Flagging supplement case revived

Posted on April 22, 2016 by rtushnet
ThermoLife Intern., LLC v. Gaspari Nutrition Inc., —
Fed.Appx. —-, 2016 WL 1460171, No. 14–15180 (9th Cir.  Apr. 14, 2016)

 

ThermoLife sued Gaspari (GNI) false advertising under the
Lanham Act and unfair competition under Arizona common law, based on GNI’s
allegedly false advertising of its testosterone boosters as “safe,” “natural,”
“legal” and compliant with the FDCA.  The
court of appeals vacated the long-suffering
district court’s grant of summary judgment and remanded, given that its
preemption analysis was based on now-overturned 9th Circuit
precedent. 
 
The court of appeals first reversed the exclusion of two experts’ opinions, and upheld the exclusion of two others.  The first wrongly excluded expert opined that the dietary supplement industry would not have deemed GNI’s products “safe,” which was relevant even if it didn’t offer a definitive opinion on safety, and also provided a usable standard for determining “safety”—the industry standard.  The expert’s “presumption that GNI’s ingredients were not safe was sufficiently valid in light of the industry’s strict reliance on establishing safety through certain procedures GNI had not used.” 

 

Another expert’s survey, which asked consumers of testosterone boosters whether they would have continued using GNI’s products (or switched to another testosterone booster) after learning GNI’s advertisements were false, was relevant to materiality.  “Although the district court faulted the survey’s biased questions and unrepresentative sample, neither defect was so serious as to preclude the survey’s admissibility.”  The sample at least included consumers both of GNI’s products and of other testosterone boosters. “Nor was the survey unreliable simply because it was not validated. Berger reasonably explained why the survey could not be validated and concluded it was nevertheless a ‘good survey’ based on respondents’ ‘consistent, across-the-board answers.’”
 
With that out of the way: “Pom Wonderful established that the FDCA generally does not preclude
Lanham Act claims for false labeling of food.” 
And its rationale applied to ThermoLife’s claim as well: neither the
FDCA nor the Lanham Act expressly barred ThermoLife’s claims, and the FDCA’s public
health-protective aim was not inconsistent with the Lanham Act’s protection of commercial
interests “by relying on the market expertise of competitors.”

 

GNI argued that Pom
Wonderful could be distinguished because ThermoLife’s claims “require
litigation of the alleged underlying FDCA violation … where the FDA has not
itself concluded that there was such a violation.” But ThermoLife’s claims that
GNI falsely advertised its products as “safe” and “natural” required no
interpretation of the FDCA, nor did ThermoLife need to demonstrate a FDCA
violation to prevail on its claims that GNI falsely advertised its products as
“legal” or “DSHEA-compliant.”  

 

Usually, claims about legality are generally inactionable
opinion because they “purport to interpret the meaning of a statute or
regulation.” But there is a “well-established exception” that an opinion “by a
speaker who lacks a good faith belief in the truth of the statement” is
actionable. Because every opinion “explicitly affirms … that the speaker
actually holds the stated belief,” a CEO’s statement about legal compliance
“would falsely describe her own state of mind if she thought her company was
breaking the law.” ThermoLife pointed to numerous emails indicating GNI was
aware its products were not DSHEA-compliant, creating a triable issue of
falsity about legality.

 

Safety statements were also factual claims.  GNI argued that its products were presumed
safe until the FDA proved otherwise. But the statutory provision on which GNI
relied didn’t mention a presumption of safety. 
It defined when a supplement is safe enough that it wouldn’t be an
“adulterated food.” A reasonable jury could find GNI’s products were not safe,
based on the evidence about recalls and the expert’s report. There was also a
triable issue of falsity on GNI’s claim that a product was “natural” and that its
ingredients were “naturally occurring and are found in natural foodstuffs,”
which were factual claims.

 

The district court also erred in its analysis of
materiality.  Survey results and internet
message board posts “indicated that the safety, legality and natural
ingredients of GNI’s products were—to varying degrees—important factors in
consumer purchasing decisions.”  

 

And there was also a triable issue on injury.  There is a presumption of commercial injury
when the parties directly compete and the defendant’s ad tends to mislead: when
competitors vie for the same customers, “a misleading ad can upset their
relative competitive positions” and thereby cause injury. There needs to be
evidence of causality, but evidence of direct competition provides a causal
link between likely deception and injury. 
 

 

There was also no preemption of the state unfair competition
law claim.  Although the FDCA expressly
preempts state-law requirements that conflict with certain FDCA provisions,
that didn’t include § 343(a), which governs the misbranding of food through
false or misleading labeling. Moreover, there was a general “presumption
against pre-emption,” and there was no preemption given that “the state-law
duty ‘parallels’ the federal-law duty.”

 

 

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When is confusion unlikely for purposes of a motion to dismiss?

