Midway through trial of this Lanham Act case between
competitors in the urine drug testing industry, the parties resolved their
remaining issues by agreeing to a consent order, but unfortunately, the
hostilities continued. Both sides issued press releases and other public
statements, and then filed new Lanham Act suits accusing each other of
violating the consent order and misstating the results of the trial and the
court’s rulings. After various
proceedings, the court told the parties that it would issue a memorandum “that
neutrally and objectively recounted the earlier litigation,” then summarily
dismiss the lawsuits.
The court first explained why it believed it had the power
to issue this clarifying memorandum and dismiss the suits. First, the consent
order gave the court authority to resolve disputes bearing on it; the court
also had inherent authority to enjoin a party from making misleading statements
concerning litigation on its docket.
(Wonder what
Paul Alan Levy thinks of this.) Second, both sides sought a jury trial: a
trial “at which a jury would decide what happened in the earlier litigation,
including the import of this Court's rulings, and whether the parties'
statements violate the Lanham Act.” (In
a footnote, the court noted skepticism over whether the press releases were
“commercial advertising or promotion.”)
Asking a jury to review thousands of pages of pleadings, orders,
exhibits, and transcripts “would be unconscionably wasteful of both judicial
and private resources.” Thus, the court was the only feasible arbiter of
disputes over earlier litigation.
Third, the standard Lanham Act false advertising relief is
equitable “because of the inherent difficulty in attributing economic injury to
a competitor's false advertisements,” and here either side could only speculate
about the effects of the press releases.
The new lawsuits were about the parties’ characterization of the earlier
litigation. The court’s memorandum, “which
recounts the history of that litigation neutrally and objectively, affords both
sides with appropriate equitable relief.” Thus, there was nothing more to
decide, and the court would dismiss the cases.
I’m not clear on what happens if one of the parties decides that this
memo isn’t accurate, though that
mention of “inherent power” above probably gives a clue.
The parties advertise to pain doctors who prescribe powerful
opiods such as oxycodone and hydrocodone.
As many as 75% of pain patients fail to take medications as
prescribed. Determining compliance is a
problem, because time-consuming personal monitoring is “at odds with the
business model (twelve to fifteen minutes per patient) that the pressure of
modern medicine has forced on many practices,” and also insurance won’t pay for
much monitoring. Thus, there’s a market
demand for a test to assist doctors in determining prescription compliance,
which means taking the right medicine, in the right dose, at the right
time. Urine testing can provide some information,
but it can only provide a snapshot of current use. Because individuals
metabolize drugs at different rates, the tests can’t determine the dosage or
time taken. Thus, they can’t determine prescription compliance.
After the parties sued each other in 2010, ultimately the court
only sent four Ameritox ads to an advisory jury for a determination of literal
falsity. The jury was asked to examine the ads from the perspective of a pain
doctor to see whether each ad contained a literally false message that Ameritox
tests could determine prescription compliance.
Ameritox’s first-generation service Rx Guardian would
analyze a sample for drugs/metabolites, then normalize the results by means of
an algorithm accounting for patient hydration and lean body mass, which would
then be plotted against a reference range.
Ameritox described the reference range as a band within which a
prescription-compliant patient’s result would be expected to fall; 95% of
compliant patients would have results within the reference range. The next generation, Rx Guardian CD, used a
new source of reference ranges, calculated on an ongoing basis from a database
of pain patients treated at a Wisconsin clinic.
The crux of Millennium’s claim was that Ameritox falsely
advertised that Rx Guardian test results could, by themselves, be used to
determine prescription compliance. For
the second-generation product, Millennium also argued that it was false to
describe the Wisconsin patients as “known to be adherent,” because they were
not monitored in a controlled in-patient setting, but rather interviewed and
their compliance assessed in part by subjective staff determinations. Ameritox argued that it only advertised the
tests as another tool to help or assist doctors in monitoring. It agreed that the Wisconsin patients probably
included some noncompliant individuals, but argued that a reasonable pain
doctor would understand “known” to mean “clinically assessed” in the context of
its database.
