SPD’s TV ad was replaced with an internet-only ad with the
dialogue:
1st Woman: I have something to tell
you: I’m pregnant!
2nd Woman: Really?
1st Woman: I took this Clearblue
test. It’s like two tests in one.
Voice over: Only Clearblue tells
you if you are pregnant and estimates how many weeks since ovulation.
2nd Woman: Oh my God, I think I’m
going to cry!
Voice over: Weeks estimator, only
from Clearblue.
The commercial cut to the image of the digital screens with
“Pregnant // 1–2,” “Pregnant // 2–3,” and “Pregnant // 3 ” in an arc over an
image of the product with the phrase “ESTIMATED WEEKS SINCE OVULATION (UP TO 3
)” in grayish blue font below the arc and above the product. Then it cut to an
image of the Revised Package in the center of the screen with “Weeks Estimator”
in large, pink lettering jumping out of the box, distracting the eye from the
rest of the packaging. The commercial ended with the full Indications for Use
statement on screen for 15 seconds, but that was the only disclaimer. Other advertising was revised similarly.
The court found intentional deception, which is presumed to
be effective. “Time and again, SPD’s
staff recognized and understood that the Weeks Estimator’s result did not align
with how doctors express pregnancy duration and that this misalignment could
confuse consumers. Rather than clarify its product advertising, SPD’s staff
sought to exploit the confusion.” In
what is perhaps a lesson on witness preparation as well as on what judges
dislike, the court commented:
SPD’s witnesses acknowledged at
trial—often with considerable reluctance—the existence of the LMP convention.
After one such longwinded explanation, the Court pointedly asked Dr. Joanna
Pike, SPD’s Senior Global Pregnancy Product Manager, “If someone says to you or
you read somewhere I am four weeks pregnant without any further explanation,
what would you assume that means?” Dr. Pike, withdrawing deeper into her chair,
provided a convoluted answer before finally acknowledging that “I think in
general you may—you may—this, it is time since LMP because it is widely used,”
which she hesitantly admitted was “[t]he truth.” The truth it was.
Given their awareness of the convention, SPD employees
recognized the resulting likelihood of confusion. Dr. Pike wrote to her colleagues:
We should not suggest in U.S. that
the product tells you ‘Weeks Pregnant’ when we have been constrained by FDA to
say ‘weeks since ovulation’. Indeed, even outside of US, this product doesn’t
tell you weeks pregnant—if you are 1–2 weeks by [the Weeks Estimator] then you
are 3–4 weeks pregnant because the universal convention for dating pregnancy is
from the LMP not from ovulation…. I think FDA would NOT approve if we used
‘Weeks Pregnant’ in any materials and we are very likely to also confuse
consumers and might end up with challenge/complaint.
The court didn’t accept Dr. Pike’s explanation that she was
conveying the FDA’s views, not her own.
Members of SPD’s U.S. Advisory Board also highlighted the likelihood
of confusion. One Board member stated that it was “important not to contradict
this clinician-defined measurement,” while another raised concerns about the
digital display screens containing “Pregnant 1–2,” etc., noting: “Need to be
clearer what this means, i.e. from time of conception NOT LMP, we are Not
saying what we are doing.” Another indicated that they might change how
pregnancy was counted, but that it would be an uphill battle.
The TV ad was the “most glaring example.” An internal SPD PowerPoint described the ad
as “Best Friends with the insight of knowing it before the doctor visit.” SPD’s market research revealed that viewers
believed the product could tell a woman how far along she was before she went
to the doctor. This necessarily implied
that the product would provide the same estimate one would get from a doctor’s
visit.
In another lesson about communicating risk, even internally,
ClearBlue’s Worldwide Marketing Director, Ryan Daly, told his colleagues: “I
know we are being told by some that the FDA will be waiting for this ad, but I
really struggle with that given their setup … they have a pharma ad division
but none for [over-the-counter products]. Net, I view the risk as low.” The
court interpreted this as a statement that “the likelihood of getting caught
airing an ad that contravened FDA requirements was minimal because the FDA did
not have resources to police advertising for over-the-counter products.” (Of
course, the FDA ultimately did object, despite its lack of resources.) Daly was, however, concerned that the
networks would find the ad unsubstantiated because “some [networks] could get
shy should they read the entire intended for use statement. So for this, I
think we need to be very careful … I want us to see everything that we plan
to send the TV stations. Only give them what they ask for.” So rather than give the networks the full
Indications for Use statement—less than a page long— SPD gave the networks a
substantially truncated version that omitted the warning: “Your doctor
determines how many weeks pregnant you are based on the first day of your last
menstrual period and ultrasound results. This test provides a different
estimate that can not be substituted for a doctor’s determination of
gestational age.” Daly could not explain how the ad communicated the message
that the product’s estimate is different from a doctor’s estimate.
