Tuesday, October 12, 2021

over dissent, 9th Cir. denies injury presumption to false advertising claimant

Quidel Corp. v. Siemens Medical Solutions USA, Inc., 2021 WL 4622504, No. 20-55933, No. 3:16-cv-03059-BAS-AGS (9th Cir. Oct. 7, 2021)

Quidel appealed the grant of summary judgment to Siemens on Quidel’s Lanham Act false advertising claims and related state claims. The case is about tests that detect thyroid stimulating immunoglobulins for management of Graves’ disease. There are two kinds of assays: (1) TSH receptor antibody (TRAb) assays, which detect both stimulating and blocking thyroid immunoglobins (TSI and TBI) and which are therefore apparently less useful and (2) TSI only assays. Quidel alleged that Siemens advertised (1) but provided (2).

First, the majority found that even if Siemens falsely advertised its assay, that wasn’t material to labs’ decision to purchase Siemens’ product over Quidel’s. Testimony from the relevant labs showed they didn’t rely on the relevant advertising materials, e.g., testimony that a lab engaged in its own internal validation process. Inferences to the contrary would be unreasonable under the circumstances:

At most, statements reflecting the lab representatives’ reliance on information in the package insert and internal debate by the laboratories’ decision-makers pertain to the required element of deception, not materiality. The extensive vetting completed by these sophisticated experts leading to their eventual purchase of Siemens’ assay overcomes Quidel’s position that the challenged statements amount to conflicting evidence on materiality. In other words, the nature of the audience—highly-skilled and credentialed professionals—is such that representations about the type and quality of an assay are not reasonably likely to influence their purchasing decisions even if it attracted the labs’ primary interest.

And there was no triable issue on actual injury based on allegedly false advertising to the physicians. Quoting the district court: “Quidel cannot claim that its damages are caused by the lab carrying the product which in turn leads to the physicians ordering the product from the lab,” because it is “the labs [that] decided which product to carry on their own, not as a result of Siemens.” And Quidel didn’t follow the FRCP in trying to present an alternative damages theory.

Disgorgement without proof of harm is appropriate in false comparative advertising cases, but any such presumption of harm was inapplicable when, as here, the “advertising does not directly compare defendant’s and plaintiff’s products.”

Also, and weird to present it this way, Siemens didn’t engage in false advertising to doctors. It said that its Immulite assay detects stimulating antibody “preferentially” —i.e., with bias—in favor of stimulating over blocking antibodies. “Had Siemens informed the physicians that Immulite detects stimulating antibody ‘only,’ as it represented elsewhere, then the statement would be false.” And although the ad specifically referenced Quidel’s product, the ad wasn’t comparative as to the challenged element.  Quidel didn’t dispute the actual comparative statement about the assays’ performance data—on clinical sensitivity and specificity—which was FDA-approved. In context, there wasn’t a false comparative ad.

Footnote: To be sure, “a competitor need not prove injury when suing to enjoin conduct that violates section 43(a). But Quidel has not met the elements for a permanent injunction. See eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).” [Not in the majority opinion: Overruled as applied to §43(a) by the TMA. So does false advertising have an injury requirement or not?]

Judge Bennett dissented, noting among other things that the TMA brought in a presumption of irreparable injury. The dissent would find triable issues on materiality and injury for both labs and doctors.

Materiality is about significance to the consumer’s decision. “Drawing all reasonable inferences in Quidel’s favor, Siemens’s statements that expressly or impliedly communicated that Immulite is a TSI assay and not a TRAb assay were material to the laboratories’ decision to switch from Thyretain to Immulite.” One lab’s representative testified that whether Immulite was a TSI assay was an important factor to the lab and that the lab wanted to replace Thyretain with another TSI assay, not with a TRAb assay. The other lab’s representative testified that it wanted a TSI assay and would not have been interested in Immulite if it were a TRAb assay. “Quidel also submitted evidence that scientists within LabCorp did not want to switch to Immulite because it appeared to be a TRAb assay. And in advertising Immulite, Siemens repeatedly highlighted the distinction between TSI and TRAb.”

