Ingredient supplier has standing to challenge supplement claims

Obesity Research Institute, LLC v. Fiber Research
International, LLC, 2016 WL 739796,  No.
15-cv-00595 (S.D. Cal. Feb. 25, 2016)
Fiber Research alleged that Obesity Research made claims for
its weight loss product, Lipozene, touting clinical testing supporting the role
of “Propol glucomannan” in promoting weight loss, but that Lipozene didn’t
contain any Propol glucomannan or any substantially equivalent glucomannan.  In particular, Fiber Research alleged that
Obesity Research claimed that Lipozene was “clinically proven,” when, in fact,
the clinical studies it relied on used Propol. Further, Obesity Research
allegedly falsely claimed that at least one of the clinical studies was
“sponsored by [Obesity Research]” and that it falsely referred to one of the
clinical studies of Propol as a “Lipozene Clinical Study.”   Finally, Fiber Research alleged that Obesity
Research falsely stated on its label that there were “[n]o known allergens in
this product” when, in fact, there were enough sulfites in Lipozene to warrant
a warning.  Fiber Research is the
exclusive licensee for Propol in the US.
Under Lexmark,
Fiber Research had standing to challenge the advertising. It alleged an injury
to a commercial interest in reputation or sales and proximate cause based on
Obesity Research’s alleged passing off of an inferior product as Propol.  Obesity Research argued that it wasn’t in
direct competition because Propol is only sold to manufacturers as an
ingredient, while Obesity Research sells directly to consumers. But there’s no
direct competition requirement after Lexmark.
As for Fiber Research’s California UCL and FAL claims,
standing requires lost money or property, which can include “lost sales,
revenue, market share, and asset value.” Ineligibility for restitution is not a
basis for denying standing under either the UCL or FAL, though Fiber Research
couldn’t argue that it was injured indirectly as an assignee; it had to rely on
injuries has suffered directly as the exclusive seller of Propol in the United
Failure to state a claim: The court characterized this as
both a false designation of origin and a false advertising claim, using the likely
confusion multifactor test as a useful framework even though some of the
factors weren’t helpful.  Fiber Research
alleged sufficient similarity between Propol and Lipozene to state a claim for
false designation of origin, especially given that purchasers can’t determine
for themselves the actual ingredients. 
Likewise, Fiber Research sufficiently alleged false advertising.  It identified the particular studies to which
Obesity Research allegedly referred in its advertising, and alleged that those
were Propol studies.  The UCL/FAL claims
survived for much the same reasons, though not the UCL unfairness claim because
Fiber Research didn’t allege antitrust-like injury.

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