Thursday, August 30, 2012

From Keywords to Naked Licensing: Notable Trademark Law Developments and Trends

Brand Protection Blog: From Keywords to Naked Licensing
On August 21, Fulbright IP attorney Christopher Kindel presented at the Austin Intellectual Property Law Association luncheon.

Discussing “From Keywords to Naked Licensing,” Kindel gave an update on notable trademark law developments and trends.

To view his presentation, visit the Austin IPLA web site and download his presentation.

Wednesday, August 29, 2012

FDA to Study “Composite Scores” in DTC Ads

Last week, the FDA announced plans to conduct two studies designed to explore how consumers understand and interpret efficacy representations made in “direct-to-consumer” (“DTC”) advertising for prescription drugs. See Notice.

Clinical Endpoints and Composite Scores

Before introducing a new drug into the market, pharmaceutical companies must prove the safety and efficacy of that drug through well-controlled clinical trials. The efficacy of some drugs can be determined using a single clinical endpoint. However, the efficacy of many drugs is measured using multiple endpoints, e.g., where a drug is intended to treat a condition that has multiple symptoms.

The results from individual clinical endpoints are sometimes combined into an overall “composite score.” A composite score is a single measure of how well a drug performs based on a combination of factors.

Although one drug may have a significantly better composite score than another drug that treats the same condition, the drug may not be significantly more effective (or effective at all) for treating a particular aspect or symptom of the condition.

Consumers and Composite Scores

Last fall, the FDA convened a focus group “to better understand how consumers understand the concept of composite scores.” According to the FDA, the work showed few consumers are familiar with composite scoring or its use in clinical trials, and most consumers “had difficulty correctly interpreting efficacy information that was based on composite scores.”

The FDA stated that these findings suggest that further research is needed to understand how the use of complex information influences consumer perceptions of drug efficacy.

FDA to Study Direct-to-Consumer Marketing

To address this, the FDA proposes to conduct two web-based studies of approximately 1,600 adults each. The first study will explore:

  • Whether consumers understand how efficacy is measured for specific drugs.
  • How well consumers understand the concept of composite scores.

The second study will examine:

  • Whether DTC ads based on composite scoring influence consumer perception of drug efficacy and risks.
  • How DTC ads can best deliver composite endpoint information to “maximize consumer comprehension and informed decisionmaking [sic].”

Proposal Criticized

The FDA proposal is not without its critics. Pharmaceutical blog, Pharmalot, has quoted Arnie Fried, a former FDA associate chief counsel, as noting: “Once again, the fact that FDA is only now proposing to study the use of composite scores in DTC advertising suggests that its conclusions about the misleading nature of various claims based on aggregate data, or based on a disaggregation of the aggregate data, are not empirically validated.”

Public comments on the proposed studies may be submitted to the FDA by October 22, 2012. See Notice.

Source: 77 Fed. Reg. 51027 (Aug. 23, 2012).

This article was prepared by Kathy Grant (( / 210 270 7182) and Saul Perloff ( / 210 270 7166) of Fulbright’s False Advertising Practice.

Tuesday, August 28, 2012

USPTO Requests Comments on Proposed Earlier Declaration of Use Deadlines

The U.S. Patent and Trademark Office (“USPTO”) is considering moving up the initial period for filing an Affidavit/Declaration of Use or Excusable Nonuse under Section 8 and Section 71 of the Trademark Act. 

The new deadline would fall between the third and fourth anniversaries of a trademark registration (or in a subsequent six month grace period) rather than between the fifth and sixth year anniversaries (plus six month grace period).

The purpose of the declaration of use requirement is to remove deadwood from the Register – registrations for marks no longer in use. The concept for the earlier filing period is premised, in part, on research indicating a higher percentage of new businesses fail during the first two years of their existence than in the three years that follow.

