4th Circuit continues its Lanham Act frolic, notes overbreadth of expansive injunctive relief

De Simone v. Alfasigma USA, Inc., No. 19-1731, 847 Fed.Appx.
174 (4th Cir. Feb. 17, 2021)

Depressingly doubling down on its bizarre interpretation of
the Lanham Act first created by misinterpreting California’s UCL, the Fourth Circuit
nonetheless mitigates some of the consequences of that game of telephone in
this opinion. (I filed an amicus brief, with which the court didn’t agree.)

The parties have been fighting for a while. Ignoring entity
shifts: De Simone used to license a probiotic formula to Alfasigma, which
continues to make a probiotic under the same trademark, VSL#3, but now with a
different formulation. Now De Simone’s entities compete with Alfasigma. A jury
found the VSL parties liable for false advertising and unjust enrichment,
basically for advertising that the formula was still the same, and awarded over
$17 million in damages. The court of appeals affirmed on liability/damages, but
partially vacated the injunction as overbroad, picking up on another problem in
the case as it has evolved—its restrictions on apparently truthful commercial

The parties presented conflicting expert testimony regarding
whether two versions of VSL#3 were essentially the same. Defendants argued
that, under In re GNC Corp., 789 F.3d 505 (4th Cir. 2015), their expert’s
testimony that the two products were genetically and functionally equivalent
precluded a finding of literal falsity as a matter of law. The district court

The court of appeals upheld the district court but declined
to recognize its GNC error, because “plaintiffs who believe that no
reasonable scientist would agree with the challenged representations remain
free to make that allegation. A manufacturer may not hold out the opinion of a
minority of scientists as if it reflected broad scientific consensus.” The
court of appeals said that the district court applied GNC accordingly by
holding as follows:

GNC thus does not broadly hold that
a false advertising claim based on a statement grounded in science must fail if
the defendant presents an expert witness supporting its position. In the
absence of a concession that the statement is the subject of reasonable
scientific debate, that question is properly decided by the jury.

Of course, the court of appeals and the district court said
two different things! In the district court, the plaintiff was not required to prove that “no
reasonable scientist would agree with the challenged representations,” or that
the defendant “held out the opinion of a minority as if it reflected broad
scientific consensus.” Apparently after GNC the plaintiff is required to plead that no reasonable scientist would agree, or at least to avoid pleading that there is a controversy. 

But at the liability stage, the plaintiff here was, appropriately, required to prove that the challenged
representations were, by a preponderance of the evidence, false. That is
different from requiring the jury to find that the defendant’s expert was
unreasonable. Punting to the jury helps disguise the variation, but does not entirely avoid the
question of what it is that the jury must find. The district court’s
approach is better than nothing, because it allows pleading to get around the
qualified immunity-like standard of GNC, but this whole mess could be
more easily avoided by looking at what the Lanham Act actually requires.

The district court’s permanent injunction barred defendants

(1) stating or suggesting in VSL#3
promotional materials directed at or readily accessible to United States
consumers that the present Version of VSL#3 produced in Italy (“Italian
VSL#3”) continues to contain the same formulation found in the Versions of
VSL#3 produced before January 31, 2016 (“the De Simone Formulation”),
including but not limited to making statements that VSL#3 contains the
“original proprietary blend” or the “same mix in the same
proportions” as earlier Version[s] of VSL#3; and (2) citing to or
referring to any clinical studies performed on the De Simone Formulation or
earlier Versions of VSL#3 as relevant or applicable to Italian VSL#3.

(2) was initially based on trademark reasoning, but seems to
have been converted over time into a concomitant of the false advertising
claim, so the district court reasoned that the remedy should be “focused on
curtailing such claims of continuity between Italian VSL#3 and the De Simone
formulation.” The court of appeals agreed, but noted that (2) was overbroad for
that objective. The studies couldn’t be cited as if they were performed on
current VSL#3, but prohibiting citation or reference to them as even
went too far. They could feasibly cite or refer to the studies as
relevant “without claiming continuity between their old product and their new



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