When does “no contract” mean “mandatory arbitration contract”?

Posted on November 4, 2015 by rtushnet
Barraza v. Cricket Wireless LLC, 2015 WL 6689396, No. C
15-02471 (N.D. Cal. Nov. 3, 2015)
 
Cricket advertised a “No Contract” wireless phone plan with
an arbitration clause in its purported contract terms.  As Omri Ben-Shahar
pointed out, advertising “No Contract” has some risks in terms of …
contract formation.  Here, Cricket still
gets a chance to prove that there was a contract, but it can’t force these
false advertising plaintiffs immediately to arbitration.
 
Until May 2014, Cricket advertised “No Contract” wireless
service, then switched to “No Annual Contract.” Plaintiffs bought wireless
service and accompanying phones at Cricket-owned stores; employees opened the
boxes and activated the phones. One panel on those boxes  included a paragraph that discussed signal
frequency and battery performance, and also said: “Use of phone requires
purchase of Cricket® service, which must be purchased separately. By activating
Cricket® service, you agree to the enclosed terms and conditions of the
service.”  The terms and conditions were in
in a 3×4 inch booklet titled “Quick Start Guide.”
 
The first page of the Quick
Start Guide described Cricket as “the home of no contract, no hassle wireless,”
and did not mention that the booklet contained terms and conditions for the use
of Cricket’s service. Pages 6-15 had “numerous terms and conditions written in
a smaller font than the rest of the contents of the booklet.”  These included (in much smaller font than here
displayed):
 
IMPORTANT: WHEN YOU START SERVICE
OR USE THE SERVICE … YOU INDICATE YOUR ACCEPTANCE OF THIS AGREEMENT. IN
ADDITION, EACH TIME YOU PAY FOR SERVICE FROM US, YOU CONFIRM YOUR ACCEPTANCE OF
THIS AGREEMENT. IF YOU DO NOT WANT TO ACCEPT THIS AGREEMENT, DO NOT START
SERVICE OR USE THE SERVICE AND RETURN YOUR WIRELESS DEVICE…FOR A REFUND
 
The Quick Start Guide also included an arbitration provision
and class-action waiver:
 
YOU AND WE ARE WAIVING RIGHTS TO
PARTICIPATE IN CLASS ACTIONS …
 
Cricket also required its employees to hand any customer
purchasing a new phone Cricket’s “Half Is More” promotional pamphlet (or to
have it stapled to the receipt), which stated, “Terms, conditions and other
restrictions apply” to Cricket’s services, written in five-point font.  Cricket made yet another handbook called “My
Cricket Guide” available within its stores, which also said in five-point font
that “Your Agreement … includes terms of your service plan  …. Carefully read all the Cricket Terms and
Conditions of Service which include, among other things, a MANDATORY
ARBITRATION of disputes provision.”  The
named plaintiffs averred that they saw the “Half as More” pamphlet and “My
Cricket Guide” handbook on display, but that they weren’t given those materials
and never reviewed them.
 
One of the plaintiffs also purchased a Cricket PAYGo card in
2013 at a gas station in order to reload the balance on her account. That card
read, “By using your Cricket service or phone, or by increasing your account
balance, you acknowledge your consent to the current Cricket Terms and
Conditions of Service.” Cricket also argued that she went to a store to change
her service;  the back of Cricket’s
printed receipts in the store included a reference to the terms and conditions,
including that the terms and conditions included an “agreement to dispute
resolution by binding individual arbitration instead of jury trials or class
actions.”
 
The FAA governs the enforcement of the arbitration
provisions. The “existence of a contract as a whole must be determined by the
court prior to ordering arbitration.” Although a party generally cannot avoid
the terms of a contract because she failed to read it, that rule does not apply
“when the writing does not appear to be a contract and the terms are not called
to the attention of the recipient.”  Here,
“the Quick Start Guide lacked any indication of its contractual nature.” Thus,
its inclusion in the box was insufficient to place plaintiffs on inquiry notice
of the terms and conditions.  By opening
the boxes before giving them to plaintiffs, Cricket’s employees “obviated the
need for plaintiffs to review the Quick Start Guide and signaled that it was
unimportant to review the text on the box before activating the service.”
 
Cricket argued that plaintiffs had 60 days to opt out of the
arbitration provisions and that numerous consumers exercised that option, but
that didn’t matter if plaintiffs never agreed to be bound by the provisions in
the first place. “An employee of a telephone service provider or an attorney
may be attuned to the possibility that an arbitration agreement would be buried
in a document titled ‘Quick Start Guide,’ while a reasonable consumer is
unaware of that possibility.”  Nor did
plaintiffs have reason to consult the other materials in the store, or to read the
inconspicuous references to terms and conditions on the back of a PAYGo card or
an in-store receipt.
 
The court did, however, reject plaintiffs’ argument that
equitable estoppel applied based on the “No Contract” ads.  It is “[a]n essential element of equitable
estoppel is that the party to be estopped…‘intended by [its] conduct to
induce reliance by the other party, or acted so as to cause the other party
reasonably to believe reliance was intended.’ ”  Even if plaintiffs relied on the “No Contract”
ads to buy wireless service, “they have failed to demonstrate that Cricket
acted with the intention or expectation that Cricket intended such reliance.”  “No Contract” claims are meant to distinguish
services with annual commitments to those without such commitments; there was
no evidence that Cricket intended to get consumers to assent to arbitration
instead of to convey that more limited message. Nonetheless, at the upcoming
summary trial to determine whether a contract was actually formed (and to
assess the credibility of named plaintiffs’ claims that they didn’t review the
materials), the “No Contract” ads could be taken into account in determining
the reasonable expectations of the parties.

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In which I read the proceedings of the 2009 Fordham IP conference

Posted on November 3, 2015 by rtushnet

Intellectual Property Law &; Policy, Vol. 12, ed. Hugh Hansen: Proceedings from a 2009 conference by a high-protectionist, with occasional interventions from people who don’t believe that more IP is always better. Confirms my belief that it’s a bad idea to make predictions; five years later they may be very embarrassing. The AP predicted that it would be out of the news business soon if new protections for it weren’t enacted. A Paramount VP told us that “no one is going to be making a special-effects film or a film with famous talent for a YouTube market where there is little or no revenue.” Time Warner’s representative told us that, as the internet matured, people were going to stop making their own mashups or “blogs” and instead just “Twitter” and comment on favorite scenes from a movie; users were more interested in consuming works and interacting with each other than in “expending the effort and the energy needed to interact with a work creatively in a very deep way.” (Your condescension is returned with interest, Time Warner!) Best of all, I learned that ACTAwas a done deal and that, once enforcement was taken care of, IP was going to fade away from business and political discussions. “And who can be against enforcement? It is a question of logic.”

I also learned that the reason that the term “three strikes” was abandoned for copyright infringement notices from ISPs, in favor of “graduated response,” was that people outside the US “do not understand that ‘three strikes and you’re out’ refers to baseball and not violence.” Other things I had not thought of: copying levies on equipment, imposed in many countries outside the US, have trouble dealing with the fact that now one consumer may have multiple copies—on her phone, her laptop, her car, etc.—but the economic effect/value of those copies is not really different than the single copy she would’ve had many years ago. Also, other intermediaries in the value chain oppose making the levies transparent to consumers, because they believe, not without reason, that a consumer who understands that she’s already paid a fee for copying music when she buys an empty hard drive will not want to pay again for a music service.

 

Separately, when IP’s proponents argue that developing countries should strengthen IP laws so that there’ll be improved tech transfer, that’s actually a pretty colonialist treatment, in that they don’t suggest that increased IP rights would lead to increased innovation from within the country. Peter Yu also made some excellent points about China—piracy rates in the US and other high-income countries are 20-40% for software; they’ve had strong IP rights for decades, so is it really more distressing that China has an 80% piracy rate? Meanwhile, the high-protectionists claimed that there’s so much piracy in developing nations that there was no need for exceptions and limitations to copyright, only for more robust rights. Jamie Love responded quite well, pointing out that if there’s a lot of outright copying there’s not much need for exceptions and limitations; only if there’s enforcement do the needs for exceptions and limitations become clear. Jessica Litman has eloquently made a related point: it’s kind of strange to think that you can expand copyright law to vast new fields while not expanding the limitations that were always part of copyright law, as if a child were growing up while its eyes and nose remained the same size.

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Only connect: security company enjoined from false association with ADT

Posted on November 2, 2015 by rtushnet
ADT, LLC v. Capital Connect, Inc., 2015 WL 6549277, No.
3:15-CV-2252 (N.D. Tex. Oct. 28, 2015)
 
ADT provides electronic security services and equipment to
nearly one quarter of those American homes that are equipped with alarm
systems. It sued Capital Connect, four other alarm-service sale companies, and
five individual alarm-service sales persons, alleging that they sell alarm
systems in unannounced door-to-door sales visits, during which the defendants
“confuse the homeowners into believing that the defendants are somehow
affiliated with ADT.”
 
