Lost goodwill isn't irreparable harm without more specifics, court says

Alfasigma USA, Inc. v. Nivagen Pharmaceuticals, Inc., No. 17-cv-01974-MCE-GGH, 2018 WL 1567820 (E.D. Cal. Mar. 30, 2018)

The parties make “medical foods,” which are intended to be used under a doctor’s supervision; subscriptions for their use are common though not required. They are not eligible for reimbursement by Medicaid, Medicare, or many private insurers. Alfasigma makes Foltx and Breckenridge makes a generic version called Folbic.

The pharmaceutical industry allegedly maintains a database in which generic foods can be linked to their name brand equivalent through an honor system. If a generic company “represents to industry databases that its generic medical food contains the same active ingredients in the same amounts as a certain branded product, the databases will link the generic to the brand.”  Nivagen makes a generic that it represented was equivalent to Foltx and Folbic, causing it to be linked. “But Nivagen also characterized its product as a prescription drug that requires an ‘Rx’ on the label, thereby entitling users to reimbursement.” Nivagen also allegedly caused its product Niva-Fol to be shown as having a National Drug Code or National Health Related Items Code number, which are for approved drugs and medical devices only, but which would qualify Niva-Fol for federal reimbursement. This conduct allegedly gave Nivagen a competitive advantage.

The court found that plaintiffs hadn't shown irreparable harm . The claimed damages were all financially-based: that Nivagen’s actions had or will cause customers to seek lower prices from plaintiffs and/or buy from Nivagen instead and that its conduct would cause a “loss of goodwill” with certain customers, lost market share, and “other economic losses.” “To the extent courts may consider a loss of goodwill to be intangible under certain circumstances, those circumstances are not present here.”  [When are they present?  Who knows?]  The claimed lost goodwill was the only potentially intangible harm, but was entirely speculative at this point.

Plaintiffs also argued that their harm was irreparable because Nivagen wouldn’t be able to satisfy a judgment against it. The court found it unlikely that “Nivagen is taking customers and stealing market share at a rapid pace, while also making little profit doing so.” But also, the cases supporting finding irreparable harm involved defendants who were insolvent or deliberately dissipating funds to avoid judgment; there was no indication that Nivagen was either.

Finally, plaintiffs’ delay undercut claims of irreparable harm. Breckenridge sent Nivagen a letter in June 2015 indicating it knew of the database linkage and accusing Nivagen of false advertising and unfair business practices. Plaintiffs still waited until September 2017 to file suit, and waited until October to move for a preliminary injunction, only then unsuccessfully seeking expedited discovery to support their request for an injunction, “which provides at least a tacit admission that they do not have sufficient evidence to support the Motion as it stands.”

Nor did the balance of equities tip in plaintiffs’ favor. “Plaintiffs have failed to so much as allege that customers are in fact choosing Nivagen’s product over their products, let alone that they are doing so at a rate that puts Plaintiffs’ businesses at risk of greater damages than would be caused by enjoining Nivagen—a much smaller entity—from advertising, promoting, or selling its product, and requiring it to change its labeling, correct any false statements already made, and recall any product already sold.”

Finally, though the public interest favored protecting consumers from false advertising, it also favored competition.