intentional misleadingness obviates need for deception evidence

Aoki v. Gilbert, 2020
WL 6741693, No. 11-cv-02797-TLN-CKD (E.D. Cal. Nov. 17, 2020)

The court explains: “Put
most succinctly, at trial Plaintiffs contended Defendants infringed Dr. Aoki’s
patents for his pulsed insulin diabetes treatment method; infringed Dr. Aoki’s
copyrighted slides; and made false or misleading statements amounting to false
advertising and unfair business practices.” There were also breach of
confidentiality claims (the parties used to be in a business relationship).

There were some
literal falsities, such as claiming that their treatment was FDA-cleared and
that certain patient outcomes were the result of defendant’s treatment when
they depicted plaintiff’s results. (If they were the exact same medically, but
administered by different entities, I would think that’s not false, but that
doesn’t appear to have been the case.)

Defendants argued
that their statement that their treatment was the “only” treatment meant merely
that it was a licensed use of plaintiff’s technology and the treatments were
the same; the court found this to be misleading and, because the statements
were intentionally deceptive, no proof of consumer reaction was required.
Certain defendants intended to deceive prospective patients and investors. “That
deception was material in that FDA clearance, patient outcomes, and
exclusivity, for example, are likely to influence both investors’ and patients’
decisions.” This also harmed plaintiffs by “intentionally muddying the waters
concerning who is the inventor and rightful owner of the patented technology”
and “tarnishing Dr. Aoki’s reputation concerning his research and protocol.”

However, plaintiffs
failed to establish liability under California’s FAL/UCL because they didn’t
show economic injury. They showed no evidence of lost profits, inability to
open clinics, or otherwise lost money or property as a result of the deceptive
statements. “Although goodwill is a protected property interest and harm to
goodwill is a cognizable injury, Plaintiffs presented no evidence of the value
of their goodwill or an economic harm stemming from the loss of goodwill.” And
to the extent that the UCL claim was premised on underlying patent/copyright
infringement, it was preempted.

The court also found
copyright infringement for copying and using Aoki’s slides for the same purpose
as Aoki used them, and awarded the maximum statutory damages:

Even after this lawsuit was filed in 2011, Defendants continued to use
Dr. Aoki’s copyrighted slides in promoting APT. Most glaringly, they used the
foot wound photos of Dr. Aoki’s patient whom he treated with MAT and which
photos he copyrighted, to claim that the patient was treated with APT rather
than MAT. These facts demonstrate Defendants knew their conduct was unlawful or
at minimum engaged in reckless conduct sufficient to support a finding of

The court found that
this was an exceptional case meriting a fee award because of the clear patent
infringement and defendants’ refusal to produce any financial documents.

Moral rights in
patent claims: The irreparable injury finding for purposes of permanent
injunctive relief based on the patent claims was predicated mainly on the harm
to Aoki’s good name and the uniqueness of his invention. “A lack of proper
oversight led to clinics modifying the treatment in some instances, creating a ‘wild
west of medicine’ and resulting in adverse consequences to patients.” Driving
the defendants out of business would be ok, if that happened, because the
treatment was “Dr. Aoki’s life’s work.” But what about the fact that the
parties agree that the treatment is good for patients? “[T]he evidence reflects
that a lack of oversight at the clinics licensed by Trina Health resulted in
negative patient outcomes in some cases, indicating the public would be better
served by the grant of an injunction to halt operations of illegitimately
licensed clinics.”

The copyright
infringement also merited a permanent injunction and a fee award.

For Lanham Act
damages, though plaintiffs didn’t show any actual damages, they were entitled
to disgorgement. Defendants profited by nearly $8 million (they earned that
amount, and failed to show any deductions) from the false advertising. (The
court doesn’t require tracing here, perhaps because the claims are at the core
of any advertising they might have engaged in.) And unsurprisingly they get a
fee award too.

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