"complete" vitamin is plausibly deceptive where essential nutrients are lacking

Devane v. Church & Dwight Co., No. 3:19-cv-09899-BRM-LHG, 2020 WL 998946 (D.N.J. Feb. 28, 2020)

Plaintiffs brought consumer protection claims based on Church & Dwight’s purportedly false labelling of several multivitamins, including L’il Critters Multivitamins, Vitafusion Women’s Complete Multivitamins, and Vitafusion Men’s Complete Multivitamins, which allegedly lacked at least three essential vitamins identified by the FDA as being “necessary for human health” (vitamin K, thiamin, riboflavin, and, in one case, niacin) but were nonetheless marketed as a “complete multivitamin” containing all “essential nutrients.”  They brought claims under New Jersey and Florida law.

The court first rejected the doctrine of primary jurisdiction; there were no relevant proceedings or FDA rulings that would justify deference. C&D argued that defining the term “complete” in regard to a dietary supplement is “squarely within the FDA’s particular filed of expertise and discretion.” But the claim here didn’t require a general definition of “complete,” but rather a determination of whether labeling the products as “complete multivitamins” was misleading. Misleadingness is “within the conventional experience of district courts.”  Next, the court found that plaintiffs had Article III standing for past injury, but not for injunctive relief.

Plaintiffs adequately pled they were deceived by the labeling plus the alleged fact that at least three essential nutrients were missing. They also adequately alleged ascertainable loss as required for NJCFA claims. Because the product couldn’t function as a “complete multivitamin,” it was plausibly “entirely valueless” for that purpose.  Although reliance isn’t required, loss must be suffered “as a result of” the defendant’s unlawful conduct, which can occur when people “saw the challenged advertisements” and “would not have purchased the [product] but for the challenged advertisements.” This was adequately alleged. Similar FDUTPA claims also survived.  New Jersey warranty claims, but not Florida warranty claims, also survived.

discovery of trade secrets in a false advertising case

Monster Energy Co. v. Vital Pharm., Inc., 2019 WL 8112506, No. 5:18-cv-01882-JGB (SHKx) (C.D. Cal. Oct. 16, 2019)

I don’t cover many discovery disputes, but this one has some passing interest for the substance of false advertising law. Monster & Vital filed a stipulated protective order providing two tiers of protection, allowing a producing party to designate documents or information it provides as either “Confidential” or “Highly Confidential – Attorney’s Eyes Only.” The latter was to be “limited to such documents, testimony, information or other things that the Designating Party believes, in good faith, contain information the disclosure of which is likely to cause substantial harm to the competitive position of the Designating Party, contain information subject to the right of privacy of any person, or contain information alleged to be a trade secret. None of the restrictions set forth in this Stipulated Protective Order shall apply to any documents or other information that are or become public knowledge by means not in violation of the provisions of this Stipulated Protective Order, or any law or statute.”  Unless otherwise ordered by the court or permitted in writing by the Designating Party, a Receiving Party could disclose such material only to outside counsel, experts/consultants to whom disclosure was reasonably necessary and who had signed a confidentiality agreement, court- or mediation-related people, and people who already had the information.

Now the parties disputed what should be disclosed. “There is no absolute privilege for trade secrets and similar confidential information,” but trade secret status is to be weighed in the analysis. Monster sought disclosure of VPX’s energy drink formula, including the amount of each ingredient.  The core dispute is about claims about creatine, an ingredient (or creatyl-L-leucine, the ingredient in VPX’s BANG products, known as Super Creatine—previous blogging on the case). VPX refused on the grounds that the formula was a trade secret and noted that Monster just introduced a competitive energy drink.

At this stage of the case, the court wasn’t going to make a judicial finding that the formulation for BANG was a trade secret, but did consider the extent to which VPX treated it as one.  VPX apparently disclosed the entire ingredient list and quantities of ingredients in its Red Line beverage, and the amount of CoQ10 in BANG, it didn’t seem to have publicly disclosed the entire ingredient list or their quantities for BANG. That was enough to meet VPX’s burden at this stage.

Monster argued that the formulations of BANG were relevant and necessary to prosecute several of its claims, specifically that, even if creatyl-L-leucine were potent, “there is not enough of it in BANG for it to materially impact the body.” VPX rejoined that Monster didn’t allege that customers chose BANG over Monster products because VPX claimed any particular quantity of any ingredient. But that goes to the merits, not to relevancy in discovery. The formulations of at least those BANG drinks advertised to contain “creatine” or “Super Creatine” were relevant because “relevancy should be construed ‘liberally and with common sense’ and discovery should be allowed unless the information sought has no conceivable bearing on the case.” In addition, the information being sought appeared “necessary” for Monster to prove its case that VPX was misrepresenting the contents of BANG drinks advertised to contain “creatine” or “Super Creatine.”

This need had to be balanced against the need for protection against injury caused by disclosure; the balance “virtually always” tilts in favor of disclosure once relevance and necessity have been shown. However, “courts have routinely recognized that disclosure to a competitor is more harmful that to a noncompetitor.” But the court had no reason to believe that counsel would disregard the restrictions in the “letter and spirit” of the protective order. Although it wasn’t expressly stated in the protective order, the court understood that “this type of information received by outside counsel cannot be used in any way to assist Plaintiff in formulating or otherwise advising Plaintiff with respect to any current or future products.”

Nor was it sufficient to tell Monster to engage in reverse engineering instead. “Defendants do not claim and do not provide any information to show that producing this information, under strict controls, would be difficult, time consuming, or expensive. Comparatively, the testing, and any likely subsequent questioning of that testing, would be unnecessarily time consuming and is not warranted, with the controls that are in place.”

In return, VPX sought the formulation of Monster’s competing REIGN in order to evaluate Monster’s claims and VPX’s defenses, including unclean hands and a lack of damages. But merely reciting “unclean hands” in an answer doesn’t put a plaintiff on notice that a defendant intends to raise unclean hands allegations regarding plaintiff’s labeling as a whole. The “misconduct that forms the basis for the unclean hands must be directly related to plaintiff’s use or acquisition of the right in suit.” Here, the relevant allegations were about creatine and “Super Creatine.” VPX didn’t show that the overall formulation, not having to do with that ingredient, was relevant or necessary. Thus, VPX’s motion to compel was denied. [I am somewhat persuaded by VPX’s argument that, if Monster is arguing that there are ingredients whose presence in an energy drink is too minimal to justify advertising their benefits, then Monster’s own practices with respect to touting ingredients versus the reality of their amounts in Monster’s products are relevant, but I see the court’s point in terms of proper notice. Something for the next defendant to keep in mind.]

FDA/FTC Workshop on a Competitive Marketplace for Biosimilars

FDA Licensure Process and U.S. Biosimilar Markets   [I entered in media res]

· Eva Temkin, Acting Director for Policy, Office of Therapeutic Biologics and Biosimilars,  CDER, FDA  

· Christine Simmon, Executive Director, Biosimilars Council, AAM: barriers to entry for biosimilars: exclusionary contracts, rebates, stakeholder misinformation. misinformation can include explicit and implicit, including policies such as naming conventions and the very existence of the interchangeable category, which is unique to the US.  [I think she was saying that the existence of the interchangeable category may mislead consumers about the suitability of the existing approved biosimilars; right now all approved biosimilars are approved for substitution but not for interchangeability, the latter of which means that there’s evidence that patients can go back and forth between the drugs as opposed to switching once.]  

· Molly Burich, Director of Public Policy, Boehringer Ingelheim   

· Surya Singh, President, Singh Healthcare Advisors, LLC  

Moderated Panel Discussion  

Meredyth Andrus, Attorney, Health Care Division, Bureau of Competition, FTC

Does the designation of interchangeability still have value in the US?

[I don’t think I can attribute statements given where I am in the room and what I can see.] Depends on the product. Primary draw: automatic substitution that can occur at pharmacy level. If the drug isn’t distributed that way, then there isn’t much point. All 15 approved/in use products are physician administered. There are several approved self-administered biosimilars, but none actually launched; have some time before we see products where interchangeability would make a difference.

Have heard from pharmacists that a different name may deter them from switching/may deter patients. Some state laws on this may also have to be addressed.

