Wednesday, June 15, 2022

dueling SJ motions lose in energy drink case; jury will decide whether "Super Creatine" is "creatine"

Monster Energy Co. v. Vital Pharmaceuticals, Inc., 2022 WL 1599712, No. EDCV 18-1882 JGB (SHKx) (C.D. Cal. Apr. 19, 2022)

The parties compete in the market for energy drinks. VPX (Vital) makes BANG, which now contains creatyl-l-leucine (CLL), “a novel ingredient marketed under the trademark ‘Super Creatine.’ … Defendants claim that CLL is more stable and more bioavailable than other forms of creatine.” Monster alleged that VPX falsely advertised Super Creatine as a source of creatine providing numerous physical and mental benefits, advertising that BANG can improve brain function, has anti-depressive effects, and helps build muscle. VPX allegedly highlights Super Creatine as BANG’s “most important distinguishing feature for purposes of sales.”

But Monster alleged that CLL was neither creatine nor a source of creatine. “Creatine” is generally understood to mean creatine monohydrate. It was undisputed that BANG does not contain creatine monohydrate. Further, no peer-reviewed study has examined CLL’s benefits, its metabolic fate, or whether it is an effective source of creatine.

Monster also alleged interference with its shelf space agreements. Shelf space is vital to energy drinks, and so they contract for it, overriding retailers’ allocation discretion. Monster alleged that VPX directed BANG representatives to displace competing energy drinks, including Monster, from their contractually guaranteed shelf space and replace it with BANG at retail locations in numerous states. Vital disputed this. There were also trade secret claims based on allegations that VPX offered former Monster employees jobs with a significant salary increase, under the precondition that they bring Monster’s confidential pricing data with them; VPX admitted that at least one former Monster employee retained and accessed information and documents belonging to Monster after joining VPX.

Here, the court denied Monster’s motion for partial summary judgment on the false advertising claim.

This was not a literal falsity case, even though it’s about what “Super Creatine” etc. means, because none of the allegedly false statements actually said “source of creatine.” Monster pointed to the use of “Super Creatine,” “creatine bonded to L-leucine” or “Stable Aqueous Amide-Protected Bioactive Creatine Species,” statements that BANG contains “Creatine, Caffeine, CoQ10 & BCAAs,” the slogan “Ice Cold Creatine,” equation of the health

benefits of creatine monohydrate with those of CLL; and referencing “creatine” without specifying Super Creatine or creatine monohydrate. [I think Monster is a trademark bully but in this it seems correct.]

Nonetheless, the court found that there was no unambiguous statement of fact here. “[S]ource of creatine” is vague. [But even if consumers don’t understand the chemical formula—any more than they understand how 55 mpg is calculated—it looks like an ingredient. If this were about how much creatine was in the product, the objection would be better taken.]

Monster also conceded that “creatine” had several different meanings. One expert report identified three different usages: (1) naturally occurring creatine, or “endogenous creatine,” (2) “creatine monohydrate,” which is what “the sports nutrition and exercise science community” understand as “creatine,” and (3) alternate and “novel forms” of creatine that are not creatine monohydrate.

The court seems to have given a cramped reading to Monster’s argument, suggesting that Monster itself defined “source of creatine” two ways: (1) a product or substance that “contains” creatine, and (2) a product or substance that is a “creatine supplement,” or “dietary source of creatine.” The first definition was used to address statements claiming that Super Creatine is “creatine,” and the second to statements that Super Creatine provides the benefits of “creatine,” where Monster argued that “[b]ecause it is not creatine, for CLL to be considered a source of creatine, it must convert into creatine and increase the body’s creatine levels.” But these seem like very much two sides of the same coin for a dietary supplement. If the drink contains something that VPX calls “creatine,” but is not the same thing that everyone else calls creatine, and it doesn’t have the benefits of the thing that everyone else calls creatine, that sure seems like a reason to reject an attempt to expand the definition of “creatine” to CLL.

This was not a case involving “a specifically defined claim expressly stated by the defendant.” [Again, “Stable Aqueous Amide-Protected Bioactive Creatine Species” and claims to include “creatine” sure sound that way—it’s just that the claim has been packed into words representing a chemical.] So there was nothing here definitively “capable of being proved false or reasonably interpreted as a statement of fact.”