The court granted summary judgment to Ameritox on
Millennium’s claims against ads challenged as literally true but misleading,
after excluding Millennium’s surveys mainly for lacking proper controls. Here, the court found lack of a control
particularly significant because these were technical services requiring highly
nuanced messages; without a control, the survey couldn’t account for
respondents’ preexisting views about urine testing. The court consulted Shari Diamond, the author
of the Federal Judicial Center's Reference Guide on Survey Research, as an
independent expert, who also concluded that the surveys were fatally flawed,
primarily for want of controls. The
court was also concerned that the surveys weren’t blind, that results hadn’t
been coded in a replicable way, and that doctors were told that the survey
would take only a few minutes even though the tested ads contained a
significant amount of technical information.
With its surveys gone, Millennium argued that Ameritox’s
intent to deceive relieved it of the need to produce confusion evidence. But this “narrow” exception should be
cautiously applied so that it wouldn’t swallow the rule; without “stark
evidence of a knowing and intentional deception,” it didn’t apply. Thus, the misleadingness portions of the case
disappeared, along with a few other pieces, such as an internal marketing piece
that the court determined wasn’t “commercial advertising or promotion.”
Likewise, Ameritox’s counterclaims ultimately went
away. Among other things, Millennium won
summary judgment on challenges to its claims (i) to have the fastest turn-around
time in the industry, and (ii) to be able to provide final quantitative lab
results by the “next business day,” despite Ameritox’s surveys, because
Millennium’s claims were literally true and clear. Ameritox couldn’t identify a competing lab
with a faster turn-around time, and Millennium could usually provide results
the day after it received a specimen.
The court then said it didn’t need to consider survey evidence when
claims were “unambiguously true,” but anyway Ameritox’s surveys were seriously
flawed.
Only four Ameritox ads went to the jury, which was supposed
to render an advisory verdict on literal falsity (as well as whether three of
the items were “commercial advertising”), which was ultimately an issue of law
for the judge. A later phase, if
necessary, would focus on injury and damages, also required to make out a
Lanham Act claim. The court instructed
the jury that, if an ad actually promised that Rx Guardian by itself could tell
the doctor whether a patient was compliant, that ad would be literally
false. If it instead promised only a
tool, then the ad wouldn’t be literally false. There were no scientific issues
for the jury to decide, such as whether the reference ranges were actually
useful or whether the Wisconsin clinic’s protocol was sound. As for the Wisconsin clinic, the challenged
ad described the patients as “known adherent,” which would be literally true if
a pain doctor would read that as “clinically assessed.”
The jury found that each ad communicated a literally false
message about the capabilities of the Rx Guardian service or about the
prescription compliance of the Wisconsin patients. Using this advisory verdict as one source of
information, the court independently found literal falsity. Three of the ads “unequivocally claimed that
Rx Guardian could ‘tell,’ ‘verify,’ or ‘determine’ whether patients were taking
their pain medications in the prescribed dosages.” The statement about the Wisconsin patients
was also false. Though a reasonable doctor would understand that nothing in
medicine is 100% certain, “known adherent” suggested rigorous monitoring in a
controlled clinical setting, whereas the Wisconsin protocol only eliminated
those who showed certain indicia of non-compliance.
At that point, two issues remained to make out a Lanham Act
claim: injury and damages. The court held off on injury, but ruled that
Millennium’s case for money damages was too speculative to proceed. “[M[onetary damages are often difficult to
obtain in Lanham Act cases due to the challenge of tracing monetary losses to
specific advertisements. This difficulty is compounded for a company like
Millennium, that has enjoyed steady increases in market share and
profitability.” Injunctive relief was still on the table, though.
At that point, the parties agreed to a consent order
providing that Ameritox would no longer state in promotional materials or
advertisements that its services can “verify compliance,” or “confirm
adherence,” nor would it use similarly definitive phrasing. The order also
required Ameritox to refer to the patients in the Wisconsin database as
“clinically assessed to be adherent” rather than “known adherent.” Further, Ameritox had to send its customers
and post on its website a letter from its CEO disclosing the advisory verdict
and the court’s ruling of literal falsity on the four challenged ads. The letter would state that “no urine drug
test can definitively determine whether a patient has taken the dosage of
medication prescribed,” and that pain doctors should “always use their clinical
judgment in combination with all available information” in assessing
prescription compliance.
Unfortunately, “[h]ostilities resumed within hours.” The court held that its present memorandum
mooted the disputes by providing a neutral account of the earlier litigation,
so the pending cases were dismissed with prejudice.
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