Capital Connect claims to use independent contractors to
sell its services in 10 states.  It’s a
dealer for one of ADT’s rival security monitoring service companies,
Monitronics International.  Its sales
force allegedly misled “ADT’s customers into believing that [Capital Connect]
represent[s] ADT, or that ADT has exited the market, or that ADT’s installed
equipment is outdated and in need of an ‘upgrade.’ ” ADT’s litigation manager
indicated that the number of customer complaints about these practices nearly
tripled in 2015, from 42 complaints during the same period in 2014 to 112
complaints this year. ADT claimed “50 reports of false sales pitches occurring
in May 2015 alone … plus another 41 for the first three weeks of June 2015.”  ADT argued that this rapid escalation, and
the risk that Capital Connect would hire college students for the summer,
evidenced the need for a preliminary injunction. Though summer is over, the
court found that ADT presented enough evidence of continuing use of illegal
sales tactics to warrant a preliminary injunction.
 
Customer declarations recounted a variety of ADT-related
sales tactics, including claims that ADT has gone out of business; claims that
Capital Connect had acquired ADT; claims that Capital Connect was a contractor
for ADT; claims that Capital Connect was affiliated with ADT in some manner,
such as being the manufacturer that made the equipment that ADT installed;
claims that ADT had left the local market; claims that ADT’s equipment was
susceptible to malfunction, or tampering; claims that the Capital Connect sales
associate was at the home to “upgrade” or “update” its alarm system; claims
that ADT customers would not be able to reach 911 in case of an emergency; and
claims that the sales associates were sent by ADT to check or replace ADT
equipment.  [Interesting that the
disparagement is mixed in with the association claims; not something you’d
expect side by side.]
 
Capital Connect argued that it had adopted several measures
to govern its sales force.  Its training
manual warned sales associates of the harm a single damaging story on the local
news covering its sales tactics could do to the company.  In fact, there had been several TV stories in
local markets about Capital Connect’s sales tactics.
 
Capital Connect also required its sales force to agree to
its “Code of Conduct, Sales Rules, and Sales Ethics Agreement,” and dressed its
sales force in Capital Connect labeled polo shirts, with photo identification
cards labeling the sales associate as a representative from Capital Connect. “Sales
Rules” prohibited the sales associates from engaging in inappropriate sales
tactics, including a prohibition against “tell[ing] a potential customer that
has an existing system with monitoring services that their existing alarm
company (1) has been bought out/merged with Capital Connect, (2) is no longer
monitoring their system, (3) has sent you to their home to upgrade their alarm
….” In addition, Capital Connect requires new customers who had a
pre-existing alarm service agreement with a different monitoring service to
sign an “Alarm Upgrade Agreement,” which expressly disclaims any connection
between Capital Connect and the current alarm monitoring company. Finally,
Capital Connect made quality assurance calls, during which a Capital Connect
representative asked the customer if he/she understood that Capital Connect was
not affiliated with ADT and that the customer had the responsibility to cancel
his/her current contract with ADT.
 
Nonetheless, ADT’s customers continued to report the
prohibited behavior, including 70 complaints to ADT in June and 57 complaints
in July, equaling 269 complaints in 2015. 
(Although ADT cited studies to support its claim that complaints
represented only a fraction of the time the tactics were used, since under 5%
of consumers take the time to complain, the court didn’t rely on those studies
to support its grant of a preliminary injunction.
 
The court extensively discussed the sufficiency of declaration
evidence on a motion for preliminary injunction without a hearing; otherwise
inadmissible evidence may be considered for a preliminary injunction.  Most of the declarants’ out-of-court
statements weren’t hearsay in that they were offered to show customers’ state
of mind, or to show that Capital Connect sales associates made the statements
claimed: a verbal act.  
 
Capital Connect attacked the credibility of some of ADT’s
declarants through transcripts of recorded quality assurance calls. Ten of them
had recorded quality assurance calls and signed Alarm Upgrade Agreements in
which they denied any confusion about whether Capital Connect is affiliated
with ADT by initialing next to the line in the contract. Two customer
declarants also corrected the typed declaration with hand-written notes.  However, Capital Connect didn’t deny that its
sales force (1) claimed to have been affiliated with ADT, (2) misrepresented
the quality of ADT’s equipment to gain favor of the customers, (3) claimed that
Capital Connect has bought out or taken over ADT, (4) stated that Capital
Connect has purchased the customer’s account from ADT, (5) misrepresented that
ADT have either gone out of business or left the local market, or (6) made
other misrepresentations or false statements. Although Capital Connect disputed
certain facts and raised credibility issues regarding roughly thirteen of ADT’s
declarants, it didn’t present evidence contradicting allegations central to the
merits of the motion for preliminary injunction and it failed to attack the
credibility of ADT’s remaining 55 declarants. It could have offered
declarations from its sales associates to dispute the statements reported by
ADT’s declarants, so it failed to present a factual dispute.
 
The court didn’t extensively analyze all the parts of the
multifactor confusion test because, for purposes of a preliminary injunction,
ADT adequately offered sufficient evidence of actual confusion, which can be
shown by anecdotal instances.  Capital
Connect argued that ADT has not reported nearly enough instances of confusion
given the size of the market. But the court was satisfied by the 55
declarations, four local news reports, and an employee affidavit regarding 269
complaints processed in 2015.  The news
reports were hearsay, but could be considered on a motion for preliminary
injunction, and the reports were also admissible to “show public perceptions”
of Capital Connect’s conduct.
 
In any event, very little evidence is required to show
actual confusion. This was more than a fleeting mix-up.  The affidavits, even disregarding the ones
for which Capital Connect offered allegedly conflicting transcripts of phone
calls with the same customer, showed “actual confusion about what entity the
sales associate at the door represented, with what entity the sales associate
was affiliated, how the sales associate came to arrive at the door, and the
purpose for which he/she was at the door.”
 
Capital Connect also argued that the confused customers in
the declarations weren’t reasonably prudent purchasers, given Capital Connect’s
measures to prevent confusion such as requiring its sales force to wear Capital
Connect gear.  But where there is an
“explicit representation of a relationship” between the violator and the
claimant, a customer is more likely to be confused, and only a few declarants claimed
that the Capital Connect’s sales associate actually pretended to be an ADT
agent. Thus, different gear wasn’t enough to avoid affiliation confusion.
 
Capiral Connect argued that it used disclaimers in its
agreement and a follow up telephone call disclosing that it was not affiliated
in any way with ADT. ADT, in response, argued initial interest confusion.  Some scholars (hi!) have argued that Lexmark should end IIC as a doctrine
because IIC does not represent proximate cause. “See, e.g., Deborah R.
Gerhardt, Lexmark and the Death of Initial Interest Confusion, 7 Landslide 22,
27 (2014); Jennifer E. Rothman, Initial Interest Confusion: Standing at the
Crossroads of Trademark Law, 27 Cardozo L. Rev. 105, 189–91 (2005).”  But despite Professor Gerhardt’s prediction,
no court has applied Lexmark to IIC
or “unfair competition claims generally.” 
Lexmark’s statement comes
 
from a section of the opinion in
which the Supreme Court holds that the proximate causation principle from
common law torts applies to a Section 43(a) claim, thus narrowing the class of
third parties who can claim to have been injured by a Lanham Act violation. It
does not directly relate to the issue before the court here. 
 
[Actually, it does: ADT is a “third party” relative to
Capital Connect’s representations to potential customers.  That doesn’t mean there’s no proximate
causation!  But it does mean  that Lexmark
should be considered (as does the plain language of Lexmark, which interpreted the language of the purpose clause of
the Lanham Act and §43(a), not the language of §43(a)(1)(B)).]
 
IIC still appears to be a valid theory in the Fifth Circuit
after Lexmark, but the court didn’t
rest its likely success finding on IIC. Instead, ADT presented sufficient
evidence that Capital Connect’s false sales pitches actually confused customers
into thinking there was some affiliation with ADT or that ADT’s equipment was
faulty.
 
Capital Connect argued that it wasn’t liable for the
unauthorized conduct of its independent contractors.  ADT argued that principal-agent liability
applied, and the court agreed, even if the sales force was classifed as
independent contractors.  Capital Connect
exerted sufficient control over the sales force to make them agents: it
required its sales force to wear Capital Connect gear; to complete training; to
sign a Code of Conduct; to wear a Capital Connect badge; and to obey its sales
rules, all on pain of punishment. 
Anything that occured during the sales pitch of the sales associate was
clearly within the scope of the agency, as it was the central purpose of the principal-agency
relationship.
 
