Thursday, September 05, 2013

existence of scientific debate doesn't take claim outside Lanham Act

Eastman Chemical Co. v. Plastipure, Inc., No. A–12–CA–057, 2013 WL 4677702 (W.D. Tex. Aug. 30, 2013)

In this case, the first opinion I’ve come across to consider the Second Circuit’s sweeping language in ONY, the court does the sensible thing and applies regular Lanham Act doctrine instead.  (I am especially pleased about this since I was interviewed about the case for NPR and took the position that ONY wasn’t the barrier that defendants made it out to be.)

Eastman alleged that Plastipure disparaged Eastman’s plastic resin Tritan by falsely stating that it leached chemicals capable of causing estrogenic activity under certain circumstances, and that those chemicals could harm humans.  A jury found in Eastman’s favor.  Defendants moved for judgment as a matter of law.

First, defendants argued that they weren’t in “commercial competition” with Eastman, as required by the “commercial advertising or promotion” element (note: not the standing element!) of a Lanham Act claim.  The court disagreed.  Plastipure’s founder and chief scientist, Dr. Bittner, testified that they were developing a plastic resin to compete with Tritan, though it might or might not be ready to market. This was sufficient for a jury to find commercial competition.  Plus, defendants published a brochure comparing test results from products made with Tritan to their own in-house brand of plastic, “further suggesting direct competition between the parties.” In addition, defendants’ “general business practice of certifying plastic products as ‘EA-free’ directly impacts Eastman’s business” (citing Logan v. Burgers Ozark Country Cured Hams Inc., 263 F.3d 447, 463 (5th Cir. 2001) (jury “could have inferred that the parties were competitors” based on plaintiff’s “direct business interest” in relevant market and defendants’ advertisements in the same market)).

Next, defendants argued that they didn’t make empirically falsifiable factual statements about Tritan, but rather participated in a scientific debate protected by the First Amendment, citing ONY.

ONY didn’t control, even aside from being a Second Circuit case.  The ONY plaintiffs sued over a published article in a peer-reviewed scientific journal; they believed the defendants had drawn the wrong conclusions from their data.  But the article disclosed the “data, weaknesses of the experiments, and potential conflicts of interest,” thus “giving the scientific audience adequate information to analyze and accept or reject the authors’ conclusions.”  Here, Eastman didn’t sue over Dr. Bittman’s scientific paper, which was also published in a peer-reviewed scientific journal. Instead, Eastment based its claims on “non-scientific materials,” including an advertising brochure, press releases, and defendants’ website, “none of which included the full context of the scientific paper, and some of which pre-dated the publication of Dr. Bittner’s paper.”  Here, the “scientific debate” “moved from the pages of academic journals to commercial advertisements targeted at consumers.”  This was “nothing more than a battle of the experts in which the jury was properly tasked with crowning a victor,” as juries routinely do.

There was also sufficient evidence for the jury to find that the statements “Tritan has EA” or “Tritan has EA and is thus harmful to human health” were false.  Expert testimony indicated that Tritan didn’t exhibit estrogenic activity or leach chemicals capable of causing estrogenic activity after common uses.  Indeed, experts on both sides universally refused to support the claim that Tritan is harmful to human health.  The court instructed the jury on falsity by necessary implication; defendants argued that their statements were ambiguous, as shown by Eastman’s survey “in which some relatively small percentage of those surveyed claimed the ‘Tritan is harmful’ statement was true.”  The court disagreed: “[T]he mere fact not everyone who read the materials believed ‘Tritan is harmful’ was a true statement does not mean the message conveyed was ambiguous. Defendants’ advertisements clearly and unambiguously stated (1) Tritan has EA, and (2) EA is harmful.”  A reasonable jury could complete the syllogism.

Defendants argued that there was no evidence of actual deception. But numerous Eastman customers expressed concern about the statements, even if Eastman ultimately reassured them, and Eastman’s survey of plastic-product purchasers concluded that a statistically significant (ed. note: argh!) percentage of respondents believed defendants’ statements.  While the survey was attacked, there was still some evidence of actual deception. Plus, the jury ultimately found falsity, not just misleadingness, so deception could be presumed.