Posted on April 22, 2016 by rtushnet

Nutter’s IP Law Bulletin covers Southgate v. Soundspark, Inc., No. 14-CV-13861-ADB, 2016 WL 1268253 (D. Mass. Mar. 31, 2016), in which the court found confusion implausible on the pleadings based on a description of the parties’ businesses.  Although Southgate had a valid registration for a design mark for “Sound Spark Studios,”

Southgate did not sufficiently plead how his company was similar to and competed with defendants’; the court said that the complaint offered little evidence of similarity aside from the fact that “both companies are involved in the music industry.” The court also explained that the complaint said nothing of the companies’ respective “channels of trade, advertising, or consumer base.” And the defendants’ apparent good faith in rebranding to “TapTape” mattered, too.

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District court still rejects contribution/contributory false advertising for supplier

Posted on April 21, 2016 by rtushnet
Nestlé Purina Petcare Co. v. Blue Buffalo Co., No. 4:14 CV
859, 2016 WL 1579195 (E.D. Mo. Apr. 19, 2016)

 

Previous
ruling on ad agency’s potential liability for helping create allegedly false
ads.  Blue Buffalo also sought
contribution from Wilbur-Ellis, one of its suppliers (since the ads involved
claims about the contents of Blue Buffalo’s pet food).  “For a right to contribution to exist under
Missouri law, defendants must be jointly and severally liable to the plaintiff
for the same indivisible harm.”  However,
Blue Buffalo didn’t sufficiently allege that Wilbur-Ellis was potentially
liable to Purina for the same, indivisible injury it is alleged to have caused.
Rather, Blue Buffalo alleged that it lost customer goodwill and paid above
market-price for the by-product meal it bought from Wilbur-Ellis, and that it
was exposed by Wilbur-Ellis’s conduct to liability in this case and others.

 

Purina alleged that Blue Buffalo harmed Purina by
disparaging its pet food and making false claims about Blue Buffalo’s own pet
food. Although Duty Free Americas, Inc. v. Estee Lauder Cos., 797 F.3d 1248 (11th
Cir. 2015), held that a claim of contributory false advertising could be
maintained under the Lanham Act, the plaintiff has to show that the relevant defendant
“contributed to that conduct either by knowingly inducing or causing the
conduct, or by materially participating in it.”   The court had previously concluded that there
was no federal common law right to contribution under the Lanham Act, nor is
there an express right of contribution under the Lanham Act.  “While the Eleventh Circuit’s reasoning in
support of recognizing a right to contributory false advertising is sound, it
is not persuasive enough to compel me to reconsider my previous ruling or to
reject the line of cases holding that no such right exists.”

 

Thus, Blue Buffalo’s only hope was to seek contribution from
Wilbur-Ellis based on Purina’s unjust enrichment claim. But there was no
allegation that Purina conferred a benefit on Wilbur-Ellis. Purina’s claim for
unjust enrichment alleged that it conferred a benefit on Blue Buffalo: Blue Buffalo’s
profits from sales to consumers who chose it because of the false
advertising.  (Still don’t see how that’s
Purina conferring a benefit on Blue Buffalo.) 
Purina’s injuries from this unjust enrichment aren’t the same as the
injuries Wilbur-Ellis allegedly caused, and Purina couldn’t have sued
Wilbur-Ellis.  “As a supplier,
Wilbur-Ellis could not be found liable for Purina’s claims that Blue Buffalo
knowingly and in bad faith engaged in false advertising or that it made false
comparative statements.”

 

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All transformative from here: 2013 case about music in reality film

Posted on April 20, 2016 by rtushnet
Threshold Media Corp. v. Relativity Media, LLC, No. CV
10-09318, 2013 WL 11287701 (C.D. Cal. Mar. 15, 2013)

 

Older case that just popped up in my Westclip search;
blogging because it’s still interesting after three years.  Threshold sued Relativity for infringing its
copyright in two sound recordings by using portions in Relativity’s film Catfish. 
The recordings were of the same song, “All Downhill from Here,” as a
duet by Amy Kuney and Tim Myers.  The
studio version is 3:29 in length, and the acoustic version is 3:09.  Catfish
was a “reality thriller” filmed in documentary style.  It followed Yaniv Schulman, a 24–year–old
photographer who lives in New York City, as he developed an online friendship
with Abby, an eight-year-old girl in Ishpeming, Michigan, her mother Angela,
and several of their family and friends, especially Abby’s 19–year–old
half-sister, Megan. Yaniv’s brother, Ariel, and their friend Henry Joost filmed
Catfish.

 

The film begins as Abby and Yaniv have been corresponding
because of paintings Abby created based on Yaniv’s photos, which she saw in a
newspaper article.  Yaniv thinks that
Megan “has a big crush” on him; she writes and records a song for Yaniv, which
is played while Yaniv discusses it.  They
flirt online. 


In the first use, Megan (using IM) says she’ll take requests and record a
song.  Yaniv asks for “Tennessee Stud.”
She emails Yaniv an acoustic recording, which Yaniv plays while he, Ariel, and
Henry discuss how impressed they are with her talent.  Angela also posted copies of songs purportedly
recorded by her and Megan. “Yaniv clicks on a song entitled ‘Downhill,’ and the
Acoustic Recording is heard playing from his computer for approximately 19
seconds–from the beginning of the song until partway through the third line of
the introductory verse.”  With the music
in the background, “Ariel and Henry tell Yaniv to let Megan know how much they
love her songs, and Yaniv is shown typing this into an instant message.”