ADT further alleged that Capital Connect misled consumers by
falsely associating itself with ADT through the use of the terms “upgrade” and
“update.” In Stokely–Van Camp, Inc. v. Coca–Cola Company, 646 F.Supp.2d 510 (S.D.N.Y.2009),
a district judge in the Southern District of New York held that Powerade’s use
of the phrase “Upgrade your formula. Upgrade your Game” on its labels was not
“literally false” or “false by necessary implication” because reasonable
consumers could interpret the phrase to compare Powerade to Gatorade, or could
compare this new Powerade drink to older Powerade drinks. But context is key to
misleadingness.  Here, the sales
associates referred to the security alarm system already installed, implying a
relationship with ADT.  Anyway, the
declarations of dozens of customers saying they were confused by the use of the
terms “upgrade” and “update,” plus four news reports citing the misleading
statements, showed actual deception by these ambiguous terms.
 
Irreparable harm: Along with eBay and Winter, Lexmark arguably supports the argument
that there should be no presumption of irreparable injury in Lanham Act cases,
as it says that a plaintiff couldn’t obtain relief “without evidence of injury
proximately caused by Lexmark’s alleged misrepresentations.”  It’s not clear whether the Fifth Circuit
still recognizes the presumption, and it still won’t be, because the court here
didn’t rely on a presumption. 
 
Instead, the court found irreparable harm because the
evidence showed that the sales reps were continuing to cast aspersions on ADT
and misrepresent Capital Connect’s relationship with ADT.  As long as that was true, “ADT has lost
control of its brand.” And “if one trademark user cannot control the quality of
the unauthorized user’s goods and services, he can suffer irreparable harm.”
[Here’s where the magic happens!  “Can”
suffer becomes “likely” to suffer—except that it’s not.]   ADT’s inability to control its reputation
meant that it was suffering irreparable harm without an injunction, since harm
to brand reputation and goodwill “is impossible to calculate.” Capital Connect “unfairly
exploited” ADT’s “time, effort, and expense exerted to create and define its
brand.”  [Again, how Capital Connect’s
benefit is ADT’s loss is not clear.]
 
Moreover, money damages were inadequate because  Capital Connect was disparaging ADT’s brand
and was continuing to use ADT’s reputation and good will to mislead ADT’s
customers into buying Capital Connect’s services; this sort of damage is
difficult to quantify.
 
Capital Connect argued that harm wasn’t imminent because ADT’s
customer declarations dated from 2013. 
But Capital Connect continued to use the challenged tactics, and ADT’s
delay wasn’t too great given that it was investigating in good faith before,
and that the number of complaints spiked in 2015.  Nor did Capital Connect’s safeguards preclude
a finding of irreparable harm, because of the evidence that its sales reps were
continuing their misrepresentations.
 
Capital Connect argued that its lawful interests would be
harmed by an injunction, but the injunction would only prevent illegal unfair
competition. “[P]reventing one’s agents from breaking federal law is not
impossible to monitor and accepting that argument would be against public
policy.”  Plus, the court narrowed the
scope of the injunction from ADT’s requests.
 
As for the scope of the injunction, the Fifth Circuit said that
a “competitive business once convicted of unfair competition … should
thereafter be required to keep a safe distance away from the margin line even
if that requirement involves a handicap as compared with those who have not
disqualified themselves.”  Capital
Connect was enjoined from suggesting endorsement by, sponsorship by, or
affiliation with ADT.  However, the court
didn’t enjoin the use of the word “outdated,” “because preventing a competitor
from discussing the age of equipment unduly restrains Capital Connect’s speech
in its sales pitches.” 
 
Nor would Capital Connect’s reps be required to use a
script.  “Requiring Capital Connect’s
sales force to pursue sales like a robot, regurgitating a court ordered script
imposes too much restraint on Capital Connect. Capital Connect’s sales force
may refer to themselves as representatives of an alarm company or a security
company.”  The court also refused to specify
the clothing Capital Connect reps must wear. Instead, it expected Capital
Connect to enforce, and ensure compliance with, its company policies and code
of conduct, “which the record shows it has not sufficiently accomplished thus
far.”
 

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In which I win a motion to intervene

Posted on November 2, 2015 by rtushnet

Actually, my fine attorneys at Public Citizen have prevailed in my motion to intervene in SanMedica v. Amazon, the case in which the court found sufficient evidence of likely confusion under the 10th Circuit’s 1-800 Contacts rule without telling us what that evidence was.  Thank you, Public Citizen!

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Reading list: trademark standing after Lexmark

Posted on November 2, 2015 by rtushnet
John L. Brennan, Determining
Trademark Standing in the Wake of Lexmark, 90 Notre Dame L. Rev. 1691
(2014). I like it:
 
Although the Court’s decision in
Lexmark has resolved the debate over the issue of standing for false
advertising claims, it remains unclear whether the Court’s holding also extends
to trademark infringement suits brought under section 43(a). The Court did not
explicitly address this question in its opinion, and district courts thus far
have differed in their interpretations of the decision’s scope.
This Note addresses that ambiguity
and aims to resolve it. It examines relevant statutory language, case law, and
scholarly criticism, and ultimately contends that the standard articulated in
Lexmark should apply to both types of claims. Part I provides background
regarding the history of the Lanham Act, looking particularly at the ways in
which courts have treated trademarks and false advertising differently. Part II
discusses the Lexmark decision and the recent district court cases that have
addressed its holding. Part III examines the text of both the Lanham Act and
the Supreme Court’s opinion in Lexmark in order to determine the decision’s
scope, and concludes that Lexmark’s holding applies equally to false
advertising and trademark claims. Finally, Part IV, which is divided into two
subsections, advances policy-based arguments for such a uniform application of
the Lexmark standard. Generally, Part IV discusses the expansive nature of
modern trademark law and explores the ways in which Lexmark’s standing
requirement might serve as a narrowing force. First, Section IV.A laments the
lack of a materiality requirement in trademark law and demonstrates how
Lexmark’s proximate cause requirement might make up for that absence. Section
IV.B focuses specifically on one area of application in trademark law—the
initial interest confusion doctrine—and suggests that Lexmark, if properly
applied, could possibly eliminate this doctrine.

RT: Sadly, this proposition may seem more logical to scholars than to courts, if results so far are any indication.

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FDLI symposium: special topics

Posted on October 30, 2015 by rtushnet
Special Topics
FDA Regulation of Genomic Testing and the First Amendment
Barbara Evans, Professor, University of Houston Law Center
 
Of companies in clinical sequencing industry: 10 of 68 do
sequencing only; 21 of 68 annotation and interpretation only. That is speech
only. [Or it’s professional advice and not even protected by Central Hudson, as
Robert Post would say.] Question of FDA scope: when there’s bundling of
interpretation with device/test, FDA jurisdiction is easy, but what if it’s
unbundled and people are merely talking? 
 
Shouldn’t have unintended consequences drive unbundling or
drive it offshore.  Regulator’s task:
protect consumers without causing these effects.
 
Bad consequences aren’t enough to justify speech regulation:
test results that lead people to make stupid medical decisions have to be
regulated by regulating medical decisions, not information.  Could require doctor for interpretation;
could put warnings/disclaimer on interpretation; develop FDA-recognized list of
which claims are proven/legitimate. 
 
State Action in Food and Controlled Substances Regulation
and the Benefits of Friction Between Regulatory Authorities
Diana R. H. Winters, Associate Professor, Indiana University
School of Law
 
Regulatory flexibility can be vertical or horizontal. Can be
productive to fill gaps, address what’s seen as misguided federal policy.  E.g., humane treatment of animal laws in Cal.,
two of which have been invalidated and are on appeal; Vt. GMO labeling law;
concerted AG action to remove allegedly fraudulently labeled dietary
supplements from shelves.  Cal. just past
a law on animal antibiotics—stricter than federal; not yet challenged.  Movement to decriminalize and regulate
marijuana—also brings fed/state interaction into sharp relief.  Challenged & invalidated: ban on sale of
foie gras.  Egg/chicken treatment law now
under challenge as preempted by Egg Inspection Act & as violating dormant
commerce clause.  That case was thrown
out for lack of standing by challenger states; on appeal.  We should enjoy and celebrate the mess as it
fills gaps and spurs national debates.
 
A First Amendment Exception for Flexible FDA Regulation
Sally Wang, Principal, DocFlight
Market arms race: inefficient to keep spending advertising
to keep in the game; costs get passed to payors and consumers.  A lot of blockbusters going off patent: there
should be shrinkage but there is almost doubling of marketing spend.  Regulatory void left by FDA has been filled
to some extent by DOJ actions—over $13 billion in fines for fraudulent
marketing. Less regulation is not beneficial for industry.  Selling drugs is different from selling TVs.  Can use gov’t granted IP rights/monopoly
privileges as a way to continue regulation. 
IP rights for drugs are closely intertwined w/regulatory process.  Analogy to FCC’s rights because it grants
spectrum to broadcasts.
 