Why are 11 of 26 biosimilars approved not actively marketed in the US?

Singh: (1) patent thickets. One drug has over 100 patents, 89 of which filed after the drug was launched. (2) commercial & contracting issues. Same manufacturers/partners are innovator/originator of biologic and also of biosimilar. (3) Rebates. Different on medical benefit (physician-administered) side from pharmacy benefit side. If a few major entities are doing most of the contracting on the pharmacy benefit side, bundling is more common compared to more splintered market for doctor-administered drugs. Manufacturers are waiting to see if the rebate trap is going to be addressed.

Susan Collins introduced bill to require patents to be listed in Purple Book for biosimilars. Would help litigation, clarity. $3 million to litigate a patent, which is a big expense. Humira: 5 biosimilars approved, none on the market; some will be entering, but only b/c of patent settlement agreements. 11 years earlier than otherwise might be possible. FTC has done a lot to ensure that patent settlement agreements are pro-competitive; put the rest the idea of pay for delay. Inter partes review is good but is under threat.

Singh: [discussion of market structure/treatment modalities] doesn’t think that misinformation influences providers’ decisions. Survey data, leaders at large practices: there’s no more reluctance to use biosimilars. The market is being driven by economics. [One way to read this is as a terrific indictment of our broken health care system.]  Explanation of how contracts can limit doctors from using the drug of choice for patients: specialty pharmacy delivers drug to practice despite what they have chosen for inventory. “Fail first” policies are used extensively and increasingly for medical benefit (doctor delivered) drugs to ensure use of their preferred drugs. When a practice chooses what biosimilar to prescribe, it’s in inventory and interchangeability doesn’t matter. Pharmacy benefit side: now interchangeability does matter—the pharmacy needs the right to substitute w/o going back to prescriber, and the only way to get that right is interchangeability.

FDA and FTC Approaches to Help Ensure Truthful and Non‐misleading Advertising and

Promotional Communications

Lowell Schiller, Principal Associate Commissioner for Policy, FDA: have seen troubling communications suggesting biosimilars are less safe/less effective than reference products or that there may be clinically meaningful differences b/t them when biosimilars can’t be approved unless there are no clinically meaningful differences. Even absence of explicit falsity can be misleading overall and potentially harmful to public health by series of statements each true on its own but misleading overall in combination w/omissions. Seen this before w/Hatch-Waxman w/communications about generics suggesting they were outdated or less effective.

Dominic Cirincione, Regulatory Counsel, Office of Prescription Drug Promotion, CDER,

FDA: Fair balance is required in labeling/ads. FDA relies on statutory authority to regulate labeling/ads. OPDP: Surveillance/communication program, including response to voluntary requests for comment on draft materials; industry guidance; social science research program (researches issues on DTC and advertising to physicians—learn about studies on their website); review of disseminated materials/ “BadAd” program/warning or untitled letters; work with DOJ to pursue enforcement actions.

Common issues observed by OPDP in prescription drug ads & promotional labeling: omission of risk; minimization of risk; overstating effectiveness (unsupported claims/misrepresent data from clinical studies); misleading drug comparisons (e.g., comparing two different studies that may have different patient populations or methodologies). Warning letters 2015-2020: omissions/minimization of risk are largest share of letters, but false/misleading comparative/benefit claims are also taken seriously.

Richard Cleland, Assistant Director, Advertising Practices, Bureau of Consumer Protection, FTC: FTC covers only commercial speech. Looks to content (promoting demand for a product/service or denigrating competitor’s product; specific product references; information about type, price, quality or other attributes, including health benefits); means used to publish the speech (would it be recognized as advertising); and speaker’s economic motivation for disseminating speech. Peer reviewed scientific article or press release may or may not be commercial speech depending on how disseminated/used.

Falsity/misleadingess is covered including failure to disclose that is misleading. Companies are responsible for both express and implied claims. Net impression is what matters, to a reasonable person in target audience. Thus net impression may differ as between an ad targeted to a diabetes patient or a doctor treating diabetes. Reasonable consumers don’t read an entire ad; a footnote will rarely alter the net impression. Reasonable doesn’t have to mean majority; if a significant number of consumers would take a message away then the advertiser is responsible for that message.  Can be liable for misleading interpretation even though a nonmisleading interpretation is possible. A consumer might interpret the use of “not interchangeable” in a misleading way—to mean that a biosimilar couldn’t be prescribed in place of the reference product.

Specific claims: clinically meaningful differences b/t reference product & biosimilar; “there’s still a chance the patient may react differently”; claims about greater safety of reference product. Could all be false, unsubstantiated, and failing to disclose material information.

FDA Draft Guidance for Industry: Promotional Labeling and Advertising Considerations for

Prescription Biological Reference and Biosimilar Products Questions and Answers

Catherine Gray, Staff Director, Office of Prescription Drug Promotion, CDER, FDA

Elizabeth Pepinsky, Health Science Policy Analyst, Office of Prescription Drug Promotion,

CDER, FDA: Draft guidance issued by OPDP in consultation w/other groups focusing on biosimilars. The basic rules are the same: truthful and nonmisleading, risk/benefit balance, and disclose material facts. Companies should specifically identify the product/products to which the information applies: e.g., if it applies to reference product & biosimilars, say that; if promo materials use studies referencing non US licensed comparator, then that status should be accurately identified in the materials.  If presenting info from studies on reference product that are relevant to conditions of use for biosimilar, should refer to biosimilar’s FDA-approved labeling for information about the biosimilar. Data from studies conducted to support biosimilarity that aren’t included in the FDA-approved labeling should, if presented, be truthful, nonmisleading, and consistent w/FDA-approved labeling. Statements implying superiority where the differences in adverse reactions are not clinically meaningful would be misleading. Individual statements of accurate information could contribute to a misleading presentation when provided in comparative context. E.g., if biosimilar is licensed for fewer indications than reference product, a comparative presentation suggesting less safety in the licensed indications would be misleading.  

Dominic Cirincione, Regulatory Counsel, Office of Prescription Drug Promotion, CDER,

FDA: Examples of presentations that conform w/guidance. Scenario: promo materials say that one drug in a clinical study had a numerically higher overall response rate than another drug, but it’s not clinically significant: touting the numerically higher response rate would be misleading. Looking forward to stakeholder input on draft guidance, especially about how to convey interchangeable information.

Pepinsky: keep net impression in mind: individual claims aren’t enough to be nonmisleading about safety and efficacy, not just for comparative claims but for all claims.

What’s at Stake?  The Benefits of Competition

Alison Falb, Regulatory Counsel, Office of Therapeutic Biologics and Biosimilars, CDER, FDA 

• Murray Aitken, Executive Director, IQVIA Institute: Many dynamics in market. Biologics=growing share of market with significant growth over 5 yrs relative to small molecule. 42% of total medicine market by price in 2018, up from 30% in 2014; represents almost all of the growth; adjusting for inflation and population growth/per capita spending, small molecules declined 12% while biologics increased 50%. R&D pipeline suggests growth will continue across most disease areas, including those traditionally based on small molecules. Reach market through multiple channels & pay times, each w/own payment dynamics, including private insurance, Medicare types (both pharmacy and physician provided), Medicaid (ditto), fee for service, cash, commercial office/physician sites. Different incentives, reimbursement levels for each segment. Largest originator brands have significant sales since launch: each of the top 10 has cumulative sales of over $40 billion since launch, on market more than 17 years.

About 40% of small molecule market sales are accessible to generics. By 2019, 17% of biologics market is accessible to biosimilars, which have 20% market share. Including approved but not launched, 50% of biologic market sales could face biosimilar competition (that won’t happen until 2023 at the earliest).

[I think] David R. Schmidt, Assistant Director, Applied Research and Outreach, FTC  It’s early days for biosimilars, and early to be analyzing these markets. Look at whether different payors (and dispensing location) are treating biosimilars differently from the small molecule drugs those payors handle.

Andreas Schick, Director, Economics, Office of Program and Strategic Analysis, CDER, FDA: Also lessons in comparing different biologics. W/generics, we don’t see wide disparities by payor type. Reasonable to think that there shouldn’t be. Would be concerned if saw very different behaviors in Medicaid and non-Medicaid markets.