Amazingly, defendants contested materiality.  More amazingly, the court said, “[w]hile a jury was certainly not required to find materiality, there was some evidence to support such a finding.”  Is there a single situation in which “dangerous to human health” is not material?  Risks might be outweighed by benefits, but is there any situation in which that consideration wouldn’t influence a reasonable consumer?

Likewise, Eastman’s evidence of deception and materiality showed injury to Eastman, and it also showed expenses for corrective advertising.

Defendants then argued that their press releases and website statements weren’t “commercial advertising or promotion.”  Yes, they were.  They were “clearly designed to bolster Defendants’ image and reaffirm Defendants’ primary business strategy; in other words, to ‘influenc[e] consumers to buy defendant’s goods or services,’ namely Defendants’ ‘safer’ plastic alternatives as well as their testing and certification services.”

Given the burden on defendants to upset a jury verdict, and the contradictory testimony on multiple issues—which the court noted was sometimes compelling for one side or the other, and sometimes both sides fell flat—“virtually any verdict the jury reached would have been sustainable.” 

This was true even given the First Amendment defense.  “Defendants refuse to acknowledge the critical factual distinction between suing someone for publishing an academic paper and suing someone for making statements in a commercial advertisement, even if those statements are based on a peer-reviewed study.”  ONY “clearly took this distinction into consideration” by discussing the importance of presenting the full dataset to the relevant discipline:

This lawsuit is not about Dr. Bittner’s scientific paper. It is about statements made in commercial advertisements or promotions, not statements made in a peer-reviewed journal. It is about statements made to consumers, not scientists. It is about statements made without the necessary context presented by a full scientific study, such as a description of the data, the experimental methodology, the potential conflicts of interest, and the differences between raw data and the conclusions drawn by the researcher.

Defendants could not be immunized from liability “simply because scientists disagree” about relevant definitions, methods of detecting estrogenic activity, and danger to human health. “ONY merely recognizes scientists must be free to have such debates within the scientific community without fear of being sued for making ‘false’ statements.”  Dr. Bittner wasn’t sued for publishing.  His companies were sued “when they transformed snippets of his paper—a paper which never mentions Tritan or Eastman by name—into commercial advertisements claiming Tritan is harmful whereas Defendants’ certified EA-free products are safe.”

Now the court really lays it out: “Defendants’ reading of ONY, taken to its logical conclusion, would eviscerate the Lanham Act. For the right price, an expert can be found to offer virtually any opinion on any given subject.”  The jury’s role is to evaluate conflicting evidence; we don’t give up just because highly qualified experts disagree.

The jury here found that defendants made three false statements: (1) Tritan has EA; (2) Tritan is dangerous; and (3) Tritan exhibits EA when subjected to “common use” stressors.  There was adequate evidence for each.  The jury could have found defendants’ tests inadequate to conclusively prove that Tritan exhibits estrogenic activity; it could have found that there was no evidence Tritan was harmful, which was essentially undisputed; and it could have found that defendants’ chosen test stressors were not “common use,” despite being described as such, because they did not simulate realistic exposure conditions for Tritan products.

Defendants then contested standing, for the first time.  Under the multifactor/antitrust test, the basic question was “whether, in light of the competitive relationship between the parties, there is a sufficiently direct link between the asserted injury and the alleged false advertising.” Answer: yes, even if this argument hadn’t been waived, as prudential standing requirements can be.