Comments are requested by October 15, 2012. See the complete USPTO Notice of Inquiry

Among the points that trademark registrants and practitioners might want to consider:
  1. The impact on businesses to have to incur the expenses of the use declaration two years earlier in the life of the registration, and to lose some of the economies that ensue from being able to combine the use declaration with the declaration for incontestability under Section 15 of the Trademark Act; 
  2. The impact on current docketing programs and protocols being used by registrants; 
  3. The impact on foreign entities owning U.S. registrations under Section 44(e) or Section 66(a) of the Trademark Act who will now need to prove use or excusable non-use, two years earlier in the life of their registrations; and 
  4. The impact on International Registrations dependent on the viability of a basic national U.S. registration for five years from the date of issuance of the International Registration. 
Source: Fed. Reg. 49425, Vol. 77, No. 159 (Aug. 16, 2012)

This article was prepared by J. Paul Williamson ( / 202 662 4545), Tara M. Vold ( / 202 662 4657) and Tracy S. DeMarco ( / 202 662 4653)in Fulbright’s Intellectual Property and Technology Practice.

Monday, August 27, 2012

Branding, Promotions and Tax Savings

Branding and promoting your goods properly can sometimes result in state tax savings, as United Parcel Service (“UPS”) recently demonstrated in a case involving the New York State Tax Law. See Slip Opinion (Aug. 16, 2012).

The case involved $3 million in sales and use tax that UPS paid for the purchase of shipping supplies and other materials that UPS provided free of charge to customers. Those shipping supplies ranged from envelopes and boxes to forms, labels, stickers and pouches.

UPS Marketing Strategies

When UPS entered the overnight air delivery business, it “implemented certain marketing strategies to promote awareness of its ‘brand’ and services . . . . To that end, the supplies at issue were designed for use in air delivery of packages with various themes specifically related to petitioner’s overnight air delivery services, as well as corporate sponsorships.” The court noted:
For example, one-day air envelopes were designed in red in order to convey urgency, and a diagonal line was used to demonstrate air and lift.
Other items carried designs illustrating petitioners sponsorship of NASCAR and the Olympics. In addition, each item bears petitioner’s logo.” Id. at n.5. The shipping supplies were provided without charge to customers. Of course, recipients of the UPS envelopes and boxes would see designs.

The court found it “significant” that customers were not required to use the supplies in order to use UPS’ services. Indeed, customers could also use the UPS supplies with competitive air delivery services.

Sales and Use Tax Exemptions 

New York’s tax law provides an exemption from sales and use tax for printed promotional materials sent to customers by means of a common carrier without charge to the customer. See N.Y. Tax Law § 1115(n)(4). New York defines “promotional materials” to include “advertising literature, other related tangible personal property,” which “includes but is not limited to, free gifts, applications, order forms and return envelopes, . . . but does not include invoices, statements and the like.” See N.Y. Tax Law § 1101(b)(12).

An administrative law judge found that the UPS materials qualified for the exemption, but the Tax Appeals Tribunal ruled that they did not, finding instead that they were primarily shipping supplies used by UPS in its air freight operation and they had only a remote relationship to advertising. 

Court Finds UPS Promotional Materials Tax Exempt

A divided appellate court reversed, and ruled for UPS on two grounds.

First, the court found the items were “promotional materials” because they “were not merely printed with petitioner’s name or trademark; they were purposefully designed to draw attention to specific aspects of petitioner’s business, primarily its air delivery services and, thus, are promotional in that they ‘publicize or advertise a product [or] institution.” (Citations omitted.)

Second, the court ruled that the supplies qualified as tax-exempt promotional materials as “free gifts” because customers were not required to use them to use UPS’ service and could use the items for other purposes, including shipping with other common carriers.1

Sources: The New York State, Department of Taxation and Finance; Matter of United Parcel Svc., Inc. v. Tax Appeals Tribunal of the State of N.Y.,, 2012 NY Slip Op. 05991 (N.Y. App. Div. Aug. 16, 2012).