 

In the second use, “Ariel begins singing along with the
music before it cuts out, continuing for a few seconds afterward, for a total
of approximately 16 seconds.”  The third
use is ominous: Ariel googles “ ‘its [sic] all downhill from here’ song” and
the film cuts to a shot of an audio player playing “All Downhill From Here / BY
Amy Kuney [featuring] Tim Myers / ON One Tree Hill.”  The studio recording plays for 28 seconds
total; after 8 seconds, Yaniv and Ariel discuss the similarities, but Ariel
says that Angela’s is better. Yaniv and Ariel discuss Megan’s failure to
attribute the source:

 

Ariel: All right. Listen, you can’t
hold it against her. She didn’t say, “Hey, I wrote this song.”

Yaniv: It doesn’t matter, it’s just
still–yeah.

Ariel: Yeah. And still, her voice
is ten times better than this girl. And she’s clearly an artist because that
came from a deep– from deep expression and feeling.

Yaniv: And she found a song, kind
of obscure.

Ariel: She covered a song, yeah.
People make careers out of that.

Yaniv: Yeah.

 

The fourth use is the full reveal: we hear a track entitled
“Amy Kuney ‘All Downhill From Here’ (Original) from One Tree Hill,” the
acoustic recording.  The friends discuss
whether this is the same recording; Yaniv realizes that he’s been deceived and becomes
agitated, condemning Megan for accepting his compliments on her singing.  They discover that she also copied “Tennessee
Stud,” which was actually performed by Suzanna Choffel.  The rest of the film chronicles their journey
to confront Megan and Angela, which leads to the discovery that Megan—and most
of the rest of Abby’s friends and family—were merely Angela’s creations.

 

The court found that the uses of the recordings were highly
transformative, adding new expressive content and using the original expression
for an entirely different purpose.  The
music comprised only part of the scenes, which had video footage, original dialogue,
and other sounds.  The men comment on the
quality of the music, albeit not in “erudite” terms (“[t]his one’s sick”; the
acoustic recording is “better” than the studio recording), and discuss whether
the recording attributed to Amy Kuney is the same recording Angela posted on
her Facebook page.  “This critical
commentary and analysis falls squarely within the category of new expressive
content that transforms the copyrighted expression into something different.”  Criticism and review are broad concepts,
applicable here.  “Nor is it relevant
that their commentary was presented as part of a work of entertainment”;
entertainment can include critical commentary.

 

The use also served a completely different purpose than the
original, a consideration that can allow “wholesale copying of an entire work.”
The original’s purpose was to entertain listeners. “The purpose of including
Kuney’s song in Catfish was not to
entertain using Kuney’s music and lyrics or even to evoke a similar story line”
of a person who withdrew from the world after a failed relationship. Instead,
it was to show Angela’s deception and to document the pivotal moment in which the
deception was discovered.  Only
comparison allowed Yaniv to determine that Megan had falsely claimed the song
as her own; by playing the song, the filmmakers invited the audience to make
the same comparison to reach its own conclusion.  “This critical analysis is entirely different
than the song’s original entertainment purpose.”  SOFA Entm’t v. Dodger Prods., 709 F.3d 1273 (9th
Cir. 2013), accepted a similar use of a music clim in a play for historical
purposes, and Lennon v. Premise Media Corp., 556 F. Supp. 2d 310
(S.D.N.Y.2008), found fair use the movie Expelled’s
use of a clip of Lennon’s “Imagine” to critique the scientific theory of
evolution and, by implication, Lennon’s naiveté.  “Catfish is even more transformative than
Expelled, which used the copyrighted
song and its lyrics to convey the song’s original message–albeit in a critical
manner. In contrast, Catfish uses
Kuney’s song as a plot device–in an entirely different story–to identify (or,
more accurately, misidentify and then clarify) the song’s author.”  The explicit attribution to Kuney as the real
author also weighed in favor of fair use. 
(Note that the court didn’t find that lack of attribution to the copyright owner was relevant.)

 

“Defendants recorded and published clips of Kuney’s song not
to retransmit its message in a different medium, but because the song played an
integral role in the plot of an unfolding story about the reality and unreality
of online relationships.”  Catfish was, in some sense, designed to
entertain, but it didn’t entertain in the
same way as “All Downhill from Here,” and was therefore
transformative. 

