Rexall makes Osteo BiFlex, a nutritional supplement for joint care with Glucosamine and Chondroitin. It alleged that Perrigo, which makes competing GC supplements for sale as store brands, used false and misleading “compare to” statements, such as “Compare to Osteo Bi-Flex Glucosamine with Joint Shield Ingredients” and “Compare to Osteo Bi-Flex,” even though the formulations materially differ. Perrigo counterclaimed that Rexall was falsely advertising that it was the number one doctor recommended brand, that it was clinically tested, and that it had certain chemical superiorities, as well as that it wrongly used the Arthritis Foundation’s name and logo. The district court denied Perrigo’s motion for summary judgment on the claims against it, and granted Rexall’s motion for summary judgment on the counterclaims except for the alleged falsity of “10 times more concentrated than typical Boswellia extracts.”
Claims
Rexall alleged that its reformulated Osteo Bi-Flex includes 5-LOXIN, a standardized extract of the herb Boswellia serrata, whose joint-care benefits have been documented in published, peer-reviewed research. The studies suggest that Boswellia has anti-inflammatory effects; there are at least 6 boswellic acids, including AKBA, which the research suggests is the most active. Typical Boswellia extracts have 2-3% AKBA, but 5-LOXIN has no less than 30%, and reduced or nonexistent amounts of the other boswellic acids. Some, but not all, Osteo Bi-Flex products contain 5-LOXIN; they all containe Glucosamine and Chondroitin. Rexall’s survey found that the “compare to” statements are understood by 29% of consumers to communicate an equivalency message as to formulation and/or efficacy.
Perrigo responded that its evidence showed that AKBA levels in the competing products were nearly identical, within the margin of measurement uncertainty. Rexall didn’t dispute this, but argued that (1) Osteo Bi-Flex has a much higher percentage of AKBA in relation to the total of boswellic acids in each product, and (2) Perrigo’s product has twice as much beta boswellic acid, which reduces the effectiveness of AKBA.
Perrigo argued that its “compare to” statements were not factual representations but only general invitations to compare. In context, however, the court concluded that the statements could be implicitly false by implying product equivalence when the products were in fact materially different. “Compare to” might be nonactionable, depending on the context, but where it conveys a specific assertion of measurable fact, such as equivalent ingredients or efficacy, it is falsifiable and thus potentially actionable. Here, the statements invite a comparison of the products’ ingredients, which is more likely to convey that the products have the same formulation/efficacy, and the statements are in close proximity to performance claims. Moreover, the evidence suggests that the products are likely to be shelved in proximity, making a consumer more likely to infer equivalence. Perrigo’s own website says: “In most food and drug stores, you can look to the right of an advertised brand on the store shelf to find the national brand equivalent (store brand). Compare the active ingredient chart found on the back of the two packages and you will see that they are equal with regard to active ingredient and potency. The only differences between the two products may be the inactive ingredients, such as the colors, etc., and the price.” And finally, the text on the side and rear panels of the Perrigo products “are either verbatim or in substantial part from the prior packaging for Osteo Bi-Flex.” Thus, whether the “compare to” statements make factual claims is for a jury to decide.
Perrigo then argued that Rexall’s evidence was insufficient to show actual or likely deception. The court rejected Perrigo’s challenges to admissibility and found that a genuine issue existed. The survey tested “Compare to Osteo Bi-Flex Glucosamine Chondroitin MSM with Joint Shield Ingredients” against the control “Different from Osteo Bi-Flex Glucosamine Chondroitin MSM with Joint Shield Ingredients”; 47% of the test cell believed that the products provided the same benefits or contained the same ingredients, while 18% of the control group believed those things. The court found the survey sufficiently reliable to survive a Daubert challenge, despite criticisms of the control, the closed-ended questions on which the expert relied, and the data analysis—all of which go to weight rather than admissibility.
Next, Perrigo argued that the “compare to” claims aren’t false: the products contain the same amount of AKBA, the only ingredient the complaint alleged to be materially different. What I’m not getting here: given that the expert grouped “same ingredients” with “same benefits” in analyzing the survey answers, doesn’t Rexall have to show that the products don’t provide the same benefits? If it can’t show that, how can we know that the equivalence message perceived by consumers is false? Maybe the answer comes from the ingredient-by-ingredient analysis: Rexall submitted evidence that the other boswellic acids in the Perrigo products could be expected to diminish the anti-inflammatory effects of the AKBA. So there was a material issue of fact.
Finally, Perrigo contested materiality. The court thought that a rational trier of fact could find the claims related to core ingredients and/or efficacy. (Indeed, it would be hard to imagine a rational trier of fact finding otherwise, I’d think.) Moreover, the prominent placement of the claims on the packaging, and their proximity to performance claims, supports materiality.
Counterclaims
The first two counterclaims involved “No. 1 Doctor Recommended Brand” claims. The problem was the same as in Mead Johnson v. Abbott: doctors generally recommend Glucosamine and Chondroitin, without specifying a brand; only 10% of surveyed doctors recommended Osteo Bi-Flex, though that was the top brand. Rexall has touted this claim heavily in ads and on the box. Rexall argued that Perrigo should have known about the alleged falsity years ago.