• Inma Hernandez, Assistant Professor of Pharmacy and Therapeutics, University of Pittsburgh School of Pharmacy: W/o interchangeability, we can’t pay for biosimilars the way we’ve been paying for generics.  Discounts are proprietary so we have trouble knowing what payors actually pay. Have some data from SSR Health; calculating average revenue for unit of product, net of discounts including rebates and other discounts including cards given to patients. Can separately estimate for Medicaid and other payors. Have showed robustness of data in paper in JAMA. One example of biosimilar entry: List and net prices increased in parallel until 2013; net prices started to decrease in 2015 when competition began, driven by increasing discounts to payors other than Medicaid. Another three examples: similar story, sometimes net prices begin to drift down before entry. Sometimes there are factors other than biosimilars (here: in-class competition by non-biosimilar drugs), also including public pressure over insulin prices for one of the examples, insulin glargine. List prices stagnated after competition, but net prices decreased due to discounts.  Unclear whether decreases related to number of biosimilars or only number of years post-biosimilar entry.  

What about rebates for drugs covered under Medicaid managed care organizations, collected by states pursuant to ACA? Market share of Basaglar (biosimilar to initial version of insulin glargine) is basically zero unless states have MCOs with no preferred drug lists (there are several other possible models). Preferred drug lists prevented uptake by listing it as non-preferred; results reflect strong financial incentives of rebates. More states are implementing preferred drug lists, so this is a timely result.  Competition is happening in discount, not in list price.

Comment by someone: seeing very different behavior for reference products in biologics space v. responses to generics in small molecules.

Aitken: we should get beyond saying they’re different from small molecules and say that fee for service Medicaid is different from managed care Medicaid and so on.

Alex Brill, Resident Fellow, American Enterprise Institute: Barriers to competition can be good and bad, big and small. Barriers to biosimilar entry: some are appropriate to protect innovator/producers and consumers (patents, exclusivity periods, approval process); others thwart healthy competition. Barriers to biosimilar utilization once entry occurs are uniformly bad. Bad barriers: myopic contracting practices by payors that discourage maturing of biosimilar marketplace; rebate traps; frivolous late-stage patents; inadequate physician and patient education not comparable to education that has taken place for small molecule generics.

Undue barriers to biosimilar entry/utilization: extends excessive monopoly rents; higher patient cost; less biosimilar discounting; fewer biosimilar competitors. Uncertainty associated w/ the viability of the market is a barrier: uncertainty of reference product price; legislative/legal/regulatory uncertainty; competitor biosimilar behavior—many of these are natural in a free market and will resolve over time w/experience, but we can strive to mitigate them. Exclusivity periods are specific and clear w/clear duration; patent thickets lack predictability. Regulators should try to minimize costs related to approval. Should be willing to incentivize participants to stop waiting—manufacturers, prescribers waiting for more information. Worth considering goosing the system to get over initial hurdle.

Improving Stakeholder Engagement:  Education and Understanding

Sarah Ikenberry, Senior Communication Advisor, Office of Therapeutic Biologics and Biosimilars, CDER, FDA

FDA has health care provider materials/fact sheets. Biosimilar basics for patients. Working on additional materials. Highlights similarities of biosimilars and reference biologics, benefits of increased access; urges patients to find out more from doctors/FDA. Going to create fact sheet for health care providers to address misconceptions, as well as teaching resources for medical/pharmacy/nursing schools.

Elizabeth Jex, Attorney Advisor, Office of Policy Planning, FTC

• Cheryl Koehn, Founder & President, Arthritis Consumer Experts: emphasizes importance of disclosure of material connections. Patients have seen white noise about safety/efficacy/lack of identicality/lack of interchangeability from originators: contributes to nocebo effect. Nocebo effect is real. Negative words, body language, subtle or not-so-subtle words are import and strategically deployed. Canada is ahead in switching: several provinces have switched most patients to biosimilars, with about 1% requesting exemptions and 1% granted. Can buy a lot of health care for $2 billion Canadian.

• Sameer Awsare, Associate Executive Director, The Permanente Medical Group: 12 million patients, $8 billion on pharma. Business model for drug use management is predicated on ability to move market share. Leverage exists b/c KP can deliver more than 90% of given market in short time; 12.2 million members are aout 4% of covered lives. Physician & pharmacist driven drug selection allows KP to promise & deliver, moving market w/99% physician compliance. Education of physicians & pharmacists with general biosimilar education; biosimilar data; then were able to show that KP patients did well. 80% of KP patients using Remicade successfully switched to biosimilar Inflectra; used medical records to guide the switch and to show outcomes. Found no increased risk of disease worsening in IBD patients switched to Inflectra. Similar experiences w/two other biosimilars. Once doctors were comfortable with the first biosimilar they were more willing to switch to others.

• Michele Andwele, Editorial Director for Health Content, Arthritis Foundation: key concerns: effectiveness? Could switching from reference product make me flare up? Are they safe? Will I pay less? Can a pharmacist substitute w/o doctor’s approval?  One patient: I pay $35/month; don’t have a financial incentive to switch if it’s working for me.  Language matters: inconsistent terminology use/unconscious bias in communication w/patients. Need provider consensus/patient advocacy group consensus on how products are described. Provider concerns: time constraints in discussing biosimilars in short time w/patients who may have many issues. Insurance coverage/patient assistance programs are issues; liability exposure in absence of interchangeability designation.  Educational initiatives shouldn’t be influenced by industry; learn from partners in Canada and Europe.

• Hillel P. Cohen, Executive Director, Scientific Affairs, Sandoz (trade group rep for Biosimilars Forum): has seen several types of disparagement. Information that is technically correct but omits info; negative framing of factual statements that matters to consumers. Sometimes factually incorrect claims. Safety, quality, and regulatory messages. E.g., efficacy is not fully proven, or may not be as good as the reference product. Seen comments about extrapolation: some doctors/patients say extrapolation is inappropriate. Seen safety not fully proven, or potential for more bad effects. Switching: there are comments that we don’t have enough data to conclude that switching is safe, implying that it may be unsafe. Doctors can already prescribe the appropriate product; you don’t need interchangeability for that. Quality: that it may not be the same as the reference product/it’s only similar or highly similar, not identical, even though differences aren’t clinically relevant—that’s difficult to understand. Statements that interchangeability is a higher standard, implying that biosimilars are of lower quality than interchangeable biologics, even though they are structurally identical. Regulatory pathway has created some of the problem: “abbreviated” pathway. Some people say it’s not as rigorous as pathway for reference products, despite rigor.

Recommendations: truthful & complete information should be required. Positive framing of benefits; easy to understand messages. Messages should be based on FDA documents but tailored to their audiences. Large orgs and patient advocacy groups have done the research and are on board w/biosimilars, but the average patient is not knowledgeable. Need to educate them, via educating physicians—rheumatologists know more than gastroenterologists right now.  FDA should prevent disparagement/misinformation. Incorporate biosimilar education into educational curriculum for doctors, nurses, pharmacists. Patient groups should disclose funding & conflicts of interests—it’s fine to speak your positions, but full disclosure is important.

Koehn: on language, biosimilars are biologics; if you use two different terms people think they’re not the same thing.

Andwele: Also need an influencer strategy: patients as peers.

Cohen: highlight the rigor of the process used to approve the biosimilar. Sound scientific policy. Doctors are used to clinical trials; it’s a different methodology, but does assure safety & efficacy. Coordinated effort w/professional societies and patient groups is necessary.

Andwele: message segmentation. Treatment-naïve patients v. someone stable on a biologic.

Biosimilar Disparagement as an Antitrust or Consumer Protection Cause of Action

• Richard Cleland, Assistant Director, Advertising Practices, Bureau of Consumer

Protection, FTC

• Randall Weinsten, Attorney, Health Care Division, Bureau of Competition, FTC

Michael A. Carrier, Distinguished Professor, Rutgers Law School: statements like “we need to proceed cautiously so we don’t end up with another thalidomide, or all the things that happen when safety isn’t considered”; claims that it would disrupt continuity of care/could put patient in ER/could bring patient out of remission. Not appropriate given definition of biosimilars.

