Wednesday, August 27, 2014

Presumed irreparable: 3d Circuit applies eBay to all Lanham Act claims

Ferring Pharmaceuticals, Inc. v. Watson Pharmaceuticals, Inc., --- F.3d ----, 2014 WL 4194094, No. 13–2290 (3d Cir. Aug. 26, 2014)

This case had an INTA amicus brief making the trademark bar’s strongest arguments for Lanham Act exceptionalism, which here means not applying eBay/Winter to Lanham Act cases and presuming irreparable harm upon a showing of likely success on the merits.  The Third Circuit here rejects that position, entrenching the lack of a circuit split—though there’s still a cert petition pending in Herb Reed (the INTA amicus here is similar in its argument).  I’m inclined to think trademark expansionists are hoist on their own petard here (dragging false advertising along with)—having emptied the concept of “goodwill” of any meaning other than “I own it,” the story that likely harm to goodwill is inherently irreparable/unmeasurable makes much less intuitive sense.  You have to know what goodwill really is before you can see irreparable harm to it.

Ferring appealed from the denial of a preliminary injunction against Watson, with whom it competes in the market for prescription progesterone, a hormone that helps women become pregnant and maintain pregnancies and that is useful in assisted reproduction (ART).  Historically, progesterone is injected intramuscularly, which is painful and not FDA-approved.  (Actually the court says “patients consider [the shot] painful”—really?  Shouldn’t we take their word for it?)  Ferring and Watson developed vaginal inserts to deliver progesterone.  Ferring’s Endrometrin is in capsule form, applied 2 or 3 times a day.  Watson’s Crinone is a gel delivered by an applicator, applied once daily.  They’re the only vaginal progesterone inserts for ART that are currently FDA-approved.

Ferring sued Watson based on two presentations made by Watson in September 2012.  Watson hosted presentations about Crinone by Dr. Silverberg, a paid consultant. The presentations were streamed online.  Ferring objected to (1) Silverberg’s reference to a “Black Box” warning on Endometrin’s package insert (“a black box warning showing the efficacy has not been demonstrated with ... patients 35 years of age and older”); (2) his discussion of a patient preference survey comparing Crinone and Endometrin; and (3) his alleged mischaracterization of the results of certain studies of Endometrin’s effectiveness in women over the age of thirty-five.

Black box: A black box warning is “of special note in the medical community, as it signifies that medical studies indicate that the drug carries a significant risk of serious or life-threatening effects.”  While Endrometrin’s package insert states that “[e]fficacy in women 35 years of age and older has not been clearly established,” it’s not a black box warning.  Dr. Silverberg was alerted to the error after the first webcast, and didn’t say it again in the second (and certified to Ferring and the district court that he wouldn’t repeat it).

Patient preference: Dr. Silverberg told the audience that “94 percent of patients thought that Crinone was easier to incorporate into their daily lifestyle, probably because it’s given once a day compared to three times a day for Endometrin, 82 percent thought that it was more convenient, or I’m sorry, that may be 88 percent, 94 percent thought that it was more comfortable to use Crinone than the Endometrin.”  (During the second webcast that last 94% on comfort became 84%.)  However, the study was not head to head; as the slide Silverberg used stated, these results were derived from a “tally of yes/no questions about whether CRINONE was easy to incorporate into a daily lifestyle, was convenient, and was comfortable to use.”  Thus the women were not actually comparing the products.  Again, Dr. Silverberg certified that he wouldn’t repeat this mistake.

Effectiveness in women over 35: Dr. Silverberg said that “efficacy has not been demonstrated with ... Endometrin for patients 35 years of age and older,” but Endometrin’s package insert actually states that “[e]fficacy in women 35 years of age and older has not been clearly established.”  Dr. Silverberg also discussed two studies on the use of the two drugs in women over 35, and said “We know that efficacy has been established for Crinone in patients under the age of 35 as well as over the age of 35. Schoolcraft’s analysis of the Doody study and also our study found the exact same thing.”  (The language in the second webcast was different but to the same effect, and also said that the Schoolcraft study “show[ed]” that Endrometrin was “not found to be efficacious for women over the age of 35.”) 

The Schoolcraft study actually concluded that “Endometrin was well tolerated and provided successful luteal support in poor prognosis patients” such as “those older than 35”; however, it also included a comparison chart indicating that Crinone had higher pregnancy rates than Endometrin for participants over 35.  The Doody study was a comparison study and found that “[n]o clinically meaningful differences were observed across the three treatment groups in pregnancy rates or live birth rates,” and that “Endometrin provides a safe, well tolerated, and effective method for providing luteal phase support in women undergoing IVF.”  Dr. Silverberg certified that, in future presentations, he will limit his statements on the efficacy of Endometrin for women over 35 in accordance with the package insert.

Because the district court found that Ferring wasn’t entitled to a presumption of irreparable harm and didn’t present sufficient evidence to show likely irreparable harm, it found that Ferring was not entitled to a preliminary injunction. The district court also addressed Ferring’s likely success on the merits, stating that it wasn’t clear that Watson’s allegedly false statements were “completely unsubstantiated” because Watson demonstrated that at least some support did exist, but the court didn’t find it necessary to make a ruling on that.