Again, the court was unconvinced by Daly’s explanation at
trial that he was just concerned about overwhelming the networks with too much
information. Among other things, SPD also used the truncated version of the
Indications for Use as the “super” at the bottom of the screen. The court also noted “his description of
something referred to internally as the ‘Bedford puke,’ an apparent shorthand
for the dangers of providing too much information to regulators and
broadcasters,” as well as his minimization of the extent of advertising by
saying that accused shelf trays were shipped only to a single retailer. That retailer “just happened to be Target.”
SPD’s employees also discussed creating a backup ad “that
correctly identified a key problem with the ad”: “Back up plan is Best Friends
with no mention of ‘knowing before doctor visit.’” Clearblue’s Brand Manager Kirsten Suarez
responded “Can we not wait to receive a letter [from C&D] and then edit?
I’m guessing we’d have time between receipt of the letter and actual need to
traffic in new copy/pull from the networks.” Again, the court was unpersuaded
by her later explanation that she wanted to refer to a doctor to encourage
women to get prenatal care. “[T]hese
communications show that SPD staff knew precisely what was false or misleading
about the commercial, but they chose to air it anyway.”
Suarez made “other troubling statements about the Weeks
Estimator’s advertising that suggest a deliberate attempt both to evade FDA
limitations and convey a false message about the product.” E.g., “One last thing, we can’t actually link
together the weeks and pregnant in the way it was on the last couple. What you
can say is the only test that estimates weeks, or the only test that also
estimates weeks, then the consumer will see Pregnant 1–2 Weeks in the windows
and put it together.” The court therefore concluded that SPD “knew that placing
the word ‘pregnant’ in proximity to ‘weeks’ would suggest that the product
provides an estimate of weeks pregnant,” just as the FDA then told it.
Suarez recognized that SPD couldn’t say the product
estimated “how far along” a woman was, but suggested including survey results
indicating that women want to know how far along they are because “[w]e can’t
say we’re doing it, just that women want to know.” She responded to a suggested use of “Find out
how far along you are,” with: “This is a tricky one, but the FDA doesn’t
actually want us to say that. I think it can be phrased as a question as you
had, or we need to use the ‘estimate weeks’ language.” Further evidence that marketers know and take
advantage of what Lanham Act jurisprudence often does not: there is no clear
express/implied distinction, and it’s easy to set up a message that works at
least as well, if not better, than an express claim.
SPD also understood that consumers didn’t have a good understanding of
ovulation. As Suarez stated, “Trust me,
it doesn’t really make sense to [consumers]. … [T]hey don’t have a knowledge of
the right days, poor understanding of the details, etc. and it’s not common
vernacular of how we would talk anything.” That’s why SPD didn’t want to use “ovulation”
other than as absolutely required. (I
still don’t get why they didn’t just add 2 to their estimate, like everybody
else.) A summary of a meeting between SPD employees and its outside marketing
firm included the observation that “[o]verall lack of consumers’ understanding
of ovulation may cause confusion. Need to address the reason why [healthcare
providers] use different method without saying it is wrong or suggesting that
Weeks Estimator takes the place of seeing [a healthcare provider].”
SPD “repeatedly suggested that it had tried in vain to
include a conversion chart on the outside of the product’s packaging that would
mitigate consumers’ confusion regarding how the product’s estimate of weeks
differs from a doctor’s estimate of weeks pregnant.” SPD first said that the
FDA had forbidden it from doing this, then that it understood the FDA’s
instructions as requiring removal “of all performance information concerning
the estimation of weeks function, including the Conversion Chart.” Then SPD
said that this determination required a “deep” read of the FDA clearance
letter.
“Because SPD often overstated other instances of the FDA and
broadcasters ‘requiring’ or ‘mandating’ as opposed to ‘permitting’ or ‘allowing’
certain conduct, the court didn’t credit SPD’s explanation, and the court’s own
reading of the clearance and hold letters didn’t indicate that the FDA intended
to prohibit SPD from including the conversion chart on the outside of the box. Plus, SPD often pushed back against the FDA on
other changes, but didn’t ask it to clarify about the conversion chart or argue
to the FDA that the conversion chart would aid consumer understanding. In any event, SPD’s own people were concerned
about confusion even when the conversion chart was on the outside of the
package.
