Unclean (but collagen rich) hands in a false advertising case

Certified Nutraceuticals, Inc. v. Avicenna Nutraceutical,
LLC, 2018 WL 3361142, No. 16-cv-02810-BEN-BGS (C.D. Cal. Jul. 10, 2018)
A rare unclean hands victory in a false advertising case.  Certified alleged that Avicenna, its
competitor in the market for collagen products used as ingredients in other
products, falsely advertised its products as “patented” or processed using
“patented formulas and production methods” while Avicenna never held any
relevant patents.
To prevail on a defense of unclean hands, a defendant must
demonstrate by clear and convincing evidence: (1) “that the plaintiff’s conduct
is inequitable;” and (2) “that the conduct relates to the subject matter of
[the plaintiff’s] claims.” Even in such cases, unclean hands isn’t
automatically a defense; the plaintiff’s wrongdoing must be balanced against
the defendant’s, considering the substance of the plaintiff’s rights.
In the Ninth Circuit, “only a showing of wrongfulness,
willfulness, bad faith, or gross negligence, proved by clear and convincing
evidence, will establish sufficient culpability for invocation of the doctrine
of unclean hands.”  Here, Avicenna
established that Certified falsely claimed patent protection for its competing
product, over a year before the PTO granted any Certified patent.  Certified argued that its product was covered
by a different patent, but Certified wasn’t an owner, assignee, or licensee of that
patent at that time or since, perhaps because of a permanent injunction against
a Certified principal enjoining him from transferring, enforcing, or otherwise
affecting the title to that patent. 
Certified’s only other evidence that the statements weren’t false or
misleading was a false statement that the principal was the assignee of a
patent that was a continuation of the enjoined patent.  Thus, the court found that Certified
knowingly made statements about the patented nature of its product—either
because it knew the later patent hadn’t been issued, or because it knew it had
no right to manufacture, distribute, offer for sale, or sell any goods under
the continuation patent.  Avicenni showed
Certified’s wrongfulness, willfulness, and bad faith in engaging in inequitable
conduct with clear and convincing evidence. [I’m not sure courts would find
that claiming patent protection when the patent was pending always meets this
standard, though it would usually have to be knowing.]
Did this inequitable conduct relate to Avicenna’s false
advertising claim? Unclean hands should only be applied “where some
unconscionable act of one coming for relief has immediate and necessary
relation to the equity that he seeks in respect of the matter in litigation,” which
means that the plaintiff dirtied its hands “in acquiring the right” presently
asserted or “the manner of dirtying renders inequitable the assertion of such
rights against the defendants.” Even though the statements were now years old,
there was still an immediate and necessary relationship to the equitable
remedies sought, because they were about the patented status of the directly
competing products.
Summary judgment on Lanham Act claims granted; coordinate
state-law claims dismissed for want of supplemental jurisdiction.

from Blogger https://ift.tt/2NJHv13

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