More subtle: claims that the biosimilar is not identical to, or acts differently from, reference product. Pfizer citizen petition contains many claims: it’s not just apples to apples; patient may react differently. Genentech says: the FDA requires highly similar but not identical. FDA is good at taking on these misrepresentations.

Another category: interchangeability. There are some intimations that not interchangeable = not meeting highest standards of safety & efficacy.

Most subtly: company says the drug acts “similarly.” Jansen says “you may be asked to switch to a drug that acts similar to Remicade.”  FDA’s guidance addresses that.

  

Rebecca Tushnet, Frank Stanton Professor of First Amendment Law, Harvard Law School 

Elements of a Lanham Act claim: key elements are falsity or misleadingness, materiality to a reasonable consumer’s purchase decision, and likelihood of harm to the plaintiff.

Mostly unique to the Lanham Act cause of action, compared to an FTC or state consumer protection law claim: the sharp doctrinal difference between false and misleading claims. Although both falsity and misleadingness are actionable, the burden on the challenger is much greater if a claim is misleading than if it is literally false. That puts a premium on distinguishing falsity from misleadingness. How does a plaintiff establish a claim is false? Courts ask: What is the explicit meaning of a claim. Once you know the explicit meaning, you can then determine whether that factual claim is false. However, sometimes courts are willing to make general inferences from disparagement. Also important to distinguish lay audiences and expert audiences: dictionary meaning may not be as important as what people are likely to understand.

How does a plaintiff establish a claim is misleading? Relevant when the claim is ambiguous and has potentially true and potentially false meanings; the question is what message reasonable consumers receive. Usually through surveys of the relevant consumers. If 15% or more of consumers, net of control, receive a false message, then P is likely to prevail.

When is empirical evidence of consumer reaction necessary? Not in literal falsity cases; literal falsity is presumed to reach a substantial number of reasonable consumers. Basically always required in misleadingness cases. [Intent, direct testimony from deceived consumers as possible but unlikely substitutes] 7th Circuit case, Eli Lilly v. Arla Foods (2018): Eli Lilly sued over images portraying rBST, a hormone given to cows to increase milk production, as a scary toothed monster with electric fur. The 7th Circuit finds there’s no literal falsity, but still affirms an injunction: “The use of monster imagery, ‘weird stuff’ language, and child actors combine to colorfully communicate the message that responsible consumers should be concerned about rbST-derived dairy products.”

Impact of First Amendment: Courts have generally said that the Lanham Act false advertising cause of action raises no constitutional issues because by definition it targets only false or misleading commercial speech, which can constitutionally be banned.

According to Supreme Court doctrine, when it comes to direct gov’t regulation of speech, there is a distinction between inherently or actually misleading v. potentially misleading: Whether the speech can just be banned or whether instead a disclosure must be added to try to draw the sting of the misleadingness. This isn’t well worked out and has largely been done by courts guessing, or worse, about what’s inherently or actually misleading versus correctable and only potentially misleading. Much room for presenting courts with facts about misleadingness.  Not the same distinction as is made in Lanham Act cases, where misleadingness is grouped into one category distinct from falsity.

Relationship between private and public enforcement: Courts in private litigation often defer to the FDA’s factual findings about what is true but without a lot of explanation about why they’re deferring.

First Amendment may also bear on the question of de novo review of agency determinations: what are the medical facts versus what are consumers’ perceptions of the messages they receive?  The former—the facts of safety and efficacy—may as a practical matter receive more deference than agency determinations about misleadingness, even though both are subject to ordinary mechanisms of proof.

Q: role of consumer protection claims?

RT: likely to be limited b/c of barriers to class actions.

Cleland: POM case: DC Circuit said deceptive = no First Amendment protection. Should go into relief ordered, not into whether it is actionable.

RT: agree, but courts are often not great at signaling their order of operations.

Cleland: materiality to competitors?

RT: to consumers, which then affects competitors when consumers’ decisions are affected. [in response to Q] Could be patients or doctors; both have substantial influence on what drugs are prescribed.

Carrier: monopolization claims: these are highly concentrated markets, w/few substitutes. Liability requires monopoly power + exclusionary conduct. Some courts have rejected any liability for disparagement; others have made it very hard/impossible to find liability; others say it’s case by case. In the first bucket, 5th & 7th circuits say that false advertising is pro-competitive by increasing competition in the market for advertising. This is nonsense. It’s at least possible to get/maintain monopoly power by disparaging rivals. Rivals can’t fix it; can have significant effect on overall market.

Second approach: de minimis rule: assumes disparagement is de minimis without a showing of lots of things: clearly false, clearly material, clearly likely to induce reasonable reliance, made to buyers w/o knowledge, continued for prolonged periods, not subject to neutralization. The bar is just too high—taken from leading Areeda/Hovenkamp treatise. Was adopted at a time when the standards for false advertsing weren’t clear. There are a lot of instances of false advertising that aren’t monopolization, but false advertising in a monopoly context can harm markets.

Clearly false: you can have deceptive statements even if they aren’t clearly false, as has been delineated here. That standard is too high.  Clearly material: yes, deals with safety/health; would induce reasonable reliance for that reason. Knowledge of subject matter: the drug companies have better knowledge. These drug monopolies go on for years. It’s hard to neutralize: biologic company says “you could go to the ER” and that’s tough to rebut.

Third bucket: case by case approach of 3d, 8th, and DC. False statements can be so unfair as to constitute an unreasonable restraint: e.g., does it lock in decisionmaking? Does it make it harder for competitor to get financing? Hard to get financing if you’re subject to claims about safety/efficacy. Relevant also: the regulatory setting. Wonderful to see FDA/FTC working on this, but the agencies might not be able to solve the problem on their own. Drug companies think it’s in their bottom line interest to get away w/slap on wrist, maintain monopoly power. Role for courts to police barriers to entry, especially given other barriers to entry like trade secrets, patent thickets, etc. Bundling existing and new patients makes it harder for new patients to get the biosimilar.

Weinstein: do we need private antitrust enforcement?

Carrier: we need all three: private antitrust, false advertising, and regulatory enforcement. No matter what agencies can do, bad actors may be able to cross the line and commit antitrust violations. The benefit is that it focuses on market effects: increased price, reduced output—antitrust is uniquely able to deal with that. It has treble damages, attorneys’ fees, injunctions: it can consider all kinds of anticompetitive conduct in their full context and interactions. Suboxone: an overall course of conduct can violate the law. The companies aren’t doing just one thing, they’re pursuing many strategies.

Weinstein: would a consumer class action work here?

Carrier: courts aren’t always receptive, especially given the nuanced role of the misinformation here. FTC uniquely has §5 power to go after unfair/deceptive acts or practices, with more leeway than private antitrust.

RT: Right now some courts do a “heads I win, tails you lose” approach: Becton Dickinson in the 5th Circuit, P lost its antitrust claim because false advertising couldn’t affect the market in general, then lost its false advertising claim b/c it affected the market in general and P couldn’t show which of the sales it had lost v. its rivals.

Carrier: our forthcoming article (watch this space) lays out how you should think about presuming anticompetitive effect when false advertising is done by a monopolist. Our test applies to monopolists, and it doesn’t make all false advertising into an antitrust problem. We take the learning from false advertising law and apply it to antitrust: a well developed body of law.

We’d need to figure out what it takes to have real competition in biologics.

Q: how do you establish competitive harm? Is deception enough?

Carrier: for a biologic w/monopoly power, I think that’s enough. Biosimilars are injured; regulatory scheme is impaired b/c biosimilars are supposed to play a crucial role in lowering price. Competitor harm = consumer harm.

Q: belief that it would be hard to deceive prescribing physicians about safety/effectiveness. If true, is there still a role here for harm to competition?

Carrier: yes, b/c we have a price disconnect. Not like any other market where price/quality determination is made by any one party. Doctors, payors/insurers, consumers: lots of room for anticompetitive conduct w/r/t patients and pharmacy benefit managers.  Pharma gives us whack a mole all the time: every time you think you’ve figured out what is going on, there’s something else. Gilead case: new combination of settlements and product hopping we haven’t seen any more. Transferred patents to Native American tribe to try to avoid PTO review. This is just the next stage in that process of invention. Antitrust is well equipped to deal w/variety of shenanigans.