Discussant:
Patricia Zettler, Associate Professor, Georgia State
University, College of Law
Genomic testing is high interest in Silicon Valley, with concerns
about FDA regulations stifling innovation. 
Appealing to distinguish between speech about the genomic test itself
and speech about what the test reveals (meaning of particular results).
 
Choice of regulators: if the fed gov’t is not regulating,
states can regulate medical practice. We have seen docs v. Glocks case in
Florida, abortion restrictions—it’s not infeasible that states might regulate.
Who do we want doing the regulating? 
(Though as with abortion, she points out, guns may be special and
therefore not a precedent.)
 
Winters persuasively argues that state-federal friction can
be beneficial for food and perhaps controlled substances. But how far does this
extend? Many examples are from Cal. & NY, which because of size and
politics may be more persuasive to this group than other states’ policy
choices.  Can Vt. be as persuasive on the
national stage?  Also, is this an actual
benefit if GMO status really isn’t that important?
 
Wang’s paper: analogy to FCC and Nat’l Endowment for Arts
may be different—obscenity/profanity restrictions v. info on drugs—some claim
the info is very valuable for the public health. I worry that courts wouldn’t
extend the rationale they’ve used for FCC/NEA to that speech.  Also, consider other areas, such as genomic
testing—how far can this extend into other areas where FDA faces First
Amendment challenges not so tied to regulatory exclusivity? Maybe the answer is
that authorization to market is a gov’t benefit in itself, but wants to know
more.
 
Winters: California does tend to drive national policy.  Humane treatment as related to human health:
connections b/t factory farming and health, as opposed to standalone concerns
about morality—may get more of a patchwork. But we’ll see industry and private
actors (like McDonald’s) moving to creating a uniformity not mandated by
federal law.  We’ll see convergence/informal
agreements.
 
Wang: Art v. IP is an interesting point.  Even profanity could have a benefit, but the
gov’t can still regulate it because of its structural position conferring a
benefit. Step outside of assumptions and think about it from IP perspective.
 
Moderator: Joseph Page, Professor, Georgetown University Law
Center: Consider state right to try laws: statutes giving people with
life-threatening diseases access to drugs w/o full FDA approval.  In order for them to be successful, the fed
gov’t has to stay its hand, as w/marijuana. 
Otherwise all you have is expressive libertarianism: symbolic laws that
make another point. It’s one thing for states to fill in the gaps; it’s another
for states to encourage violation of federal law.
 
Winters: it fits in the theme b/c it’s a conversation, but
agrees it’s different.
 
Zettler: FDA does allow compassionate use, so you could
comply with both treatment regs and right to try laws, though the laws are
intended to circumvent FDA rules.  But
not as direct a conflict.
 
Winters: Controlled Substances Act has mostly been enforced
by states; states are refusing to take action, but historically they were the
ones who locked people up for drugs.  So
that’s another difference.
 
Q: gov’t property allocation doesn’t mean there are no 1A
rights.
 
Wang: there has to be a relationship to the gov’t program.
It’s not a direct mapping, but a looser analogy.

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FDLI symposium: John Coates keynote on deconstitutionalizing corporate speech

Posted on October 30, 2015 by rtushnet
John Coates, John F. Cogan, Jr. Professor of Law and
Economics, Research Director, Center on the Legal Profession, Harvard Law
School: Re-de-constitutionalizing Corporate & Commercial Speech
 
What I see as a mess in my space is even more of a mess in
your space.  Struck by practitioners who
were candid about some of the directions—ways in which industry is very
deliberately using 1A attacks to unsettle regulation across the board.  Another perspective w/in many large companies
that don’t view what’s going on with total happiness, though they like
particular wins. Undoing entire regulatory space will not make some big
companies happy.
 
1978: Bellotti/Central Hudson: that was first non-expressive
business victory under 1A; emerged very late. 
US was dominant economic power by 1900. 
Business & corporations didn’t need the constitution to achieve
world economic dominance, despite the existence of extensive regulation of
corporate speech.  Pre-founding, we had
contract law (silence = assent); commercial law—assignability of notes; tort
law (fraud, silence); agency law (apparent authority); waiver, estoppel
(liability from speech); antitrust in common law (price-fixing); corporate law
(charter limits on purposes).  Pre-1931: Sherman
Act (speech about prices); Pure Food and Drug Act; state blue sky securities
laws; professional licensing laws. 
Pre-1952: Securities laws; FDCA; Wheeler-Lea Act; pre 1976: Drug
Industry Act; Truth in Lending Act; state consumer protection laws.
 
Business involvement in 1A SCt cases.  First none, then low level of activity
(media); then giant increase, then stabilized in SCt at about 1/2.  Due to Powell, who was corporate lawyer
before he went to SCt/technical and strategic genius in thinking about clients’
interest.  Memo to Chamber of Commerce,
1972: lays out his plan. “Under our const’l system … the judiciary may be the
most important instrucment for social, economic and policital change.” Didn’t
have this memo when they confirmed Powell. 
At odds w/standard conservative fictions about judiciary.  Business 1A cases ramp up when he’s on SCt.
 
Businesses get much higher win rates in cases.  Appeals court citations to Central Hudson
keep increasing.  Different citation
pattern than for Mapp v. Ohio or Roe v. Wade.  What drives this: people who want to disrupt
existing regulatory system to get advantage. Massive amounts of capital are
ready for any company w/a strategy to exploit the 1A for purposes not w/in
contemplation of Founders or those in 1900 etc. 
Among other cases, consider Safelite Group (2d Cir. 2014)—remarkable
factfinding about what’s important to consumers as a way of avoiding Zauderer and using the incredibly
malleable “fit” requirement of Central
Hudson.  Invites judicial discretion
to be abused. Asking for what we’ve got on DC Circuit, which is a lottery. 
 
Brilliant strategy: no fit b/c we can find some other sugary
drinks you’re not imposing labeling on. 
Requires regulation to be much tougher to survive scrutiny, which is not
generally something businesses would like if the regulation is adopted.
 
Rent-seeking: stealing/deceiving consumers is rent-seeking,
a form of cost that could be better spent on productive uses.  SCt has essentially said that preventing
rent-seeking isn’t a compelling purpose for 1A principles, in IMS v. Sorrell, preventing economic
regulation that enhances social welfare. 
In other cases, anti-rent-seeking becomes justification for applying
stricter scrutiny: in Safelite, court says “we don’t believe what was
articulated as justification; this was essentially protection for established
industry, so we’re going to apply Central
Hudson.”  This is worse than ordinary
rent seeking b/c it unsettles old policy, delays convergence on new policy.
What’s the current law on off label promotion? 
No one knows.  Suppresses
resolution of difficult policy tradeoffs. Can’t undo constitutional law through
Congress or rewrite statute through FDA—impose burdens on polity that we’re not
up for.  Forces greater restrictions on
liberty to justify lesser. 
 
For business: Encourages investment in litigation and
deception.  Discourages R&D,
reinforced by uncertainty.  Given
scarcity of time, dilutes strategic focus: C-suite can only focus on one or two
things at once.  Simple strategy is
required. Distorts careers in business. 
For society: more rent seeking = more corruption = less investment =
lower growth.
 
Legal options: Constitutional amendments?  Convention? 
What about the current constitution? 
Courts should ok anti-rent seeking as a compelling interest for
legislative and regulatory action. Defer to judgments, contra Safelite, of
those bodies where there’s a risk how it should be regulated.  Recognize that court-generated rentseeking is
a bad consequence of constitutional method. 
Reverse unworkable precedents that didn’t allow anti-rent-seeking moves
by gov’t, such as Bellotti, Central Hudson, Citizens United, and IMS Health,
all of which reversed previous precedents. 
 
In securities regulation, the DC Circuit judges have no
capacity to evaluate the output of the Federal Reserve Board—they don’t know
how to evaluate a change in the capital reserve rule.  The drug industry seems similar.  The idea of relying on drug companies to help
us—that’s not good enough.  Corporations
have no souls to damn/moral claims on free speech.  Citizens United should be decided as it was
for the nonprofit, but that’s b/c members of the nonprofit all have the same
interests in forming the nonprofit. 
Contrast to Chevron: almost everyone in this room is part owner of
Chevron.  Chevron is speaking on our
behalf?  We have no ability to discover
or respond to that speech.  The corporate
structure is not one in which individuals’ speech interests are typically well
represented or vindicated.  Caronia:
salesperson isn’t speaking out of his own individual interest, but to get paid
by his company. 
 
Current trend: Capitalism will completely prevent
established companies from doing business as usual. They will have to invest in
destroying regulation too or they will go bankrupt.
 
RT: is there any room for judicial factfinding? What if we
think the agency is captured?
 
