Recent Happenings in APRM
October 2013Retractable Technologies v. Becton Dickinson & CO After Being Tripped Up By the Lanham Act, Jim Brown Rushes at Electronic Arts with a Right of Publicity Claim New California Law Allows Minors to Remove Regrettable Digital Content New European Commission Medical Device Safety Initiatives Aimed at Notified Bodies Will Impact Device Manufacturers As Well FDA Issues Final Guidance on Mobile Medical AppsFTC Trying to Read Between the Blurred Lines of Native Advertising
In what may be the largest false advertising jury verdict ever, last week a Texas federal jury awarded Retractable Technologies Inc. $113.5 million in false advertising damages against longtime rival Becton Dickinson & Co. Contrary to many media reports, the jury did not award any antitrust damages. Instead, the jury awarded $113,508,014 in "Deception Damages" and found in favor of plaintiff on all of its false advertising claims under the Lanham Act. So how did the plaintiffs lose on their main antitrust claims and still win over $100 million? Here's the real story about what advertising claims were found to be false leading to a massive verdict.
The Evidence Supported Deception, Not Monopolization
The main theme of Retractable's case at trial was monopolization. Essentially, this was an antitrust case about the monopolization of the market for safety syringes, conventional syringes and safety VI catheters. Counts One and Two of the 120 page complaint alleged antitrust violations of the Sherman and Clayton Acts and the Texas Antitrust Act. It was not until Count Three that the plaintiffs sought to recover for false advertising in violation of Section 43(A) of the Lanham Act. Basically, the plaintiff contended that the defendant's false advertising was the core evidence of monopolization and supported the antitrust allegations.
But the jury apparently didn't see it that way. Instead, the jury found that Retractable had not proven its monopolization claims, contractual restraint of trade claims, or exclusive dealing claims, all of which were submitted for the jury's consideration. And while the jury did find in favor of the plaintiff on the single claim of attempted monopolization of the safety syringe market, the jury expressly awarded zero damages for any antitrust injury. Basically, the jury rejected plaintiff's antitrust case. [See the Jury Verdict Form Here]
Becton Made Ad Claims the Jury Found Did Not Stand Up In Court
So how did the plaintiffs lose on their main claims and still win over $100 million? The evidence of monopolization was largely based on the defendant's advertising claims. And while the jury clearly did not buy the monopolization case, it was convinced—and apparently angry about—what it found to be a false and misleading advertising campaign. After an eight day trial, the jury found that the medical supply giant had engaged in deceptive advertising as part of its effort to defend its dominant position in the market for safety syringes.
Based on Becton's own web-based and print advertising, the jury concluded that all four categories of advertising claims identified by the plaintiff were false. Two categories of false claims pertained to what is known as "dead space" or "waste space." After injection, all syringes contain a small amount of residual medication left behind in the syringe tip and needle hub. The volume of residual medication is known as "waste space." Becton claimed that its syringes, not only had less waste space than its competition, but that it had "Data on file" to prove it. As it the evidence at trial showed, Becton had no such "data" on file. Instead, they only had some charts containing numbers based on unproven assumptions. Moreover, Becton also made claims that its syringes were the "World's Sharpest Needles" and that it had "Data on file" to support such claims. The jury found otherwise.
We do not know at present how the jury arrived at its damages calculation, or how that calculation relates to the allegedly false advertising statements. One can be reasonably confident that these issues will be argued on appeal, assuming the parties do not settle.
On October 11, Becton filed a motion for judgment as a matter of law, for new trial or for remittitur, arguing in part that the verdict was not supported by legally sufficient evidence and because the size of the verdict was larger than the maximum amount a reasonable jury could have awarded. One of Becton's core arguments on appeal is that false advertising and product disparagement cannot turn a "nonmonopolist into a monopolist." "Exagerrating the virtues of one's own product or misrepresenting the features of a rival's may be unfair, but they do not indicate a lack of competition and do not 'threaten to destroy competition itself.'" Becton Dickinson Motion, at 2, No. 2:08-CV-16 (E.D.TX.Oct.11, 2013). In essence, it argues, false advertising is evidence itself of competition unless in an extreme case of attempting to eliminate a rival from the market; the Lanham Act is focused on protecting specific competitors, not competition in general. The motion then goes on to summarize extensive evidence in the record tending to show that competitors were able to react to the allegedly false claims with their own counter-advertising, that consumers of these products were not influenced by the false claims, and that prices and sales for all competitors had been rising rather than falling. Becton also argued that the alleged damages did not flow from antitrust injury, but rather false advertising, and were thus inconsistent with the theory of liability on which the jury supposedly ruled.
The damages awarded in this case are a high water mark for a combine false advertising and antitrust case – many times higher than recent false advertising verdicts in other industries. In a previously published report, we have noted the increasing number of such cases that progress beyond preliminary injunctions to a trial on the merits, and the trend of courts in awarding damages (previously quite rare). It is a common misconception that the fact-finder must conclude that the false advertising defendant's conduct was egregious before awarding damages. If it stands, the verdict here again demonstrates that no such willful behavior need be proved.
The lessons learned from Retractable Technologies v. Becton Dickinson & Co. are straightforward:
- False advertising claims are often bolted on to other causes of action, such as antitrust and patent, but often assume great importance as each case progresses. Juries may have a difficult time understanding the complexities of monopolization, but they can latch onto and understand the difference between a true advertisement and a false one. It is a mistake to assume that the false advertising causes of action in any case are tangential or minor. They can easily become the most important.
- There is a high burden of proof in supporting technical advertising claims such as "less syringe waste." Such claims cannot be supported by means of assumptions, but rather must be supported with detailed measurements and surveys that adhere to statistically rigorous methods. Surprisingly, we often find some of the most sophisticated scientific companies, such as those in the life sciences and medical products industries, to be the least savvy about advertising substantiation. There is an art to matching advertising language to technical evidence, and one cannot assume that "close enough" is good enough for advertising compliance.
- By claiming that it had "data on file" to support its lower waste and sharpest syringe claims, the defendant transformed them into "establishment claims," subjecting to them attack based on the argument that the "data on file" did not support the claims. Had the "data on file" representation been omitted, defendants would have had a stronger argument that the plaintiff would have had to prove the claim false with affirmative evidence that its own products outperformed defendant's.
The case also highlights an emerging battlefield for false advertising cases – medical and health-related industries. With the advent of the Affordable care Act, the institution of new health-insurance exchanges, and greater consumer choice among providers, we have seen an unprecedented level of advertising from these kinds of entities. Unfortunately, unlike consumer products makers who have lived with comparative false advertising battles for decades, these kinds of fights are new turf for the healthcare community.