Q: rulemaking as a possibility. Comm’r Chopra wants more FTC rulemaking.

Carrier: may well be useful. Yes to rulemaking and yes to enforcement in the courts. Could shed light on the problem, as does the guidance FDA has offered. Make clear you can’t hide behind clear falsity: deception/misleadingness is a problem. 

Q: gov’t v. private actors?

Carrier: sometimes this conduct is nuanced. Safety intimations; an ideal recipe for FTC action.

RT: at some point companies should step up and go to court to defend their own interests if they’re losing millions. But public harm also matters and can justify gov’t intervention. Antitrust prides itself on its hard-headed empiricism but the majority tests presently ignore all the learning we have about false advertising’s effects. That should change.

Carrier: Pfizer is suing J&J; it is possible, b/c entering the market w/ a biosimilar requires lots of resources.

Open Public Comment  

• Sarah Ikenberry, Senior Communication Advisor, Office of Therapeutic Biologics and Biosimilars, CDER, FDA 

• Eva Temkin, Acting Director for Policy, Office of Therapeutic Biologics and Biosimilars, CDER, FDA 

• Catherine Gray, Staff Director, Office of Prescription Drug Promotion, CDER, FDA

• Antara Dutta, Economist, Bureau of Economics, FTC 

• Armine Black, Attorney, Health Care Division, Bureau of Competition, FTC

Juliana Reed, Pfizer/ Biosimilars Forum: continued problems of misleadingness, but that’s not the only barrier.

U Pitt pharmacy school professor: Europeans are fine prescribing biosimilars b/c of nearly 2 decades of experience. Physician confidence is high uniformly but uptake varies by country, which probably reflects other factors including payor practices. Health care practitioners in the US are also not skeptical; they are enthusiastic about biosimilars.

Marilyn Feldman, Alliance for Safe Biologic Medicines: rheumatologists were willing to prescribe, but clinicians are often hesitant to change b/c it can take years to stabilize a patient. And they’ve become sensitized to non-medical changes based on formularies that have changed patients’ medicines every 6 months in order to make higher profits. They even switch patients to completely different biologics. So doctors are leery of a great switching experiment. Biosimilars are behind the 8-ball because of financial incentives. Incentives that benefit the physician can undermine trust in doctors. Considering the perception that US lags behind Europe, 5 years out there were 11 products but we have 26: FDA deserves thanks for building out approval so quickly.

Sundar Raman [sp], biosimilar company: Data for biosimilarity should also suffice for interchangeability; no more is required and practically they are already interchangeable. But the difference allows anticompetitive behavior by originators, including misrepresentations and payment practices.

Andrew Spiegel, GCCA, Alliance for Safe Biologic Medicines: Unaware of any attempt to undermine confidence of patients & doctors in biosimilars. Patients & providers have accepted biosimilars as part of health care.

Kim Caldwell, pharmacist, PCMA (pharm benefit manager ass’n): 270 million Americans in covered plans. Patent thickets are bad; product substitution is good—should lower barriers to substitutions. Patients & clinicians may be uncertain about switching/substitution.

Andrew Greenspan, Jansen Pharm./J&J: patients should have data on alternating before that happens; implying that alteration/interchangeability is fine for a biosimilar is misleading w/o data. Some molecules are more immunogenic than others; patients may face switching every 6 months and need good info.

Ad compliance guy: Dr. Google is often the driver of patients to particular sites. FDA Warning letter last month specific to search ads on Google: request that final guidance documents specifically get into how biosimilar guidance applies to marketing platforms w/character space limits, and to brand-connected ads: ads that don’t mention a brand themselves and then link directly to a brand website.

Rheumatologist: hasn’t seen disparagement in educational materials, offices, etc. Don’t believe that’s responsible for impaired patient access. The access problem, which exists, lies elsewhere. Manipulations designed to maximize profits from fees, rebates, and other schemes. Don’t address those and access won’t happen; far outweigh the effects of deceptive marketing. Formulary decisions are rarely if ever based on medical outcomes. Overly consolidated industry of unregulated middlemen with unfettered power demanding ever increasing tolls from patients and pharmacos. Major driver of rising costs. Should not be allowed to continue. Insurers, large pharmacies, and PBM conglomerates are main barriers to access for biosimilars and indeed all pharmaceuticals.

Laura Brandt (sp), Amgen: US market is emerging but robust; the current market structure is good.

Andre Barlow (sp) on behalf of Coalition to Protect Patient Choice: highlights the role of rebate walls: agencies should prohibit rebate policies that block biosimilar competition. Such policies raise the cost of drugs overall. Go to PBMs rather than consumers; perverse incentives to negotiate higher list prices, requiring higher coinsurance payments from patients b/c of higher list costs. Rebate wall/trap: use existing market power to secure formulary access w/volume based rebates on condition that they deny formulary access to rival drugs, bundled across drugs for many conditions that can’t be matched by new entrants—even if the biosimilar is offered at greater discount or for free. Most PBMs require patients to fail first on the more expensive branded drugs, instead of the historical fail first on generic requirements. Step therapy rules used to foreclose competition.

PhRMA rep: Physician education is good. Meaningful rebate reform would promote access and competition.

Corey Greenblatt (sp) Global Health & Living Foundation: nonprofit for chronically ill patients. Pricing is the key. Nonmedical switching needs to be defined; patients/doctors should be able to nonmedically switch when it benefits them, not when it benefits the PBM. Forced nonmedical switching only profits PBMs/insurers. Patient is the only one who shows up w/a checkbook and no power. You can change this by strictly regulating insurance practices & creating market incentives for uptake.

Laura McKinley, Pfizer: Should be able to extrapolate for additional indications even in the absence of clinical data, speed up approvals. Biosimilar exclusion contracts withholding rebates for both current and future patients exclude biosimilars. Prevents doctors/patients from trying biosimilars.

"better lives for hens" was puffery, but hen living conditions claims weren't

Lugones v. Pete & Gerry’s Organic, LLC, No. 19 Civ. 2097 (KPF), 2020 WL 871521  (S.D.N.Y. Feb. 21, 2020

Plaintiffs alleged that they bought defendant’s eggs, branded as Nellie’s Free Range Eggs, based on false advertisements indicating that the hens were loved and are given ample access to open, green spaces in which they can peck, perch, and play. Instead, (i) defendant’s hens are allegedly kept in tightly constricted spaces, with no real access to the outdoors; they are crammed “into sheds up to 20,000 at a time ... prevent[ing] them from extending their wings, foraging or making their way to the outdoor space [Defendant] advertises so prominently”, and (ii) the hens are subject to numerous husbandry practices that plaintiffs oppose, such as beak-cutting and culling for slaughter when they’re calcium-depleted.

The containers used slogans like “we love our hens, you’ll love our eggs”; “we love our hens”; “better lives for hens mean better eggs for you!”; and “outdoor forage.” The container also claimed that “[m]ost hens don’t have it as good as Nellie’s,” because Nellie’s hens “can peck, perch, and play on plenty of green grass.” The containers all included imagery highlighting young children playing with hens in an open field.

Plaintiffs alleged they “would only consider purchasing Nellie’s eggs in the future if Defendant[ ] were to treat chickens in a manner consistent with [its] advertising.” The court held this conditional intent wasn’t enough to give them standing to pursue injunctive relief.

However, plaintiffs did state claims under GBL §§ 349 and 350, based only on statements and images they claimed to have viewed before purchase: the statements and images on the container, including this paragraph:

Most hens don’t have it as good as Nellie’s. 9 out of 10 hens in the U.S. are kept in tiny cages at giant egg factories housing millions of birds. Sadly, even “cage-free” is now being used to describe hens that are crowded into large, stacked cages on factory farms, who never see the sun. Nellie’s small family farms are all Certified Humane Free-Range. Our hens can peck, perch, and play on plenty of green grass.

Statements on the website, however, were non-actionable because plaintiffs didn’t allege that they viewed the website before purchasing and thus they couldn’t have relied on those statements.