A: the answer to that we had for the first few hundred years
of the republic is political action. Go to legislature, lobby for change.  There will be pockets that survive for a long
time with rentseeking in place.  The
uncertainty created now deters investment across the board, and creates
rent-seeking opportunities of its own.
 
It’s a cross-regulatory problem. My solution requires a
change in the composition of the bench, or a revelation for those on the bench
now.  In the meantime, you have a big
problem, but a bunch of people share it. 
Agency task forces exist to deal w/the constitution everywhere—could try
to coordinate strategies/share intelligence. The FTC’s problem in the Second
Circuit will become the FDA’s problem. 
 
If federal laws fall because of the constitution,
haphazardly, then all the states get to come in, b/c there will be no more
preemption. If you don’t want tort litigation in every state, if regulation
enhances your ability to sell things effectively—FDA’s success is totally
coincident with pharma’s success—then you should be dramatically worried with
return to state level, w/uneven and sometimes very strict regulation.
 
Q: other areas of 1A are different from off-label uses.  Can be used very paternalistically to block
people’s access to genetic information.
 
A: we already do distinguish between levels of scrutiny
depending on the type of speech. I’d be happy to give robust protection to
individuals. But when business interests capture your data, they have a lot
more money to litigate.  1978 was a
robust time for individual speech. 
 
Q: but regulations can restrict ability of clinical labs to
communicate information to individuals—to deliver results to a patient who wants
to hear them.  Regulator says no.
 
A: consumer protection requires difficult tradeoffs, and
courts using the 1A won’t do it well. There are real interests at stake in
getting some of this info.  But those
same organizations also by design have interests in exploiting the ordinary
person’s inability to understand this information without an intermediary.  Another natural outcome of where we’re going:
patch holes at federal level by starting to regulate doctors, and we’re already
starting to do that with health care costs/payors. If individuals on the ground
don’t pay attention, will find themselves victims of unintended consequences.
 
Q: my daughter had a rare disease for which all the
treatments are off label and off patent, but nobody can talk about it.  A lot of people don’t have the ability to
find that truthful information.  It’s
unconstitutional to keep away truthful information about the standard of
care.  Medical standard for drug induced
abortions is different from what FDA has indicated. To prevent people from
learning about information from the source.
 
A: I’m sorry for your family’s suffering. Others will suffer
if the 1A results in a radical cutback of regulation.
 
Q: we’re talking about truthful.
 
A: no, we’re talking about truthful in the eye of one
particular regulator after the fact.  To
enforce the law, the agency has to bring cases. 
If they don’t then there will be people who aren’t deterred.  Nobody reading Caronia could think that the statement at issue was truthful (this
is a very safe drug = 300 people had died). 
These are hard decisions. The question is who should decide. You don’t
like how the FDA does it. That’s cool.  But I don’t want the courts to rewrite drug
policy. That’s the wrong mechanism and the wrong branch.

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FDLI symposium part 2: First Amendment/Commercial Speech

Posted on October 30, 2015 by rtushnet
Session 2: Constraints on Commercial Speech and the First
Amendment
 
Moderator: Richard Cleland, Assistant Director, Federal
Trade Commission, Bureau of Consumer Protection
 
Tracing the FTC’s Line Between Advertising and Free Speech
Katie Bond, Senior Associate, Kelley Drye
 
FTC can only go after commercial speech.  A person who works for a company that makes
super-organic kale chips.  Talking on NPR
about healthy lunches for schools; health benefits of kale.  A person who works at a company that makes
lacrosse helmets; takes to Twitter after seeing a story they think grossly
mischaracterizes the concussion-preventing technology.  Commercial speech?  Current FTC approach seems to say yes and
yes, which is concerning.
 
Law on commercial speech: Three main principles: (1) Va. Bd.
of Pharm.: drug price advertising; didn’t need definition, but said in passing
that it is speech that merely proposes a commercial transaction.  (2) Then you started to see advertorial-type
publications.  Egg trade group published
editorials on eggs and heart disease. 
Seventh Circuit: science was a matter of public debate; but yes, it
proposes a commercial transaction at its core, even if it touches on a matter
of public debate.  (3) SCt looks at
protected speech + commercial speech, but not voluntary mixing—state regulation
of charitable fundraisers that required disclosure from professional
fundraisers.  Inextricably intertwined:
can’t regulate as commercial speech.
 
FTC v. POM: FTC didn’t address inextricably
intertwined.  They’ve taken action
against situations similar to the hypos. Went after a company selling green
coffee diet products, with lots of websites/ads, but also an appearance by
company owner on Dr. Oz show.  Didn’t get
inextricably intertwined standard coming in. 
Proposed a commercial transaction, but didn’t address whether that was
inextricably intertwined.  By contrast:
journalist’s editorial questions about Uber & responses that journalist
decided to print are inextricably intertwined, so it’s fully protected speech.
Companies and company employees have a right to comment in matters of public
debate, but the forum in which they can do so may be shrinking given FTC
guidance—media/social media.  Could be a
person who works for a food company, talking about nutrition; employee of
gunmaker who wants to be part of debate on gun violence; ob-gyn who provides
abortions but wants to be part of the debate. Would they still participate if
they thought their spontaneous comments would be treated like commercial
speech?
 
Rebecca Tushnet, Professor, Georgetown University Law Center
 
First note: abortion is different. The reason ob-gyns don’t
talk on camera is (1) death threats, and (2) regular 1A doesn’t apply even to
their noncommercial speech; maybe more protection for them, both physically and
in 1A terms, is the one thing that we can agree on.
 
When discussing commercial speech, I like to discuss the Stevens
concurrence in Central Hudson: Justice
Stevens proposed a functional definition. 
When protecting the consumer transaction, gov’t has very wide scope for
action; when regulating speech to achieve some other objective, like decreasing
violence, it must satisfy stringent standards. 
So the answer to whether many of these scenarios are commercial speech
is properly: it depends on what the gov’t is trying to regulate. If it’s trying
to decrease the amount of shoe shopping by limiting how many shoe ads can run,
no.  If it’s trying to decrease consumer
deception in the market for shoes, then the answer is yes. 
 
Speech standards are not just a one way ratchet, though it
looks like now.  Speech that isn’t even
commercial speech: warranties, contracts, tort liability for failure to
disclose.  If you expand the 1A too
broadly, you get problems.
 
Speech proposing a commercial transaction: far too narrow,
as Court itself has recognized.  Reason
to believe and buy = enough even if there’s no offer that can be completed by
acceptance.  Not just point of sale.
California Supreme Court’s context-based definition in Nike v. Kasky has some
useful features: Because the messages in question were directed by a commercial
speaker to a commercial audience, and because they made representations of fact
about the speaker’s own business operations for the purpose of promoting sales
of its products, we conclude that these messages are commercial speech for purposes of applying state laws barring
false and misleading commercial messages. 
 
Very few of the paper’s examples, if any, involve  commercial speech inextricable from political
or fully protected speech.  No law of man
or nature requires you to discuss homemaking with selling plastic bins—that’s
the SUNY
v. Fox case—and equally true that no law of man or nature requires you to
pitch drugs on morning news shows, which is in general fully protected
speech.  The Supreme Court made a special
rule for charities, and that’s understandable because they have to ask for
money to be charities—a better way to
say it is that asking for money isn’t always proposing a commercial
transaction, as we know from political situations.  The inextricably intertwined argument is not
a good fit for profit-seeking companies that sell goods and services.
 
Why worry: Consumers frequently treat advertising as less
credible than editorial content.  Social
proof—people think that a claim is more credible because it comes from another
person or people like them.  This is why
promoters say that word of mouth is the best way to sell—when advertisers
themselves believe that, maybe we should believe them.
 
Newswashing: if you can make your commercial speech
noncommercial by finding a friendly person to repeat it—in return for free
stuff, even—then that’s how many products will be sold.  Video news releases: produced by companies,
often provided to news stations with space so that the station’s own reporter
can introduce the segment.  False claims
in such presentations can do more damage because the consumer doesn’t know that
they are being sold to as opposed to informed.  Also potential for unfairness/anticompetitiveness
if endorsements are allowed without disclosure because only some businesses
have the ability to get this kind of apparently unsolicited coverage.
 
Consider an FTC action not mentioned in the paper, but worth
discussing:
Consumers who tuned in to programs like the Today Show,
Daybreak USA, and local newscasts may have caught interviews with guests billed
as “The Safety Mom,” a home security expert, or a tech expert.  Among the products they reviewed was ADT’s
Pulse Home Monitoring System.  Describing
it as “amazing” or “incredible,” they offered glowing details about its
capabilities, safety benefits, and cost. 
ADT had paid the three spokespersons a total of more than $300,000 and
provided two of them with free systems valued at $4,000 (not to mention free
monthly monitoring) to tout the ADT Pulse Home Monitoring System.   [clip!]
  This is an ad.
 