This article was prepared by Sue Ross ( / 212 318 3280) of Fulbright’s Intellectual Property and Technology Practice.

1One member of the court found that UPS had met its burden of showing that the Tax Tribunal’s determination relating to “free gifts” was irrational but that UPS had not met its burden that its interpretation of “other related tangible personal property” was not the only possible rational interpretation. Another member of the court would have upheld the Tax Tribunal’s ruling as having a “rational basis.”

Friday, August 24, 2012

Creative Commons License 4.0 Comment Period Expires September 2012

Creative Commons, a “global nonprofit organization dedicated to the sharing and reusing of creativity and knowledge through free legal tools,” has published the second draft of its Creative Commons licenses (the “CC Suite”), dubbed “4.0.” The CC Suite is a set of free copyright licenses granting permission to licensees to use and adapt content, including for commercial purposes, in ways that would typically violate a copyright holder’s rights.

Several major institutions incorporate a CC Suite license into at least some of their practices. For example, GlaxoSmithKline (GSK) published data on more than 13,500 compounds that have shown activity against the malaria parasite using a license within the CC Suite. GSK has said that it will not seek any rights over these compounds if researchers discover a new treatment for malaria.

The 4.0 process was initially launched at the Creative Commons Global Summit in September 2011, with the multi-pronged goals of improving the CC Suite’s internationalization, interoperability, longevity, relevance to governments and intuitions in the field of data, public sector information, science and education, and supporting existing adoption models and frameworks. See Creative Commons Nov. 3, 2011 News.

On August 1, 2012, after a roughly five month discussion period, which drew comments and input from more than 50 countries, draft two of 4.0 was released for further evaluation and comment. According to Creative Commons, several provisions from the CC Suite 3.0 remain unchanged including, for example, the scope of the definition of “NonCommercial.” See suite comparisons.

One of the many interesting discussions surrounding 4.0 relates to CC Suite’s attribution rules, which Creative Commons hopes to improve upon. Up for discussion is whether reference to a URL where the original work may be accessed should satisfy the Suite’s attribution rules. See comparison of attribution changes.

The discussion and comment period for draft two of 4.0 is scheduled to expire on or about September 15, 2012. The third draft of 4.0 is expected to be published in October 2012. The final version of 4.0 is expected to be released in November or December 2012. Participate in the discussion.

Resources: GlaxoSmithKline’s Sep. 2010 Interim Update;

This article was prepared by Jessica S. Parise ( / 212.318.3397) in Fulbright’s Intellectual Property and Technology Group.

Thursday, August 23, 2012

Microsoft Unveils New Logo

Earlier this month it was reported that Microsoft would abandon the “Metro” brand to describe the tile-driven user interface on its Windows Phone and upcoming Windows 8 operating systems. Online tech journals, The Verge and Ars Technica, which helped break the story, reported that the decision was possibly due to threats of legal action relating to trademarks held by German retailer Metro AG.

Although Microsoft has not yet settled a new name for the user interface, the company has just unveiled a new corporate logo for the first time in 25 years.
Jeff Hansen, Microsoft’s General Manager for Brand Strategy, explained the news in a post on Microsoft’s Official Blog. Mr. Hanson wrote that “the Microsoft brand is about much more than logos or product names.” He explained:

We are lucky to play a role in the lives of more than a billion people every day. The ways people experience our products are our most important “brand impressions”. That’s why the new Microsoft logo takes its inspiration from our product design principles while drawing upon the heritage of our brand values, fonts and colors.

As shown above, the new Microsoft logo comprises two components: A new logotype and a symbol. For the logotype, Microsoft is using the same Segoe font it currently uses for its products and marketing communication. To the left of the Microsoft name is a symbol of four colored squares that evokes the Windows logo as well as the “Metro” interface.

“The symbol is important in a world of digital motion,” Hansen explained. “The symbol's squares of color are intended to express the company’s diverse portfolio of products.”