 

Threshold argued that Relativity could have used an
alternative storytelling device to reveal Angela’s lies without “gratuitously”
playing the song again and again.  Nope:
first, the song wasn’t repeated gratuitously. 
Second, the filmmakers didn’t choose the song.  The uncontroverted evidence was that the film
documented “the real-life relationship between Yaniv and Angela,” although it
may have distorted reality in other respects; thus, a reviewer’s conclusion
that the film was “slipshod in its adherence to basic ethical norms” was
irrelevant. There was just no evidence that the filmmakers had any control over
the songs Angela chose.  “Whether certain
members of the general public doubt that the events depicted in the film are
real is irrelevant.”  The only critical
fact, confirmed by Threshold’s citation of off-camera evidence, was that “Yaniv
did not realize before the scene at issue that Angela had copied the songs from
somewhere else and was genuinely surprised to find out the truth.” 

 

Thus, the fact that Catfish
was commercial had minimal relevance, as did the expressive nature of Kuney’s
original work (factor two).  The amount
of the work used—about 22% of the acoustic recording and 12% of the studio recording—was
also okay in light of the purpose.  Catfish used no more than necessary to
document the critical events. The first use was “enough to give the audience a
sense of the song but no more”; similarly, the second use was no longer than
necessary “to give the audience a sense of what he is doing.”  The third use basically repeated the first
use, now attributed correctly, and used “long enough for Yaniv and the
filmmakers to comment on and for the audience to grasp the two versions’
similarity. The fourth use … is somewhat longer because Yaniv, Ariel, and Henry
are commenting on the track more actively as it continues to play in the
background.”  By the time the chorus comes
on, “the scene’s focus is on the realization that Angela has lied rather than
on presenting the music for its own inherent entertainment value.


Threshold argued that Relativity could have used an alternative plot device to
reveal the deception, though it didn’t explain how.  Though the filmmakers could have reenacted the
scene with different music or replaced the scene with an interview of Yaniv
narrating the key events. “But such alternatives artificially impinge upon the
creative process. They would force the filmmakers to sacrifice the film’s
verisimilitude, its drama, or both. The descriptive term ‘reality thriller’
would no longer apply.”  Though “one
might quibble whether the filmmakers could have cut a second or two from their
uses,” the overall amount used was reasonable in light of the purpose, and thus
factor three favored Relativity.

 

Finally, market effect: Catfish
wouldn’t substitute for a purchase of the song. 
Digital music stores typically allow prospective purchasers to hear at
least 30-second samples; [i]t is inconceivable that hearing a similarly timed
clip of Kuney’s song in Catfish would
dissuade a listener from purchasing it if the listener were otherwise
predisposed to do so,” especially since the audio quality of the song in the film
is low because it’s played through laptop speakers and captured as ambient
sound instead of being recorded directly into the audio track—“or at least the
film is engineered to sound that way.”

 

Nor was there any harm to potential synch licenses.  Even if the onetime use of the song on a TV
show in the past showed a market demand for future synch licenses, which was
doubtful, Catfish wouldn’t affect
that demand.  Market demand for synch
licenses for TV and movies “inevitably tapers off over time as the song falls
out of people’s favor or memories,” and creators of audiovisual works may
prefer recently released songs.  Some
songs are more enduring than others, but this song was published on May 18,
2008, and licensed the next day for use in a One Tree Hill episode. More than two years passed before Catfish came out, with no further
licensing of the studio recording, and the acoustic recording had never been
licensed.  “These facts are inconsistent
with Plaintiff’s assertion that a synchronization market exists.”  If anything suppressed demand for synch
licenses, it was far more likely that it was the use in One Tree Hill.  “The creators
of other television shows and movies, wanting their works to appear fresh, may
not want to synchronize a song that has already been heard on television.”  There was no evidence that any of Kuney’s
other songs had been licensed more than once.

 

Balancing the factors, the court noted that the filmmakers
didn’t have a choice about which song to use in the story to document the
critical moment that Yaniv first realized that Megan and Angela were lying to
him.  This was not an ordinary
synchronization context, “where the filmmakers or studio can bargain with
various artists for the use of their songs in a film, television show, or
commercial. If one artist presents a holdout problem, … there is a sufficiently
large market that the filmmaker or studio can decide how to balance the
economic and artistic tradeoffs.”  Catfish couldn’t turn to that market. “To
hold that their use of Amy Kuney’s music was not fair would be to grant
Plaintiff not just a copyright but–in effect–a veto over a new, transformative
work.”  So, fair use.

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Minimal pleading of responsibility suffices to evade 230 dismissal

Posted on April 19, 2016 by rtushnet
Congoo, LLC v. Revcontent LLC, 2016 WL 1547171, No. 16-401
(D.N.J. Apr. 15, 2016)

 

The parties compete in the market for native
advertising.  Congoo alleged that
Revcontent caused false/misleading native advertising to be published.  Revcontent asserted §230 immunity.  The court found the following allegations
sufficient to avoid dismissal based on the idea that Revcontent is an “information
content provider” for purposes of the false advertising claims:

• Defendants have published or
caused to be published many impressions of native advertising unit ads
(“Defendants Ads”) with various Published Websites, including Publisher
Websites that were previous clients of Plaintiff.

• Many, if not most of Defendants’
Ads and the Advertisement Websites to which the Ads redirect unsuspecting
consumers, employ false and misleading advertising intended to deceive innocent
consumers out of the significant monies by charging their debit cards or credit
cards.

