Blast from the past: pleading falsity based on scientific claims

Biolase, Inc. v. Fotona Proizvodnja Optoelektronskih Naprav
D. D., No. CV 14-0248, 2014 WL 12579802 (C.D. Cal. Jun. 4, 2014)
A rare case applying the Second Circuit’s ONY case and perhaps suggesting why that case wasn’t
a blockbuster.  Biolase and Fotona sold
lasers used in dentistry. Jeff Jones used to be Biolase’s CEO, and Keith
Bateman used to be Biolase’s VP of Sales. They were fired in 2007; Jones then
founded and became CEO of T4Med, and Bateman became Executive VP. T4Med was a
sub-distributor for Lares, which was a distributor for Fotona.
Biolase alleged that Fotona and T4Med used false and
misleading advertising to get customers to switch from using Biolase dental
lasers to Fotona dental lasers by claiming Fotona’s lasers are safer, faster,
more precise, and less painful than Biolase’s lasers. Defendants allegedly represented
that these advertising claims are based on independent scientific articles, but
the articles are written by Fotona affiliates and published in a journal
established by Fotona. Only one of the authors  disclosed their affiliation with Fotona.  Biolase also alleged that defendants made
false and misleading oral statements, including that Biolase’s technology was
faulty and worthless, and that Biolase’s management was incompetent.
The court dismissed the complaint.  Some of the statements at issue were puffery:
Fotona’s “… patented VSP (Variable Square Pulse) technology … maximize[s]
patient safety …,” “QSP (Quantum Square Pulse) … allows for exceptionally
fast laser drilling speed with unmatched efficiency and precision,” and
“Fotona’s patented QSP (Quantum Square Pulse) mode allows the laser to ablate
more efficiently and with greater precision.”
There were nonpuffing, measurable statements: “Up to 20
W[atts] of Er:YAG laser power provide an exceptionally wide range of fast, safe
and effective treatment options,” and Fotona’s laser has “superior clinical
results.” However, the court found these statements non-actionable because they
restated scientific research.
Under Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th
Cir. 1997), allows a false advertisement claim where a plaintiff alleges that
the tests supporting the challenged claim “are not sufficiently reliable to
permit one to conclude with reasonable certainty that they established the
claim made.” Biolase alleged that defendants’ advertising statements were based
on “junk science,” and were unreliable.  But ONY, Inc. v. Cornerstone Therapeutics,
Inc., 720 F.3d 490 (2nd Cir. 2013), affirmed a district court’s decision to
grant a motion to dismiss Lanham Act claims because the advertising statements
were based on accurate descriptions of conclusions from peer-reviewed
scientific journal articles. 
Statements in journals themselves aren’t actionable; then
the question was whether advertising statements “based on research published in
scientific journal articles” were actionable. ONY concluded that the answer was no, absent allegations “that the
promotional materials misstated the article’s conclusion” or “distorted [the]
article’s findings.”  The same logic
applied here.  The tests in Southland Sod Farms were distinguishable because they were done by the company
doing the advertising, and weren’t studies and conclusions published in
peer-reviewed scientific articles. “A Southland
Sod Farms
type claim is appropriate for Courts to decide, but attacking the
validity of experiments and conclusions published in peer-reviewed scientific
journal articles is better done in the scientific, not legal, realm.”  For example, Biolase alleged that the
articles’ conclusion that Fotona’s laser has a higher absorption of water at
room temperature was misleading because dental lasers are not used at room
temperature. But Biolase didn’t allege that the study didn’t actually find a
higher absorption of water at room temperature. 
[Note this—it will become important in the next iteration, showing the
way to plead around ONY.]
Also, the court commented that, to the extent that T4Med’s statements
accurately represented the published studies’ findings, it was questionable
whether a substantial segment of the sophisticated target audience would be
deceived, “since dentists would likely be educated enough to see the alleged
weaknesses in the studies.”
The defamation claim failed for lack of sufficient
specificity about who made the allegedly defamatory statements, where they made
them, when they made them, or to whom they made them.
Biolase, Inc. v. Fotona Proizvodnja Optoelektronskih Naprav
D. D., 2014 WL 12577153, No. 14-0248 (C.D. Cal. Sept. 15, 2014)
Biolase amended its complaint and tried again, with greater
success.  Here, Biolase alleged that the
published article at issue was “based upon and presents fraudulent data, and
contains several false statements,” and that the article’s conclusions didn’t
support claims of any clinical advantages. Further, Biolase alleges that the
Journal of Laser and Health Academy, where the article was published, was controlled
by Fotona and not peer-reviewed, though JLHA’s website states that it is an
“international peer reviewed journal.”
To rebut the court’s earlier concern that sophisticated
dentists wouldn’t be confused, Biolase alleged that “dentists are not usually
introduced to or trained in lasers … in dental school, and so lack sufficient
expertise to understand the differences and details of laser technologies.” It
also alleged a statement by T4Med’s CEO that “only a small percentage of
dentists use lasers to perform dental procedures.” “Based on these allegations,
it is plausible that dentists would be deceived by false advertising concerning
lasers.”

As for the ONY problem,
here, Biolase alleged that the article’s data were fraudulent and that it didn’t
support defendants’ superiority claims. The court had “concerns” with the
fraudulent data allegations, but the other allegations stated a plausible
claim. Biolase alleged that defendants falsely advertised its lasers as safer
than, faster than, and clinically superior to Biolase’s lasers, and that there
were “no scientific studies, experiments, or other evidence” supporting these
claims.  The JLHA article on which
defendants relied “never clearly concludes that Defendant’s lasers are safer
than, faster than, and clinically superior to Biolase’s lasers, nor did
Defendants show that the article supports such statements.”  Indeed, Biolase alleged that at least some of
the tests reported in the article were performed in settings inapplicable to
clinical use.  For example, the article’s
conclusion that defendants’ laser required less energy and time to cut tissue
was allegedly based on testing at a temperature not seen in clinical uses.  ONY
avoided. 

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