Also, many of the challenged parts of the container were not actionable.  “We love our hens, you’ll love our eggs” and “better lives for hens mean better eggs for you” were “paradigmatic examples of puffery.” It was unreasonable to interpret such statements to mean that the hens were free “from chick culling, beak-cutting, calcium depletion[,] and sale to commercial slaughterhouses and live markets.”  But “[m]ost hens don’t have it as good as Nellie’s. ... Our hens can peck, perch, and play on plenty of green grass” was factual, reinforced by references to “OUTDOOR FORAGE” and images of hens frolicking in elysian pastures. There was enough specificity to go beyond puffery and into potential materiality. Defendants argued that reasonable consumers wouldn’t rely on these claims, but that wasn’t a good argument on a motion to dismiss: the court wasn’t willing to find as a matter of law that consumers wouldn’t look at these claims and the associated iamges “and not believe that Defendant’s hens have significant access to the outdoors.”

Fraud/fraudulent misrepresentation claims likewise survived. When it came to reasonable reliance, “Plaintiffs would have had no independent means of ascertaining the truth of Defendant’s misrepresentations — short of driving themselves to Defendant’s facilities and sleuthing about the grounds for the truth. Such an effort would go far beyond the ‘minimal diligence’” required.” But breach of express warranty claims failed.   

Cal. court says "controversial" claim is therefore not factual

Serova v. Sony Music Entertainment, 44 Cal.App.5th 103 (2020)

Hard to believe the reasoning in this case could get worse, but they may have achieved it. The California Supreme Court told the court of appeals to reconsider its earlier decision in light of FilmOn.com Inc. v. DoubleVerify Inc., 439 P.3d 1156 (Cal. 2019).  Same result, slightly different reasoning: Because there is a dispute over the vocalist on certain recordings advertised as “Michael Jackson” recordings, this is a “controversial” question that therefore cannot be factual for purposes of commercial speech doctrine. In fairness to the court of appeals, this is a known problem of using “controversial” as a standard in a lawsuit over compelled commercial speech, where there is by definition a controversy. I’m not even strongly committed to this decision being wrong on the merits given the special context of an entertainment product. But it is a bad sign of where First Amendment cases are going: disclosure cases are now contaminating ordinary falsity cases.

Serova alleged that the album cover and a promotional video wrongly represented that Jackson was the lead singer on each of the 10 vocal tracks on the album, when in fact he was not the lead singer on three of those tracks. Previously, the court of appeals held that: (1) Serova’s claims arose from conduct furthering Appellants’ right of free speech “in connection with a public issue” under the anti-SLAPP law; and (2) Serova did not show a probability that her claims under the UCL and the CLRA would succeed because the claims concern noncommercial speech that is not actionable under those statutes.   

Reaffirming its earlier reasoning, the court of appeals concluded that FilmOn concerned only the first step of the anti-SLAPP analysis, i.e., whether particular claims arise from conduct that the anti-SLAPP statute protects. Specifically, FilmOn considered “whether the commercial nature of a defendant’s speech is relevant in determining whether that speech merits protection” under the anti-SLAPP law, and concluded that the context of a statement—including “the identity of the speaker, the audience, and the purpose of the speech” —is “relevant, though not dispositive, in analyzing whether the statement was made ‘in furtherance of’ free speech ‘in connection with’ a public issue.”

Here, the representations that Michael Jackson was the lead singer on the three disputed tracks “did not simply promote sale of the album, but also stated a position on a disputed issue of public interest.” Before the album was released, “certain Jackson family members and others publicly claimed that Jackson was not the lead singer,” while the Estate made a public statement about the authenticity, making the identity of the artist “a controversial issue of interest to Michael Jackson fans and others who care about his musical legacy.”  Sony’s financial interest in authenticity didn’t change that.

This case arguably falls within an exception to an exception: the legislature amended the anti-SLAPP law to exclude commercial speech, but then excluded ads for “any dramatic, literary, musical, political, or artistic work” from that exclusion. Still, the court reasoned, that didn’t mean that all such ads were necessarily within the scope of the anti-SLAPP law. There still needs to be some connection to a “public issue” or an “issue of public interest”; otherwise, an ad falsely claiming that a musical album contains a particular song would be covered by the anti-SLAPP law.

In FilmOn, the state Supreme Court held that a court must consider the context as well [as] the content of a statement in determining whether that statement furthers the exercise of constitutional speech rights in connection with a matter of public interest.” FilmOn alleged disparaging statements about the Web-based entertainment programming distributed by FilmOn.com by defendant’s confidential reports to paying clients classifying FilmOn Web sites under categories of sites that engage in copyright infringement and contain “adult content.” The court held that these reports were not “ ‘in connection with’ ” an issue of public interest. It was “ ‘not enough that the statement refer to a subject of widespread public interest; the statement must in some manner itself contribute to the public debate.’ ”

Here, the issue of public interest was whether Michael Jackson was in fact the singer on the three tracks. And the issue doesn’t simply concern some trivial fact about his life, but relates to his artistic legacy; the dispute was of widespread interest among Michael Jackson fans. This public controversy distinguished this case from other cases about allegedly misleading descriptions of a particular commercial product or service.

The connection between the issue and the speech is also relevant. The speaker and the audience for the statements at issue suggested a commercial purpose: appellants sell the album, and they made the statement to an audience of potential purchasers. But the content still was not merely commercial speech, and anyway FilmOn was clear that “[s]ome commercially oriented speech will, in fact, merit anti-SLAPP protection.” The content of the statements related directly to the issue of public interest, rather than being tangentially connected through a generalization of the statements’ subject matter (the  “‘synedoche theory’ of public interest”); cf. Commonwealth Energy Corp. v. Investor Data Exchange, Inc. (2003) 110 Cal.App.4th 26, 34, 1 Cal.Rptr.3d 390 [“The part is not synonymous with the whole. Selling an herbal breast enlargement product is not a disquisition on alternative medicine”].)   Even though the challenged statements didn’t refer to the controversy, they took a position on that controversy.  Unlike the statements in FilmOn, the statements here were public and contributed to the public conversation.  

It was also relevant that Sony wasn’t selling “a typical consumer product” but rather a product that is itself subject to First Amendment protection. “[T]he challenged conduct in this case helped shape the experience of the music that consumers purchased,” which was indeed the basis for Serova’s complaint. Without anti-SLAPP protection, Sony might have decided not to sell the disputed tracks at all; others might decide not to include songs or other artistic works with disputed provenance in a collection “rather than either (1) risk the expense of consumer litigation, or (2) dilute their marketing by acknowledging doubts about the provenance of the work that they do not share.” That would discourage protected speech.   

Then, Serova couldn’t show a probability of success because the UCL and CLRA apply only to commercial speech. Again, the speaker and the intended audience suggested a commercial purpose. But the content of the challenged speech was “critically different” from purely commercial speech for two reasons: (1) Sony’s statements “concerned a publicly disputed issue about which they had no personal knowledge” and (2) “the statements were directly connected to music that itself enjoyed full protection under the First Amendment.”

Personal knowledge matters because one reason commercial speech receives less constitutional protection than political speech is its greater verifiability. In Nike v. Kasky, the California Supreme Court “ascribed great significance to the fact that, ‘[i]n describing its own labor policies, and the practices and working conditions in factories where its products are made, Nike was making factual representations about its own business operations.”” Thus, “Nike was in a position to readily verify the truth of any factual assertions it made on these topics,” and that commercial regulation was “unlikely to deter Nike from speaking truthfully or at all about the conditions in its factories.” [Important note: not its factories. The factories were owned by subcontractors.] Here, by contrast, Sony’s representations about the identity of the lead singer didn’t concern its own business operations or a fact of which it had personal knowledge. Other defendants, not the Sony defendants, allegedly “jointly created, produced, and recorded the initial versions” of the tracks, so the vital element of personal knowledge was missing. The court of appeals commented that Kasky might well have come out differently “if the statements at issue concerned the labor practices of an independent commercial supplier who simply sold products to Nike for resale,” whereas the Kasky court specifically noted that Nike had entered into a memorandum of understanding assuming responsibility for its subcontractors’ compliance with local labor laws. [Assuming responsibility is not the same thing as having personal knowledge, by the way.]