Especially since the FTC’s baseline here is just disclosure
when the consumer might find the connection with the advertiser to be material,
I think that’s the minimum necessary constraint.  As for knowing when disclosure is required on
social media and similar areas, I don’t think it’s actually that
difficult.  The FTC’s standard is: when
the connection would be material to consumers. 
There’s a tendency among anti-regulatory types to treat consumers like
incredibly savvy lawyers who scrutinize every claim carefully or discount it
heavily, but then to treat the new wave of social media endorsers as fragile
and easily confused.  But—at least when
the endorsers aren’t savvy as the Kardashians—they’re often just like the other
people in their social circles—they find some things intuitive and some things
confusing; they’re neither robots nor children. 
“I got this for free,” for me, falls on the intuitive side of a statement
required by regulation.
 
In terms of chilling effect, I’m unconvinced that having to
tell your endorsers to disclose their connections and having to possess
substantiation for factual claims causes a chill worth caring about.  This is, after all, the standard that must
already be followed in conventional advertising, so if the advertiser wants to
use a different method to make claims, it has to bring those standards with it
to the new advertising method.  If that’s
costly given the nature of the new method, that’s a cost the advertiser simply
must weigh.  After all, the flip side of
the argument is this: if the First Amendment requires us to allow a person to
make unsubstantiated or even untrue factual claims to tout her employer’s
product because she’s speaking on social media, why doesn’t it also require us
to allow those same claims in a paid ad? 
Does it require us to continue to allow her claims when the post goes
viral and 100,000 people see it?  Or: If
a person belongs to a multilevel marketing scheme and pitches her friends and
family to buy from her, should we not call that commercial speech because it’s
individualized? 
 
Call for ever-more-elaborate standards to deal with ever
more intricate scenarios invites gaming and evasion; FTC FAQs seem pretty
sensible to me, covering common situations and trying to teach advertisers how
to think about the next situation that pops up. 
There might be room for more FAQs as we go on, but the basic approach is
sound.
 
Bond: there is room to do both—loosen up and allow
legitimate public debate and go after fraudsters hawking wares through Dr. Oz.
 
The Promotion of Medical Products in the 21st Century
R. Alta Charo, Warren P. Knowles Professor of Law &
Bioethics School of Law, and Dept of Medical History & Bioethics,
University of Wisconsin
 
A long history of flimflam that did harm.  Overpromising of remedies, sometimes to the
detriment of other things that might have worked better. Sexuality, obesity,
bowel movements; many of the patent medicines contained cocaine, heroin, or
alcohol, so you felt better but didn’t get better. Some were genuinely
dangerous; “snake oil” really did exist. 
That is still with us.  Dietary
supplement industry: homeopathy, constipation remedy that’s 40% alcohol:
problem for alcoholics, teens—not something you necessarily check for on the
label.
 
Fraud: had to prove intent; hard to get a handle on things
before people were injured. 100s of deaths from “elixir of sulfanilamide”—because
victims were children and because this was at the time of the rise of the
regulatory state, had to at least prove safety (which is a relative issue: safe
for what?).  Still fraud-based; there’s
an implicit representation that a product is fit for purpose, and if it’s
unsafe that’s misbranding. 
 
Thalidomide: prescribed offlabel during pregnancy.  US was the only one w/o this scourge b/c
Frances Kelsey, FDA, didn’t feel that the safety data were sufficient.  For a long time, she was celebrated for this—led
to a cautious approach, demanding high levels of proof for clinical trials. We
prided ourselves on not being fast and careless. We now have a whiplash
problem: FDA told that it’s alternately going too slow or too fast.  Laetrile for cancer; HIV treatments for
HIV.  Now there are unexpected problems
in postmarket period: nonsteroidal anti-inflammatories like Vioxx or diabetes/Avandia;
now we’ve forgotten about those and demanded more speed. This is a repeated
pattern. Reactive to latest tragedy; frustrating but real.
 
Against this backdrop, offlabel promotion: we’ve watched
expansion of protections for commercial speech and corporate speech in other
contexts.  Now companies can take
advantage of safe harbors; respond to questions; distribute reprints (including
with risk assessments that differ from FDA’s). 
Previously: had to prove to independent arbitrator, FDA, that
risk/benefit profile was sufficient to justify approval before you could
promote the drug for that purpose.  Otherwise,
could be used but not promoted.  Burden
of proof problem.
 
Which brings us to Amarin:
Amarin had a statement that was really a nonstatement: truthiness: supportive
but not conclusive research shows that consumption may reduce the risk of heart
disease. How could that statement be falsified? 
Its only purpose is to suggest reduction in heart disease even though
the evidence before the FDA suggested the opposite—that there was no reduction.
They do that to get doctors to prescribe offlabel. That’s a statement about intended
use.  Even if there’s a single study,
that doesn’t take account of the other studies that show the opposite.  That’s a misleading omission.

What will be the incentive for anyone to prove safeness & effectiveness for
secondary/tertiary uses? You take away the economic theory behind the way we
regulate drugs to encourage research. 
There’s no logical stopping point: we might end up with postmarket
remedies only/even a requirement of intent to deceive. 
 
Subtle genetic/environmental components to disease are now
being targeted; any component could be targeted by promotion but could still be
highly misleading. It’s time to contextualize 1A against public health
consequences of abandoning what worked well since Kelsey saved us from limbless
children.
 
Discussant: Coleen Klasmeier, Partner, Sidley Austin
Shift of responsibility from FDA to courts seems to be
ongoing; paper argues that this will result in less use of evidence &
corresponding negative impacts on public health.  How confident are we that clinical decisions
are in fact currently based on the evidence that’s permitted by FDA? The way
that clinical decisions occur isn’t the way the reg scheme seems to assume.
Doctors don’t look at the FDA approved labeling and make decision; much
messier, heterogeneous sources.  A lot of
those sources are based on standards of evidence that probably wouldn’t pass
muster if FDA were to evaluate them. What’s our level of confidence/certainty
that current decisions are effective?
 
How confident can we be that outcomes have improved in the
years since FDA/DOJ began aggressively policing drug & medical device
information?  There was a period in the
1990s of more aggressive interpretation of statutory authority; less
comprehensive in 1980s.  Continuing
education moves in 1990s were more ambitious: are we better off?  Given how ubiquitous information is, does it
even make sense to look back at horse and buggy days?  [Um, given that vaccination levels are
dropping to lows not seen in decades, I’ll go with yes.]  Of course we shouldn’t make important policy
decisions in a vacuum, but is that the right context to inform the policy decision?  We have extensive provisions for mandatory
posting of certain details on clinicaltrials.gov; lots of transparency mandates
that are self- or government-enforced. 
Companies have to reveal their clinical data pretty quickly.  [But if the 1A applies fully, that won’t be
true.] Patients and payors also require real-time data; old-school assumption
that info will be scrubbed and censored by the gov’t. Old-fashioned to say that
some sources of information are allowed and others aren’t. Sorrell: that speaker discrimination isn’t ok under current
law.  Public discussion carries a
responsibility to be authentic: a fuzzy concept: better have your facts
straight.  Gov’t shouldn’t need to
preapprove.
 
“FDA doesn’t regulate practice of medicine”: no longer true
b/c of expanded drug safety authority, as well as growth hormone and device
authority.  Pretty clear that FDA has a
big legal problem on its hands b/c off-label use is legal.  If the gov’t continues to permit the conduct,
then how can you ban the speech about that conduct? Doesn’t make sense, amounts
to a constitutional pathology. 
 
Historical article doesn’t wrestle with constitutional
issues—courts are supposed to wrestle with constitutional issues.  Even in Caronia
and Amarin, gov’t conceded that the
statements were truthful and nonmisleading (though that may not have been true
in Caronia)—if true, the case law
would be hard to wrestle with.  Mature
regulatory scheme is on collision course with 1A, and the gov’t is not winning.
 
Options available to the gov’t: should talk about which
option we will use.  What will we do
next? Rather than saying we should maintain the status quo.
 
Charo: How confident we are that doctors use FDA info? As a
matter of policy, the fact they’re using info of varying levels of quality
doesn’t mean we should eliminate the best quality info.  How confident about health claims?  Well, compare health supplement industry—a variety
of things that are useless or affirmatively harmful—and now we’re talking about
going down to that standard for pharmaceuticals! 
 
Are we going to require each doctor to be academic reviewer,
looking for methodologies, hidden conflicts of interest, etc.?  That would further destroy the practice of
information. Nothing stops people from getting realtime information. We want
one really credible, independently verified source of info, so people aren’t
always trying to evaluate the speaker and the source for chemo drugs. 
 