The new logo already appears on and in certain retail stores (Boston, Seattle and Bellvue). Microsoft states the it will soon be seen in all Microsoft stores and be used to support marketing Microsoft’s products.

Sources: Microsoft’s Official Blog; The Verge; Ars Technica;

This article was prepared by Saul Perloff ( / 210 270 7166) in Fulbright’s Intellectual Property and Technology Practice.

Reps Propose “Loser Pays” for Long-Shot Patent Suits

Congressmen Peter DeFazio (D-Oregon) and Jason Chaffetz (R-Utah) have introduced the SHIELD Act (Saving High-Tech Innovators from Egregious Legal Disputes, H.R. 6245) to combat the perceived threat of non-practicing entities (NPEs) to American innovation.

Specifically, the Act would allow a court to award attorneys’ fees to a prevailing party in cases involving computer patents without a showing that the losing party brought the case in subjective bad faith.

Currently, section 285 of the Patent statute gives a court discretion to award reasonable attorney fees to the prevailing party in an “exceptional” case. 35 U.S.C. § 285. As the Federal Circuit highlighted earlier this month, the current statute requires a prevailing party to establish that a case is “exceptional” by clear and convincing evidence. See Highmark, Inc. v. Allcare Health Management Systems, Inc., Case. No. 2011-1219 (Aug. 7. 2009).

There is both a subjective and objective component to this showing:
It is established law under section 285 that absent misconduct in the course of the litigation or in securing the patent, sanctions may be imposed against the patentee only if two separate criteria are satisfied: (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.
Id. The new legislation would amend § 285 to allow a court to award “full costs,” including reasonable attorneys fees, to the prevailing party in a dispute if the court determines the losing party alleged infringement of a computer hardware or software patent without “a reasonable likelihood of succeeding.”

In recent years, lawsuits by NPEs have captured the attention of Congress and the public. A June 2012 study estimated that NPEs cost defendants $29 billion in 2011 alone.

For more, please see:

Wall Street Journal Law Blog, “Bill Would Require Patent Trolls to Pay Legal Costs”, “Bill would force patent trolls to pay defendants’ legal bills”

Corporate Counsel, “Congress Takes Aim at ‘Patent Trolls’ With SHIELD Act”

Boston University School of Law: “The Direct Costs from NPE Disputes”

This article was prepared by Andy Liddell ( / 512 536 3043) from Fulbright’s Intellectual Property Practice and Saul Perloff ( / 210 270 7166) from Fulbright’s False Advertising Practice.

Wednesday, August 22, 2012

Anti-Counterfeiting Legislation Enacted

To combat the continuing problem brand owners and the public have with counterfeit trademarks, Congress has enacted two new pieces of legislation.

First, the National Defense Authorization Act (“NDAA”) was signed in December 2011 and went into effect earlier this year. The NDAA increased penalties for counterfeits found in the military supply chain.

Second, on July 9, 2012, President Obama signed into law S. 3187, the Food and Drug Administration Safety and Innovation Act (“ACTA”). ACTA enhances penalties for trafficking in counterfeit drugs.

This article was prepared by Mark Mutterperl ( / 212 318 3183) of Fulbright’s Intellectual Property Practice.

Tuesday, August 21, 2012

Addressing Rogue Websites

As eCommerce accounts for an ever-growing share of retail sales, rogue websites have become a special concern for brand owners seeking to protect their valuable intellectual property from counterfeiters and others seeking a “free ride” on the brand’s goodwill.

Just last week, the Department of Justice announced that a man had plead guilty to selling more than $2.3 million in pirated software through several websites he ran from his Annandale, VA, home.

While some brand owners have strict controls in place--for regulatory or brand protection reasons--limiting the number of web sites offering their goods, others do not. Either way, brand owners are well-served by monitoring the internet for rogue websites.