Without personal knowledge, Sony’s statements didn’t fit into the definition of speech that is “ ‘less likely to be chilled by proper regulation,’ ” given the strict liability of consumer protection law.  Personal knowledge about the content of speech is “an important feature” in determining whether speech is commercial. Without direct involvement in the recording, from Sony’s perspective, its statements about the identity of the lead singer “were therefore necessarily opinion.” Appellants “could only draw a conclusion about that issue from their own research and the available evidence.” Thus, Sony’s representations about the identity of the singer were just statements of opinion. 

To avoid potential liability, it would have had to put a disclaimer on the album or leave the songs off entirely. The second option shows a chilling effect, and the first option is also constitutionally dubious because compelled commercial speech is a First Amendment problem, as shown by National Institute of Family & Life Advocates v. Becerra, ––– U.S. –––  (2018), which in response to Breyer’s dissent stated that it accepted [only] “the legality of ... purely factual and uncontroversial disclosures about commercial products.” Here, any compelled disclosure would not be “uncontroversial” by definition because “controversy has surrounded” the disputed tracks, and it wouldn’t be “purely factual” from Sony’s perspective because it lacked personal knowledge of the facts. Forcing Sony to put a claim in its advertising materials with which it doesn’t agree would be bad compelled commercial speech. Even a statement about uncertainty “implies the existence of real controversy or doubt about the identity of the singer even though Appellants might not believe that any reasonable doubt exists.” [Although Sony doesn’t actually know, according to the court of appeals, so the basis of its certainty is … an interesting question.]

Aaaaaaaaargh. The epistemological confusion here is so deep it’s more like rot.  Sony doesn’t have “personal” knowledge because it is a corporation and does not “know” anything. Imputing knowledge to a corporation serves many functions, but it’s distracting rather than helpful here.  If we took this concept seriously for commercial speech purposes—which, to be clear, we absolutely should not—then the companies selling quack autism cures are exempt from regulation precisely to the extent that they are ignorantly or avariciously parroting claims from bogus anti-scientific literature and didn’t do the research themselves.

This whole thing is not even a correct description of Kasky! Nike didn’t have “personal knowledge” of conditions in the factories of its subcontractors because it had made the business decision to set itself up in a way that offloaded risk and control to its subcontractors. Subcontractors are independent third parties. That was the point.  Nike had hired other third parties to monitor, but even if those third parties had “personal knowledge” of the conditions, Nike still didn’t, by the exact same logic that is in play in this decision.

The imposition of strict liability for factual claims made to sell products should not depend on—and never has before depended upon—the corporate form a company has chosen to adopt, which by the way is usually unknown to consumers.  Nike and Sony both decided to have certain tasks performed outside the boundaries of the corporation; they did so for reasons that are doubtless well-founded in economics, but should not be encouraged by the structure of false advertising law—especially since, if corporations do take advantage of this new rule, there will often be no one to hold liable for resulting falsity. For example, ingredient suppliers don’t engage in “advertising” to the public, and the sellers of the final product won’t have personal knowledge of whether the ingredients are truly the ingredients. The ingredients list on the product will therefore, according to the reasoning of the court of appeals here, merely be the seller’s “opinion” about the ingredients.  Contrary to what the court of appeals says, what is “purely factual” should not be and never before has been measured by the “perspective” of the advertiser.

That’s not even getting into the invited error around controversiality/disclosure precedents. Under this interpretation, an advertiser seems to get to create controversy by disagreeing with the regulator, at least if the advertiser has enough market power to get its voice heard.

But even if you think that “controversial” serves an important purpose in mandatory disclosure situations, the court of appeals’ reasoning here has turned every deception case into a mandatory disclosure case, which makes no sense.  Consider: the shark cartilage seller wants to advertise that shark cartilage cures cancer. The regulator says: no, that’s false.  The seller says: now my choices are to not sell shark cartilage or to put a disclaimer on my shark cartilage saying it doesn’t cure cancer, and that’s bad compelled speech about a controversial subject!  Those are the exact choices Sony has. But if a commercial speaker is saying something false, those are legitimate choices to put it to—shut up and stop fooling people, or say something true instead—even if it believes its own claims.  

All the real work in this case is being done by the idea that the factuality of “Michael Jackson sang this” is of a different order/regulability than the factuality of “shark cartilage cures cancer” because of the former’s connection to an expressive work. Making other arguments than that just screws up First Amendment doctrine for everyone.

The court of appeals does go on to say that there’s a deep connection between the challenged statements and the First Amendment-protected art they promote.  Unlike the foregoing, this is actually a legitimate argument. As long as there is a distinction between speech that is sold and other things that are sold that happen to have speech on them (e.g., cans of corn), this rationale will not destroy false advertising law generally.

The court of appeals notes that “[t]he identity of a singer, composer, or artist can be an important component of understanding the art itself. No one could reasonably dispute that knowing whether a piece of music was composed by Johann Sebastian Bach or a picture was painted by Leonardo Da Vinci informs the historical understanding of the work.” I think that’s true, but it’s interesting to consider the ideological work being done here: “Thus, the marketing statements at issue here are unlike the purely factual product or service descriptions constituting commercial speech in cases that Serova cites.” There’s nothing “thus” about it!  There is a ground truth about who was the lead vocalist on these songs, at least as much as there is about a “representation that products were manufactured in the United States” and about an “attorney’s certification as an expert,” two of the cited cases.  Indeed, what counts as “made in the USA” once you know the historical facts is often substantially more subject to debate than how to decide who’s the lead singer on a song once you know the historical facts, as far as I can tell.  The implications to the consumer of the “purely factual” question of who sang a song may be complex—but then again, so are the effects on the consumer of “made in the USA,” and of knowing how much alcohol is in a can of beer. And there are a lot of factual statements that are, because of how science works, provisional: right now, we think some things about aspirin are true because that’s what the scientific consensus is; false advertising law should rely on scientific consensus even though the ground truths it seeks are subject to revision.

Anyway, the court continued, some statements about art could be commercial speech—like film ads featuring fictional endorsements from a nonexistent critic, or a statement falsely stating that a particular song is included in an album. But not these statements, where (1) the identity of the artist was itself an issue of public discussion and interest; and (2) Sony had no personal knowledge of the issue.

Final note: this standard is out of whack with the usual First Amendment rules for defamation, which are usually thought of as pretty strong. Defamation of a public figure requires malice—knowledge or reckless disregard for a high probability of falsity. Even if the court of appeals was right that Sony’s scienter should matter, why shouldn’t it be enough to allege that Sony was reckless about the truth?  Suppose, for example, that a non-Sony defendant had privately acknowledged to Sony that MJ probably wasn't the singer. 

YouTube's terms of service/content policies aren't commercial advertising or promotion

Prager Univ. v. Google LLC, No. 18-15712 (9th Cir. Feb. 26, 2020)

YouTube isn’t a public forum and didn’t engage in false advertising by telling users it supported freedom of expression. Prager “University” (it’s not) complained that YT was discriminating against its conservative viewpoints by putting some PragerU content in Restricted Mode, which makes it unavailable to 1.5-2% of users. YT’s guidelines say that videos that contain potentially mature content—such as videos about “[d]rugs and alcohol,” “[s]exual situations,” “[v]iolence,” and other “[m]ature subjects”— may become unavailable in Restricted Mode. The restriction is done either by an automated algorithm that examines certain signals like “the video’s metadata, title, and the language used in the video,” or manually by a user; there is an appeals process that involves human review. YT tagged several dozen of PragerU’s videos for Restricted Mode and demonetized some videos.  PragerU appealed but was not entirely successful.

The ubiquity of YT didn’t make it public. Marsh v. Alabama is about a company town where the private actor “perform[s] the full spectrum of municipal powers,” which YT is not. And even if YT has said that it’s committed to freedom of expression and an Alphabet executive stated before a congressional committee that she considers YT a “neutral public for[um],” private companies can’t self-designate as public fora. The First Amendment is not opt-in.

