Tuesday, September 11, 2012

Mathematically impossible claims aren't literally false

CytoSport, Inc. v. Vital Pharmaceuticals, Inc., 2012 WL 3881599 (E.D. Cal.)

Defendant VPX released Muscle Power, a protein shake, and CytoSport sued for infringement of its Muscle Milk mark and trade dress (including layout and font) for the same products, along with false advertising.  The products were both marketed in octagonal tetra-packs, “one of the few available FDA approved packages available for ready to drink protein drinks.”  Their prices and target markets were similar.  The challenged Muscle Power ads depicted a woman nursing a child with the caption, “MILK IS FOR BABIES, MUSCLE POWER IS FOR MEN!” and claimed that Muscle Power contained 600% less sugar and 183% less fat than Muscle Milk.  After CytoSport won a preliminary injunction on the trademark claims, VPX introduced a new product that didn’t resemble Muscle Milk, but the case continued, including on VPX’s false advertising claims centered around the use of “Milk” to name a non-dairy product.

The parties submitted conflicting survey evidence on likely confusion between the products: one found 4.1% confusion and the other 25.4% (I’ll let you guess which was which), and CytoSport employees also provided declarations about customer source confusion.

VPX’s false advertising counterclaim relied heavily on an FDA warning letter that preliminarily determined that “Muscle Milk” was deceptive as containing no milk.  VPX also used deceptiveness as an equitable defense to enforcing CytoSport’s mark, and sought cancellation of the mark (available despite the mark’s incontestability since deceptiveness is a ground for cancellation at any time).  To date, the FDA hasn’t followed up on its 2011 warning letter with a final determination.

The court excluded a VPX survey about use of the Muscle Milk mark on a product that contains no milk.  The survey showed respondents three brand names without accompanying trade dress or product images: Muscle Milk, ProMan-X, and Lean Body. The survey asked if each product contained a lot, some, or no protein, creatine, and milk. There was no “I don’t know” option.  While Lean Body is also a protein drink, ProMan-X is a “male enhancement” supplement.  The answers showed an unacceptable level of guessing.  For ProMan-X, 98% of respondents said it contains protein, 92% creatine, and 68% milk, but it has none of these. As for Muscle Milk, 80% responded that it contained milk. The survey expert admitted in his deposition that respondents were guessing.  VPX failed to show that the survey comported with accepted principles of surveying, and thus it was excluded.

On the other hand, VPX’s confusion survey was admitted; the criticisms went to weight rather than admissibility.  The confusion survey asked respondents to examine a container of Muscle Power and determine who made the product. CytoSport argued that it failed to replicate market conditions, failed to determine whether or not respondents were aware of CytoSport or Muscle Milk before asking them questions, and failed to identify respondents who believed that the Muscle Power product was actually Muscle Milk.  But CytoSport didn’t dispute that the survey was conducted using an approved format (it’s an Ever-Ready survey), relevant, and conducted according to accepted principles.  The court found the criticisms persuasive, but that was ultimately for the jury.

Turning to the false advertising claims, the court first found the Lanham Act counterclaim barred by deference to the FDA under the recent Pom case.  VPX’s primary evidence was the FDA warning letter.  (Thus, if there had been non-excluded evidence of falsity and materiality independent of the FDA issues, this might have been a different case.)  “The FDA is aware of CytoSport's labeling and has not acted. If the FDA determines that CytoSport's use of the term ‘Muscle Milk’ is misleading to consumers, despite the ‘Contains No Milk’ disclaimer on the label, it will act to enforce the labeling requirement.”  The warning letter itself was informal and advisory.  Any Lanham Act claims were barred until the FDA issued its decision.

On the other hand, the state law claims weren’t barred to the extent that state law requirements were “identical” to FDA requirements, as the FDCA specifically allows.  So while federal courts won’t interpret the FDCA or FDA regulations for Lanham Act purposes, they may have to do so for state-law false advertising claims.