Suspicious Websites

Brand owners and consumers alike can look for these common-sense indicators that a website is not legitimate:
  • suspicious logo, i.e., upside down, wrong color, wrong location, outdated. 
  • Poor grammar and spelling. 
  • Complaints about the site found on the web. 

URL Changes

The SANS Institute recently reviewed this issue and added another flag to help identify fake web sites:
Criminals will often use the brand name of the goods you are searching for in the URL so they look legitimate to you. But they also frequently change the URLs of their counterfeit websites, making it harder to shut them down. As a result, criminals will often use several different domain names and e-mail addresses during the purchasing process. For example, . . . the cyber criminals may have one domain name for the website (such as, another domain name for the e-mails they send you (such as from, and a third domain name for support e-mails (such as All these different domains are another big red flag. See “Counterfeit Websites,” OUCH! Aug. 2012.
The ownership information of those various domain names may also assist the brand owner in determining whether a web site(s) is suspicious. In some instances, the brand owner may be able to have those domains transferred to the brand owner.

Sources: The U.S. Dept. of Justice for the U.S. Attorney’s Office for the Eastern District of Virginia website; The SANS Institute website; and The SANS Institute OUCH! Aug. 2012.

This article was prepared by Sue Ross ( / 212 318 3280) of Fulbright’s Privacy, Competition and Data Protection Practice.

Tuesday, August 14, 2012

EU’s Highest Court Allows Extended Patent Protection for New Medical Uses of Known Products

Last month, the European Court of Justice (ECJ) ruled that drug companies are eligible for extended patent protection on new medical uses for known products.

Neurim Pharmaceuticals Ltd. was entitled to a supplementary protection certificate (SPC), which provide additional patent protection for pharmaceutical products beyond the expiration date to compensate for the time spent getting regulatory approval.

In 1992, Neurim applied for a patent on using melatonin as an insomnia treatment. It was not until 2007 that the company was able to develop a drug based on the patent and obtained regulatory approval.

With less than five years remaining on the patent, Neurim applied for an SPC which the U.K. IPO rejected in 2009, citing a prior method of using melatonin to regulate sheep breeding.

Neurim appealed to the Court of Appeal for England & Wales, which asked the ECJ to determine whether a medicinal product that has received regulatory approval for one use should be prevented from obtaining an SPC based on the previous approval of a different use for the same active ingredient.

Contrary to the IPO, which defined the product as the active ingredient melatonin itself, the ECJ concluded that the product in question was the method of using melatonin to treat insomnia. Therefore, Neurim had the first approved use of the product and was eligible for an SPC.

The ECJ concluded that since “the fundamental objective of the SPC regulation is to ensure sufficient protection to encourage pharmaceutical research,” new uses of known active ingredients are entitled to SPC protection.

Commentators have remarked that the decision is one of the most significant in decades, and changes the European pharmaceutical landscape for the better.

Sources: IP360, PatentDocs

This article was prepared by Andy Liddell ( / 512 536 3043) from Fulbright’s Intellectual Property Practice.

Monday, August 13, 2012

Rhode Island Physician’s Assistant Sentenced to 12 Months for Taking Kickbacks from Orthofix

On July 19, 2012, the Department of Justice announced that Michael Cobb, a Rhode Island physician’s assistant, was sentenced to one year incarceration after pleading guilty to receiving kickbacks from Orthofix, Inc.

From 2004 to 2011, Orthofix paid Cobb approximately $120,000 for arranging the implantation of Orthofix bone growth stimulators. 

The sentence is the result of a broader investigation into Orthofix’s marketing activities that has led to a series of guilty pleas. 

From December of 2011 to May of 2012, two Territory Managers for Orthofix pled guilty to health care fraud, a Regional Manager for Orthofix pled guilty to perjury, and a Vice President of Orthofix pled guilty to paying kickbacks. 

According to the Department of Justice, the investigation remains ongoing.

Read the Department of Justice press release.