The court also noted that “SPD’s intentional deception
extended to other aspects of its advertising not directly relevant here, such
as touting the fact to U.S. retailers that 15% of European purchasers of the
product had used the product to track their pregnancy despite the FDA’s
explicit restrictions on making such statements.”
C&D scored a hat trick: the ads were unambiguous and
literally false; even if the ads were ambiguous, SPD’s intentional deception
gave rise to a presumption of consumer confusion; and C&D presented
evidence of consumer confusion.
The literal falsity here was by necessary implication. “Considered together, the name of the product
(‘Clearblue Advanced Pregnancy Test with Weeks Estimator’) and the digital
screens (‘Pregnant // 1–2 Weeks,’ etc.), without any clarification, necessarily
imply that the product tells a woman whether she is pregnant and, if she is
pregnant, how many weeks pregnant she is.” Further, the product was an OTC test
marketed to women for use before they see a doctor. “[I]n the context of a home pregnancy test
that also provides an estimate of ‘weeks,’ the overriding message to consumers
is that this is an estimate of weeks pregnant that is consistent with a
doctor’s estimate of weeks pregnant.” This unambiguous message was false.
The presence of the full Indications for Use statement on
the side of the package did not change the package’s literal falsity. “[T]he entire statement is 206 words long,
separated into four paragraphs, and printed in minuscule font. Stacey Feldman,
C&D’s Vice President of Marketing for Women’s Health and Personal Care, credibly
testified that in her experience very few consumers will read the Indications
for Use statement on the side panel.” Many courts have disregarded a footnote
or disclaimer in fine print, and this one couldn’t fix the literal falsity. Nor did the package insert fix the problem;
along with being in fine print, it was only available after a consumer bought
the product, and many consumers wouldn’t review it, especially because of the
extensive ad campaign to which they’d already been exposed.
C&D also met the standard for showing implied falsity
because of the deliberate deception. The burden shifted to SPD to show that
confusion was unlikely, but SPD didn’t.
Indeed, C&D had evidence of both actual confusion and
likelihood of confusion. An April 2014 CBS affiliate news report reported that
an expectant mother who had purchased the Launch Package believed the product
provided an estimate of weeks pregnant that was consistent with how her doctor
would estimate weeks pregnant. The woman became concerned, wondering if her
“baby was not developing correctly,” when her doctor told her that she was
further along in her pregnancy than the estimate provided by the product. SPD knew about this story, but chose to do
nothing to address the confusion.
However, the court disregarded 310 non-US complaints made to SPD’s
consumer care line; only 17 of the remaining 30 showed a mistaken belief that
the product estimated pregnancy duration the same way a doctor would. This was
a small percentage of the nearly 1.9 million Weeks Estimators sold in the US
over the relevant period, but that fact didn’t favor SPD either, “because many
deceived consumers may not even know about the care line or may not be inclined
to call it.”
C&D also presented a consumer survey concluding that
roughly 20% of consumers thought that the product’s estimate of weeks was the
same as a doctor’s estimate of weeks pregnant. The export, Hal Poret, conservatively “assumed
that a respondent was deceived only if that respondent answered both that the Product
estimates the number of weeks a woman is pregnant and that the Product’s
estimate of weeks is the same as a doctor’s,” but even so this was a
substantial number of consumers.
The revised package and ads didn’t help. Even disregarding the issue of whether
consumers understood the added references to “ovulation,” they were still
implicitly false. SPD’s past intentional
deception mattered, even though “an advertiser who has learned the error of its
ways and has modified its advertising accordingly should not be forever held to
account for prior instances of bad conduct.” Still, “evidence of prior
intentional deception may be probative of whether subsequent corrections were
sincerely implemented.” SPD added “since
ovulation” to the package, but it wasn’t prominent, consistent with SPD’s
dislike of the term.
Regardless, Poret’s surveys also showed that between
16-17.3% of consumers were still confused by the revised package, which was
enough for deception.
The court’s analysis of the other ads proceeded similarly.
In the TV ad, for example, “[t]he dialogue between the two women only further
augments this unambiguous message when the first woman states that she knows
she is two weeks pregnant despite not having gone to the doctor yet because she
used the Weeks Estimator. This exchange communicates to the viewer that the
woman received the same estimate of weeks pregnant from the product that she
would have received had she gone to the doctor—which is false.” The super was of no use, not only because SPD
intentionally omitted clarifying language, but also because it was “in small,
whitish font that blends in to the white background such that even the Court
failed to notice it upon first viewing.”