CytoSport argued that the state law claims were barred by the statute of limitations, but VPX didn’t suffer any harm (triggering standing) until it introduced a competing product, and it counterclaimed well within the FAL/UCL four-year statute of limitations measured from then.

Fortunately for CytoSport, competitor FAL/UCL claims are judged by Lanham Act standards (except for the preclusion part—is your head spinning enough yet?), and VPX didn’t have enough evidence of falsity or materiality.  Along with the FDA warning letter, VPX offered as evidence of deception the PTO’s initial rejection of the mark MUSCLE MILK ACTIVE; NAD’s decision to refer CytoSport to the FDA and FTC for refusing to participate in a proceeding with Nestle on this issue; preliminary actions from Canadian IP authorities; and CytoSport’s decision to add a “Contains no Milk” disclaimer, which it has also registered as a mark.  None of this was enough to show unambiguous falsity—the decisions were all preliminary and the disclaimer wasn’t an admission of previous deceptiveness.  Without the VPX survey, CytoSport’s expert report was uncontradicted, and it tended to show that consumers were no more confused by Muscle Milk’s label than by a generic control bottle label.

Materiality was a separate problem.  There was no evidence that a mistaken belief that the product contained milk would cause consumers to choose Muscle Milk over the alternatives.  And it followed that VPX couldn’t show harm, since without materiality there can be no harm—something I really wish trademark cases would recognize!

Thus, all VPX’s counterclaims, including the cancellation claim, failed for want of admissible evidence supporting them.

However, CytoSport’s motion for summary judgment on its infringement claims was also denied.  VPX was still allowed to raise deceptiveness as a defense.  (I’m not sure why, if no reasonable jury could find in its favor on the cancellation claim, a reasonable jury could find in its favor on the defense, but ok.)  Also, there were material issues on likely confusion.  As to mark similarity, VPX noted that there were many products in the protein supplement market using “muscle,” and the PTO allowed both marks.  But the similarity in fond and placement of the marks on the packaging was strong, and the PTO didn’t have marketplace evidence in front of it. Still, VPX raised a genuine issue of material fact.  A reasonable jury could look at “power” and “muscle” as the key words, and CytoSport’s argument also rested at least in part on its trade dress claims, as to which it hadn’t sought summary judgment.  Trade dress was relevant in creating the context for comparison, but “what confusion stems from the similarity of the marks and what confusion stems from trade dress is primarily a question for a jury to answer.”

Likewise, actual confusion was disputed given the competing surveys; the jury could also regard the CytoSport employee statements about consumer confusion as de minimis.  Intent was also in dispute.  VPX’s CEO looked at every tetra-pak packaged protein shake before choosing the Muscle Power design; CytoSport argued that this should lead to an inference of intent to copy. VPX responded that it ran comparative ads disparaging Muscle Milk, which was evidence of intent to distinguish.  A reasonable jury could go either way.  Considering the packaging of every protein shake on the market doesn’t necessarily lead to an inference of intent to copy.  The CEO “may have intended to create a package that was an amalgamation of many competitors' designs or merely a design that met existing industry expectations.”

Turning to those disparaging ads: CytoSport argued that VPX’s claims that Muscle Power had 600% less sugar and 183% less fat than Muscle Milk were literally false because they described mathematical impossibilities.  The parties agreed that Muscle Milk contained six times more sugar and 1.83 times more fat than Muscle Power.  VPX argued that a reasonable jury could find that the ads conveyed a “colloquial” message that Muscle Power contained 1/6th the sugar and 100/183rds the fat of Muscle Milk.  “Mathematically nonsensical” claims couldn’t be literally false.  A reasonable jury could find that innumerate consumers would receive a truthful message, so there was no literal falsity (though misleadingness was apparently preserved for trial).

VPX sought a motion to stay until the FDA acted, which might allow it to use the deceptiveness of CytoSport’s mark as a defense.  The court disagreed, because the FDA’s standards were different from Lanham Act standards (how?) and the FDA’s reasoning was already laid out in the warning letter (which could be presented to the jury?).  I’m still a bit confused how this defense will work given the rejection of the FDA-based claims.

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