Defendants also challenged the jury’s finding of willfulness, arguing that they based their statements on Dr. Bittner’s published scientific paper.  But that didn’t categorically preclude a willfulness finding. Plus, they didn’t simply quote or excerpt the paper.  They “redesigned a bar chart to compare Tritan with PlastiPure products (as in the brochure) and read in wholly unsupported conclusions (e.g., Tritan is harmful).”  The jury also saw an email from Dr. Bittner, before any testing on Tritan, claiming Tritan would be estrogenically active.  Other testimony said that the bar chart didn’t fit the underlying data and omitted data unfavorable to PlastiPure products. One of defendants’ employees even testified he did not believe the tests they used simulated “common use” stressors. A reasonable jury could have concluded that defendants knew of or were indifferent to the falsity.

Turning to injunctive relief, the propriety of which was judged using eBay, defendants argued that Eastman hadn’t shown irreparable injury.  Unlike a trademark claimant, a false advertising claimant can’t presume irreparable injury from success on the merits. (Argh.)  Still, it would be “somewhat unusual” not to enjoin an infringer.  A five-year cessation of the challenged claims and their present outdatedness could justify denying an injunction, but here, “there is a undoubtedly a possibility Defendants will make similar statements in the future.”  The jury found evidence of injury, such as Eastman’s strained relationship with a Korean company that fell out of Eastman’s list of top ten customers after it encountered the disparaging statements.  And Eastman spent about half a million on corrective advertising. 

While some of these injuries would be easily compensable, such as its corrective advertising expenses, others couldn’t be easily measured.  “This is especially true of the ongoing potential harm if Defendants continue making similar statements through difficult-to-monitor channels, such as direct advertising via emails to customers.”  Given the statements’ literal falsity, their deceptiveness was presumed; the inability to quantify the harm done weighed in favor of finding irreparability.

Defendants had already taken down the brochure and press releases, so “[a]n injunction putting legal force behind their commitment is a minimal burden.”  The First Amendment wasn’t implicated, since they wouldn’t be barred from “participating in scientific discussions, continuing their research, or publishing scientific articles.”

Defendants argued that Eastman had unclean hands based on its own allegedly false and misleading statements about Tritan and defendants’ testing, but none of that was submitted to the jury and the court wasn’t going to conduct its own mini bench trial.

Unsurprisingly, Eastman sought a broad injunction, including a required formal retraction on defendants’ website.  Defendants argued that they should only be required to attach disclaimers, and that they should be free to engage in scientific publications and to link those publications to their website.  “Disclaimers are appropriate when a disclaimer can effectively make the presentation of particular information no longer deceptive or misleading.”  But misleading commercial speech isn’t protected by the First Amendment, and defendants had no protectable interest in making the statements the jury found false and misleading.  There was no reason to think that disclaimers would remove the potential for harm; the infringing party should have some burden to show that a disclaimer would effectively remedy false and misleading statements.  “Defendants’ proposed disclaimers could be the subject of an entire second trial, with the expert witnesses continuing to disagree with each side’s characterization of the testing methodology and underlying data.”  Though Eastman’s direct customers were sophisticated and capable of understanding the disclaimers, there was evidence that defendants intentionally targeted end users to convince them to put pressure on manufacturers to use EA-free materials—that is, not Tritan.  “It is totally unclear whether Defendants’ proposed disclaimers would alleviate the downstream harms associated with unsophisticated consumers encountering Defendants’ statements.” 

An injunction was therefore appropriate, though it had to be narrowly tailored.  The court would enjoin the three statements the jury found false, but not a related statement (“Defendants’ use of the MCF–7 in vitro assay is a definitive final test for estrogenic activity in chemicals or substances, including Tritan”) the jury wasn’t asked to consider.  No special limits on the injunction were necessary, since nothing barred defendants from engaging in additional scientific research or publishing scientific papers. “If Defendants conduct new research and believe their results show Tritan exhibits estrogenic activity, they are free to publish a scientific paper on the topic. If Defendants further believe their research proves the statements the jury found to be false and misleading are no longer false and misleading, Defendants may seek relief from the injunction in this Court.”

The court declined to order defendants to run Eastman’s proposed corrective advertising, given the significant investment Eastman had already made.  “[I]t is unclear what additional effect a digital billboard written by Eastman and posted on Defendants’ website will have.”

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