Tuesday, February 27, 2018

University-adjacent is not university-approved in supplement ads

Obesity Research Institute, LLC v. Fiber Research International, LLC, 2018 WL 1001089, No. 15-cv-00595 (S.D. Cal. Feb. 21, 2018)

Despite the high-falutin’ names, the parties compete in the market for glucomannan dietary supplements. Glucomannan is a soluble-viscous fiber derived from the Konjac plant root used in weight loss supplements. The parties agree that numerous studies have shown that at least some types of glucomannan are effective for losing weight, but dispute whether different types, grades, places of origin, processing procedures, and/or characteristics, including viscosity, of the specific glucomannan products alter its effectiveness on weight loss.

ORI’s former products sourced glucomannan from another company, Shimizu. Currently, ORI sells its supplements branded as Lipozene, which is not manufactured with Shimizu’s glucomannan.  ORI (with a supplier) funded a study purporting to find significant weight reductions, of which 78% was fat, using Shimuzu-supplied glucomannan.  ORI references the study in promoting Lipozene, characterizing it as a “major university double blind study.” Lipozene’s packaging stated that there are “[n]o known allergens in this product.”

Shimizu assigned any false advertising claims it might have to FRI, as well as the rights to distribute its glucomannan. The court found that FRI had statutory standing under the Lanham Act to bring claims on behalf of Shimizu.  Though trademark claims require “an interest in the asset allegedly harmed,” under §43(a) standing is broader.  Under Lexmark, Shimizu had standing: it invested millions of dollars into developing its products, and created a relationship with FRI to serve as its newest U.S. distributor, largely because FRI was in a stronger position to “launch direct-to-consumer” products than Shimizu, given its location in Japan. Though it isn’t a direct competitor with Lipozene, Shimizu also distributes glucomannan and supplies glucomannan to FRI, who seeks to compete with Lipozene in the glucomannan supplement market. Thus, Shimizu likely suffered an injury to a commercial interest in reputation or sales and ORI proximately caused Shimizu’s injuries by using a clinical study analyzing Propol to sell an allegedly inferior glucomannan product. “Because a valid assignment allows for an assignee to ‘stand in the shoes’ of the assignor, the Court finds FRI has standing to proceed with Shimizu’s Lanham Act claim.   

FRI also showed standing to sue on its own behalf.  FRI’s declarations included testimony that “[a]s a direct result of ORI’s use of claims derived from the Propol® studies to sell an inferior product, FRI has been unable to make inroads into the direct to consumer glucomannan supplement marketplace.” Though FRI didn’t have a sale when it counterclaimed,

having a sale is not the sole mechanism for standing under the Lanham Act. The law is clear that a party does not need to show a loss of sales. Moreover, a lack of sales is consistent with FRI’s alleged economic injury that it was shut out of the glucomannan supplement market because of ORI’s false advertisements. Based on the evidence presented, a reasonable juror could find that FRI sought to enter the glucomannan supplement market, but found it was blocked from doing so in part by ORI utilizing a clinical study on its exclusive source of glucomannan.

Though the Court didn’t consider FRI’s post-counterclaim activities for standing purposes, its later market activities were consistent with its claims: it registered a website, launched a direct to consumer Propol, and made a sale.

Falsity: FRI challenged a bunch of ORI’s statements allegedly based on clinical studies; instead of studying Lipozene, the key studies (by Kaats & Walsh) evaluated Shimizu’s Propol-branded glucomannan, a distinct product. ORI disagreed, arguing that the product was the same and that it used the specifications from the Kaats Study as a guide and “floor” for the ingredients they ultimately chose. These disputes were best presented to a jury, so the court denied summary judgment.

ORI also advertised that the Kaats Study is a “major university study.” But the study was conducted by Dr. Kaats’s then-private clinical research organization. ORI responded that the study’s design was approved by Texas Women’s University’s IRB and that two of the named reviewers of the study were affiliated with two major universities—Georgetown University and the University of Texas.  Nope.  Kaats stated that he isn’t affiliated with a major university, that no university was involved in the measurements for the study, and that he does not consider the study a university study (and even told ORI to stop calling his study university sponsored).  There was no evidence that IRB involvement “transforms a study’s sponsorship or affiliation into that of the IRB,” or that a reviewer’s affiliation with a university allows the study to adopt that university’s affiliation or sponsorship.  FRI was entitled to summary judgment on the falsity of this claim.

ORI also advertises that, in the Kaats Study, the test subjects were “asked not to change their lifestyle” and “asked not to change their diet or exercise” and lost weight anyway. FRI argued that this statement was literally false because the test subjects were given no instruction—one way or another—as to their lifestyle, including diet and exercise. In fact, the study states that “participants were free to follow any diet/exercise plan of their own choosing.”  The court found literal falsity: ORI sought to communicate that study participants “were affirmatively asked not to change their diet and exercise, implying that any weight lost while taking Lipozene could not be due to a lifestyle change.” But that message is not true, although a jury could find it immaterial.

FRI also challenged ORI’s “pure glucomannan” claims such as “Take pure Glucomannan from the finest Konjac Plants and see results” and “Lipozene is made with 100% pure Glucomannan, which comes from the root of the Konjac plant.” Lipozene is made of a combination of ingredients, with the majority being glucomannan.  No reasonable jury could find literal falsity—the message was that Lipozine was “made with” glucomannan, not “made entirely of” glucomannan, and there was no evidence of actual deception, so that falsity claim was gone.

Finally, ORI claimed that Lipozene contains “no known allergens,” but FRI argued that it contained excessive sulfite levels, which qualify as a “known allergen” under FDA regulations. The court couldn’t grant summary judgment either way; FRI didn’t show that these FDA requirements should apply to ORI’s statement, and ORI didn’t show that the absence of “major food allergens” was the same as having “no known allergens.” A jury could find that this statement only applied to the commonly known major food allergies, such as nuts, milk, and other common allergies, or that it instead meant additional irritants, such as sulfites.

Deception: falsity and deception are linked; “[t]he expenditure by a competitor of substantial funds in an effort to deceive consumers and influence their purchasing decisions justifies the existence of a presumption that consumers are, in fact, being deceived.” FRI was entitled summary judgment as to the deception element of its Lanham Act claim for the “major university” and “no lifestyle change” statements.

Materiality: The court mostly declined to find that, as a matter of law, the challenged statements were material, but neither did ORI show immateriality. For the false-as-a-matter-of-law statements, “major university study” and “no lifestyle change,” FRI argued that false claims were presumed to be material, but the court disagreed, and anyway ORI rebutted such a presumption for the “no lifestyle change” statement by arguing that the difference between the true and false statements wasn’t material to a consumer. Though “extensive” empirical evidence isn’t required, FRI needed something.  Nor was “no lifestyle change” an “inherent quality or characteristic” of the product in the same way as statements relating to Lipozene’s product composition and proven effects on weight loss.  However, the court did find that no reasonable jury could find that “major university” was immaterial. “[A] ‘major university’ affiliation invokes a level of legitimacy and assurance for a consumer that would likely affect a consumer’s decision to purchase Lipozene,” which accounted for ORI’s desire to have a “university affiliated” study.

Although there was a genuine issue of material fact as to whether FRI and Shimizu were likely injured, they failed to show irreparable harm absent injunctive relief. Even assuming the Ninth Circuit would still presume irreparable harm from falsity [no], ORI rebutted the presumption, so the issue was best suited for a jury.

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