statements to investors aren't false advertising under the Lanham Act

Tercica, Inc. v. Insmed Incorporated, 2006 WL 1626930 (N.D. Cal.)

The parties are competitors in the drug market for the treatment of growth failure in children. Plaintiff makes Increlex, an FDA-approved drug it has begun to commercialize. Defendant had an FDA approvable letter for its drug iPlex. In statements to investors, made generally available on its website, Insmed stated that plaintiff’s Increlex caused two times as many serious adverse events than iPlex; this statement was also repeated by a news report by an independent party and by defendant’s press release. Defendant made other comparative and absolute safety- and efficacy-related statements, also appearing in communications to investors and newspaper articles. Though defendant had no head-to-head studies, it repeatedly compared iPlex to Increlex in words and charts – a major no-no in FDA’s opinion when it comes to communicating to doctors and patients.

After the FDA approved iPlex, defendant continued to make statements to investors inconsistent with the approved labeling. These included apparently false statements that a major advantage of the product was that it didn’t need to be coordinated with food intake, which can be an important consideration for children, as well as claims that might generously be deemed “hopeful,” such as that iPlex is a long-term treatment even though the FDA-approved package insert warns that efficacy beyond one year hasn’t been established.

Plaintiff sued in California for violations of California law and the Lanham Act. (Why California law? As the court pointed out, the parties didn’t bother to argue that there were any differences between state and federal law.) The court granted defendant’s motion to dismiss for lack of personal jurisdiction, lack of venue, and failure to state a claim – the trifecta.

The court did find that plaintiff and defendant were competitors for standing purposes even though the statements were made before competition began; imminent competition suffices. The complaint failed to state a claim because the investor communications at issue didn’t constitute “commercial advertising or promotion” for Lanham Act purposes. They were made to potential investors, not to consumers. Nor were they made for the purpose of influencing consumers to buy defendant’s goods or services.

Query: Is this rule inconsistent with the growing consensus among courts that confusion among investors can constitute trademark infringement? See, e.g., Checkpoint Systems, Inc. v. Checkpoint Software Technologies, Inc., 269 F.3d 270 (3rd Cir. 2001).