Perrigo also alleged that “clinically tested” was false. Prior formulations of Osteo Bi-Flex have been clinically tested, and the ingredients including 5-LOXIN have been clinically tested on humans, but the current formulation hasn’t been, and Rexall didn’t specify on the box what the clinical testing had been for. Rexall argued that it had discontinued this claim.
Then, Perrigo challenged the claim “More Pure Glucosamine as Compared to Glucosamine Sulfate” because there was no evidence that this fact would result in a performance benefit. Once again, Rexall disagreed and noted that it had discontinued the claim.
Perrigo further challenged the “10 Times More Concentrated” claim for the Boswellia ingredient, though a 30% AKBA extract has at least 10 times more AKBA than a typical Boswellia extract. Perrigo’s consumer survey showed that consumers who saw a package with this message, as compared to consumers who saw a package without the message, were more likely to think that Osteo Bi-Flex was superior to other Glucosamine/Chondroitin supplements in conferring performance benefits.
Finally, Perrigo challenged Rexall’s use of the Arthritis Foundation name and logo. Rexall has supported the Foundation for years with contributions, and is authorized by the Foundation to display its name and logo in packaging and ads. Rexall called this an “implied endorsement” in its strategic plans. Rexall argued that its boxes say “this product is not intended to diagnose, treat, cure or prevent any disease,” but Perrigo argued that many examples of packages and ads don’t say this, and that the disclaimer doesn’t appear close to the logo anyway, so the logo conveys the false and misleading claim that the product treats, prevents, or cures arthritis.
In 2008, the NAD ruled on Rexall’s claims—all except the last one at issue here. It didn’t find literal falsity, but recommended modifications: improving the disclosure on the “#1 Doctor Recommended Brand” claim, discontinuing “clinically tested” (though NAD found a reasonable basis for the claims with respect to glucosamine and chondroitin), modifying the comparison to Glucosamine sulfate and discontinuing the comparative claims regarding 5-LOXIN, and a few others.
The court found that laches warranted summary judgment on the “#1 Doctor Recommended Brand” and Arthritis Foundation claims. The other claims were not explicitly false, and except for “10 times more concentrated,” Perrigo had no extrinsic evidence of falsity. Perrigo’s consumer survey saved the “10 times more concentrated” counterclaim from dismissal.
Laches: The claims at issue had been around since at least the late 1990s, and Perrigo should have known—it’s sold its store-brand version since 2001, and admitted that it monitors Osteo Bi-Flex. Perrigo argued that it had no reason to know the claims were false until the 2007 NAD proceedings, but it should have known—the information needed to check “#1 Doctor Recommended” was publicly available, as was information about Rexall’s relationship to the Arthritis Foundation. Given that the Lanham Act has no statute of limitations, the court analogized to the 6-year statute of limitations for fraud; the claims here had been around for longer than that, raising a rebuttable presumption of laches. The court found that Perrigo had no excuse for its delay. Rexall had been prejudiced by its substantial investments of money and resources in using the claims in its ads and packages.
Perrigo argued that the public interest counseled against finding laches. Though there’s a public interest in avoiding false advertising, that can’t swallow the rule that laches is available in Lanham Act cases. With no health or safety threat alleged, the court found laches applicable.
Aside from the “10x more concentrated” claim, the court also found that all the claims—including the lached ones—were not literally false. Though “clinically tested” is an establishment claim, and though the current formulation hasn’t been clinically tested, the claim only appears on the Osteo Bi-Flex website, which discusses the various formulations and their primary ingredients, never specifying which have been clinically tested. The phrase doesn’t unambiguously apply only to the current formulation, so it’s not literally false.
Perrigo argued that the NAD and NARB decisions were extrinsic evidence of falsity, but the court disagreed. The findings of those decisionmakers can’t substitute for consumer evidence, and in fact might well be inadmissible hearsay, like judicial findings in other cases.
The remaining claim did survive. Perrigo argued that the “ten times more concentrated” claim, juxtaposed with a performance claim, conveyed to consumers that they were getting better performance benefits from a concentrated version, and that Rexall had no evidence of better performance. Rexall’s Daubert arguments about Perrigo’s survey on this point were as unavailing as Perrigo’s; a 17% net deception result, as reported by the survey, was sufficient to proceed to trial.
Perrigo also had sufficient evidence of materiality and causation. Rexall argued that both the control and test subjects expressed essentially the same amount of interest in purchasing the product. However, that doesn’t make the claim immaterial as a matter of law. Materiality need not be proven by extrinsic evidence, and may be shown by evidence that the claim relates to an inherent characteristic of a product. (Take that, Papa John’s!) Likewise, though Perrigo didn’t submit specific evidence of harm, injury may be presumed where a comparative statement is obviously targeted at the challenging party, given the nature of the market. Here, the claim “does seem to suggest an advantage over competing products,” and given the summary judgment standard, Perrigo showed a material issue about whether the claim targets it.
No comments:
Post a Comment