Wednesday, September 22, 2021

4th Circuit continues its Lanham Act frolic, notes overbreadth of expansive injunctive relief

De Simone v. Alfasigma USA, Inc., No. 19-1731, 847 Fed.Appx. 174 (4th Cir. Feb. 17, 2021)

Depressingly doubling down on its bizarre interpretation of the Lanham Act first created by misinterpreting California’s UCL, the Fourth Circuit nonetheless mitigates some of the consequences of that game of telephone in this opinion. (I filed an amicus brief, with which the court didn’t agree.)

The parties have been fighting for a while. Ignoring entity shifts: De Simone used to license a probiotic formula to Alfasigma, which continues to make a probiotic under the same trademark, VSL#3, but now with a different formulation. Now De Simone’s entities compete with Alfasigma. A jury found the VSL parties liable for false advertising and unjust enrichment, basically for advertising that the formula was still the same, and awarded over $17 million in damages. The court of appeals affirmed on liability/damages, but partially vacated the injunction as overbroad, picking up on another problem in the case as it has evolved—its restrictions on apparently truthful commercial speech.

The parties presented conflicting expert testimony regarding whether two versions of VSL#3 were essentially the same. Defendants argued that, under In re GNC Corp., 789 F.3d 505 (4th Cir. 2015), their expert’s testimony that the two products were genetically and functionally equivalent precluded a finding of literal falsity as a matter of law. The district court disagreed.

The court of appeals upheld the district court but declined to recognize its GNC error, because “plaintiffs who believe that no reasonable scientist would agree with the challenged representations remain free to make that allegation. A manufacturer may not hold out the opinion of a minority of scientists as if it reflected broad scientific consensus.” The court of appeals said that the district court applied GNC accordingly by holding as follows:

GNC thus does not broadly hold that a false advertising claim based on a statement grounded in science must fail if the defendant presents an expert witness supporting its position. In the absence of a concession that the statement is the subject of reasonable scientific debate, that question is properly decided by the jury.

Of course, the court of appeals and the district court said two different things! In the district court, the plaintiff was not required to prove that “no reasonable scientist would agree with the challenged representations,” or that the defendant “held out the opinion of a minority as if it reflected broad scientific consensus.” Apparently after GNC the plaintiff is required to plead that no reasonable scientist would agree, or at least to avoid pleading that there is a controversy. 

But at the liability stage, the plaintiff here was, appropriately, required to prove that the challenged representations were, by a preponderance of the evidence, false. That is different from requiring the jury to find that the defendant’s expert was unreasonable. Punting to the jury helps disguise the variation, but does not entirely avoid the question of what it is that the jury must find. The district court’s approach is better than nothing, because it allows pleading to get around the qualified immunity-like standard of GNC, but this whole mess could be more easily avoided by looking at what the Lanham Act actually requires.

The district court’s permanent injunction barred defendants from

(1) stating or suggesting in VSL#3 promotional materials directed at or readily accessible to United States consumers that the present Version of VSL#3 produced in Italy ("Italian VSL#3") continues to contain the same formulation found in the Versions of VSL#3 produced before January 31, 2016 ("the De Simone Formulation"), including but not limited to making statements that VSL#3 contains the "original proprietary blend" or the "same mix in the same proportions" as earlier Version[s] of VSL#3; and (2) citing to or referring to any clinical studies performed on the De Simone Formulation or earlier Versions of VSL#3 as relevant or applicable to Italian VSL#3.

(2) was initially based on trademark reasoning, but seems to have been converted over time into a concomitant of the false advertising claim, so the district court reasoned that the remedy should be “focused on curtailing such claims of continuity between Italian VSL#3 and the De Simone formulation.” The court of appeals agreed, but noted that (2) was overbroad for that objective. The studies couldn’t be cited as if they were performed on current VSL#3, but prohibiting citation or reference to them as even relevant went too far. They could feasibly cite or refer to the studies as relevant “without claiming continuity between their old product and their new one.”

 

 

No comments:

Post a Comment