Friday, March 04, 2022

9th Circuit finds noncompetitor lacks statutory standing in nondisparagement false advertising case

ThermoLife Int’l LLC v. BPI Sports, LLC, 2022 WL 612669, No. 21-15339 (9th Cir. Mar. 2, 2022)

The court of appeals upholds the rejection of ThermoLife’s false advertising claims (Lanham Act and Florida’s FDUTPA) on statutory standing grounds.

ThermoLife’s allegations were too speculative to establish proximate causation. “ThermoLife operates at a different level of the supply chain than BPI.” It sells compounds/licenses its technology for use in sports nutrition supplements, while BPI produces its own dietary supplements. And, unlike in Lexmark, ThermoLife didn’t plead facts showing “anything like a 1:1 relationship between ThermoLife’s lost sales or licensing fees and any potential sales diverted to BPI due to its false advertising.” It didn’t allege that its ingredients were necessary to/had no other use than making the same supplement made by BPI. Instead, its complaint showed that there were many competing supplement companies. It wasn’t enough to allege that products containing its ingredients have similar health benefits or were sold side-by-side on websites to BPI’s product. “In a dietary supplement market that is robust with competitors and different products, this is insufficient to show that sales captured by BPI leads to a direct loss of dietary supplements containing ThermoLife ingredients.” Even if some supplements containing ThermoLife ingredients were direct competitors with BPI’s products, ThermoLife didn’t allege that its licensing arrangement causes it to lose fees proportionally to those products’ lost sales.

Plaintiff Muscle Beach, a supplement seller, did allege direct competition. “But Muscle Beach failed to allege any facts that show consumers consider its products to be substitutes with BPI’s products.” Alleging the use of similar language to describe their health benefits was is insufficient to show direct competition, and Muscle Beach didn’t provide any photographs of its products being listed side-by-side with BPI products or provide any customer review stating a preference for one over the other.

Failing Lexmark also meant that plaintiffs failed to meet the standing requirements for common law unfair competition and Florida Deceptive and Unfair Trade Practices Act claims. “After all, claims of unfair competition under state statutory and common law are substantially congruent to claims made under the Lanham Act,” and a FDUTPA claim requires “actual damages” caused as a result of a defendant’s unfair conduct. Note: the parties apparently didn’t dispute that the same analysis applied to all claims, but I think this was a mistaken concession (understandable in the realities of litigation, but conceptually unsatisfying). Actual damages aren’t the same thing as zone of interests/proximate cause, and broad language of substantial congruence is taken from cases about the substantive standard for liability, not cases about statutory standing—which concept has generally not gotten much scrutiny as applied to common law or state statutory claims.


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