Tuesday, April 20, 2010

Misrepresentation of inventorship is actionable

PhotoMedex, Inc. v. Irwin, --- F.3d ----, 2010 WL 1462377 (9th Cir.)

PhotoMedex lost summary judgment on its Lanham Act and California false advertising/unfair competition claims and appealed, alleging that defendants misrepresented (1) FDA clearance to market their dermatological laser device, (2) the anticipated date their laser would be available for purchase, and (3) Irwin’s role as inventor of PhotoMedex’s laser device. Irwin was formerly on PhotoMedex’s development team, before he left to cofound codefendant Ra Medical.

The FDA permits manufacturers such as defendants to determine in the first instance whether their laser device was covered by clearance previously given a similar device, and also permits them to market the device without an affirmative statement of FDA approval. In these particular circumstances, when the FDA declined to make a finding that there was no valid clearance and declined to bring an enforcement action itself, claim (1) couldn’t proceed.

The court of appeals held that “when, as here, the claim would require litigation of the alleged underlying FDCA violation in a circumstance where the FDA has not itself concluded that there was such a violation.” To win, PhotoMedex would have had to show that there were significant differences between the FDA-cleared device and the device actually sold, but the determination of significant difference was a matter for the FDA (which had expressed uncertainty on the matter but never took enforcement action). This was not to say that the Lanham Act can never support private party claims involving FDA approval or clearance. For example, if it were clear that an affirmative statement of FDA approval was required and that no such FDA approval had been granted, “a Lanham Act claim could be pursued for injuries suffered by a competitor as a result of a false assertion that approval had been granted.”

In a footnote, the court commented rather pointedly that, unlike premarket approval, the clearance available to these device manufacturers “does not in any way denote official approval of the device.” 21 C.F.R. § 807.97. PhotoMedex didn’t argue that defendants’ “FDA approved” statement was in itself false or misleading because these devices were not “approved” in the way that other devices (and drugs) are, “perhaps because it too advertised its XTRAC laser as ‘FDA approved.’” The court explicitly reserved decision on whether representing such a device as having “FDA approval” may be actionable on the grounds that these devices are not actually subject to premarket approval.

But (2) and (3) were potentially viable. As for (2), false projections of market availability: though a forecast of future events “may ordinarily be a statement of opinion upon which such claims cannot be based,” it can be actionable if the speaker knew when the statement was made that it was false or lacked a good faith belief in its truth. Here, defendants distributed a brochure at a March 2003 trade show proclaiming that its Pharos laser was “FDA approved” and claimed that it would be available for purchase within a few months. But they didn’t ship the Pharos until September 2004 (and the laser they shipped differed in some respects from the FDA-cleared laser). Defendants argued that they were delayed in part by PhotoMedex’s multiple lawsuits. The district court thought that the release date predictions were mere statements of opinion regarding future events, which are “generally not actionable.” But there’s a well-established exception if the speaker knows of facts that make the opinion unwarranted. If defendants knew that the Pharos couldn’t actually be available until a substantially later date, they can be liable for misrepresentation.

The difference between nonactionable opinion and actionable factual misrepresentation is for the jury, as PhotoMedex offered sufficient evidence to survive summary judgment. Irwin told FDA officials that the design plan for the Pharos was developed in March 2003, and PhotoMedex’s expert testified that it would take 12 to 18 months to move from design to production, assuming everything was complete and well-documented; the expert further testified that Ra Medical’s work was not complete and well-documented. Thus, the expert concluded, it wouldn’t have been reasonable to project delivery for any time in 2003, but only in the second half of 2004; and a person knowledgeable in the field would have known this. This testimony raised a genuine issue of material fact.

The motivation for and harm from such a misrepresentation was obvious. Defendants might have persuaded clients not to buy PhotoMedex’s available device, leaving them “open” to buying defendants’ product later.

The “commercial depiction” of Irwin as inventor was actionable because it might misrepresent his actual contribution. Defendants’ marketing materials described him as “inventor of the first FDA approved excimer laser for phototherapy” (which was PhotoMedex’s laser). PhotoMedex argued that he was neither the only nor the primary inventor of the PhotoMedex laser. Defendants argued that he was VP of engineering, where he was “intimately involved” in the development of the laser, and that he invented particular components. But this depiction was actionable “to the extent it misled consumers into believing that Irwin was the sole inventor or made more than his actual share of inventive contributions.” Irwin was only named as inventor in patents for the laser’s cooling apparatus; other individuals designed the “bulk” of the system. (Interesting that there’s no discussion of materiality, though I can easily see the argument for same.)

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