Monday, February 04, 2013

What's the proper scope of corrective advertising?

Merck Eprova AG v. Gnosis S.P.A., 2013 WL 364213 (S.D.N.Y.)

Merck also won a false advertising claim against Gnosis (and in this case, there were “egregious discovery violations”).  In this opinion, the court settled on an attorneys’ fee award and discussed the appropriate corrective advertising already ordered.  The award was over $1.9 million, and nearly $300,000 in costs.  Gnosis argued that this sum far exceeded their sales of the product at issue, $175,664.71, as well as the damages awarded by the court, $526,994.13.  But the actual stakes in the case were the market share of one of Merck’s flagship products, and Merck’s lawyers got a significant victory (including an injunction), making the fee reasonable.

Merck proposed tha the corrective advertising campaign (1) disclose that the campaign is court-ordered; (2) explain that Gnosis’s misrepresentations were found to be willful; (3) provide a link to the opinion hosted on Merck’s lawyers’ website; (4) run on Gnosis’s homepage; (5) run on third-party industry websites; and (6) run in trade magazines where Gnosis’s offending products were advertised.  Gnosis argued that the first two were punitive and unrelated to curing market confusion; that providing a link to the opinion was unnecessary and provided free advertising for the lawyers, given that the opinion is available free online; that the ads should only run on pages where the products are sold, not Gnosis’s homepage; and that the ads shouldn’t run on third-party websites or trade magazines because Gnosis itself didn’t advertise there.

Corrective advertising must be reasonable and causally related to the false advertising.  Some of Merck’s requests went beyond addressing consumer confusion.  So, the ads would have to disclose that the campaign is court-ordered to provide consumers with context for Gnosis’s clarification, but need not disclose that its misrepresentations were willful.  The ads had to provide a link to the opinion, but it need not be hosted on Alston & Bird’s website.  The ads had to be on Gnosis’s homepage as well as product sale pages “to ensure sufficient market dissemination,” but need only run elsewhere “where the offending products were or are presently advertised by Gnosis.”

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