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Coca-Cola Has a Rough Day at the Supreme Court

When a Supreme Court Justice suggests your product’s label “cheats consumers” it is probably not a good sign for your position on the merits.  When your brand is famous for slogans like “Can’t Beat the Real Thing” the observation likely carries a special sting.

During oral arguments yesterday, the Supreme Court appeared poised to breathe new life into POM Wonderful’s false advertising claim against Coca-Cola’s Minute Maid pomegranate blueberry juice.  The Justices expressed varying degrees of skepticism that Coca-Cola’s compliance with the Federal Food, Drug, and Cosmetic Act (“FDCA”) could insulate it from Lanham Act liability.

Coca-Cola argued that the FDCA precludes POM’s Lanham Act claim.  Coca-Cola pointed to provisions in a 1990 amendment to the FDCA that preempt state laws related to food labeling.  The goal of that preemption provision, Coca-Cola counsel Kathleen Sullivan argued to the Court, was to create uniform national food labeling standards.  Coca-Cola explained that “it cannot be that Congress meant to preempt these [state law] claims” that require more than just compliance with the federal standard while leaving similar theories based on federal law untouched.  In Coca-Cola’s view, since its label complies with the FDCA, POM’s false advertising claims are barred as a matter of law.

In a telling exchange, Justice Kennedy pushed Coca-Cola’s attorney on her client’s preemption rationale.  “Is it part of Coke’s narrow position that national uniformity consists in labels that cheat the consumers like this one did?” he asked Sullivan.  After Sullivan explained “[t]here is no [evidentiary] record” in the case, Justice Kennedy responded that if “Coca-Cola stands behind this label as being fair to consumers, then I think you have a very difficult case to make.”  He then expressed concern about how Coca-Cola’s position is that even if the label is misleading to consumers, “there’s nothing we can do about it.”

Justice Ginsburg put her finger on POM’s competitive plight.  “The consumer is able to buy the Coke product much cheaper and the POM product costs more; the consumer thinks that they are both the same, so they’ll buy the cheaper one,” she said.

Coca-Cola tried to diminish the impact on consumers by hinting at how an adverse ruling could open a Pandora’s box.  Sullivan explained that allowing Lanham Act claims against labeling like Coca-Cola’s would create “burdens and inefficiencies of having constantly shifting labeling standards imposed by juries, which will ultimately cost more to the consumer.”

Justice Sotomayor pressed Coca-Cola on how this case is any different from Wyeth v. Levine, 555 U.S. 555 (2009).  In Wyeth, the Supreme Court held that FDA approval of a medication and its label did not automatically insulate a drug manufacturer from liability under state tort law. 

“How is Wyeth any different?” Justice Sotomayor asked.  “The FDA here—it’s even worse, this case.  The FDA doesn’t approve the [juice] labels.  It never looks at them and says they are okay or not okay unless they decide to enforce the statute.”

Coca-Cola offered two potentially unconvincing reasons why Wyeth does not apply.  First, while Coca-Cola admitted the FDA did not preapprove the juice labels at issue in this case, “they couldn’t have gotten closer here” with the specificity of the regulations.  How this distinguishes Wyeth from this case is unclear.

Second, Coca-Cola maintained Wyeth was an implied preemption case.  By contrast, “the express preemption provision here . . . says that Congress wanted nationally uniform labeling regulations.”  The trouble with this position is that earlier in its argument Coca-Cola conceded that its case is not based on express preemption.  Coca-Cola earlier explained that since the “express preemption provision would make POM’s claims expressly preempted under State law, it follows a matter of inference from the national uniform scheme that Congress set up, that Lanham Act claims are precluded . . . to the extent the state claims would have been preempted.”

The Court may be unwilling to draw that inference.  “You are asking us to take what [the FDA] has said about juice as blessing this label, saying it’s not misbranding, when its regulations aren’t reviewed by the Court, when there is no private right of action, and say that that overtakes the Lanham Act,” Justice Ginsburg said.  “[I]t’s really very hard to conceive that Congress would have done that.”

Justice Kennedy echoed Justice Ginsburg.  “[Y]ou want us to write an opinion that . . . Congress enacted a statutory scheme because it intended that no matter how misleading or how deceptive a label it is, it if it passes the FDA . . . there can be no liability,” he said.

Another of Coca-Cola’s arguments backfired.  In attacking POM’s false advertising claim, Coca-Cola appealed to the ability of ordinary consumers to determine the content of its juice.  “[W]e don’t think that consumers are quite as unintelligent as POM must think they are,” Coca-Cola’s counsel explained.

“Don’t make me feel bad because I thought that this was pomegranate juice,” Justice Kennedy quipped.

“He sometimes doesn’t read closely enough,” Justice Scalia jokingly added.

The Court will issue an opinion in the case this summer. 

