University-adjacent is not university-approved in supplement ads

Obesity Research Institute, LLC v. Fiber Research
International, LLC, 2018 WL 1001089, No. 15-cv-00595 (S.D. Cal. Feb. 21, 2018)
Despite the high-falutin’ names, the parties compete in the
market for glucomannan dietary supplements. Glucomannan is a soluble-viscous
fiber derived from the Konjac plant root used in weight loss supplements. The
parties agree that numerous studies have shown that at least some types of
glucomannan are effective for losing weight, but dispute whether different
types, grades, places of origin, processing procedures, and/or characteristics,
including viscosity, of the specific glucomannan products alter its
effectiveness on weight loss.
ORI’s former products sourced glucomannan from another company, Shimizu. Currently,
ORI sells its supplements branded as Lipozene, which is not manufactured with
Shimizu’s glucomannan.  ORI (with a
supplier) funded a study purporting to find significant weight reductions, of
which 78% was fat, using Shimuzu-supplied glucomannan.  ORI references the study in promoting
Lipozene, characterizing it as a “major university double blind study.”
Lipozene’s packaging stated that there are “[n]o known allergens in this
product.”
Shimizu assigned any false advertising claims it might have
to FRI, as well as the rights to distribute its glucomannan. The court found that FRI had statutory standing under the
Lanham Act to bring claims on behalf of Shimizu.  Though trademark claims require “an interest
in the asset allegedly harmed,” under §43(a) standing is broader.  Under Lexmark,
Shimizu had standing: it invested millions of dollars into developing its
products, and created a relationship with FRI to serve as its newest U.S.
distributor, largely because FRI was in a stronger position to “launch
direct-to-consumer” products than Shimizu, given its location in Japan. Though it
isn’t a direct competitor with Lipozene, Shimizu also distributes glucomannan and
supplies glucomannan to FRI, who seeks to compete with Lipozene in the
glucomannan supplement market. Thus, Shimizu likely suffered an injury to a
commercial interest in reputation or sales and ORI proximately caused Shimizu’s
injuries by using a clinical study analyzing Propol to sell an allegedly inferior
glucomannan product. “Because a valid assignment allows for an assignee to ‘stand
in the shoes’ of the assignor, the Court finds FRI has standing to proceed with
Shimizu’s Lanham Act claim.   
FRI also showed standing to sue on its own
behalf.  FRI’s declarations included
testimony that “[a]s a direct result of ORI’s use of claims derived from the
Propol® studies to sell an inferior product, FRI has been unable to make
inroads into the direct to consumer glucomannan supplement marketplace.” Though
FRI didn’t have a sale when it counterclaimed,
having a sale is not the sole
mechanism for standing under the Lanham Act. The law is clear that a party does
not need to show a loss of sales. Moreover, a lack of sales is consistent with
FRI’s alleged economic injury that it was shut out of the glucomannan
supplement market because of ORI’s false advertisements. Based on the evidence
presented, a reasonable juror could find that FRI sought to enter the
glucomannan supplement market, but found it was blocked from doing so in part
by ORI utilizing a clinical study on its exclusive source of glucomannan.
Though the Court didn’t consider FRI’s post-counterclaim activities
for standing purposes, its later market activities were consistent with its
claims: it registered a website, launched a direct to consumer Propol, and made
a sale.
Falsity: FRI challenged a bunch of ORI’s statements
allegedly based on clinical studies; instead of studying Lipozene, the key
studies (by Kaats & Walsh) evaluated Shimizu’s Propol-branded glucomannan,
a distinct product. ORI disagreed, arguing that the product was the same and
that it used the specifications from the Kaats Study as a guide and “floor” for
the ingredients they ultimately chose. These disputes were best presented to a
jury, so the court denied summary judgment.
