modifying a false advertising injunction is justified when likelihood that claim is false has changed

De Simone v. VSL Pharmaceuticals, Inc., No. TDC-15-1356, 2018
WL 4567111 (D. Md. Sept. 24, 2018)
De Simone sought modification of a preliminary
injunction governing statements it could make about a probiotic product, VSL#3

and its relationship to De Simone’s now-competing product, Visbiome.  (I was a bit critical at the time.) They
sought to be able to advertise that ExeGi Pharma was the exclusive provider of
the “De Simone Formulation,” the term they have coined for the combination of
probiotic strains developed by De Simone and first commercialized in the United
States as VSL#3; to cite clinical studies with the term “VSL#3” in the title as
part of their promotional materials; and to engage in other speech critical of
VSL#3.
As relevant here, the prior order required ExeGi to refrain
from “stating or suggesting that the license agreement” between De Simone and
VSL had “expired,” or asserting that “VSL#3 will no longer be on the market.” At
the time, both products, though differently branded, used the same formulation.
Thus, Visbiome’s exclusivity statements were false advertising. The court also
enjoined (apparently 100% truthful) Visbiome statements that studies with
“VSL#3” in the title constituted studies relating to the “De Simone
Formulation.”
The De Simone parties returned to court, arguing that the
VSL product was no longer made under De Simone’s formulation, resulting in a
clinically different composition; VSL agreed that production was now elsewhere
but argued that the changes weren’t clinically significant, and that any
changes were the result of De Simone’s breach of his fiduciary duty so they
shouldn’t be allowed to be communicated to the public.  [You can tell my feelings about that last
part.]
A court has the power “to modify an injunction in adaptation
to changed conditions.”
The court didn’t let De Simone speak truthfully by citing
studies that use the term VSL#3 in the title (while studying the De Simone
formulation). The court previously found the extensive use of the citations to
be confusing and concluded that “[e]ven if ExeGi has a reason to refer to those
studies because Visbiome is, as a scientific matter, the same formulation that was
subjected to those trials, that scientific equivalence cannot be used as an
opportunity or excuse to erode VSL’s trademark.”  Again, “eroding” a trademark isn’t a thing,
but the court determined that the change in the VSL product’s formulation
didn’t constitute a relevant change for trademark purposes.  [Which is an interesting variant on the fact
that trademark doesn’t actually protect the public from changes in quality
initiated by the trademark owner.]  So
now, the De Simone defendants are infringing if they truthfully refer to the
studies, while VSL might be falsely advertising (if the formulation is indeed
materially different) if they refer to the studies. 
However, conditions did change as to representations of
exclusivity. At the time of the old order, while the license agreement between
De Simone and VSL had recently expired, VSL continued to have inventory of
product produced under that agreement, so De Simone’s statements at that time
that they were the “exclusive” provider of the De Simone formulation
constituted false advertising. That’s no longer true, and promotional materials
including those touting VSL#3 as dairy-free, now made clear that VSL#3 and
Visbiome were no longer exactly the same, removing the factual predicate of the
injunction about exclusivity statements. At a minimum, the likelihood of
success of a false advertising claim against the exclusivity statements had
changed: though VSL had offered explanations for the composition discrepancies,
and criticized De Simone’s published studies as biased, they hadn’t submitted a
comparable published study indicating that the current versions of VSL#3 and
Visbiome were identical or even functionally equivalent. Plus, the balance of
equities had shifted because VSL#3 has been marketed as “the same quality
product, containing the same genus and species of bacteria, in the same
proportions that you have come to expect,” while ExeGi couldn’t dispute that.
Thus, the injunction would no longer bar assertions that the
licensing agreement between De Simone and VSL has expired and that ExeGi is the
exclusive provider of the De Simone formulation, but the court refused to
declare broadly that ExeGi is free to “engage in commercial speech critical of
its competitor’s products.” This was warranted particularly because the De
Simone parties had a history of stretching the court’s orders to the breaking
point, and also because a trial was upcoming to resolve the factual disputes.
Until trial, the exclusivity statement would have to read: “We believe that
ExeGi is the exclusive provider of the De Simone Formulation because it is our
position that the current version of VSL#3 uses a different formulation.
Whether VSL#3 presently uses the De Simone Formulation is the subject of
pending litigation in federal court.”

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