Product disparagement as trademark dilution?

Ferring Pharmaceuticals Inc. v. Braintree Laboratories, Inc., 2014 WL 3850072, No. 13–12553 (D. Mass. Aug. 4, 2014)

This is mostly a false advertising case, but stick around for the weird dilution ruling.  The parties compete in the market for bowel preparation drugs that are administered prior to colonoscopies.  Ferring sells Prepopik, and Braintree sells Suprep.  They sued/countersued each other for false advertising under the Lanham Act and unfair business practices under MGL ch. 93A.  Ferring also alleged that Braintree diluted the Prepopik mark by suggesting that Prepopik (the product) poses the same risks as a chemically identical product sold in Canada, Pico-Salax.  Braintree also sued for trade secret misappropriation.

The court here resolved Ferring’s motion to dismiss Braintree’s counterclaims and Ferring’s motion for summary judgment.

Ferring’s motion, trade secrets: Ferring’s VP and GC contacted Braintree to express concerns about certain Braintree training materials that he’d come to possess, supposedly “sent in from the field” by an unknown source.  Ferring returned six pages, but Braintree believed Ferring had the whole set of materials because it didn’t disseminated only those six pages. 

The court found that Braintree failed to state a claim; it didn’t adequately specify any trade secrets, and the six pages Ferring admitted possessing didn’t contain any protectable trade secrets.  They included publicly available information about Prepopik and information about Ferring’s marketing strategy.  “Braintree cannot plausibly claim that information it has obtained about the marketing strategy of a competitor is a protectable trade secret.” 

The materials did recommend strategies for Suprep in light of Prepopik’s marketing strategy: claims that Suprep was more effective, less expensive, and safer for patients with low renal function; encouragement to sales representatives to emphasize the link between Prepopik and Pico-Salax (“Don’t hide from the fact that Pico is out there and discuss this with accounts”); and suggestions to leverage existing relationships (“BLI has been servicing these accounts for over 3 decades, don’t be fooled by a foreigner!”).  Though one court suggested that marketing strategies could be protectable trade secrets under Massachusetts law, there was no evidence that the information about price, efficacy and safety differences was proprietary to Braintree. “Furthermore, it is implausible that platitudes such as ‘Cash in on relationships!’ are the product of significant effort or investment or are valuable to Braintree’s competitors.”

Lanham Act false advertising: Braintree alleges that Ferring made four false or misleading claims about Prepopik: “superior cleansing efficacy”, “lowest volume”, “flexible dosing” and “helps achieve success.”  Because literal falsity is a question of fact, it’s rarely susceptible to a motion to dismiss.  The court also declined to apply Rule 9(b) heightened pleading to false advertising claims.

The “superior cleansing efficacy” claim was, according to the relevant ad, backed up by study results; it was a statement of fact, not puffery.  In fine print, the relevant ad explained that the claim was based on “demonstrated non-inferiority” during randomized trials. The claim was allegedly falsified by evidence from a head-to-head study, and allegedly overstated Prepopik’s efficacy. That was enough to plead literal falsity.

Ferring repeatedly advertised Prepopik as  the “lowest volume of active prep solution/ingredient,” but Braintree alleged that this was false and misleading because there are tablet-only prep products requiring no solution.  Ferring argued that a reasonable doctor would be aware of the different kinds of prep regimens and would understand that the ads only compared Prepopik to other products that required some amount of liquid.  The court doubted that any reasonable doctor would find the claim misleading, but evaluating audience reaction wasn’t its job at the motion to dismiss stage.

Braintree alleged that Ferring’s “flexible dosing” claim was false and misleading as patients must take certain identified doses, must drink certain requisite quantities of other liquids, and must finish drinking all requisite liquids at least two hours before their colonoscopy. The relevant ad claimed “FLEXIBLE DOSING using either a split dose or day-before regimen.” Ferring argued that the ad didn’t claim that there were no restrictions on use.  Unlike the two previous comparative claims, this one didn’t draw any implicit comparisons or assert a specific and measureable benefit that could be proven true or false.  At most, “flexible” was ambiguous, and no reasonable person reading the advertisement as a whole would fail to understand that, as used in context, “flexible dosing” refers to “either a split dose or day-before regimen.”

As for “helps achieve success ... with the lowest volume of active prep solution,” Braintree didn’t identify a specific ad that made the “helps achieve success” claim, so it was gone and would’ve been puffery anyway.

The court did apply a heightened pleading standard to related New Jersey Consumer Fraud Act claims, and found that Braintree hadn’t pled enough facts to establish that Ferring actually distributed a different set of claims—information and belief was enough.  Also, the court held that unfair competition under New Jersey common law doesn’t cover false advertising, only palming off.