The Lanham Act false advertising claim also failed. YT’s statements about its content moderation policies weren’t “commercial advertising or promotion.”  Its statements “were made to explain a user tool, not for a promotional purpose to ‘penetrate the relevant market’ of the viewing public.  Not all commercial speech is promotional.” Likewise, the designation of PragerU videos for Restricted Mode wasn’t advertising or promotion, and it also wasn’t a representation. The designation, and the reason therefor, are not made available to the public. And the fact that some PragerU videos were tagged to be unavailable in Restricted Mode didn’t imply any specific representation. Even implied falsity must be specific and communicated to a substantial number of consumers.

Likewise, YT’s “braggadocio about its commitment to free speech” was puffery/opinion, not an actionable factual representation. Statements that YT believes that “people should be able to speak freely, share opinions, foster open dialogue, and that creative freedom leads to new voices, formats and possibilities” and statements that the platform will “help [one] grow,” “discover what works best,” and “giv[e] [one] tools, insights and best practices” for using YouTube’s products were unquantifiable puffery.

Trademark Scholars Roundtable, Stanford part 3

Session 3: Remedies in Trademark and Unfair Competition Cases  

Introduction: Mark Lemley, Leah Chan Grinvald Discussant: Laura Heymann, Eric Goldman  

[I had another conference in the morning so came in late.] Discussion of eBay’s effects. Burrell: In other countries the trend has to been add more and more remedies, extension of jurisdiction over intermediaries, etc.—US trend is not recognizable elsewhere.

McKenna: Lack of unfair competition has limited our flexibility w/r/t remedies; injunctive relief could be limited to font, presentation, other concerns.

Lemley: Increased use of counterfeiting claims may also be response to limit on remedies: a way to get out of eBay (maybe) and to get out of limits on damages/disgorgement.  Disgorgement other than replacing damages is a windfall to P: it’s money it wouldn’t have earned (b/c you can’t have double recovery) unless it is in practice just recovery for unprovable actual damages. Disgorgement as deterrence: if not limited to willful infringers, will deter some amount of lawful conduct.

Heymann: may also be for damage to reputation that we don’t think we can measure. [Though there’s no reason to think this actually happens in terms of reputational harm.]

Burrell: there are people who say that giving up wrongfully acquired profits isn’t punishment, so willfulness shouldn’t be required.

Lemley: it’s a differently calculated form of punishment. Treble damages might be more punitive, though they also may be less punitive than the gains from unlawful conduct, as in antitrust/drug cases.

RT: Irreparable injury: I see it these days often used as quick way out of a PI analysis when the underlying claim is weak. Analogy to 230: does it matter what the rationale  if the P was going to lose anyway? I think a reasonable answer is yes, but how it matters is up for debate. Making a bad case cheaper to fight actually has some value where otherwise costs will deter assertion of valid defenses. Cf. Lunney, etc.

Goldman: Equitable remedies: all facts are in play; Ps may not immediately and easily be able to gauge whether they will be able to establish all the requirements for injunctive relief, which makes it different and worse as a sorting tool than 230.

Mid-Point Discussants: Bill McGeveran: Notable that intermediaries will stand up for users in some circumstances, e.g., Fourth Amendment issues/tell police to get a warrant. [Though it’s less risky in that they don’t face severe financial penalties as long as they merely seek confirmation from a court about that, and they also may think that law enforcement demands/burdens on the platforms can be made more predictable this way.] Privacy by design as a potential model for TM remedies, remedial modesty. Easier online to find the people who need corrective advertising than if the ad had been a billboard. UX can be targeted. Also greater ability to monitor compliance, which could give courts more ease in ordering targeted remedies.

Jessica Silbey: remedies as ends of stories. They can tell us the moral of the story or what the story was about. Confusion in remedies signals confusion in what we’re trying to do w/TM law. Injunctions tend to broaden TM rights when they are broad. But no injunction at all seems like a gutting of the benefit. So how to inform courts/ think more specifically and concretely on choices w/in the scope of the injunction? Help them think about what they mean by goodwill. Money and control are the options: why is money not good enough/why do we go to control? Particularly relevant to TM. In patent/© money matters a lot; is it b/c there’s a consumer interest where the consumer doesn’t benefit if $ changes hands? If it’s about control, that’s a different way of thinking about the moral. Compulsory licensing remedy? Why is that uncomfortable for TM? What would a reasonable royalty be? Would a licensing remedy be likely to broaden the scope of TM rights in ways we don’t like, as w/the arguments over fair use?  Role of attorneys’ fees. In © cases, there are a lot of settlements that look like reasonable royalties + fees, b/c lawyers assume that fee shifting will happen if they get past sj. Need more empirical work on remedies to inform courts/policies.

In teaching, we could frontload remedies/teach them as front and center to help students understand their practical importance. We could help out w/amicus work only on remedies: think about the stakeholders who aren’t represented.

Dinwoodie: Old Kellogg litigation ended up being very much about remedies: there were multiple cases about what had to be on the box, what shape the biscuit could be and still absorb milk, and so on. Satellite litigation is a real thing when we talk about the burden of monitoring.

McKenna: compulsory licensing isn’t that different; look at how little we actually require for quality control in a licensing relationship. A lot of stuff that’s licensed, there isn’t any quality to control: these aren’t products/services w/any expertise in the licensor co. The value the licensee is getting is the value of exclusivity. It’s not about quality control, which could be baked into a compulsory license. It’s about the value of exclusivity.

Gangjee: Coexistence agreements as self-help remedies. Ends up working along similar lines, but may fool the public even though we allow it.

Heymann: property concepts: the affront of unauthorized use demands something of the remedy. Not just control of property but control of reputation/identity, at least for some TM owners.

Lemley: in real TM cases, cases going to what TM is supposed to be about, reputational interest and consumer interest align and should be protected by injunction. Not w/confusion w/o materiality. Rather not have those latter cases at all, but $ is less disruptive than control, so a halfway step would be to refuse injunction. Should we limit the alienability of those injunctions, then? Settling by allowing D into the market in exchange for $ suggests that it’s not really about control/reputation but really just about $.

RT: false advertising remedies are not always but sometimes tailored to figure out what the defendant actually can say. The solution space seems wider to courts as does the defendant’s interest in speaking truthfully. Look at those analogies.

Silbey: trade secret cases can require losing party to pay ongoing monitoring fees; maybe there’s a workable parallel there. Can imagine compulsory licenses as a reasonable thing if we’re worried about anticompetitive market exclusivity, but they could end up just extending the TM owner’s footprint. Tying losses to infringement: we estimate damages all the time. Why worry more about causation in TM than in other cases? Estimable v. irreparable seems like another axis worth thinking about, as does discrete v. ongoing behavior. Remedies should be as specific as possible.

Burrell: TRIPS prohibits compulsory licensing of TMs, though of course the US may no longer care.

Fromer: Gucci allowed Gucci Ghost to infringe: makes Gucci more cool by allowing it (though not allowing certain others). Uncontrolled use can sometimes be good for brand owners.

Diamond: Monitoring isn’t realistic in many cases. Go to Blinded Veterans website: there’s no disclosure. Is it b/c they just gave up b/c disclaimer wasn’t enough? Or is it that they’re now ok with the market and there’s no confusion/overlap problem?

Silbey: TM owners build monitoring into their own practices; the question is whether there are creative ways of shifting costs. TM owners get a lot of feedback from clients about possible infringements—monitoring is a partnership b/t audiences and owners. In some cases, Ds had to submit ongoing evidence of uses and how they change over time. So a T-shirt maker might have to submit new designs for approval. But she only found that in merchandising cases. Costs of monitoring might be different across types of cases.

Diamond: Across cases, the Q is whether people think it’s worth doing.

Silbey: there’s an expressive component to a judge saying it should be done. Trade secret monitoring doesn’t seem to be much enforced but hangs over employees’ heads.

McKenna: monitoring is a normal part of complete injunction, which says don’t use mark X or anything too similar. What is too similar is an ongoing Q. So court needs to pay attention to how it’s writing the injunction. There’s a difference b/t requiring “reasonable prominence” and requiring this font/this size. Happens all the time with settlements too. It’s a marginal additional cost.

Silbey: we could add clarity/predictability.

Gangjee: also happens with parallel imports/repackaging & rebranding required: you have to submit samples. So it’s already built into the system.