This post is prepared by Fulbright senior associate Peter Leininger ( / +1 202 662 0278) in Fulbright's health care practice.

Friday, August 10, 2012

More Good Than Harm: Cease-and-Desist Letters in the Viral Age


It seems that every few months, this story plays out: A trademark owner sends a cease-and-desist letter to someone it legitimately believes is infringing its trademark rights. The infringer in these stories – often a small business owner or charitable group – takes one look at the pages of legalese and heads straight to the local TV station or Facebook to fight a battle in the court of public opinion. A furor is raised in which the trademark owner is painted as a bully. Petitions are signed and the trademark owner is chastised in the media. While the controversy inevitably dies down, the concern is that the trademark owner may have done its brand more harm than good.

Invariably, these media accounts omit any explanation that U.S. trademark law requires owners to police their marks or risk losing them to genericide, or that the legal requirement of a “likelihood of confusion” is more complicated than simply comparing Product X and Product Y. Regular people – that is, non-trademark lawyers – are unlikely to be familiar with the ins and outs of trademark law, but the aggregate opinions of those same people are what gives a brand its strength. In a time where anything can go viral, trademark owners are beginning enforce their trademark rights with an eye toward their customers and the public at large.
[image via Esquire]
Jack Daniels’s offers an example of media savvy brand protection in the viral age. “The Nicest Cease-and-Desist Ever” rocketed around the web recently after the alleged infringer (an author) posted it on his personal blog. In a one page letter, Jack Daniel’s trademark lawyer Christy Susman explains in a neighborly way that the cover of Patrick Wensink’s book, Broken Piano for President, infringes the distinctive JD marks. She explains that while Jack Daniel’s is flattered, allowing uses like this risks weakening their brand. Susman requests that the author change the cover with the next printing, but offers to help with the costs if he would change the cover sooner than that.

And that’s it. No legalese. No threatening language for internet commentators or TV anchors to latch onto. The simple sentiment of “This is our brand, we are required to protect it, so let’s work it out” was all it took for this letter to be anointed the “nicest ever.” Jack Daniel’s got some free publicity and looked good in the public eye.

Of course, every infringement presents its own set of facts and trademark owners cannot always be as restrained as JD was here. A firmer hand or a stronger stance may be required from the outset or might eventually become necessary. But as an opening shot to a “friendly infringer”, a brand owner could do worse than following Jack Daniel’s lead.

This article was prepared by Andy Liddell ( / 512 536 3043) from Fulbright’s Intellectual Property Practice.

Thursday, August 9, 2012

FTC Announces Google Settlement

The FTC has just announced a settlement with Google Inc. resolving alleged privacy violations involving Apple Inc.’s Safari Web browser.

Under the terms of the agreement, Google will pay a $22.5 million civil penalty.

The matter stems from allegations that Google misrepresented to Safari users that Google would not place tracking “cookies” or serve targeted ads to those users.

The press release and consent documents may be found at:

This article was prepared by Erika Brown Lee ( / 202 662 4643) of Fulbright’s Privacy, Competition and Data Protection Practice

Permission of Federal Dilution Claims Against Validly Registered Federal Trademarks in the Works

On August 1, 2012, the House Judiciary Committee passed, without amendment, H.R. 6215, introduced by Rep. Lamar Smith (R-Texas) to “correct an error” in the Trademark Dilution Revision Act and, thereby, permit federal dilution claims currently barred by the Lanham Act (15 U.S.C. § 1125).

Claims against the owner of a valid trademark registration are currently barred where:
  1. the claim is brought under the common law or state statute and seeks to prevent dilution by blurring or tarnishment (§ 1125(c)(6)(A)); or 
  2. the claim asserts actual or likely damage or harm to the distinctiveness or reputation of a mark, label, or form of advertisement (§ 1125(c)(6)(B)). 
Thus, the law bars all dilution claims against the owner of a validly registered federal trademark , whether those claims are brought under federal law (§ 1125(c)(6)(B)), state law or common law (§ 1125(c)(6)(A)).

