selling to multiple hospitals isn’t "advertising or promotion" when total market is large

Synthes, Inc. v. Emerge Medical, Inc., 2014 WL 2579286, — F. Supp. 2d — (E.D. Pa. June 5, 2014)

This is a big case involving trade secrets/former employees who started a competing medical device firm. I’m just going to cover a few bits. The Lanham Act false advertising claim, which included challenges to Emerge’s comparative statements about the Synthes product, seem headed towards failure because the statements weren’t sufficiently disseminated to count as advertising or promotion.  (Post edited for clarity: Given the procedural posture–a denial of summary judgment for the plaintiffs on their Lanham Act claim–all that can be said right now is that the court didn’t need to resolve any other issue to deny summary judgment to Synthes.)

At one point, Emerge “would begin the sales process by approaching a hospital system directly—either by phone, email or in person, through corporate supply chain management. Emerge would then describe its method of not relying on sales reps and would make representations about the characteristics and performance of its products. These statements were made via phone calls, emails, in-person meetings, websites, printed materials, presentations, trade show displays, and social media.”

Even if the statements were literally false, discovery had shown only sporadic instances of dissemination. The identified recipients included 9 healthcare facilities/groups and several other hospitals in the Arizona, Texas, Massachusetts, Georgia, and California regions. However, the relevant device market was national since each hospital and orthopedic surgeon was a potential customer. Thus, this didn’t show wide dissemination throughout the relevant market. (How close does “sufficiently disseminated” have to be to “nationally/nearly comprehensively”?  A campaign that reaches 25% of a huge market can do a lot of harm, and the description of the conduct seems to me to cross over from sporadic to a significant component of a marketing strategy, even if not the only component.)

The CFAA claim was dismissed for failure to show sufficient harm. Synthes argued that it incurred sufficient expenses in investigating the data breach at issue to trigger the CFAA, but there’s a difference between the harm caused by the misappropriation of data/expenses incurred in litigating the issue and the requisite CFAA harm caused by investigating damage to the integrity of a computer system. Synthes’ evidence went to the former. Synthes only investigated damage to its systems once the litigation began, over a year after the alleged unlawful access.

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