Wednesday, September 15, 2021

LinkedIn posts weren't commercial advertising or promotion for pediatric orthopedics

Orthopediatrics Corp. v. Wishbone Medical, Inc., No. 3:20-CV-929 JD, 2021 WL 3887243 (N.D. Ind. Aug. 31, 2021)

Plaintiffs “have an interest in a patented computer program that allows medical professionals to more easily determine the correct way to position bones for optimal healing after orthopedic procedures.” They alleged that defendants copied the program and infringed the patent, as well as engaged in a smear campaign against plaintiffs in an effort to steal market share in the pediatric orthopedic industry. I’m only going to discuss the false advertising aspects.

There is an ongoing, separate litigation about ownership of the relevant patent; plaintiffs alleged that the two inventors assigned the patent to plaintiff Orthex. Defendants allege that one inventor was contractually bound to disclose and assign to a separate entity any patent he received related to his work on the idea. There was ongoing litigation in Florida in which that entity, IMED, was suing the inventor and two of the instant plaintiffs over the alleged breach.

Plaintiffs alleged that Wishbone employees—including a former OrthoPediatrics employee—engaged in a smear campaign mostly on FB and LinkedIn, including by sharing “articles and reports on the ongoing Florida state court case and another Indiana state court case OrthoPediatrics brought against Wishbone and a former employee.” When one employee shared an article about the Indiana state court litigation, Wishbone’s COO/Secretray/Treasurer commented on the post “suggesting that OrthoPediatrics was following former employees in an effort to ruin their lives.” The poster added a comment of his own stating “[t]he only way [OrthoPediatrics] can compete is to constantly harass us with lawsuits. It is sad.” In another comment, he stated that OrthoPediatrics had been bullying Wishbone for years and that the company was engaged in “evil behavior.” And in another LinkedIn post, he wrote comments that were supportive of the claim that OrthoPediatrics had stolen the patent and suggested that OrthoPediatrics’ actions in doing so were “just the tip of the iceberg.”

First, the court found that the litigation privilege—if it applied to the various claims at issue—would not cover these statements, which were too remote from actual litigation. Social media posts “sharing articles about the state cases and by offering their own, often negative, statements as to what the litigation says about OrthoPediatrics as a company” would not be covered, nor would the other communications alleged in the complaint (an email saying the employee’s “goal with litigation was to put pressure on OrthoPediatrics’s stock price” and “very general allegations” that Wishbone contacted current and potential OrthoPediatrics customers to spread misinformation):

The Defendants have not presented, and the Court has not found, any case that has extended the litigation privilege to statements like those at issue here, which at best have a barely tangential connection to the actual proceedings of the ongoing litigation. Additionally, there is no evidence that protecting these social media posts and other communications, even those that are arguably commenting on the ongoing litigation, would serve the recognized purpose of the privilege to protect free expression that is integral to the judicial system’s functioning.

Lanham Act claim: Were these alleged statements commercial advertising or promotion? The answer depends on industry practice. “There is also no requirement that the communication be broadly distributed to the public, just that there be some public dissemination as opposed to, for example, simply person-to-person correspondence.” Although the Seventh Circuit hasn’t adopted Gordon & Breach, the court looked to that test for guidance as well. Taken together, the complaint didn’t plausibly allege commercial advertising or promotion.

First, the court wasn’t convinced that the social media posts or other alleged statements were commercial speech. (This seems dodgy—they have the usual obvious economic interest of competitors.) The statements didn’t themselves propose a commercial transaction. They didn’t advertise any alternative or promote a specific product. Although one could “infer a possible economic motivation for a subset of the social media posts,” there was “no evidence to suggest that the posts were broadly disseminated to consumers or that they had any economic impact.”

More persuasively, even if this was commercial speech, plaintiffs failed to plead facts showing that the statements were made to influence consumers or were disseminated to the relevant purchasing public within the pediatric orthopedic industry. Plaintiffs never alleged that “social media is a place where potential customers in the pediatric orthopedics space go to receive information about companies and products.”

And finally, plaintiffs didn’t adequately allege materiality. Vague allegations of reputational harm didn’t make clear that the reputational harm was in the eyes of consumers or that the communications actually translated to any lost sales or other economic harm.

Defamation: Plaintiffs failed to allege malice, even in a conclusory way.

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