ORI also advertised that the Kaats Study is a “major
university study.” But the study was conducted by Dr. Kaats’s then-private
clinical research organization. ORI responded that the study’s design was
approved by Texas Women’s University’s IRB and that two of the named reviewers
of the study were affiliated with two major universities—Georgetown University
and the University of Texas.  Nope.  Kaats stated that he isn’t affiliated with a
major university, that no university was involved in the measurements for the
study, and that he does not consider the study a university study (and even
told ORI to stop calling his study university sponsored).  There was no evidence that IRB involvement “transforms
a study’s sponsorship or affiliation into that of the IRB,” or that a
reviewer’s affiliation with a university allows the study to adopt that
university’s affiliation or sponsorship.  FRI was entitled to summary judgment on the
falsity of this claim.
ORI also advertises that, in the Kaats Study, the test
subjects were “asked not to change their lifestyle” and “asked not to change
their diet or exercise” and lost weight anyway. FRI argued that this statement was
literally false because the test subjects were given no instruction—one way or
another—as to their lifestyle, including diet and exercise. In fact, the study
states that “participants were free to follow any diet/exercise plan of their
own choosing.”  The court found literal
falsity: ORI sought to communicate that study participants “were affirmatively
asked not to change their diet and exercise, implying that any weight lost
while taking Lipozene could not be due to a lifestyle change.” But that message
is not true, although a jury could find it immaterial.
FRI also challenged ORI’s “pure glucomannan” claims such as “Take
pure Glucomannan from the finest Konjac Plants and see results” and “Lipozene
is made with 100% pure Glucomannan, which comes from the root of the Konjac
plant.” Lipozene is made of a combination of ingredients, with the majority
being glucomannan.  No reasonable jury
could find literal falsity—the message was that Lipozine was “made with”
glucomannan, not “made entirely of” glucomannan, and there was no evidence of
actual deception, so that falsity claim was gone.
Finally, ORI claimed that Lipozene contains “no known
allergens,” but FRI argued that it contained excessive sulfite levels, which qualify
as a “known allergen” under FDA regulations. The court couldn’t grant summary
judgment either way; FRI didn’t show that these FDA requirements should apply
to ORI’s statement, and ORI didn’t show that the absence of “major food
allergens” was the same as having “no known allergens.” A jury could find that
this statement only applied to the commonly known major food allergies, such as
nuts, milk, and other common allergies, or that it instead meant additional
irritants, such as sulfites.
Deception: falsity and deception are linked; “[t]he
expenditure by a competitor of substantial funds in an effort to deceive
consumers and influence their purchasing decisions justifies the existence of a
presumption that consumers are, in fact, being deceived.” FRI was entitled summary
judgment as to the deception element of its Lanham Act claim for the “major
university” and “no lifestyle change” statements.
Materiality: The court mostly declined to find that, as a
matter of law, the challenged statements were material, but neither did ORI
show immateriality. For the false-as-a-matter-of-law statements, “major
university study” and “no lifestyle change,” FRI argued that false claims were
presumed to be material, but the court disagreed, and anyway ORI rebutted such
a presumption for the “no lifestyle change” statement by arguing that the
difference between the true and false statements wasn’t material to a consumer.
Though “extensive” empirical evidence isn’t required, FRI needed something.  Nor was “no lifestyle change” an “inherent
quality or characteristic” of the product in the same way as statements
relating to Lipozene’s product composition and proven effects on weight loss.  However, the court did find that no reasonable
jury could find that “major university” was immaterial. “[A] ‘major university’
affiliation invokes a level of legitimacy and assurance for a consumer that
would likely affect a consumer’s decision to purchase Lipozene,” which
accounted for ORI’s desire to have a “university affiliated” study.
Although there was a genuine issue of material fact as to
whether FRI and Shimizu were likely injured, they failed to show irreparable
harm absent injunctive relief. Even assuming the Ninth Circuit would still
presume irreparable harm from falsity [no], ORI rebutted the presumption, so
the issue was best suited for a jury.

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