Monday, February 29, 2016

Ingredient supplier has standing to challenge supplement claims

Obesity Research Institute, LLC v. Fiber Research International, LLC, 2016 WL 739796,  No. 15-cv-00595 (S.D. Cal. Feb. 25, 2016)
Fiber Research alleged that Obesity Research made claims for its weight loss product, Lipozene, touting clinical testing supporting the role of “Propol glucomannan” in promoting weight loss, but that Lipozene didn’t contain any Propol glucomannan or any substantially equivalent glucomannan.  In particular, Fiber Research alleged that Obesity Research claimed that Lipozene was “clinically proven,” when, in fact, the clinical studies it relied on used Propol. Further, Obesity Research allegedly falsely claimed that at least one of the clinical studies was “sponsored by [Obesity Research]” and that it falsely referred to one of the clinical studies of Propol as a “Lipozene Clinical Study.”   Finally, Fiber Research alleged that Obesity Research falsely stated on its label that there were “[n]o known allergens in this product” when, in fact, there were enough sulfites in Lipozene to warrant a warning.  Fiber Research is the exclusive licensee for Propol in the US.
Under Lexmark, Fiber Research had standing to challenge the advertising. It alleged an injury to a commercial interest in reputation or sales and proximate cause based on Obesity Research’s alleged passing off of an inferior product as Propol.  Obesity Research argued that it wasn’t in direct competition because Propol is only sold to manufacturers as an ingredient, while Obesity Research sells directly to consumers. But there’s no direct competition requirement after Lexmark.
As for Fiber Research’s California UCL and FAL claims, standing requires lost money or property, which can include “lost sales, revenue, market share, and asset value.” Ineligibility for restitution is not a basis for denying standing under either the UCL or FAL, though Fiber Research couldn’t argue that it was injured indirectly as an assignee; it had to rely on injuries has suffered directly as the exclusive seller of Propol in the United States.
Failure to state a claim: The court characterized this as both a false designation of origin and a false advertising claim, using the likely confusion multifactor test as a useful framework even though some of the factors weren’t helpful.  Fiber Research alleged sufficient similarity between Propol and Lipozene to state a claim for false designation of origin, especially given that purchasers can’t determine for themselves the actual ingredients.  Likewise, Fiber Research sufficiently alleged false advertising.  It identified the particular studies to which Obesity Research allegedly referred in its advertising, and alleged that those were Propol studies.  The UCL/FAL claims survived for much the same reasons, though not the UCL unfairness claim because Fiber Research didn’t allege antitrust-like injury.

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