As to Braintree’s motion for summary judgment, Ferring alleged that Braintree engaged in a nationwide campaign to disparage Prepopik, and that Braintree’s false and misleading statements about Prepopik’s risks “diluted Ferring’s trademark in Prepopik.”

Allegedly false claims that Prepopik was “dangerous” or “deadly”: Ferring’s press release announcing Preopik’s FDA approval stated that “Ferring has a long history in the international gastroenterology market, where PREPOPIK is available in Canada (marketed under the name PICO–SALAX), U.K., and other countries ....”  Pico-Salax and Prepopik are chemically identical, but Prepopik is approved in the US for only one indication, while Pico-Salax is approved in Canada for the additional uses of preparing for x-ray examinations and surgeries and is also approved for pediatric use.  The dosing instructions also differ; the Prepopik dose is smaller, which can change risks associated with fluid and electrolyte imbalances. Pico-Salax is available over the counter while Prepopik is prescription only.

A Canadian agency published information about Pico-Salax in Canadian Adverse Reaction Newsletter, stating that “[t]he diarrhea produced by [Pico–Salax] can lead to dehydration and loss of electrolytes, particularly sodium which may result in hyponatremia and convulsions.... As of June 30, 2012, Health Canada received 11 reports of convulsions suspected of being associated with Pico–Salax.”  Ferring alleged that Braintree was using the newsletter and related statements to claim that Prepopik was unsafe.  One rep allegedly wrote “Pico-Salax = Prepopik” on a copy of the newsletter given to a doctor.

Braintree argued that it was true that Pico-Salax was dangerous and that Pico-Salax was Prepopik give their chemical equivalency. The court found genuine issues of material fact, including what conclusions should be drawn from the newsletter and whether the different dosages eliminated the risk of convulsion.

Allegedly false or misleading claims about Suprep’s efficacy and superiority:  Braintree’s marketing materials say Suprep is 98% effective whereas Prepopik is only 74% effective, but Ferring alleged that there were no head-to-head studies and its own clinical trials showed greater effectiveness.  A Braintree ad claimed superiority in bowel cleansing based on investigator grading compared to a control group treated with polyethelene glycol, but Ferring argued that the prescribing information and FDA approval documents for Suprep indicated that no statistically or clinically significant differences between groups treated with the two preparations.

Ferring argued that the ad made an establishment claim, and Braintree disagreed, but it was wrong. “While the claims do not expressly reference a study or test, claims of 98% effectiveness and superior results ‘based on investigator grading’ are not ‘general claims of superiority.’” Thus Ferring’s burden would be to show that the tests weren’t sufficiently reliable to permit a conclusion that Suprep was superior.  There were genuine factual disputes about this; a study abstract alone couldn’t establish reliability, and Ferring hadn’t been provided the full results.

As a result, the ch. 93A claim, which in a competitor action requires “rascality,” also survived past summary judgment.

State trademark dilution: here we take a turn into the completely wrong.  Ferring alleged that Braintree’s negative comparisons were likely to dilute Prepopik’s distinctive quality as a mark—and the court bought it, at least for summary judgment purposes.  Ok, deep breaths.  Of course, even dilution proponents should immediately see the fatal problems.  (1) The mark is not the product.  Dilution protects marks, not products.  Braintree disparaged (truthfully or not) the product.  False advertising can be a legitimate cause of action in such cases, along with commercial disparagement/trade libel.  (Which, not at all incidentally, are subject to important First Amendment limitations, like “falsity.”)  Dilution cannot be implicated here.  Braintree didn’t suggest that the product had a stupid name.  (2)  Relatedly, comparative advertising does not have any effect on the “distinctive” quality of the mark, other than to reinforce it as being connected to its producer and distinguish it from the advertiser’s own product.  Using a mark to describe the mark owner’s product can’t be dilutive.  Not even Deere v. MTD would go that far.

What went wrong?  Braintree may have put too much emphasis on another logical, but much less powerful, argument, which was that it’s impossible to dilute a mark by comparing it to another mark owned by the same entity, Ferring.  But “[w]hile Braintree is correct that no Massachusetts case has expressly held that Ferring may assert a trademark dilution claim based upon confusion between two of its own marks, it is also the case that no court applying Massachusetts law has foreclosed that theory.”  (And note the incidental slippage between confusion and dilution.  But I’m not even mad about that.)  The court found that a federal court’s previous statement that dilution arises from an association with “products or services marketed by others” was “clearly dicta,” which again, argh—that is the classic definition of dilution used even by its profoundest believers.  Kodak pianos, anyone?