Even if “source of creatine” had been a statement of fact, Monster failed to show that any ads unambiguously conveyed that BANG or Super Creatine was a “source of creatine.” The court also found that none of the challenged statement expressly claimed that Super Creatine was creatine or that Super Creatine provides the benefits of “creatine.” The labels might be misleading, but they weren’t expressly false. [I admit, I would be tempted to use falsity by necessary implication here.]

Consider the labels: Every label has “SUPER CREATINE” printed at the top alongside “ULTRA COQ10.” Older labels say: “Power up with BANG’s potent brain & body-rocking fuel: Creatine, Caffeine, CoQ10 & BCAAs (Branched Chain Amino Acids).” Newer labels replace “Creatine” with “Super Creatine®” and BCAAs with “EAAs (Essential Amino Acids).” Each label lists “SUPER CREATINE (Creatyl L-Leucine [creatine bonded to L-Leucine])” as an ingredient. The phrase “Stable Aqueous Amide-Protected Bioactive Creatine Species” runs next to the nutrition panel with CLL’s patent number for CLL. Thus, the ingredients section specifically defined Super Creatine as CLL, and the old labels never stated “creatine” without also stating “Super Creatine” elsewhere.

At least the court agreed that this necessarily implied that Super Creatine is a form of “creatine.” “Using ‘creatine’ more than once to describe Super Creatine unambiguously expresses that Super Creatine is creatine.” But Monster tripped itself up by arguing that VPX necessarily implied that BANG and Super Creatine were a “source of creatine.” “Unless a consumer integrates an outside understanding of ‘source’ and ‘creatine,’ a consumer is unlikely to reach this conclusion.” [I do not understand. If my supplement’s ingredients say “calcium,” it would seem bizarre for me to think “oh, it might not be a source of calcium, it might only contain calcium but not be a source of it.”] Monster offered no evidence that consumers would understand that the labels would be understood as promising a “source of creatine.”

Also: “Because other key ingredients, such as ‘Ultra CoQ10,’ ‘BCAA Aminos,’ and ‘EAA Aminos,’ are highlighted with Super Creatine, a consumer is unlikely to conclude that BANG specifically supplements creatine.” My peanut butter ingredient list says peanuts and salt. I expect both ingredients to be in there! I assume there’s some spillover here from the implausible stuff lots of supplements say about supporting bodily mechanisms, but I don’t think that should let courts create markets for lemons.

Anyway, Monster failed to show literal falsity definitively. One of its experts stated that CLL “is not bioavailable” and that even a “high-dose CLL has no effect on blood, muscle, or brain creatine content.” Another expert stated that Super Creatine contains a creatyl amide, which is structurally different from “the creatine complex.” But he opined that it was “inaccurate”—not “outright false,” a term the court apparently wanted him to use, to describe CLL or Super Creatine as “creatine,” “a form of creatine,” or “containing creatine.” Defendants’ expert opined that CLL is a form of creatine. And both parties submitted evidence that the word “creatine” has many different usages, including most commonly for naturally occurring creatine and creatine monohydrate.

“Drawing all inferences in Defendants’ favor, the Court finds that the evidence does not definitely show that Super Creatine is not creatine or not a source of creatine.”

VPX also allegedly advertised Super Creatine as providing the health benefits of “creatine.” It Monster identified statements in social media posts, online marketing, press releases, and other advertisements at trade shows, expos, and in retail stores, as well as emails to retail and distribution partners. The court excluded consideration of the emails to retail and distribution partners because they weren’t “commercial advertising or promotion.” However, oral statements to customers and statements made in the context of contract negotiations were commercial advertising.

The identified statements necessarily implied that Super Creatine has creatine’s health benefits. E.g., “Here’s what Super Creatine has been proven to do for you: Be neuroprotective in the brain, Increases cognition, Increases attention span, Delays mental fatigue, Has anti-depressive effects, Has antioxidant effects in the brain.” Another post claimed, among other things, that Super Creatine’s solubility meant “increased bio-availability.”  