After falsity, materiality was simple, given SPD’s marketing.
Injury: with literal falsity, no further extrinsic evidence
of injury to the plaintiff is required. Moreover, C&D provided evidence showing
a logical causal connection between SPD’s false advertising and its own sales
position. C&D’s market share in terms of dollar sales for its First
Response product had been steadily growing for over a decade. Clearblue’s
market share, by contrast, went from approximately 16 dollar share points at
the beginning of 2012 to 12.5 dollar share points in August 2013. After SPD’s extensively advertised launch,
Clearblue gained significant market share while First Response lost it. C&D’s expert credibly testified that this
sharp change couldn’t be attributed to any product feature other than the
central weeks estimator. SPD’s internal
marketing documents agreed, as did C&D’s market research.
SPD argued that C&D should have conducted “rigorous”
regression analysis to control for independent variables. This argument would be more appropriate in
the damages phase; C&D only needed to show a “logical causal connection”
and need not “come forward with specific evidence that [defendant’s] ads
actually resulted in some definite loss of sales.”
The court noted that, “at $2.6 million in annual sales per
dollar share point, even the loss of just one dollar share point is significant
in terms of revenue.” Plus, it was
likely that C&D’s countervailing response, such as offering rebates,
mitigated the decline in its market share.
SPD’s expert posited that the Weeks Estimator’s exciting new feature
grew the market as a whole, meaning that C&D’s dropping market share was
less harmful, but “[e]ven if the whole pie grew because of the new product, but
C & D’s share of that pie grew at a smaller rate than it would have in the
absence of SPD’s false advertising, C & D would still have lost sales on
account of the false advertising.”
A finding of false advertising here also furthered the
policy of having the Lanham Act and the FDCA complement each other, “allowing
the expertise, perspective, and resources of market competitors to augment
those of the FDA.” SPD was willing to
take the risk here given its perception of limited FDA resources—a fact that
also came up in Pom Wonderful. The trial confirmed Pom Wonderful’s statement that “competitors who manufacture or
distribute products have detailed knowledge regarding how consumers rely upon
certain sales and marketing strategies. Their awareness of unfair competition
practices may be far more immediate and accurate than that of agency rulemakers
and regulators.” The FDA didn’t have the
benefit of C&D’s surveys and additional evidence, revealing additional
confusion.
On to permanent injunctive relief. Irreparable injury/inadequacy of damages: The
parties compete directly, and there’s a logical link between SPD’s false
advertising and harm to C&D. Moreover, SPD’s disputes about C&D’s need
to control for numerous independent variables in establishing its damages “demonstrates
the difficulty of fully quantifying the loss of market share that C & D
suffered as a result of its direct competitor’s false advertising.”
Plus, both parties position themselves as “innovators” in
the market. SPD’s internal marketing
documents revealed that the TV ad produced a “halo effect” for the Clearblue
brand overall. “[I]t is difficult if not
impossible to quantify the harm to C & D caused by SPD’s falsely
advertising its product as possessing an innovative feature that it did not in
fact possess.” Further, false
advertising in a product category “may cause harm to that category as a whole.
Consumers who purchase the Weeks Estimator and then learn that it does not
actually estimate weeks pregnant the way a doctor does may lose confidence in
home pregnancy tests as a whole and may question innovative features offered by
other brands.” Thus, it would be hard to measure C&D’s loss of market
share, goodwill, and brand equity.
Balance of hardships: SPD had no protectable interest in its
false advertising. Public interest:
greater clarity in advertising certainly wouldn’t harm the public interest.
Thus, SPN was permanently enjoined from “communicating—either
literally or impliedly—that the Weeks Estimator provides an estimate of weeks
pregnant that is the same as a doctor’s estimate of weeks pregnant.” The parties were to meet and confer to see if
they could agree on specific language for the order. The appropriate language would extend to
messages conveyed, not to specific pieces of advertising. SPD was required to recall all initial and
revised packages currently on store shelves; this was a burdensome requirement,
but appropriate in light of the nature of the product and the degree of SPD’s
intentional deception. The court would
also consider ordering a corrective advertising campaign “to explain the difference
between the product’s estimate of weeks since ovulation and a doctor’s estimate
of pregnancy duration based on weeks since LMP.”