• Defendants have employed the
above stated false and misleading representative in advertising to generate
greater income from their Ads and those of Defendants’ Advertisers, (emphasis
added).)

This sufficiently pled that Revcontent was responsible in
part for the development of the subject advertisements.   Eric Goldman will not be pleased.  Nothing about contribution to the content in any way?

 

Revcontent also challenged whether Congoo adequately pled
falsity or standing under §43(a)(1)(B). 
However, the complaint alleged “false and misleading representations in
advertising” in which Revcontent participated, which was enough for
falsity.  As for standing, Congoo alleged
that Revcontent’s false and misleading statements in advertising allowed it to
generate greater income from ads and therefore to offer more attractive rates
to publishers than Congoo could. This was “an injury to a commercial interest
in sales or business reputation proximately caused by [Revcontent’s]
misrepresentations.”

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Student IP writing competition from the Virginia Bar

Posted on April 19, 2016 by rtushnet

Intellectual Property Section Intellectual Property Law Student Writing Competition

For more than 40 years, the Intellectual Property Section of the Virginia State Bar has striven to advance the quality of intellectual law practice in the Commonwealth of Virginia. The Intellectual Property Law Student Writing Competition (the “Competition”) seeks to promote academic debate and the dissemination of ideas and scholarly writing in the field of intellectual property. The Competition is sponsored by the Intellectual Property Section of the Virginia State Bar. All articles submitted will receive consideration for publication by the Section to its membership. Student authors entering the competition thereby authorize such publication. The Section publication’s editors reserve the right to make editorial revisions to the author’s article prior to publication on the Section’s website. Prize $5,000 and publication on the Section’s website.

If the Section determines that a second article is of sufficient quality, it may award a second prize of $2,500 for that article, as well. Eligibility The Competition is open to all students enrolled and in good standing during the 2015-16 academic year (including December 2015 graduates) at (i) any Virginia law school, or (ii) a law school outside Virginia as a resident of Virginia (with proof of residency). Articles must have been written solely by the entrant while enrolled in law school. Topic & Format Articles must relate to an intellectual property law issue or the practice of intellectual property law. Preference may be given to topics demonstrating particular relevance to contemporary events, addressing unsettled issues of law, or presenting novel and unique perspectives. Articles should be approximately 25 to 40 typed pages (including footnotes) in length. Entries must be double-spaced, in at least 12-point font, with one-inch margins and numbered pages. Citations should conform to the Bluebook. Entries must be submitted electronically in WordPerfect or Microsoft Word format.

Entries should also include the student’s name, address, telephone number, law school, expected graduation date, and the following signed statement: “I declare that during the 2015-16 academic year, I was enrolled and in good standing (i) at a Virginia law school, or (ii) at a law school outside Virginia as a Virginia resident. I further declare that this entry was written solely by me while enrolled and in good standing in law school.” The student author’s inclusion of this statement in the transmittal email, together with his or her typed name between two forward slashes (i.e. /Jane M. Doe/) shall constitute a signature for the purpose of the signed statement requirement. Deadline All entries must be sent by email to tbranscom@cowanperry.com and must be received no later than 4:00 P.M. Eastern Daylight Time on Friday, May 20, 2016. For problems with transmission, please contact Tara A. Branscom at 540-777-3459. Judging Entries will initially be judged by members of the Section, in their sole discretion, who will select no more than five finalists.

The final judge will be the Honorable Richard Linn of the U.S. Court of Appeals for the Federal Circuit. Judge Linn will select the winner, in his sole discretion, from among the finalists. Criteria for judging include: • Subject matter originality • Relevance to intellectual property practice • Quality of topic development • Analysis of the subject matter • Quality of writing • Proper reliance on cited authorities • Clarity of expression • Grammar, spelling and vocabulary

The winner will be announced no earlier than August 12, 2016 and no later than September 16, 2016. Presentation of Award The winner will be notified by telephone and electronic mail and will be invited to the Section’s 28th Annual Fall Weekend Seminar, for an award presentation ceremony. Hotel accommodations for that evening will be provided to the winner by the Section.

Other Terms & Conditions No article submitted as an entry in this competition may be published in any other forum until the competition has ended and the winner has been announced. After that time, articles submitted but not selected as the winning article may be published without limitation. The author of the winning article grants the Section a non-exclusive license to publish the article at the Section’s discretion. Other publications of the article by the author must include a footnote acknowledging the award from the Section. By submitting an article in this competition, the student author agrees to be bound by the rules, terms and conditions governing the competition and the award of any prizes therein. The Section reserves the right not to make an award in this competition if no entries of acceptable quality are received.

