, it could just submit a section viii statement. Caraco did so, but then Novo changed its use code to describe its patent more expansively, as "[a] method for improving glycemic control in adults with type 2 diabetes." Because the new use code appeared broad enough to cover all three approved uses, the FDA told Caraco that it couldn't use a section viii statement to bring its drug on the market after all. Caraco filed a statutory counterclaim seeking an order requiring Novo to correct its use code because its patent did not actually claim two of the three approved uses. The District Court granted summary judgment to Caraco. But the Tenth Circuit reversed, for two reasons. First, the Tenth Circuit interpreted the statute, which permitted counterclaims when "the patent does not claim . . . an approved method of using the drug" as permitting counterclaims only when the patent did not claim any approved method of using the drug. Here, Novo's patent claimed at least one of the three approved uses. Second, the Tenth Circuit held that the counterclaim provision did not reach use codes because they were not "patent information" as described in the statute.

The Court roundly, and unanimously, reversed. Writing for the Court, Justice Kagan did her best to make the technical subject matter entertaining. Starting with the text of the statute, the Court found that the meaning of "not . . . an approved use" was ambiguous. It could mean, as Caraco argued, "not a particular one." For example, if your spouse told you that he got lost because he "did not make a turn," you would understand that he failed to make a particular turn, not that he drove all the way in a straight line. Or, it could mean, as Novo argued and the Tenth Circuit held, "not any." As Justice Kagan put it: "if a sports-fan friend bemoans that ‘the New York Mets do not have a chance of winning the world series,' you will gather that the team has no chance whatsoever (because they have no hitting)." The statutory context, however, better supported Caraco's position. The statutory scheme contemplates that a single drug will have multiple methods of use, only one or some of which are protected by patent – that's why brand manufacturers are required to provide use codes for publication in the Orange Book. The purpose of the counterclaim is to allow a generic manufacturer to challenge a brand's assertion of rights over the particular use or uses the generic manufacturer wishes to pursue. Novo and the Tenth Circuit's position would allow brand manufacturers to duck counterclaims for uses they don't have patents for, as long as they have a patent for some use. Novo further argued that Congress could have expressly limited "an approved use" to a particular use, but didn't. The Court rejected that argument as well, with language that may come in handy elsewhere: "[T]he mere possibility of clearer phrasing cannot defeat the most natural reading of a statute; if it could (with all due respect to Congress), we would interpret a great many statutes differently than we do." The Court also made quick work of Novo's argument that use codes are not "patent information" as described in the statute. Although the statute does not define "patent information," use codes must qualify, as they purport to describe the method of use claimed in a patent, and are submitted pursuant to the statute's implementing regulations. Finally, the Court observed that Novo's position would be inconsistent with the statute's language that a successful counterclaimant could obtain an order requiring the brand to "correct" or "delete" its patent information. If "an" meant "any," there would never be any reason to "correct" information, it would have to be all or nothing.

If you're left with the sense that this is all more complicated than it needs to be, Justice Sotomayor shares your pain. In a concurring opinion, she lamented the "difficulties created by an overly broad use code" and the FDA's "remarkably opaque" guidance as to what is required of brand manufacturers. While Sotomayor agreed with the Court's reading of the statute, in her view, "the counterclaim cannot restore the smooth working of a statutory scheme thrown off kilter" by an overly broad use code: "A fix is in order, but it must come from Congress or the FDA."

Next, in Mohamad v. Palestinian Authority (11-88), the Court unanimously concluded that the Torture Victims Protection Act of 1991 (TVPA) authorizes suits only against natural persons and not organizations. Thus, notwithstanding the State Department's conclusion that Azzam Rahim died in the custody of Palestinian Authority intelligence officers, his Estate could not sue the Palestinian Authority under the TVPA for Rahim's alleged torture and eventual death.

Led by Justice Sotomayor, the Court's analysis was brief. The TVPA provides a remedy where "[a]n individual who, under actual or apparent authority, or color of law, of any foreign nation" subjects another "individual" to torture or extrajudicial killing. While "individual" is not defined by the TVPA, its common dictionary meaning refers to a human being, not an entity. "No one, we hazard a guess, refers in normal parlance to an organization as an ‘individual.'" Indeed, statutes often use the term "individual" to distinguish between a national person and an entity. For example, the Dictionary Act generally requires courts to construe the word "person" to include "corporations, companies, associations . . . as well as individuals." Further, the TVPA uses the word "individual" once to describe the perpetrator of the torture/killing and numerous times to describe the victim, who could only be a human being. It would be odd to construe the same word differently within the same statute. While the Court found resort to legislative history unnecessary given the TVPA's language clear, it nevertheless concluded that the TVPA's legislative history supported its conclusion. Specifically, Congress had considered a prior version of the TVPA that would have used the broader term "person," rather than "individual." That version was amended to narrow the scope of the TVPA to "individuals." (To make a point, Scalia – who really doesn't like legislative history – didn't join this portion of the decision.) Justice Breyer wrote a brief concurrence to state his view that the term "individual" does not obviously refer only to human beings, but given the context of the TVPA and its legislative history, Breyer agreed with the Court's conclusion.

In other news, the Court has granted cert in Kirtsaeng v. John Wiley & Sons, Inc. (11-697) concerning § 602(a)(1) of the Copyright Act, which prohibits importing a work "without the authority of the owner" of the copyright, and the "first-sale doctrine," which allows the owner of a copy "lawfully made" to sell or otherwise dispose of the copy without the copyright owner's permission. The question presented is: can a copy that was made and legally acquired abroad and then imported into the United States "never be resold within the United States without the copyright owner's permission," "sometimes be resold within the United States without permission, but only after the owner approves an earlier sale in this country," or "always be resold without permission within the United States, so long as the copyright owner authorized the first sale abroad"?

That's all for now. We'll be back soon with the two decisions issued yesterday and today.

Kim & Jenny

From the Appellate and Complex Legal Issues Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart or any other member of the Practice Group at 203-498-4400