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Supreme Court to Define Interplay Between the Lanham Act and the Federal Food Drug and Cosmetic Act

Is prominently labeling a juice "Pomegranate Blueberry" when it actually contains less than 1% pomegranate blueberry juice actionable false advertising under the federal Lanham Act or is that claim barred by the Federal Food, Drug, and Cosmetic Act ("FDCA")?  The Supreme Court has granted certiorari in Pom Wonderful, LLC v. Coca-Cola Corp. to answer this question.

The case involves Coca-Cola's Minute Maid "Pomegranate Blueberry" juice.  Despite its label, Coca-Cola's beverage is 99.4% apple and grape juice.  Pom Wonderful makes a juice that contains only pomegranate and blueberry juice.  Concerned it was losing sales to Coca-Cola, Pom Wonderful sued Coca-Cola for false advertising under the federal Lanham Act.  Both the federal district court and the Ninth Circuit Court of Appeals rejected Pom Wonderful's claim, finding Coca-Cola's labeling acceptable under the FDCA.

Now Pom Wonderful's false advertising claim lives to see another day.  The Supreme Court's decision will be of great interest to the food and beverage industry.  It should be carefully watched by all industries regulated under the FDCA.

The Dietary and Nutritional Supplements Industry

As I wrote last month, dietary supplement manufacturers will want to keep tabs on Pom Wonderful's fate.  If the Supreme Court reverses the Ninth Circuit, supplement companies could see more Lanham Act lawsuits.  False advertising plaintiffs may be especially interested in airing these claims given recent negative publicity for the supplements industry stemming from research published in the journal Annals of Internal Medicine.

Pharmaceutical Manufacturers

Pom Wonderful's appeal should matter to drug manufacturers, particularly companies that shoulder the expense of bringing a drug to market through the FDA approval process.  Many times these manufacturers and their approved products face competition from drug products that have never been approved by the FDA.  Many courts, including the Fourth Circuit Court of Appeals, see, e.g., Mylan Laboratories v. Matkari, 7 F.3d 1130, 1139 (4th Cir. 1993), have turned back attempts by pharmaceutical companies to use the Lanham Act to mitigate the impact of such unapproved drugs.  The Supreme Court's decision should shed light on the viability of these claims.

Medical Device Industry

Advertisements about "FDA approved" medical devices are legion.  Many of those advertisements are inaccurate.  The reason is that most medical devices are on the market through the 510(k) clearance process.  This means the device manufacturer has shown that its device is "substantially equivalent" to another legally marketed device.  A medical device has been "approved" by FDA when the agency approves a manufacturer's (expensive) premarket approval application ("PMA").  If a device is on the market through a PMA that means the FDA has found the device safe and effective for its intended use.

Medical device manufacturers who have invested resources in the PMA process might be interested in using the Lanham Act to prevent manufacturers of 510(k) devices from using "FDA approved" to market their 510(k) device.  For reasons similar to the ones the Ninth Circuit gave in Pom, those claims have failed in the past.  Cf. PhotoMedex, Inc. v. Irwin, 601 F.3d 919 (9th Cir. 2010).  The Supreme Court may breathe new life into these claims.

Multivitamins, Dietary Supplements, and False Advertising. Will the Supreme Court Weigh In?

Multivitamin and dietary supplement makers are under fire.  A December 17 editorial in the journal Annals of Internal Medicine takes direct aim at the multi-billion dollar nutritional supplements industry.  After summarizing the results of three studies of the impact of supplements on chronic diseases, the editorial delivers this verdict: "Most supplements do not prevent chronic disease or death, their use is not justified, and they should be avoided."

That conclusion is difficult to square with how dietary supplements are marketed.  Claims on packaging like "cellular age defying formula," "boosts your immune system," and "improves digestive health" are commonplace.  While those claims are a far cry from the "fair balance" required in prescription drug marketing, statements on the label of a dietary supplement that describe the "general well-being from consumption of a nutrient or dietary ingredient" are acceptable under the Federal Food, Drug, and Cosmetic Act ("FDCA") so long as the supplement manufacturer "has substantiation that the statement is truthful and not misleading" and the claim is accompanied by a disclaimer.  21 U.S.C. § 343(r)(6); 21 C.F.R. § 101.93.

None of this is lost on false advertising plaintiffs.  In the past, suits have been brought against supplement manufacturers alleging false advertising and related state law claims.  See, e.g.Stanley v. Bayer Healthcare, LLC, No. 11cv862-IEG(BLM), 2012 WL 1132920 (S.D. Cal. 2012) (plaintiff asserting false advertising claim against probiotic supplement manufacturer).  The studies published in the Annals of Internal Medicine will embolden these plaintiffs.