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Expert testimony in false advertising cases can rely on studies of other events

Posted on April 18, 2016 by rtushnet
Concordia Pharmaceuticals, Inc. v. Method Pharmaceuticals,
LLC, 2016 WL 1464639, No. 3:14CV00016 (W.D. Va. Apr. 13, 2016)
 
Previous
opinion on how announcing a product launch and not following up might be false
advertising discussed here.  Here,
the court resolves some challenges to the parties’ expert witnesses.  Daubert
requires that expert testimony must be “the product of reliable principles and
methods that are reliably applied to the facts of the case.”  Courts aren’t required to admit opinion
evidence “connected to existing data only by the ipse dixit of the expert,” but
neither must they determine that the testimony is irrefutable.
 
Concordia’s expert Dr. Reisetter, a licensed pharmacist with
a doctorate in pharmacy administration, who also works as a consultant for the
pharmaceutical and medical industries, offered opinions on the market impact
and industry consequences of Method’s submissions to drug databases. Reisetter
had performed extensive research on the effects of database listings on the
perceptions and behavior of pharmacists and doctors. Here, he offered the
opinion that Method’s efforts to list its Me-PB-Hyos products with the
databases “caused the marketplace to believe that there was an actual ‘generic’
or pharmaceutical equivalent for Donnatal appropriate for substitution,” and
that this “set off a series of inevitable downstream events in the marketplace
that adversely affected the number of prescriptions for Donnatal filled and
units sold, despite no such product being available.”
 
Method argued, among other things, that Reisetter improperly relied upon surveys conducted in
other cases (or, apparently, other “research projects”) in forming his
opinions.  While there are valid concerns here—especially for surveys
conducted for other litigation, as opposed to for other research objectives—I
think it’s often a mistake to assume that surveys conducted for a specific
litigation are more reliable than surveys conducted without the specific case
in mind.  Even the techniques we have for
detecting bias are not necessarily very reliable, and if anything, generalized
knowledge about a field might be more useful and predictive. 
 
The court found that exclusion was unwarranted; the issues
could be adequately addressed on cross-examination.  In particular, “[w]hile the court may
ultimately limit the extent to which Dr. Reisetter is permitted to reference
specific responses to survey questions, the court will permit him to offer
opinion testimony based on the results of the prior surveys,” as long as
experts in the field would reasonably rely on these kinds of prior surveys. “The
defendants are also free to point out that Dr. Reisetter ‘s opinions are not
based on quantitative or qualitative research employed to determine actual
market behavior in response to the particular database listings at issue in
this case.” In a footnote, the court said that, because these prior surveys
didn’t “account for the actual allegations in this case,” they wouldn’t support
an implied falsity theory.  It’s this
kind of reasoning that makes me sad—I think appropriately conducted surveys can
tell you how consumers will react to a claim, or a type of claim, even without expensively
testing the exact ad claim at issue in a particular defendant’s advertising.
For example, “Made in USA” is the kind of claim that is likely to work the same
way across products and contexts.  More
generally, elevating surveys over marketing experts creates a false sense of
precision, while raising litigation costs and ignoring on the front end (the
survey requirement for implicit falsity claims) all the weaknesses of surveys
that courts—expensively—deal with on the back end (the particular survey once
conducted, which might well end up being discounted).
 
Method also offered the opinions of Dr. William Fassett, a
licensed pharmacist and a professor emeritus of pharmacotheraphy at Washington
State University with an extensive background. 
In his report, he opined that price increases such as those Concordia
implemented for Donnatal would explain the harm Concordia attributed to
Method’s actions: that the reactions of pharmacists and prescribers to price
increases are generally consistent and that he would expect formularies to
eventually exclude Donnatal, and prescriptions for Donnatal to ultimately
decrease, in response to increased prices. 
As an example, he cited a prescription pain reliever that, like
Donnatal, had no generic equivalent. When the manufacturer increased the price
by over 600%, the results were increased sales dollars, fewer prescriptions and
unit sales, exclusion from formularies, and substitution, “all of which would be
expected with Donnatal.”
 
His opinions were “derived from his decades of experience as
a pharmacist, during which he dispensed Donnatal and its generic competitors;
his extensive experience working with formulary committees; and his specialized
knowledge of how formulary committees make coverage determinations.”  Personal experience is a possible
qualification for an expert as long as he can “explain how [his] experience
leads to the conclusion reached, why [his] experience is a sufficient basis for
the opinion, and how [his] experience is reliably applied to the facts.”
 
The court did exclude a portion of Concordia’s damages
expert’s report dealing with lost profits. Concordia failed to establish that his
lost profit calculations were “the product of reliable principles and methods”
that were “reliably applied” to the particular facts of this case. He failed to
take into account numerous market factors that could have affected Donnatal
sales and prescriptions.  For example,
while he determined that Donnatal prescription volume was “generally unaffected
by price increases,” he limited his analysis to two price increases in 2012, a
time when existing inventories of competing generic products were being
eliminated from the market, and he disregarded another price increase in 2013
that was followed by a reduction in Donnatal prescription volume and unit
sales. This price increase occurred after generics had been removed from the
market, but before Method’s products were listed with the pharmaceutical
databases.  Nor did he consider the
impact of newer drugs available for treating IBS, “which, unlike Donnatal, have
been approved for effectiveness by the FDA.” The expert’s failure to consider
them, or to offer an explanation for his failure, creates “enough of a doubt as
to the overall reliability of [his] opinions as to render them inadmissible.”