A rational juror could easily infer from this evidence that whether Immulite was a TSI assay was an important factor to the laboratories—one likely to influence their decisions—and that Siemens made the representations it did because it knew the distinction between TSI and TRAb was important to the purchasers. Indeed, that the laboratories were only interested in a TSI assay to replace Thyretain supports that the laboratories would not have even considered Immulite had Siemens advertised it as a TRAb assay. Put another way, a juror could easily find that Siemens’s statements were likely to influence the laboratories’ purchasing decision because its statements attracted the laboratories and prompted them to conduct their own tests before ultimately purchasing Immulite.Siemens’s alleged false statements were the catalyst that led to the purchasing decision and therefore likely influenced the purchasing decision. Thus, I would find a triable issue on materiality.

This relates to a key but underlitigated issue: since materiality is often supposed to be an objective test, in theory you can infer that the element was satisfied without even hearing from the consumers. As the dissent puts it:

Even if a jury were to determine (were the question relevant) that the laboratories ultimately purchased based on their own tests, that doesn’t matter to whether the representations were likely to influence the purchasing decisions. Indeed, even in the light most favorable to the moving party, it would be difficult for anyone to seriously claim that the purchasing decisions would have been the same had Siemens represented what Quidel claims is the truth (even with puffery): “Immulite—An exceptional TRAb assay!”

This is a more sensible approach given the fact that people who have already made a purchase are particularly likely to insist that they would have made it anyway (so as not to feel like suckers) and in general people aren’t great at telling you why they did things. Here there’s more of a paper trail than there usually is, but (as the dissent notes) that doesn’t defeat these dynamics. The dissent would have held that “even if the laboratories’ purchasing decision may have been partly influenced by their own testing, that fact would not preclude a juror from concluding that Siemens’s statements were likely to (and did, at least in part) influence their purchasing decision.”

The dissent would not have fully credited the testimony that internal testing was the driver of the decision for purposes of summary judgment:

[A] reasonable juror could reject this testimony given that the laboratories’ witnesses had strong incentives to give testimony validating their prior decisions. The laboratories’ sophisticated experts would be reluctant to admit that they had been deceived and had incorrectly recommended switching to Immulite.

What about injury? A presumption of injury could apply either if (1) Quidel and Siemens operate in a two-player market, or (2) Siemens engaged in false comparative advertising. But the majority neglected to address the two-player market scenario, and the evidence supported that characterization of the market. The labs wanted to replace Thyretain with Immulate, not a TRAb assay. “Because the laboratories considered only Immulite and not TRAb assays, a factfinder could reasonably infer that Quidel and Siemens operate in a two-player market—the TSI player market.” Quidel’s survey evidence supported that inference by showing that a majority of the physicians surveyed are likely to order both a TSI assay and a TRAb assay for a patient, indicating that they aren’t competitors.  

The dissent would also have found a triable issue on whether the advertising to doctors was false comparative advertisement. The advertising contained statements that allegedly communicated that Immulite was a TSI assay and not a TRAb assay: “TRAb tests are not designed to discriminate stimulating, blocking, and neutral antibodies often present in [Graves’ disease] patients. The Immulite ... assay is specifically engineered to preferentially detect stimulating antibody.” And it expressly compared Immulite to Thyretain: “[Immulite’s] [s]uperior clinical sensitivity for diagnosis of Graves’ disease (98.6%) vs. Thyretain bioassay (92%).” “[A] factfinder could conclude that it was a false comparative advertisement because it falsely communicated that Immulite, like Thyretain, is a TSI assay (not a TRAb assay), and Immulite is better than Thyretain. The majority errs by failing to construe the DocAlert as a whole and in favor of Quidel.” [I’m more sympathetic to the dissent’s argument here: if you make a claim that you are in a particular class of tests—“not TRAb,” here—and then compare yourself to the other member of that class, that’s a comparison about membership in the class.]

Also, because a presumption of injury could apply, Quidel could establish harm sufficient for a permanent injunction. Cite to TMA: “Quidel, if successful on its Lanham Act claims, might obtain permanent injunctive relief without affirmative proof that it suffered irreparable harm.” [But, unlike a TM plaintiff, it does still need to provide reson to believe that it suffered some kind of harm in its prima facie case; here that role would be played by the two-player market/false comparative advertising presumption of harm.]

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