One defense supplement makers have raised in these cases is the primary jurisdiction doctrine.  Since supplement labeling is addressed by the FDCA and pursuing violations of that statute is committed to the discretion of the FDA, supplement manufacturers argue that federal and state false advertising claims are essentially pre-empted.  Defendants thus urge courts to have consumers and competitors direct their complaints to the FDA as opposed to airing them through civil litigation.

At its January 10 conference, the Supreme Court will consider whether to take a case in which it could shed light on the viability of this defense.  The case, Pom Wonderful LLC v. Coca-Cola Co., involves Coca-Cola's Minute Maid Pomegranate Blueberry Juice.  Coca-Cola's juice contains less than 1% pomegranate and blueberry juice.  The other 99% is apple and grape juice.  Pom sells a competing juice that is a blend of only pomegranate and blueberry juice.  Asserting it was losing sales to Coca-Cola, Pom sued Coca-Cola for false advertising under the federal Lanham Act.

As I explained last year on this blog, the Ninth Circuit Court of Appeals rejected Pom's Lanham Act claim.  The Ninth Circuit found that "Congress and the FDA have thus considered and spoken to what content a label must bear, and the relative sizes in which the label must bear it, so as not to deceive."  Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1177 (9th Cir. 2012).  The court dismissed Pom's Lanham Act claim and told it to take its complaint to the FDA.  Id. at 1178.

Pom is asking the Supreme Court to reverse the Ninth Circuit's decision.  The Supreme Court has been considering the petition for more than a year.  Earlier this year, the Court asked the Solicitor General for the views of the United States.  While the United States criticized aspects of the Ninth Circuit's ruling, it ultimately recommended that Pom's petition for discretionary review be denied.  If history is any indicator, the Court will follow the Solicitor General's recommendation.  Those who serve clients in industries regulated under the FDCA will want to keep close tabs on what the Court does with Pom's petition.

Anti-Patent Troll Bill Passes House, Has Broader Implications

On December 5, a bill aimed at curbing patent trolls passed the House of Representatives.  If it makes it through the Senate and is signed by President Obama, the Innovation Act would be the most significant legislative reform to patent law since the Leahy-Smith America Invents Act became law in 2011.

Congressman Bob Goodlatte is the Innovation Act's primary sponsor.  In his remarks on the floor of the House, Representative Goodlatte explained that the bill is designed to prevent "abusive patent litigation."  Congressman Goodlatte put patent trolls on notice.  Citing the "abusive behavior" of trolls, he complained about patent infringement lawsuits that "target a settlement just under what it would cost for litigation, knowing that these businesses will want to avoid costly litigation and probably pay up."  "The patent system was never intended to be a playgrond for litigation extortion and frivolous claims," he said.

The Innovation Act certainly targets trolls.  It mandates disclosure of the ultimate entity that owns the asserted patents and limits a patent troll's ability to target consumers with a patent infringement suit.  But the bill does not stop with patent trolls.  It has significant implications for patent litigation.  Here are a few of the key provisions.

Changing the Standard for Pleading Patent Infringement—Infringement Contentions at the Outset.  Under current law, a plaintiff need only meet the vague pleading standard set out in Form 18 of the Federal Rules of Civil Procedure to state a claim for patent infringement.  Form 18 requires a simple, conclusory statement that the defendant is "making, using, and selling [products] that embody the patented invention."  No specific product names or model numbers are necessary.  No explanation of how the products infringe is necessary.

The Innovation Act would change that.  So long as the information is "reasonably accessible," a patentee would be required to plead as part of its complaint the infringement contentions most judicial districts require as part of their Local Patent Rules.  This means a patentee would have to specifically identify which of the accused infringer's products infringe by product name and model number at the outset of the case.  The patentee would also have to identify on an element-by-element basis which claims are present in the accused product.  Interestingly, the Innovation Act exempts Hatch-Waxman litigation from the heightened pleading standard it would establish.

Moving Toward "Loser Pays" in Patent Litigation.  The Innovation Act would establish a type of "loser pays" system for patent litigation.  The Act mandates that a "court shall award, to a prevailing party, reasonable fees and other expenses incurred by that party" in the litigation.  The Act gives a court discretion to decline to award fees if "the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact" or if "special circumstances"—i.e., if the award would cause "severe economic hardship to a named inventor"—would "make an award unjust."  The current Patent Act has a fee-shifting provision, but like the Copyright Act and the Lanham Act, attorney's fees awards are left entirely to the discretion of the court.