At the center: what is it that constitutes misleading? That’s
a huge gray zone. That nonstatement is viewed as nonmisleading b/c it’s so
empty. But the court in Amarin tried
to rewrite the FDA’s own language.  The
FDA wanted to say “the available evidence doesn’t show …” the court said that
you couldn’t say that b/c it implied that the evidence showed otherwise. Forces
you to rely on the court’s view of the evidence—costly as well as wrong.  That worries me. [Me too!  Innumeracy is a huge problem in courts,
including In re Pearson.]
 
Cleland: Should Amarin finish its trial, if these claims are
currently blessed by the court? What if the trial comes out badly?
 
Klasmeier: Amarin affirmed that it was continuing on with
the study. Broader question of incentives in view of entitlement to make
qualified claims: this concern that research endeavor will be gutted is
overblown; there are lots of reasons other than regulatory approval to do these
studies. Payors drive clinical decisions and payors want data. There’s also
value in demonstrating to regulator your entitlement to make a claim.  [Ah, but which regulator? The court or the
FDA?]  These cases should be troubling to
people who care about FDA regulation, but they don’t represent what the
established players are doing.  [Neither
did the dietary supplement industry; neither did Google represent what
newspapers were doing.]  They want the
FDA to remain relevant.
 
Cleland: I’m not sure the battle will be decided by the core
of the industry. The outliers will want to drive stakes into the heart of the
regulation.
 
Klasmeier: that may be. But you’ll always have that challenge
no matter what improvements you make. [Unless you uphold the scheme.] Would
rather try to improve 1A and 5A treatment [5A!] by FDA.
 
Charo: Hope you’re right, but we already are seeing
disturbing indications in light of the fact that most research isn’t definitive
for a long time. Worlds of opportunities for selective reporting.  Genetic testing: tried to market tests for
indications that were absolutely not proven, but claimed to be relevant to
clinical outcome.  Tempted to use
incomplete indicators; as long as someone can say there’s one study that says
the product might be useful, we’ll have this promotion problem and
consumers/drs are not in a good position to evaluate that.
 
Cleland: Postmarket surveillance as an option?
 
Klasmeier: one of the options, but not the core industry’s
choice.  Industry position is docketed
w/FDA. More finely reticulated regulatory scheme, more responsive to different
stakeholders, w/central role for FDA.  Nobody
that I know is talking about taking FDA approved labeling out of the mix of
info available to doctors.  We’re talking
about data from Phase III clinical studies of a new use of an oncology drug,
where FDA hasn’t yet received the supplemental application but the data results
are published; or where NIH does a study of every atypical antipsychotic.
 
Charo: but those can already be distributed.
 
Klasmeier: you’re lumping everything into the category of
offlabel marketing, though the FDA does distinguish offlabel promotion from
permissible information of offlabel info. 
Standards aren’t clear enough about whether your speeck is on the OK
side of the line. The Justice Dep’t is also running around with FDCA theories
of liability that don’t always accord with what FDA says.  E.g., FDA just proposed a rule saying that
knowledge of offlabel use isn’t enough, but Justice is prosecuting someone
right now on that theory.  Together, a
huge incentive for self-censor. A ton of thoughtfully presented information
w/robust data sources, sometimes important to reinforce FDA labeling, not
getting out there.  We’re not talking
about flimflam.
 
Q: offlabel marketing to doctors/consumers.  Even more problematic to market to
consumers?  Dr serves as intermediary but
marketing to consumers still has effect.
 
Charo: The rules are different b/c of the absence of dr as
intermediary.  Another avenue of
analysis. Consumer isn’t even arguably in position to act as arbiter.  There is a real distinction in how ads to
consumers are done.   We do know DTC ads work to get consumers to
ask, and the structure of medical services means that doctors, given a choice
of what patient wants and what doctor might have prescribed, is likely to say “sure.”
 
Klasmeier: TV ads are very responsible—tell you to contact
your doctor. Harnessed by the FDA as additional information source to
patients.  Celebrex: when it came back
after the COX-2 scandal, the DTC ad was 2 minutes long, full of contextual
claims. That product still does some people good.
 
Q: would it be legally defensible to have a listener based
restriction?  Amarin: P said it was going to doctor w/its message.
 
Klasmeier: wouldn’t be defensible to go to consumers.
Industry recognizes that “it’s just different” practically and politically if
not legally. I’m personally uncomfortable with that distinction.  Anyone who has a kid knows they have to be a
savvy consumer.  Doesn’t feel right that
I can’t get all the information. 
[Lochner! Smart people will do well, sorry about the rest of you.]
 
Charo: Doctor adds a safety factors to otherwise dangerous
drugs.
 
RT: Strict/heightened scrutiny is not “is this good policy.”  That is one reason why the core industry will
not set the rules if we get Sorrell.  It is very difficult to imagine how the
Amarin standard would allow restrictions on DTC to stand.
 
Klasmeier: No one’s talking about Lochnerizing the First
Amendment.  [Other than some of the
panelists on panel 1, but ok.]

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FDLI symposium on constitutional challenges to FDA

Posted on October 30, 2015 by rtushnet
FDLI Symposium: Constitutional Challenges to FDA Law &
Regulation
 
Session 1:  Compelled
Speech
Moderator: Allison Zieve, Director, Public Citizen
Litigation Group, Vice-Chair, FDLI
 
First Amendment Limits on Compulsory Labeling
Nigel Barrella, Sole Practitioner, Washington DC
 
Review of commercial speech doctrine. Product labels are
commercial: propose a transaction.  Other
FDA “labeling”?  Labeling not sold direct
to consumers, such as Rx drugs, vaccines? 
Package inserts?  Medical
literature? (Caronia, Amarin case finding that it was unconstitutional to
regulate off-label promotion by the manufacturer.) 
 
DC Circuit’s rejection of tobacco images trying to promote
an emotional response; 6th Circuit pointed out that facts can
provoke emotions, but that doesn’t make them opinions.
 
Ongoing dispute: what does “uncontroversial” mean?  At a minimum, controversial can’t mean that
someone was willing to sue.
 
Ongoing cases: genetic engineering compulsory labeling for
foods; on appeal in 2d Cir.  Argument:
topic is simply too controversial for labeling. Vt. says the test is whether
the disclosure is factual, not opinion-based, not reasonably disputable.  Abortion regulations provide precedent for
saying that extremely controversial subject matter can’t be subject to
labeling, no matter how true it is.  If
that’s the test, though, then tobacco labeling shouldn’t have been allowed;
total fat etc. labeling shouldn’t be allowed.
 
Some cases suggest you can’t tell consumers what to do: “try
to quit smoking.”  But what about “Surgeon
General’s Warning”?  What about “This
statement hasn’t been evaluated by the FDA”?
 
Future of Zauderer: uncontroversial seems to be gravitating
to being fact-based; can’t tell consumers what to do but can provide them with
consensus.  Substantial interest in
things other than preventing deception as justification for disclosure?
 
Discussant: Bert Rein, Founding Partner, Wiley Rein
 
Zauderer: easy cases make bad law.  Deceptive by omission. If the alternatives
are ban or cure with disclosure, disclosure is what makes sense.  Listerine remedy case: disclosure that it
doesn’t kill germs corrects the falsehood you’ve been disseminating. 
 
Safety warnings: state’s interest is truth in market/health
and safety of consumers. That’s a reasonable interest, and the temptation is to
say “why not”?  Why not poison,
electrical hazard, flammability warning—state has a compelling interest no
matter what standard you apply. 
[Hunh?  Why isn’t public education
a less restrictive alternative?]  But you
can’t use that foundation of health, safety, fairness to go beyond and start
expressing opinions.   Also important to have standardized ways of
defining terms, like “gallons” or the names of foods—fairness/fair choice is an
important interest.  Another interest:
state using compelled speech to carry out a regulatory regime.  Labeling on OTC drugs—comprehensive responsibility
to take care of health and safety in drugs. 
Regulatory interest can be very important, and as part of that it may
need to regulate labeling.  That is a
generally recognized legit interest, but what is the limit on that?  44 Liquormart and compounding cases: you can
use speech regulation as part of a regulatory regime, but only as a last
resort.  Is this essential/can’t be done
another way?  Is it a reasonable advancement
of the interest the gov’t is serving?
 
The AMI case is therefore wrong.  There is no general regime governing safety
[of meat?].  Same with SEC disclosure of
conflict minerals—no relation to the overall regime.  [What counts as a general regime?]  Parsing the conflict minerals disclosure is itself
very difficult.
 