Preliminary injunctions require showing (1) likely success on the merits, (2) irreparable harm, (3) a balance of equities favoring the plaintiff, and (4) that an injunction is in the public interest.  The absence of any element makes a preliminary injunction inappropriate.  Ferring argued that irreparable harm could be presumed in Lanham Act comparative false advertising cases. Although the Third Circuit had never applied such a presumption, several other circuits had.  (Citing a 9th Circuit case presuming actual deception and harm from deliberate falsity, not irreparable harm; this will bring trouble.  There are many reasons a court might believe that harm at some level was going to occur if consumers were confused; that it could not yet quantify that harm at an early stage of the case; and also that this harm could ultimately be measured in money damages—or, if not, a permanent injunction could be appropriate once all the evidence was in.  Thus, a presumption of harm should be distinguished from a presumption of irreparable harm; one goes to the nature of the party’s claim and its ultimate burden of proof while the other is about procedure in advance of a final disposition.)

The court of appeals began with the Second Circuit’s reasoning, which was that:

A misleading comparison to a specific competing product necessarily diminishes that product’s value in the minds of the consumer. By falsely implying that Advil is as safe as Tylenol in all respects, AHP deprived McNeil of a legitimate competitive advantage and reduced consumers’ incentive to select Tylenol rather than Advil. This is analogous to a Lanham Act trademark dispute. An infringing mark, by its nature, detracts from the value of the mark with which it is confused.

The court of appeals also cited the related rationale from the Seventh Circuit that “it is virtually impossible to ascertain the precise economic consequences of intangible harms, such as damage to reputation and loss of goodwill, caused by such violations.”  So: (1) the harm is inherent in the false comparison, as in trademark cases; and (2) the harm is irreparable because it’s virtually impossible to quantify in money damages.  The Third Circuit, before eBay and Winter, repeatedly applied a presumption of irreparable harm in trademark cases, on the same rationale (which then reduces to difficulty quantifying damages).

But then the Supreme Court spoke.  Courts of appeals have followed by rejecting the presumption of irreparable harm in copyright and patent cases, even though eBay didn’t expressly reject that particular part of the Federal Circuit’s approach.  eBay made clear that “broad classifications” and “categorical rules” were inappropriate, and that courts should use traditional principles of equity.  As the Second Circuit held, “eBay strongly indicates that the traditional principles of equity it employed are the presumptive standard for injunctions in any context.”

What does this mean for the Lanham Act?  Well, the injunctive relief provision of the statute “is premised upon traditional principles of equity, like the Patent Act’s. Accordingly, we should interpret this nearly identical wording in the same way.”  There’s no evidence from the language that Congress intended a major departure from the long tradition of equity practice.  And eBay’s reasoning doesn’t seem limited to patent cases.

Ferring argued that eBay was different because patents are property and the Lanham Act does not create property rights, especially with respect to false advertising.  Relatedly, as David Bernstein and AndrewGilden have argued, patent/copyright injury can generally be measured in monetary terms by looking at usurpation of a market, injury to goodwill and reputation “is real but difficult to measure in dollars and cents,” per McCarthy. 

Nope.  eBay did not reason that patent cases were somehow unique, but rather that equity has rules.  “It follows that a court is not free to depart from traditional principles of equity merely because it believes such a departure would further a statute’s policy goals, such as, in the case of Lanham Act claims, compensating plaintiffs for harms that may be difficult to quantify.” Given the language of the Lanham Act, there was clear congressional intent to require courts to grant or deny injunctions according to traditional principles of equity.  (I find it interesting that the court of appeals doesn’t engage directly with this property v. goodwill argument; although scholars have been investigating this topic for a while, courts are poor in language explaining what goodwill might be.)

Winter further supported this conclusion.  Winter rejected the Ninth Circuit’s possibility of harm standard; if a possibility of irreparable harm is too lenient, then a presumption of irreparable harm without any showing at all is also too lenient.  We need to remember that injunctive relief is an “extraordinary remedy” requiring a “clear showing” of entitlement to such relief.  (Random thought: this change in procedure, which is across the board and highly defendant-friendly, has the practical result of coming close to the proposals copyright/trademark restrictionists were making around fifteen years ago, when expansion looked completely unchecked, that liability should be limited to damages in many infringement cases, allowing the defendant’s speech to continue.  Politics being what it is, it turns out that it’s not speech but a general skepticism of claims brought against businesses that has done the job.)

Ultimately, “[a] presumption of irreparable harm that functions as an automatic or general grant of an injunction is inconsistent with [traditional] principles of equity”: likelihood of irreparable injury, competing claims of injury, and the public consequences of this extraordinary remedy.

The court of appeals then affirmed the district court’s finding that Ferring failed to show irreparable harm. Dr. Silverberg promised not to make the challenged statements again, and they’ve been removed from the web.  Ferring argued that it offered a declaration from a licensed reproductive endocrinologist stating that doctors would be less likely to prescribe a drug if they believed Dr. Silverberg’s statements, and that Watson was still making claims for the superiority of Crinone over Endrometrin in patient preference surveys.

The court of appeals found no clear error.  Although only Dr. Silverberg, not Watson, promised not to repeat the offending statements, “Ferring has adduced no evidence that there is any risk that any Watson representative will make such statements, especially in light of the fact that Watson has conceded that certain of these statements were inaccurate, and that all of the statements at issue here were made by Dr. Silverberg.”  Ferring’s declaration was speculative and didn’t assert that the endocrinologist or other doctors had actually prescribed Endrometrin less frequently as a result of Dr. Silverberg’s allegedly false statements.

Ferring argued that a defendant can’t moot a case simply by ending its violative conduct, but must bear the heavy burden of showing its conduct has been totally reformed.  But mootness and irreparable harm are different questions.

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