By emphasizing bioavailability, solubility, and sports nutrition, the posts unambiguously express that Super Creatine will be absorbed in the body and provide the same, if not more, health benefits than creatine. The posts also convey that BANG is healthier than other energy drinks because it contains less sugar and more fueling ingredients like creatine. References to science and the picture of the beaker support this message.

Moreover, “Monster sets forth significant evidence to suggest that this claim is literally false,” but that wasn’t enough to avoid a jury, because the posts didn’t necessarily imply that Super Creatine and BANG were a “source of creatine.” I’m basically just confused at this point. The court seems to have seized on the phrase “source of creatine”—perhaps encouraged by Monster—as somehow inherently different from “provides the benefits of creatine,” which in context I don’t think it can be.

Without literal falsity, deception would not be presumed either. So too with materiality. If “equating Super Creatine with creatine and stating that Super Creatine offers the benefits of creatine misrepresent an ingredient, which is an inherent quality of Super Creatine” was at the core of Monster’s claim, then Monster had evidence of materiality, such as consumer inquiries about creatine in BANG, the prominence of “SUPER CREATINE” in Defendants’ advertising, and a key principal’s statements that Super Creatine is “the primary ingredient found in BANG, which drives the BANG formula.” But because Monster was challenging “source of creatine,” it didn’t show materiality. It also didn’t show that statements about BANG/Super Creatine as a “source of creatine” entered interstate commerce. [Uh, what? That’s not a failure on the interstate commerce element!]

On the other hand, the court declined to award defendants summary judgment on the Lanham Act/UCL/FAL claims (I’m mostly ignoring the other claims).

Here, the court declined to consider press releases as commercial advertising or promotion because there was no evidence they were actually distributed to the relevant public. “By contrast, one of the presentations includes language that it is a presentation typically shared with potential distributors and retailers. The Court finds that this presentation constitutes commercial advertising or promotion.”

The labels and presentations necessarily implied that “Super Creatine” was creatine. VPX didn’t submit any evidence that consumers distinguished the two, while Monster submitted evidence that creatine in dietary products is generally understood as creatine monohydrate. There was also a genuine dispute over falsity. Likewise, a jury could conclude that, by using the term Super Creatine, the label necessarily conveys that BANG contains creatine.

And a jury could conclude that VPX was falsely claiming that Super Creatine provides the benefits of creatine. VPX argued that “power up with BANG’s potent brain & body-rocking fuel” was puffery, but that statement couldn’t be considered in isolation. “Together, the emphasis on ‘Super Creatine’ as a nutritional ingredient combined with the statement ‘potent brain & body-rocking fuel’ necessarily implies that Super Creatine provides benefits.” So too with the social media posts that made a bunch of claims about BANG’s special effectiveness because it has Supre Creatine.

VPX definitely didn’t prove truth. Its evidence was “the opinions of experts that, due to the lack of studies around Super Creatine, they could not absolutely rule out a possibility that Super Creatine breaks down into creatine when consumed.” Monster, on the other hand, subitted expert reports and studies that show Super Creatine is not bioavailable, meaning that it does not break down into creatine or increase endogenous creatine levels when ingested. “Under these circumstances, a reasonable jury is likely to conclude that a claim that Super Creatine provides the health benefits of creatine is literally false.”

Patent-based claims: Monster alleged that references to U.S. Patent Number 8,445,466 in Vital promotions and directly on BANG can labels were literally false, as the PTO rejected the ‘466 Patent. But the cancellation is still pending, so the statement wasn’t literally false, and Monster forfeited a misleadingness argument, so VPX won summary judgment on the patent-related statements.

“Sugar crashes”: BANG labels say “BANG is not your stereotypical high sugar, life-sucking soda masquerading as an energy drink! High sugar drinks spike blood sugar producing metabolic mayhem causing you to crash harder than a test dummy into a brick wall.” VPX said this was puffery, or true because sugar-sweetened beverages can cause crashes.

Monster argues that the statement is literally false because a “crash” describes reactive hypoglycemia, which its expert opined was different from the common feeling of fatigue that follows consumption of carbohydrates. The expert also opined that hypoglycemia was unlikely to occur from consuming Monster’s energy drink.