Suppose the gov’t was worried that people were ignoring
Christmas.  Could the gov’t require all
food sold in November to say “remember Xmas is coming on Dec. 25th”?  [No, because of the Establishment Clause, not
b/c of a general restriction on gov’t position-taking.]  That’s inconsistent w/1st
Amendment b/c inconsistent of your right to determine what you want to say,
though it’s truthful and beyond dispute (unless you are Greek Orthodox).  [Wow, where to start.  Okay: let me just say that the “you” is an
important issue here.  Does the
commercial speaker have interests of its own, or just interests in informing
consumers?]  Gov’t shouldn’t instruct
people what to buy.  State has no legit
interest in telling you (food seller) to put that message on food.  If the state can require GMO disclosure, then
it can also require you to disclose that there’s no benefit to GM-free food
that’s been shown.  [Yes, I believe that’s
the teaching of the modern understanding post-Lochner: the legislature in general gets to make these calls.  I’m not clear on why that’s the troublesome
outcome of the slippery slope.]
 
Authors: You Want a Warning with That? Sugar-Sweetened
Beverage Warnings and the Constitution
Sabrina Adler, ChangeLab Solutions, Oakland, CA (co-authored)
 
Increase in obesity; 135% increase in calorie intake from
sugar-sweetened beverage, half of Americans over age 2 drink at least one a
day. 63% of HS students.  Connection
between liquid sugar consumption and greater health problems v. solid
food.  Safety warning issues?  First Amendment, preemption under NLEA, and
dormant commerce clause.
 
Paper argues that the science justifies special treatment
for SSBs, and thus that warnings should be analyzed under Zauderer.  Current agreement
under courts of appeals: Zauderer is
not limited to the potential for consumer deception, but can extend to the
protection of public health.  Even if
substantial interest is required, health is such an interest.  No disclosure has ever been struck down under
Zauderer.
 
However, the evidence that labels decrease consumption (much less improve health outcomes) is weaker
than the evidence that labels increase
awareness of the risk.  Would be at
risk if strict scrutiny were applied; there are less restrictive means of
conveying the info such as public education.  (Or we could, you know, ban SSBs without
running afoul of the First Amendment.) 
What about the possibility of gov’t speech?  Forcing message on someone else’s label—boundaries
have not been spelled out, but most proposed labels do attribute message to the
gov’t.
 
NLEA has express preemption, no implied preemption.  No definition of what constitutes “nutrition
labeling.”  They argue that it should
mean the quantitative info required on the label, not qualitative info.  Thus shouldn’t be preempted by nutrition
labeling.  Nutrient claim/Health claim:
relationship between ingredient and health conditions. This is technically what
an SSB warning would do. But we argue that “claims” refers to positive
statements made by producers to increase sales—that was what Congress was
concern about.  Regs specify a list of
permissible health claims, and they’re all positive.  Safety warning exception to preemption?  Lactose (not a warning); BPA in baby bottles
(FDA specifically exempted from labeling regulation, and thus warning exception
couldn’t apply); coloring in colas that California added to Prop. 65/potential
carcinogen list (FDA specifically found it to be GRAS/generally recognized it
as safe—court found that unrelated to labeling, but predicate to labeling; thus
this type of warning shouldn’t be preempted and was subject to safety warning
exception to preemption).
 
Stuart Pape, Shareholder, Polsinelli
First Amendment never came up in the 1970s at the FDA—pre Virginia Pharmacy.  Doesn’t envy the task now.  How do you make sense out of current doctrine
combined with regulations that have been around for decades?  How do you advise a client? The principles
aren’t clear enough.
 
If SSB warning has to be on 20% of billboard/other ads, how
does that work?  It’s not scientifically
apparent that two products—12 oz. of 100% organic apple juice, which SF favors
b/c it’s not regulated, and equivalent amount of cola, which does get regulated—are
different; the apple juice even has more calories. So how does the city
conclude there’s clear evidence that one product should get a warning and the
other shouldn’t?  That is part of what
makes the warning constitutional.  FDA is
currently considering an “added sugars” line on the nutrition panel, and
establish a daily reference value.  But
the evidence to support that is weak/unscientifically justified, according to
past FDA heads. If there’s serious controversy over mere disclosure of
amount/reference point that’s subject to the warning, the warning itself is
controversial—singles out one type of beverage and forces them to say “this is
a bad product.”
 
Court rejected disclosure about radiation from cellphones
for similar reasons. 
 
Also hard to demonstrate substantial interest b/c you require
warnings for some things/not other things (the apple juice)—swiss cheese
approach makes it harder to defend. 
Also, it’s just an opinion: we have to do something about obesity; the
scientific evidence about health f/x is compelling (he thinks both of these are
opinions).
 
Discussion among panelists: anti-regulationists say alcohol
label may be ok b/c of the scientific evidence that it is really bad, not like other things, which is an interesting thing to
be assessing under First Amendment standards.
 
Pape: Amarin case: the court observes that the entire
premarket approval system for pharma is at risk under current standards. While
pharma industry would like more freedom to communicate w/doctors, they’re not
looking to have a system in which pharma reg is more like dietary supplement
reg, which is a free for all. Bears watching. 
(Careful what you wish for?  The
First Amendment doesn’t enact Mr. Herbert Spencer’s Social Statics, and neither
does it enact Bayer’s wishlist.  Welcome
to your new competitor, GNC.)
 
Zieve: Congress, in response to health tragedies, organized
the regulatory structure: illegal until approved, and then approved only for
conditions it’s safe and effective for according
to FDA. FDA doesn’t regulate the practice of medicine; FDA’s authority is
only over manufacturers. If you promote it for an unapproved use, that’s
illegal.
 
Rein: asymmetry: unlawful to tout, but lawful to use—that doesn’t
work.
 
Zieve: but the doctor isn’t engaging in off-label promotion.
 
Rein: what bothered ct in Amarin was that the manufacturer was disseminating information
based on well-controlled studies. If studies had been done by independent third
parties, would have been able to disseminate them.  May have promotional effect, but is
scientific speech. Disparity of regulation/intervention.  Nike v.
Kasky: the same asymmetry.  [No, a different
one.]  Kasky is regulated only by
defamation standard when he says Nike uses child labor; Nike’s speech is
commercial when it denies it does.
 
Zieve: In your remarks before you mentioned a valid warning
as integral to regulatory process—so did you actually mean that?  Vt. did a study showing 90% of consumers
wanted to know whether the food they bought had GMO ingredients—would that
matter?
 
Barrella: the whole reason that we extended protection to
commercial speech was consumers’ interest in getting truthful information.  DC Circuit en banc did say that consumer
interest was substantial interest in itself for country of origin information.
 
Rein: overwhelming support is poor indicator of
constitutionality; NH residents “overwhelmingly supported” putting “Live Free
or Die” on license plates.
 
Zieve: Facts/opinion?
 
Adler: commercial speech also makes a difference from Live
Free or Die.
 
Q: What about the standards of identity?  Hampton Creek’s “Just Mayo”—barred on
standards of identity, which is integral to a regulatory process, but what’s
the compelling interest in saying you can’t label your product “Just Mayo” just
because it isn’t mayo according to the standards of identity. 
 
Barrella: it’s a Central Hudson question. 
 
Zieve: this is false and deceptive advertising. People think
mayo means a certain thing; it’s like calling Coke orange juice.  Standard of identity makes the deception
stronger, but calling it just mayo divorces “mayonnaise” from its meaning.
 
Pape: maybe historically people knew what mayo was; standard
of identity developed b/c producers were making things that people had once
made at home. Congress wanted consumer to be able to go to store and pick up
what he/she would have previously made in the kitchen. The standards of
identity are definitions.  “Cheese food.”  It’s not cheese.  Signal that it’s not cheese. Same thing with
mayo. There is something called “mayonnaise dressing”: like mayo, but not.  Interesting to consider whether standards of
identity are now vulnerable to the First Amendment.  [Yeah, interesting’s one word.]
 
Q: soy milk = milk? 
Industry was laughed out—why isn’t this the same question?  Soy milk has an ingredient list.
 
Zieve: why would you read the ingredient list?  Soy milk isn’t called “just milk.”
 
Rein: State puts up these markers to provide a basis for
comparison in the marketplace. It’s meaningless unless it’s enforced. If std of
identity for mayo is legit exercise of gov’t power, enforcement is ancillary to
that fundamental Q.
 
Q: where in the First Amendment analysis do we deal with
false/misleading speech, trademark, Lanham Act?
 
Barrella: that’s just outside the First Amendment.
 
Adler: there may be affirmative misrepresentations in our
areas, but we’re more worried here about a lack of information.  Slightly different issue.
 
Rien: Zauderer is
a case of fraud by omission.
 
Zieve: Also consider influence of POM v. FTC, where DC Circuit said that a 2 clinical trial standard
was too onerous.  Pom says that if it has
one study, it can make those claims, even if other studies show no effect. Can
drug companies take advantage of this? 
Keep watching—cert petition just filed.

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Transformative work of the day, Pom Wonderful/Halloween edition

Posted on October 30, 2015 by rtushnet

Crafty blogger Cat has created an excellent Halloween costume (more pictures at link):

Her purse is a repurposed Pom Wonderful bottle.  Are there possible confusion claims?

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