Friday, February 24, 2017

Blast from the past: pleading falsity based on scientific claims

Biolase, Inc. v. Fotona Proizvodnja Optoelektronskih Naprav D. D., No. CV 14-0248, 2014 WL 12579802 (C.D. Cal. Jun. 4, 2014)

A rare case applying the Second Circuit's ONY case and perhaps suggesting why that case wasn’t a blockbuster.  Biolase and Fotona sold lasers used in dentistry. Jeff Jones used to be Biolase’s CEO, and Keith Bateman used to be Biolase’s VP of Sales. They were fired in 2007; Jones then founded and became CEO of T4Med, and Bateman became Executive VP. T4Med was a sub-distributor for Lares, which was a distributor for Fotona.

Biolase alleged that Fotona and T4Med used false and misleading advertising to get customers to switch from using Biolase dental lasers to Fotona dental lasers by claiming Fotona’s lasers are safer, faster, more precise, and less painful than Biolase’s lasers. Defendants allegedly represented that these advertising claims are based on independent scientific articles, but the articles are written by Fotona affiliates and published in a journal established by Fotona. Only one of the authors  disclosed their affiliation with Fotona.  Biolase also alleged that defendants made false and misleading oral statements, including that Biolase’s technology was faulty and worthless, and that Biolase’s management was incompetent.

The court dismissed the complaint.  Some of the statements at issue were puffery: Fotona’s “... patented VSP (Variable Square Pulse) technology ... maximize[s] patient safety ...,” “QSP (Quantum Square Pulse) ... allows for exceptionally fast laser drilling speed with unmatched efficiency and precision,” and “Fotona’s patented QSP (Quantum Square Pulse) mode allows the laser to ablate more efficiently and with greater precision.”

There were nonpuffing, measurable statements: “Up to 20 W[atts] of Er:YAG laser power provide an exceptionally wide range of fast, safe and effective treatment options,” and Fotona’s laser has “superior clinical results.” However, the court found these statements non-actionable because they restated scientific research.

Under Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th Cir. 1997), allows a false advertisement claim where a plaintiff alleges that the tests supporting the challenged claim “are not sufficiently reliable to permit one to conclude with reasonable certainty that they established the claim made.” Biolase alleged that defendants’ advertising statements were based on “junk science,” and were unreliable.  But ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2nd Cir. 2013), affirmed a district court’s decision to grant a motion to dismiss Lanham Act claims because the advertising statements were based on accurate descriptions of conclusions from peer-reviewed scientific journal articles. 

Statements in journals themselves aren’t actionable; then the question was whether advertising statements “based on research published in scientific journal articles” were actionable. ONY concluded that the answer was no, absent allegations “that the promotional materials misstated the article’s conclusion” or “distorted [the] article’s findings.”  The same logic applied here.  The tests in Southland Sod Farms were distinguishable because they were done by the company doing the advertising, and weren’t studies and conclusions published in peer-reviewed scientific articles. “A Southland Sod Farms type claim is appropriate for Courts to decide, but attacking the validity of experiments and conclusions published in peer-reviewed scientific journal articles is better done in the scientific, not legal, realm.”  For example, Biolase alleged that the articles’ conclusion that Fotona’s laser has a higher absorption of water at room temperature was misleading because dental lasers are not used at room temperature. But Biolase didn’t allege that the study didn’t actually find a higher absorption of water at room temperature.  [Note this—it will become important in the next iteration, showing the way to plead around ONY.]

Also, the court commented that, to the extent that T4Med’s statements accurately represented the published studies’ findings, it was questionable whether a substantial segment of the sophisticated target audience would be deceived, “since dentists would likely be educated enough to see the alleged weaknesses in the studies.”

The defamation claim failed for lack of sufficient specificity about who made the allegedly defamatory statements, where they made them, when they made them, or to whom they made them.

Biolase, Inc. v. Fotona Proizvodnja Optoelektronskih Naprav D. D., 2014 WL 12577153, No. 14-0248 (C.D. Cal. Sept. 15, 2014)

Biolase amended its complaint and tried again, with greater success.  Here, Biolase alleged that the published article at issue was “based upon and presents fraudulent data, and contains several false statements,” and that the article’s conclusions didn’t support claims of any clinical advantages. Further, Biolase alleges that the Journal of Laser and Health Academy, where the article was published, was controlled by Fotona and not peer-reviewed, though JLHA’s website states that it is an “international peer reviewed journal.”

To rebut the court’s earlier concern that sophisticated dentists wouldn’t be confused, Biolase alleged that “dentists are not usually introduced to or trained in lasers ... in dental school, and so lack sufficient expertise to understand the differences and details of laser technologies.” It also alleged a statement by T4Med’s CEO that “only a small percentage of dentists use lasers to perform dental procedures.” “Based on these allegations, it is plausible that dentists would be deceived by false advertising concerning lasers.”

As for the ONY problem, here, Biolase alleged that the article’s data were fraudulent and that it didn’t support defendants’ superiority claims. The court had “concerns” with the fraudulent data allegations, but the other allegations stated a plausible claim. Biolase alleged that defendants falsely advertised its lasers as safer than, faster than, and clinically superior to Biolase’s lasers, and that there were “no scientific studies, experiments, or other evidence” supporting these claims.  The JLHA article on which defendants relied “never clearly concludes that Defendant’s lasers are safer than, faster than, and clinically superior to Biolase’s lasers, nor did Defendants show that the article supports such statements.”  Indeed, Biolase alleged that at least some of the tests reported in the article were performed in settings inapplicable to clinical use.  For example, the article’s conclusion that defendants’ laser required less energy and time to cut tissue was allegedly based on testing at a temperature not seen in clinical uses.  ONY avoided. 

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