The court found that the statement wasn’t puffery, because it “unambiguously implies that energy drinks from competitors are high in sugar and cause sugar crashes.” But Monster failed to create a fact issue on literal falsity. “[A] reasonable jury is unlikely to conclude that a ‘sugar crash’ can only refer to hypoglycemia.” Still, there was evidence of misleadingness, so that theory could continue.

Deception/materiality: also enough to continue given the genuine dispute on literal falsity and evidence of materiality from multiple consumer surveys. It was undisputed that at least some surveyed consumers indicated that they believed and liked that BANG’s label and that “Super Creatine” communicate that BANG contains creatine or more creatine. Some consumers in the surveys also chose “health benefits” as important to their decision to purchase BANG. With respect to “sugar crash,” Monster submitted some evidence of misled or confused consumers, such as survey participants who indicated that they liked BANG for its claims that it was a “healthier alternative to energy drinks” and labeled as containing “0 sugar, 0 calories, 0 carbs.”

Damages: Another genuine dispute. One survey found that 61.5% of surveyed BANG consumers “stated they would purchase Monster instead of Bang and 14.2% stated they would purchase Reign instead of Bang,” if “Super Creatine” were removed from Bang.” Also, the same survey indicated that most of the BANG consumer participants expected BANG to contain more Super Creatine or creatine than it actually did, and would purchase less if they knew the actual level.

An individual defendant, CEO Owoc, argued that he couldn’t be held vicariously liable for torts in which he didn’t participate. “[T]he individual officer or director will be immune unless he authorizes, directs, or in some meaningful sense actively participates in the wrongful conduct.” But a reasonable jury could credit the evidence that he did—he testified at deposition that he “personally oversee[s] VPX’s advertising and marketing,” and that he is VPX’s “chief scientific officer,” who invented Super Creatine and worked to develop the BANG formula. The sales VP testified that Owoc decides what features VPX should highlight to retailers when promoting or selling BANG. And he made social media posts containing the claims at issue! “Under these facts, a reasonable jury could find that Mr. Owoc is liable for false advertising.”

Shelf space interference: Monster submitted evidence of valid contracts, and of VPX’s knowledge thereof. [IIRC, VPX posted on social media about this!] Deposition testimony of VPX executives and employees attested that they generally knew Monster held contracts with some retailers for shelf space and that VPX employees placed BANG in Monster’s contracted-for space. “One employee testified that when he moved Monster products from a shelf for BANG, he was told by the retailer that Monster contracted for the space.” This also was evidence of intentional interference. There was contrary evidence. But overall, there was evidence that “BANG employees intended to move Monster drinks from Monster’s contracted-for space, were sometimes instructed to do so, and understood that shelf space interference was a strategy to gain a competitive advantage.” Owoc even testified in his deposition that “he instructed employees to take the shelf space of all competitors, though he could not specifically recall whether he had instructed employees to take Monster’s shelf space.”

Though Monster didn’t show any resulting contract termination, breach or disruption was enough. “A reasonable jury would likely conclude that the placement of non-Monster products on shelf space Monster contracts is a disruption of Monster’s contracts.” And Monster’s damages expert estimated the resulting damages, along with a Monster executive’s testimony about a disrupted launch.

Likewise, a reasonable jury could conclude that Owoc was personally liable because he directed VPX employees to run shelf space interference, including with Monster’s contracted-for space. He also “ratified VPX’s employees’ efforts to steal Monster’s space when they sent him pictures documenting the interference.”

On intentional interference with prospective economic advantage, however, an independently wrongful act is required since there’s no interference with a contract. Competition is not independently wrongful unless carried out by improper means. Though VPX may have falsely advertised BANG to retailers, Monster’s evidence failed to link VPX’s false advertising with shelf space interference. “A reasonable jury may infer from this evidence that retailers stocked BANG as a result of VPX’s allegedly false statements. Critically, however, Monster proffers no evidence that shows VPX made these claims to interfere specifically with Monster’s shelf space contracts.”

The trade secret claims headed to a jury, though not against Owoc individually because of lack of evidence that he understood that the relevant information had been obtained by improper means or specifically authorized or directed VPX’s misappropriation of Monster’s trade secrets. It wasn’t enough that he encouraged hiring former employees of certain competitors, including Monster, and some of these employees allegedly misappropriated Monster’s trade secrets. CFAA claims against VPX also survived.

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