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Further results from my FOIA case against ICE

Posted on April 8, 2016 by rtushnet

With the assistance of Georgetown’s Institute for Public Representation, I sued ICE to get it to answer some questions about why its representative claimed that “X sucks” merchandise would infringe X’s trademark rights, at least where X is a sports team.  ICE has made three productions so far, and it’s basically a lot of blurry pictures and heavily redacted guides produced by sports teams/apparel companies.  Assuming that the sample I have is at all representative, it seems to me that ICE does seize a lot of plain counterfeits, but it can also seize more questionably.  Is this design on a shirt likely to cause confusion about source?


Blunt Blowin’ Bull with bloodshot eyes and marijuana

Certainly, many of the photos showed counterfeits, including counterfeit tags claiming to be genuine NFL etc. merchandise.  With the caveat that the organization of the production makes start/endpoints for different seizures difficult to determine, there was one seizure centering on Seattle Seahawks merchandise that didn’t follow this pattern.  There didn’t seem to be counterfeit tags–ICE didn’t produce photos of tags for this seizure, and their practice is apparently to photograph tags when they might be counterfeits.  Some of this merchandise bore Seahawks logos alone; others involved Seahawks-related images, or a logo plus other positive/fannish commentary.  Many of those shirt didn’t look particularly official to me; they might make good examples for discussion of trademark as a pure merchandising right, which ICE is helping to protect.

Superman/Seahawks

Seahawks with list

Match-up with both teams’ logos

Go Hawks Re-Pete

I have no idea what’s going on here; suggestions very welcome

Why not us?

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Comments on section 512 from the OTW and a few others

Posted on April 8, 2016 by rtushnet

The Copyright Office has posted the responses to its notice of inquiry on 512.  Here’s the Organization for Transformative Works comment on 512.  Also, among the 90,000+ responses, there are comments from Eric Goldman, and a comment based on the empirical work of the Takedown Project.  If anyone wants my collection of downloaded long-form comments, let me know and I’ll send you the Dropbox link.  I’m sure there will be many interesting submissions in there. And a lot of grandstanding from practically everybody.

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announcing product launch and pricing can be false advertising if no launch occurs

Posted on April 7, 2016 by rtushnet
Concordia Pharmaceuticals, Inc. v. Method Pharmaceuticals,
LLC, 2016 WL 1271082, No. 3:14CV00016 (W.D. Va. Mar. 29, 2016)
 
Concordia bought the Donnatal line of pharmaceutical
products from former plaintiff PBM. Donnatal is a prescription line of
combination phenobarbital and belladonna alkaloid (PBA) products that is used in
the treatment of irritable bowel syndrome and acute enterocolitis. They’re
grandfathered drugs; the FDA was required to conduct a retrospective evaluation
of such drugs in 1962.  Concordia
benefits from conditional approval ANDAs that allow Donnatal to be legally
marketed until the FDA resolves questions regarding the drugs’ effectiveness
under the FDCA; the FDA has concluded that Donnatal is safe.
 
Donnatal faced competition from generic PBA products that
were pharmaceutically equivalent to Donnatal for many years, but then
manufacturers of the generic versions began to take their products off the
market, making Donnatal the only PBA product available for prescription.
 
Method, a wholesale drug distribution company, tried to
enter the market with a PBA product it planned to call Me-PB-Hyos, and sought a
manufacturer for a product that would be pharmaceutically equivalent to
Donnatal. Method issued four purchase orders to another company, Winder, for
the development of Me-PB-Hyos, including a purchase order for stability tests.
Winder and Method agreed on the price that Winder would charge and discussed
commercial production.
 
Method listed the Me-PB-Hyos products with two
pharmaceutical industry databases, used nationwide by wholesalers, third-party
payors, pharmacies, and pharmacists.  Based
on the information provided by Method, the Me-PB-Hyos products were assigned
the same Generic Product Identifier as Donnatal by one database, with a marketing
start date of June 1, 2014, and the marketing category was listed as
“unapproved drug other.”  The other
database listed the Me-PB-Hyos products in early June 2014.  In both databases, the price information
provided by Method indicated a lower price than that for Donnatal.
 
This lawsuit began, and Method contacted Winder, stating “We
think it might be best to bail on this project at Winder and not bring Winder
into the litigation.”  On the same day,
Method advised one of the databases that “Me-PB-Hyos is an active product and
will be available to ship by 11/15/14.” Following up, Method explained that “The
products were never launched. Within days of our listing with Medi-Span back in
April, Method was sued by a competitor… Based on the status of the case, Method
intends to launch in mid-November.”  But
it never did, and about a month later, the databases removed their active
listings for the Me-PB-Hyos products.
 
