intentional misleadingness obviates need for deception evidence

Aoki v. Gilbert, 2020 WL 6741693, No. 11-cv-02797-TLN-CKD (E.D. Cal. Nov. 17, 2020)

The court explains: “Put most succinctly, at trial Plaintiffs contended Defendants infringed Dr. Aoki’s patents for his pulsed insulin diabetes treatment method; infringed Dr. Aoki’s copyrighted slides; and made false or misleading statements amounting to false advertising and unfair business practices.” There were also breach of confidentiality claims (the parties used to be in a business relationship).

There were some literal falsities, such as claiming that their treatment was FDA-cleared and that certain patient outcomes were the result of defendant’s treatment when they depicted plaintiff’s results. (If they were the exact same medically, but administered by different entities, I would think that’s not false, but that doesn’t appear to have been the case.)

Defendants argued that their statement that their treatment was the “only” treatment meant merely that it was a licensed use of plaintiff’s technology and the treatments were the same; the court found this to be misleading and, because the statements were intentionally deceptive, no proof of consumer reaction was required. Certain defendants intended to deceive prospective patients and investors. “That deception was material in that FDA clearance, patient outcomes, and exclusivity, for example, are likely to influence both investors’ and patients’ decisions.” This also harmed plaintiffs by “intentionally muddying the waters concerning who is the inventor and rightful owner of the patented technology” and “tarnishing Dr. Aoki’s reputation concerning his research and protocol.”

However, plaintiffs failed to establish liability under California’s FAL/UCL because they didn’t show economic injury. They showed no evidence of lost profits, inability to open clinics, or otherwise lost money or property as a result of the deceptive statements. “Although goodwill is a protected property interest and harm to goodwill is a cognizable injury, Plaintiffs presented no evidence of the value of their goodwill or an economic harm stemming from the loss of goodwill.” And to the extent that the UCL claim was premised on underlying patent/copyright infringement, it was preempted.

The court also found copyright infringement for copying and using Aoki’s slides for the same purpose as Aoki used them, and awarded the maximum statutory damages:

Even after this lawsuit was filed in 2011, Defendants continued to use Dr. Aoki’s copyrighted slides in promoting APT. Most glaringly, they used the foot wound photos of Dr. Aoki’s patient whom he treated with MAT and which photos he copyrighted, to claim that the patient was treated with APT rather than MAT. These facts demonstrate Defendants knew their conduct was unlawful or at minimum engaged in reckless conduct sufficient to support a finding of willfulness.

The court found that this was an exceptional case meriting a fee award because of the clear patent infringement and defendants’ refusal to produce any financial documents.

Moral rights in patent claims: The irreparable injury finding for purposes of permanent injunctive relief based on the patent claims was predicated mainly on the harm to Aoki’s good name and the uniqueness of his invention. “A lack of proper oversight led to clinics modifying the treatment in some instances, creating a ‘wild west of medicine’ and resulting in adverse consequences to patients.” Driving the defendants out of business would be ok, if that happened, because the treatment was “Dr. Aoki’s life’s work.” But what about the fact that the parties agree that the treatment is good for patients? “[T]he evidence reflects that a lack of oversight at the clinics licensed by Trina Health resulted in negative patient outcomes in some cases, indicating the public would be better served by the grant of an injunction to halt operations of illegitimately licensed clinics.”

The copyright infringement also merited a permanent injunction and a fee award.

For Lanham Act damages, though plaintiffs didn’t show any actual damages, they were entitled to disgorgement. Defendants profited by nearly $8 million (they earned that amount, and failed to show any deductions) from the false advertising. (The court doesn’t require tracing here, perhaps because the claims are at the core of any advertising they might have engaged in.) And unsurprisingly they get a fee award too.