Caraco v. Novo Nordisk: A Counterclaim to Police the Orange Book

Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, 566 U.S. 399 (2012), No. 10-844, was decided on April 17, 2012. Justice Kagan delivered the opinion for a unanimous Court, with a separate concurrence by Justice Sotomayor. The case is a deep cut of Hatch-Waxman procedure, but its subject — the “use code” a brand-name manufacturer files to describe the method-of-use patents covering its drug — sits at a pressure point of generic competition. The Court held that a generic applicant may invoke a statutory counterclaim to force the correction of a use code that overstates what a patent actually claims, restoring the “skinny label” pathway Congress designed to let generics sell a drug for its unpatented uses.

At a glance

• Case: Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, 566 U.S. 399 (2012), No. 10-844
• Court: Supreme Court of the United States, reversing the Federal Circuit
• Decided: April 17, 2012; unanimous opinion by Justice Kagan; concurrence by Justice Sotomayor
• Holding: The Hatch-Waxman counterclaim under 21 U.S.C. § 355(j)(5)(C)(ii)(I) lets a generic applicant force a brand to “correct or delete” patent information, including an overbroad use code, when the listed patent does not claim a method of use the generic seeks to market. The phrase “an approved method of using the drug” reaches the situation where a patent claims one approved use but not another.

The Orange Book, use codes, and the section viii carve-out

When the FDA approves a brand-name drug, the manufacturer lists the patents covering it in a public registry — the Approved Drug Products with Therapeutic Equivalence Evaluations, universally called the Orange Book. For a patent that claims a particular method of using the drug rather than the compound itself, the brand also submits a short narrative “use code” describing the patented method. The FDA does not check the accuracy of these submissions; it accepts the brand’s description and acts on it ministerially.

That deference matters because of how generics enter the market. A generic may seek approval for fewer than all of a brand’s approved uses through a “section viii carve-out,” in which the generic proposes a label that omits any indication still covered by a method-of-use patent. The FDA will grant a carve-out only if the proposed generic label does not overlap with the brand’s listed use code. So if a brand files a use code that is broader than the patent it actually holds — one sweeping in uses the patent does not claim — the FDA, taking the code at face value, will refuse the carve-out. An overbroad use code thereby becomes a roadblock that keeps a lawful generic off the market for indications no valid patent protects.

The dispute over repaglinide

Novo Nordisk markets repaglinide, a diabetes drug, as Prandin. The compound patent had expired; what remained was a method-of-use patent (the ‘358 patent) directed to using repaglinide in combination with metformin. The FDA had approved repaglinide for three uses: alone, with metformin, and with thiazolidinediones. Caraco sought to market a generic for the two uses the ‘358 patent did not claim, filing a section viii statement and proposing a carve-out label.

Novo responded by amending its use code to a broad description that, read literally, covered all three approved uses. With the use code now overlapping the indications Caraco wanted to sell, the FDA could not grant the carve-out. Caraco invoked the counterclaim Congress had added in the 2003 Medicare Modernization Act, which allows a generic defendant in an infringement suit to “assert a counterclaim seeking an order requiring the [brand] to correct or delete the patent information … on the ground that the patent does not claim … an approved method of using the drug.” The Federal Circuit read that language narrowly and held the counterclaim unavailable. The Supreme Court reversed.

The Court’s reading: “an” and “method,” in context

The case turned on two ordinary words. The Federal Circuit had read “the patent does not claim … an approved method of using the drug” to mean the counterclaim was available only where the patent claimed no approved use at all — so that a patent claiming even one approved use was immune. The Supreme Court rejected that reading. In context, the Court held, “not … an approved method” naturally means “not a particular approved method” — so a patent that claims one approved use but not another does not “claim” the method the generic seeks to market, and the counterclaim lies.

The Court anchored that construction in the statute’s design. The carve-out and counterclaim provisions exist precisely to let generics reach the unpatented uses of a drug. Reading the counterclaim to evaporate whenever a patent covers any single approved use would defeat that purpose and hand brands a tool to wall off competition through the simple expedient of an expansive use-code narrative the FDA never scrutinizes. The Court also confirmed that a use code is “patent information … submitted under” the listing provisions, so the order to “correct or delete” reaches the use-code narrative itself, not merely the bare patent number and expiration date. Justice Sotomayor’s concurrence agreed with the result while pressing the FDA and Congress to give the use-code system clearer rules, observing that the regulatory framework invited the very ambiguity the litigation exposed.

Open questions

Caraco confirmed that the counterclaim exists, but it did not specify how precisely a corrected use code must be drafted, leaving district courts to supervise the remedy case by case. Because the counterclaim is available only once a brand has sued the generic for infringement, the decision also leaves open how generics fare when no suit is filed and the overbroad code simply sits in the Orange Book blocking a carve-out. And the opinion did not resolve the broader institutional problem Justice Sotomayor flagged — that the FDA accepts use codes without vetting them — which means the accuracy of the registry still depends largely on brand self-policing backstopped by litigation.

Implications

• Use codes are now contestable. Generics have a concrete mechanism to force correction of an overbroad method-of-use description, protecting the section viii carve-out pathway.
• Drafting the use code is a litigation decision. Brands that describe a method-of-use patent more broadly than it claims risk a counterclaim and a court-ordered correction; precision in the narrative now carries legal weight.
• The carve-out works as designed. The ruling preserves Congress’s plan that a drug’s unpatented uses become available to generic competition even while a method-of-use patent survives on other indications.
• Self-policing remains imperfect. With the FDA not vetting use codes, accuracy still leans on the threat of the counterclaim — a remedy that depends on the brand first suing the generic.

Frequently asked questions

What is a “use code”? A short narrative a brand-name manufacturer submits to the FDA describing the method of use covered by a listed method-of-use patent. The FDA records it in the Orange Book without independently checking its accuracy.

Why would an overbroad use code hurt a generic? The FDA grants a “section viii” carve-out — letting a generic sell a drug for only its unpatented uses — only if the proposed generic label does not overlap the brand’s use code. An overbroad code creates a false overlap and blocks the carve-out.

What does the counterclaim actually do? It lets a generic defendant in a Hatch-Waxman infringement suit obtain a court order requiring the brand to correct or delete inaccurate patent information, including a use-code narrative that describes the patent as claiming a method of use it does not in fact claim.

Authorities and sources

• Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, 566 U.S. 399 (2012), No. 10-844 (April 17, 2012). Opinion via Cornell LII.
• Faegre Drinker, “Supreme Court Decides Brand-Name-Drug ‘Use Code’ Case”.
• Patent Docs, “Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S (2012)”.
• Sunstein, “Generic Pharmaceuticals Win Big at the Supreme Court: Orange Book Use Codes Can Be Contested”.