Changing Discovery in Patent Litigation.  The Innovation Act would limit the amount of discovery a litigant could conduct prior to the court issuing a claim construction order "to information necessary for the court to determine the meaning of the terms used in the patent claim."  The exception to this limitation would be discovery necessary to resolve properly raised, pre-Markman order motions such as a motion to dismiss for lack of personal jurisdiction, actions seeking a preliminary injunction, and other special circumstances a court may find.

Demand Letters and Willful Infringement.  Taking aim at "evasive demand letters," the Innovation Act would prevent patentees from using demand letters as evidence of willful infringement unless the letter sets out with particularity which patents are infringed, who owns the asserted patents, and how the letter's recipient is infringing the patents.

How Credit Unions Can Beat Patent Trolls

Not-for-profit cooperatives like credit unions are not immune from patent trolls.  This article in CU Times offers a way for credit unions to take on patent trolls—cooperatively.

Google Books is Fair Use

On November 14, 2013, federal district court judge Denny Chin of the Southern district of New York dismissed a long-running class action copyright infringement lawsuit against Google for running Google Books. This case has important implications for the fair use doctrine of copyright law in the digital era.

In 2004, Google began scanning books. Lots of books. Entire libraries full of books. In color. To date, the search engine giant has scanned over twenty million books into its database. Many of these books are subject to copyright, and Google made no attempt to obtain the copyright holders’ permission to scan the books. Initially, Google did share ad revenue with those copyright holders that gave permission for the scanning, who viewed the project as a means for promoting the books and making them discoverable. In 2011, Google ceased displaying ads in connection with the display of any books, and terminated the payments.

Users may search the books’ text, and Google displays “snippets” of books selected from a list of search results. For example, a user may peruse the first 70 pages (and front and back covers) of the 321-page book The Mediterranean History, including its many rich, full-color illustrations – with the exception of page 44. Users may then click an “About this Book” link, which provides information on each book, such as bibliographic information, information about the author, other editions, user reviews, and links to bookstores and/or libraries where the book may be found.

In 2005, several individual authors and The Authors Guild, Inc., the nation’s largest authors’ organization, sued Google in a class action for copyright infringement. The parties negotiated a settlement over 2008-2011, under which Google would gain blanket rights (excluding some individual works identified by copyright owners) to scan and index the books, run the searchable database, online access to individual books, and sell advertising on pages displaying book snippets. Google would pay 60-70% of ad revenues, which would be distributed to copyright owners by a Book Rights Registry created by the agreement. The settlement included provisions for so-called “orphan works” – books that are under copyright, but which are out of print, and/or for which the copyright owners are unknown or cannot be found. Over 500 objections to the settlement agreement were filed – including by Google competitors Microsoft and Amazon – and over 6800 class members opted out. In 2011, the court struck the settlement agreement, holding that it was not “fair, adequate, and reasonable.” The litigation continued.

Eight years into the litigation, Judge Chen granted summary judgment to Google, ruling that the creation and operation of Google Books, while violating the protections of copyright law, falls under the “fair use” provisions of 17 U.S.C. § 107. Fair use holds that the use of a copyrighted work for certain purposes – among which scholarship and research are explicitly listed – is not an infringement of copyright. The fair use statute lists four non-exclusive factors to be considered in deciding whether a use is “fair:”

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Considering the first factor, Judge Chen found Google’s use of the copyrighted works “highly transformative,” and that it does not merely supplant the work. Under the second factor, the judge found that the majority of books in Google Books’ collection are non-fiction and published, factors indicating fair use. Regarding the third factor, the court held that since only snippets are displayed, random pages are omitted from a displayed passage, and considering other protections Google built in to protect works from being wholly copied, the display of snippets is fair use. Finally, considering the fourth factor, the court held that “a reasonable factfinder could only find that Google Books enhances the sales of books to the benefit of copyright holders.” Going beyond the four statutory factors, the court stated,

In my view, Google Books provides significant public benefits. It advances the progress of the arts and sciences, while maintaining respectful consideration for the rights of authors and other creative individuals, and without adversely impacting the rights of copyright holders. It has become an invaluable research tool that permits students, teachers, librarians, and others to more effectively identify and locate books. It has given scholars the ability, for the first time, to conduct full-text searches of tens of millions of books. It preserves books, in particular out-of-print and old books that have been forgotten in the bowels of libraries, and it gives them new life. It facilitates access to books for print-disabled and remote or underserved populations. It generates new audiences and creates new sources of income for authors and publishers. Indeed, all society benefits.

The Authors Guild plans to appeal.

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