Wednesday, December 30, 2009

Formulaic: store brand mostly wins a round in formula battle

PBM Products v. Mead Johnson Nutrition Co., 2009 WL 5090862 (E.D. Va.)

Previous discussion. PBM complained that Mead Johnson had renewed its false advertising in a 2008 mailer “falsely stating that only Mead Johnson’s Enfamil ® LIPIL® has two fats, DHA ... and ARA ..., which Mead Johnson calls ‘LIPIL®.’” Both PBM’s store brand formula and Mead Johnson’s Enfamil LIPIL have the same levels of the lipids at issue and obtain them from the same supplier, which is the only FDA-approved source. Still, the mailer states, “It may be tempting to try a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development,” and uses a graphic with a blurry/clear image of a duck to the same effect. The smaller-type footnotes this disclose that the comparison is between Enfamil LIPIL and Enfamil without DHA and ARA. The next page says “En-Fact: Enfamil LIPIL’s unique formulation is not available in any store brand.”

Mead Johnson argued that PBM’s false advertising claims were barred by a broad 2007 settlement in a trade dress case between the parties. But the claim regarding the 2008 Mailer could not have been brought then because it did not yet exist. Mead Johnson also argued laches. The Lanham Act has no express limitations period, so courts borrow analogous state periods for purposes of assessing laches; here, the court chose Virginia’s action for fraud, which has a two-year statute of limitations. Mead Johnson argued that many of the key statements were repeated from its 2006 mailer, of which PBM was aware.

Laches requires (1) lack of diligence by the plaintiff and (2) prejudice to the defendant. On prejudice, Mead Johnson argued that it had used the challenged ads extensively in its marketing and spent hundreds of millions of dollars linking its product to these claims. The court agreed with PBM, however, that while the 2008 mailer might contain similar language pieced together from earlier ads, it made “stronger and more direct arguments related to the efficacy of store bought infant formula than prior Mead Johnson ads.” This “new tone and point” meant that PBM did not delay unduly after being wronged. In context, the mailer was designed to “[c]reate uncertainty” about the benefits of store brand formula; evidence that the campaign decreased sales of store brands also showed that the 2008 mailer was different from prior ads.

With that out of the way, Mead Johnson’s argument that the Lanham Act claim couldn’t succeed on the merits was also rejected, because it depended on the idea that PBM’s survey failed to distinguish laches-protected claims from laches-unprotected claims. Thus, whether the claims were literally or impliedly true or false presented material factual issues. And even without proof of consumer deception, PBM had enough evidence to go to trial on intentional deception, an alternate means of proving falsity. In a footnote, the court also left open the possibility of finding, after trial, that the mailer was literally false.

PBM’s state law commercial disparagement claim, however, failed because Virginia recognizes only palming off and misappropriation as unfair competition.

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