Friday, July 28, 2017

SDNY declines to extend ONY to press releases about studies

Mimedx Group, Inc. v. Osiris Therapeutics, Inc., No. 16 Civ. 3645, 2017 WL 3129799 (S.D.N.Y. Jul. 21, 2017)

The parties compete in the wound care biologics market for tissue-graft products.  Mimedx makes “EpiFix,” “a tissue graft processed from [a dehydrated] human amniotic membrane that is derived from donated placentas using [Plaintiff’s] proprietary technology, including its Purion process.” EpiFix is designed to help “reduce inflammation, enhance healing, and reduce scar tissue formation.” Osiris (cool name), its direct competitor, makes Grafix, “a cryopreserved placental membrane” used to treat acute and chronic wounds.

A comparative study conducted in Montana was eventually published in the peer-reviewed journal Wound Repair and Regeneration. Osiris published a press release on its website touting the results of the study.  Mimedx argued that statements in this press release, as well as in an Osiris brochure, violated the Lanham Act and New York G.B.L. §§249, 250.

First, the court found that the press release and the brochure were properly alleged to be “commercial advertising or promotion.”  Osiris argued that its statements weren’t commercial speech under ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013).  ONY held that a medical article’s “contents [we]re not actionable under the Lanham Act” because statements in scientific literature “are more closely akin to matters of opinion, and are so understood by the relevant scientific communities.” But here, Mimedx wasn’t challenging the study, but rather the press release, which allegedly misrepresented the study, and the brochure, which wasn’t even reporting on the study. These were “statements in commercial materials directed principally to consumers, not statements in scientific materials directed to scientists.”  In ONY, the court of appeals highlighted that the plaintiff there didn’t allege that the defendant’s promotional materials misstated the relevant article’s conclusions. The plaintiff here did.  The “mere fact that the Press Release and the Brochure touch on topics of scientific debate does not trigger ONY immunity and disqualify them as commercial speech.”  Were that so, the Lanham Act would hardly ever be enforceable.

Likewise, Mimedx adequately pled sufficient dissemination to the relevant public, even though it didn’t plead the number of copies distributed or the exact scope of the target market.  “The touchstone of whether a defendant’s actions may be considered ‘commercial advertising or promotion’ under the Lanham Act is that the contested representations are part of an organized campaign to penetrate the relevant market.”  Mimedx identified the relevant market as “the wound biologics market,” and alleged distribution of the press release to current and prospective customers, including specific wound treatment centers.  Many of the further details would be difficult to identify without discovery; Mimedx had done enough to plead plausibly.

Finally, for the most part, Mimedx plausibly alleged falsity or misleadingness.  In terms of the press release’s claims that the study showed “that Grafix has demonstrated superior outcomes to EpiFix,” the study itself indicated that, “as to certain types of ulcer wounds, EpiFix closed the same number as or slightly more than did Grafix; that is, for some wounds EpiFix is arguably equally if not slightly superior to Grafix, according to this metric.”  Whether the press release statement was in fact deceptive because of the overstatement couldn’t be resolved at this stage.

Similarly, the brochure claimed that (i) “A Chronic Wound Needs: ... Viable Cells”; (ii) EpiFix’s Purion process “destroys endogenous tissue viable cells” and lacks the “presence of viable cells”; and (iii) “Grafix provides everything you need for treating chronic wounds” such as “viable cells.”  Mimedx claimed that these statements were misleading because, “[w]hile viable cells can be beneficial for wound healing, viable cells in a placental derived tissue graft like Grafix are not necessary for effective wound healing,” and indeed, “viable cells added to a chronic wound through an allograft die quickly upon introduction to the wound or migrate away from the wound site,” and thus have a “minimal contribution on the effectiveness of the allograft.” A reasonable consumer could understand the brochure to be claiming that viable cells played an important, even vital, role in the efficacy of tissue grafts and that EpiFix lacks such cells while Grafix contains them.  Assuming the truth of Mimedx’s allegations, this could deceive consumers.  Similar reasoning applied to the brochure’s claims that EpiFix had a “high level” of Matrix Metaloproteases (MMPs) while Grafix had low levels, and that MMPs were “not … desirable” for wound repair.  Mimedx alleged that the MMPs in EpiFix were inactive and thus harmful, making the claim of deceptiveness plausible.

Finally, the brochure claimed that EpiFix’s Purion process “ ‘causes significant alterations’ to the extracellular structural matrix (‘ECM’) of the amniotic cells, such that the ECM is no longer ‘intact,’ ” which Mimedx alleged was literally false.  Osiris argued that, to plead literal falsity, Mimedx was required to identify “studies, literature, or other [scientific] bas[e]s” for its factual assertion. The court declined to impose such a requirement.

Similarly, the motion to dismiss §§ 349 and 350 G.B.L. claims was denied. You might wonder whether this conduct was “consumer-oriented,” but the parties agreed that this was basically the same question as “commercial advertising or promotion” (sort of weird), so that was that at this stage.  Still, to the extent that the end users are members of the general public, I can see an impact on the public from falsity about these medical products.

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