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.
Posts