The proposed amendment would only bar claims brought under the common law or state statute:
  1. seeking to prevent dilution by blurring or tarnishment (§ 1125(c)(6)(B)(i)); or 
  2. asserting actual or likely damage or harm to the distinctiveness or reputation of a mark, label, or form of advertisement (§ 1125(c)(6)(B)(ii)). 
Thus, as amended, 15 U.S.C. § 1125(c)(6) would bar state and common law dilution claims, but permit federal dilution claims, against the owner of a validly registered federal trademark.

Sources: House Judiciary Committee, Office of the Law Revision Counsel of the United States House of Representatives

This article was prepared by Todd Hambidge ( / 212 318 3010) of Fulbright’s Intellectual Property and Technology Practice.

Wednesday, August 8, 2012

Merck’s Claritin® Faces Challenge To Its Madagascar Co-Branding

Last month, The Public Health Advocacy Institute (PHAI) filed a complaint with the FTC alleging that Merck & Company’s marketing of its pediatric Claritin® products violate FTC precedent concerning promotional campaigns directed toward children.

The promotion in question concerns OTC pediatric Claritin® and characters from the recent Dreamworks film, Madagascar 3.

The marketing campaign involves packaging, advertising, promo movie tickets, games, activity guides, and social media.

According to the complaint, Dreamworks licensed its Madagascar characters to “at least 15 major companies,” affiliating it with brands such as Dole, Airheads, Blue Bunny, Sun-Maid, Betty Crocker, and McDonald’s.

PHAI’s complaint asserts:
  • The affiliation of Madagascar characters “creates a situation whereby children may perceive Grape-Flavored Children’s Claritin chewable tablets and syrup as candy;” and 
  • “The Madagascar campaign for Children’s Claritin may induce children to request Merck’s brand-name OTC drug” and feign symptoms “to get medicine perceived to be candy.”
PHAI relies upon a consent decree that followed FTC’s 1977 complaint against Hudson Pharma. Corp.

Hudson advertised its children’s OTC supplements using a “Spiderman” character endorsing the product on the children’s TV show, “The Electric Company,” featuring “Spidey.”

The FTC alleged children would be unable to distinguish between the show’s Spidey character and Spiderman, the endorser of Hudson’s vitamins.

Finally, FTC charged advertising to children would induce them to take excessive amounts of vitamins causing injury. The case settlement before trial.

Claritin® advertising was previously challenged by a public interest group.

In 2001, New Jersey Citizen Action sued Schering (n/k/a Merck) after it launched its first direct to consumer advertising campaign featuring Cole Porter’s “Blue Skies.”

The group claimed unconscionable advertising practices that promulgated false and deceptive assertions. See New Jersey Citizen Action, et. al. v. Schering-Plough Corporation, et. al. Complaint.

The trial court granted Schering’s Motion to Dismiss which was affirmed by the appellate court. The N.J. Sup. Ct. denied cert.

Source: PHAI’s June 20, 2012 Letter to FTC

This article was prepared by Bob Rouder ( / 512 536 2491) of Fulbright’s False Advertising Practice.

Monday, August 6, 2012

UPDATE: KV Files For Chapter 11 Bankruptcy Protection

Last week, we reported on K-V Pharmaceutical’s (“KV”) litigation against the FDA seeking to require the agency to enforce KV’s exclusive rights to market its brand drug, Makena®.  As we noted, KV asserted in the case that it would likely run out of cash if the court did not grant the injunctive relief KV sought.  On August 4, 2012, KV and certain KV subsidiaries filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code. In its press release KV states:

[KV] has been unable to realize the full value of its most important product, Makena® . . . because of a lack of enforcement of the orphan drug marketing exclusivity granted to K-V for Makena® by [FDA] . The lack of enforcement has also led certain state Medicaid agencies to impose barriers to access to Makena® on low-income pregnant women at high risk for recurrent preterm birth, despite those states’ legal obligation to cover FDA-approved drugs.