Katherine Heigl Sues Duane Reade. #LanhamAct #RightofPublicity

Take Twitter and Facebook and add a recognizable brand and some paparazzi pictures of a celebrity.  What do you get?  A lawsuit at the intersection of social media, trademark law, the right of publicity, and the First Amendment.

Katherine Heigl is an actress well-known for her roles in films like 27 Dresses and TV’s Grey’s Anatomy.  Duane Reade is a pharmacy chain with 250 stores in and around New York City.  Duane Reade maintains an active presence on social media, including on Twitter and Facebook.  In March, paparazzi captured Heigl carrying Duane Reade bags in New York City.  Duane Reade sent out the tweet below featuring one of those pictures.

duanereadeheigltweet

That tweet may prove costly for Duane Reade.  Last Wednesday, citing the tweet and Duane Reade's use of the photograph on Facebook, Heigl filed suit against Duane Reade in federal court.  Heigl’s fifteen-page complaint charges Duane Reade with (1) violating section 43(a) of the federal Lanham Act, (2) misappropriating Heigl's right of publicity under New York law, and (3) committing common law unfair competition.

Heigl's lawsuit could help set the rules for how brands use social media.  Many legal questions around social media are unsettled.  There is not much case law on the subject.  The murkiness is also a function of the medium.  Brands use social media to advertise.  But not every tweet or Facebook post from a brand is an advertisement.

"Twitter is a marketer's dream come true," Gary Vaynerchuk writes in his book Jab, Jab, Jab, Right Hook, "because it allows you to initiate a relationship with your customer."  The key to building a strong relationship is authenticity.  According to Vaynerchuk, brands leverage social media effectively when they carry on conversations like real people.  Brands squander the medium's potential when they bombard their followers with a steady stream of advertisements and coupons.

The outcome of this case will likely turn on whether the court sees Duane Reade's tweet and related Facebook post as a conversation starter or an advertisement.  On what side of that line does Duane Reade's content fall?

Throughout Heigl's complaint, her attorneys labor to paint Duane Reade's content, to include the tweet above, as advertising.  They write that "[t]he purpose of [Duane Reade's] social media activities is commercial advertising aimed at attracting customers and revenue."  The conversations Duane Reade initiates with its customers through social media are incidental to that overarching purpose.  In particular, Heigl's complaint points out how Duane Reade called itself New York City's "favorite drugstore" and "most convenient drug store" in its Heigl tweet and Facebook post.  The complaint also alleges that Duane Reade took the paparazzi photograph from celebrity gossip news site JustJared.com, "eliminating all news reporting aspects" of the post from the original source.

Duane Reade will try to distinguish the disputed content from commercial advertising.  To refute Heigl's social-media-as-advertising narrative, Duane Reade can cite to the exhibits Heigl attached to her complaint.  Exhibit A to her complaint is a 36-page print out of Duane Reade's Twitter feed.  Heigl's exhibit shows that Duane Reade's twitter feed contains links to products and coupons.  However, it also shows Duane Reade routinely distributing content that is unrelated to pharmacies and the products they sell.  For example, one tweet shows Duane Reade asking its followers “[i]nquiring minds want to know…What would be your dream car?”  In another tweet Duane Reade invites its followers to “[l]earn more about Greek culture at the Greek Independence Day Parade” in New York City.  Heigl’s exhibit also shows Duane Reade tweeting inspirational quotes at its followers from thinkers like C.S. Lewis.

Set against that backdrop, Duane Reade might be able to characterize the tweet as something akin to news reporting.  Duane Reade could argue that it was informing its followers of the fact that a celebrity visited one of its stores.  Duane Reade followers and other consumers might be more likely to think “that’s interesting” instead of “if Katherine Heigl shops there so am I.”  In that way, Duane Reade’s content becomes more about informing the public—which strikes at the heart of the First Amendment—than trading on Heigl’s fame.

If Duane Reade’s content is advertising, then the court will apply the Lanham Act and New York’s right of publicity statute.  Even if Duane Reade is successful in defending the Lanham Act claim by showing that consumers viewing the content are not likely to believe Heigl endorses or is otherwise affiliated with its products, its defense would likely falter on the New York right publicity claim.  All a violation of that statute requires is a use of a person’s “name, portrait, picture, or voice” in New York “for advertising purposes or for the purposes of trade” without written consent.  N.Y. Civ. Rights Law § 51.  If Duane Reade’s content is advertising, then Heigl will be able to hold it liable under New York law.

So what will happen?  My guess is that cooler heads will prevail and prevent resolution of an interesting legal question.  Look for the parties to settle and for Duane Reade to issue a press releasing announcing a donation to a charity of Heigl’s choice.  Whether Duane Reade shares the press release with its followers on Twitter or its Facebook friends may be a different story.

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.

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