After the Me-PB-Hyos products were listed on the databases,
pharmacists began to submit claims for the product.  There were instances in which insurance
coverage for Donnatal was refused; at least once, a claim for Donnatal was
refused while a subsequent claim for Me-PB-Hyos was approved. But because
Me-PB-Hyos was unavailable, the patient was switched to different medications
and didn’t receive a prescription for Donnatal. 
Third-party payors began placing Me-PB-Hyos on their formularies as a
generic alternative to Donnatal, and at least once Donnatal was actually
removed from a formulary with Me-PB-Hyos listed as the preferred generic
alternative.  Some doctors stopped
prescribing Donnatal altogether based on the mistaken belief that it was no
longer available. One doctor testified that “12 or 14 prescriptions … were
turned down” in June of 2014, and that she “slowly stopped writing
[prescriptions] because [she] didn’t want to get the phone calls back” from
pharmacies indicating that Donnatal wasn’t available.  The total number of Donnatal prescribers decreased
by nearly eighteen percent in the twelve-month period following Method’s
claimed launch date, and weekly prescription counts for Donnatal also
decreased, though the causation was disputed.
 
From January 2012 to June 2014, the prices of Donnatal
products increased by 1,480%, and then in June Concordia doubled the price
again.  Its profits and profit margin
increased after Method’s Me-PB-Hyos products were listed with the databases,
though Concordia argued that it would have made even more had Method not listed
its products.
 
Concordia argued that the listings were literally false,
since no Me-PB-Hyos products were ever manufactured.  Method responded that the mere existence of a
listing for a product in a pharmaceutical drug database is not a representation
of current commercial availability, and that at least one pharmaceutical
industry representative deposed by Concordia testified that it was common to
find a database listing for a product that was not yet commercially available. Concordia’s
own pleadings stated that databases are “used … to evaluate medications that
are currently or will soon be on the market.”  There was a genuine issue of material fact
about literal falsity as to availability; a reasonable jury could conclude that
there was literal falsity by necessary implication.
 
Concordia also argued that  Method made literally false statements
indicating that the Me-PB-Hyos products had been approved by the FDA, because
the package inserts included the following: “FDA has classified the following
indications as “possibly” effective: For use as adjunctive therapy in the
treatment of irritable bowel syndrome (irritable colon, spastic colon, mucous
colitis) and acute enterocolotis ….” 
Method responded that it never claimed that its own product had been
approved, and specifically advised the listing services of the absence of FDA
approval (thus the category “unapproved drug other”).   Its reference, Method argued, was to PBA
drug products, and it noted that product labels and package inserts for other
generic PBA drug products previously on the market contained similar language.  The court still found a factual issue as to
literal falsity: “reasonable minds could differ as to whether FDA approval was
conveyed by necessary implication as a result of the indications and usage
section of the package inserts.”
 
Concordia also argued that Method made false claims of
pharmaceutical equivalence, because it had no products with the same active
ingredients in the same amounts—it hadn’t produced anything.  (Isn’t this really an unusual lack of
substantiation claim?  Before there is a
product, it seems that it’s neither true nor false that the product is
pharmaceutically equivalent.  The product
isn’t.  That doesn’t mean it’s not pharmaceutically equivalent, because the failure to be comes before it could be evaluated as
equivalent or not.)  Indeed, the court’s
phrasing makes clear that this is a lack of substantiation claim: “Concordia
argues that Method had no basis for
the information contained in the labels and inserts” (emphasis added).  Method argued that it intended to distribute
a pharmaceutically equivalent product, and was only halted by this
lawsuit. 
 
The court again found a material issue of fact, hinging in
part on whether Method falsely represented that the products were commercially
available.  If a jury so found, it could
also find the descriptions of ingredients to be literally false.  But if the listing merely indicated an intent
to market, a jury could find that there was no literal falsity. 
 
The court went through the same reasoning with respect to
Method’s price claims.
 
Materiality: assuming that the Fourth Circuit would require
a showing of materiality even in cases of literal falsity, there was a genuine
issue of material fact on materiality. A jury could find that claims of
pharmaceutical equivalence, price, FDA approval, and availability were likely
to influence purchasing decisions.  So
too with harm, even without Fourth Circuit guidance on when a presumption of
harm might be allowed, given the (contested) evidence of harm recited
above.  (There was other evidence of
alternative causes—for example, “Donnatal was pulled up with no generic product
showing” at three major pharmacy chains, and the doctor who testified might
have been told that Donnatal was no longer being made because one version had in
fact been discontinued.)
 
State-law unfair competition claims survived for the same
reason, but not Virginia Consumer Protection Act claims, because that law
doesn’t provide competitors with standing. Likewise, unjust enrichment failed
because there was no evidence that Method received any value from using
Donnatal product labels to create its own labels.  (Anyway, that theory sounds like a FDCA
preemption claim waiting to happen.) Nor could conspiracy claims survive;
employees of a corporation can’t conspire with the corporation, and there was
no evidence that Winder was part of any conspiracy; even though it knew that
Method wanted to make a competing product, there was no evidence that it knew
about the database listings, the only source of harm here.  Tortious interference also failed for want of
evidence of any specific, existing contractual relationship or business
expectancy that was destroyed.
 

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