Lanham Act unclean hands defenses are hard to win

World Nutrition Inc. v. Advanced Enzymes USA, No. CV-19-00265-PHX-GMS, 2024 WL 3665360 (D. Ariz. Aug. 6, 2024)

The parties—here WNI and AST—sell enzyme supplements and sued each other under the Lanham Act, and both prevailed on their affirmative claims and got disgorgement. The claims generally related to enteric coating (that is, its absence despite the parties’ representations), though WNI also falsely advertised certain certifications. WNI got a permanent injunction. WNI’s award of disgorged profits was larger than AST’s, so AST was ordered to pay WNI $1,827,651.68.

What about unclean hands? This requires a defendant to show by clear and convincing evidence (1) “that the plaintiff’s conduct is inequitable,” and (2) “that the conduct relates to the subject matter of its claims.” Of relevance to dueling false advertising claims: “Factual similarity between the misconduct that forms the basis for an unclean hands defense and the plaintiff’s allegations in the lawsuit is not sufficient.” The defense only protects those who “have acted fairly and without fraud or deceit as to the controversy in issue.” And, in the Lanham Act context, “fraudulent intent” is required. Plus, unclean hands isn’t automatic even then; it depends on what justice requires.

Given this high mountain, AST didn’t show that it was protected by WNI’s unclean hands. AST falsely advertised with literally false claims about enteric coating. WNI’s claims of a buffer-enteric coating and manufacturing compliance were also literally false, but AST failed to show that WNI’s products were not enterically coated. If AST had proved that WNI’s claim its products had an enteric coating that was 100% effective was false, the court would have reached a different result on this part of the inquiry, and would rule that justice was best served by offsetting damages. “The fact that AST ultimately owes WNI damages is a reflection of two things: (1) each party’s ability to prove damages and (2) the fact that AST earned more profits while misleading consumers.”