At this point, it is unknown how the bankruptcy will impact KV’s ability to continue to fund the Makena® litigation.

European Commission Sends Statement of Objections to Lundbeck Over Patent Settlements

On July 25, 2012, the European Commission (the "Commission") announced that it has sent a statement of objections (the "statement") to Danish pharmaceutical company, Lundbeck, as part of its investigation into agreements concluded with four generic competitors concerning the antidepressant Citalopram.

The Commission launched formal proceedings against Lundbeck in 2010, following its pharmaceutical sector inquiry.

The statement outlines the Commission's objections, stating that it is the Commission's preliminary view that Lundbeck concluded agreements with generic competitors to prevent the entry to the market of competing generic versions of the drug.

It is alleged that Lundbeck entered into agreements, involving substantial value transfers, with generic manufacturers who subsequently abstained from entering their generic versions onto the market.

The Commission alleges that the "value transfers" included direct payments from Lundbeck to the generic competitors, the purchase of generic Citalopram stock for destruction and guaranteed profits in a distribution agreement.

The statement was also sent to Merck KGaA, Generics UK, Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma, A.L. Industrier and Ranbaxy, the generic manufacturers with whom Lundbeck is said to have contracted.

The Commission considers that the behavior may have caused harm to consumers because it delayed the entry of cheaper generic versions of the drug for up to two years.

Following receipt of the statement, each addressee has the right to examine the Commission's file, reply in writing and may also request an oral hearing. The Commission will consider all the evidence and arguments submitted before reaching its final decision.

If established this behavior would infringe Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) and could lead to a prohibition on the conduct and a fine of up to 10% of each infringing company's annual worldwide turnover.

On the same day the Commission announced its third report on its monitoring of patent settlements in the pharmaceutical sector and stated that, in the coming days, it is planning to take further steps in its investigation into agreements between Les Laboratoires Servier ("Servier") and generic competitors concerning the cardio-vascular drug Prindopril.

Read the Commission's press release regarding Lundbeck.
Read the Commission's press release regarding its third monitoring report and Servier.

Rod Lambert ( / +44 207 832 3606), a partner, and Nicola Birney ( / +44 207 832 3636), an associate, in the healthcare practice of Fulbright & Jaworski International LLP in London.

Friday, August 3, 2012

Third Circuit Finds Pay-for-Delay Settlements Prima Facie Unlawful

The Third Circuit's opinion on July 16, 2012, in In re K-Dur Antitrust Litigation, sharpened the divide between the circuits on the appropriate antitrust treatment of pay-for-delay patent settlements by rejecting the scope-of-the-patent test and embracing a "quick look" approach that finds these types of settlements prima facie unlawful.

The court's decision is a major victory for private plaintiffs and the FTC and begs the question of whether the Supreme Court will finally hear the issue.

The Underlying Dispute

At issue in the case were separate patent infringement settlement agreements that Schering-Plough Corporation entered into with Upsher-Smith Laboratories, Inc. and ESI Lederle.

Schering-Plough was the brand patent holder of a sustained-release potassium chloride supplement (K-Dur). The K-Dur patent was set to expire on September 5, 2006.

Before the expiry of the patent, Upsher-Smtih and ESI, two generic competitors, filed abbreviated new drug applications ("ANDAs") with the FDA, making paragraph IV certifications under the Hatch-Waxman Act that claimed that their products did not infringe Schering-Plough's patent.

On receiving notice of the ANDAs, Schering-Plough brought infringement actions against the generic competitors.

The lawsuits were "vigorously defended" and the parties eventually settled. 

Under the settlement agreements, Upsher-Smith and ESI received payments to delay the entry of their generic products until September 1, 2001 and January 1, 2004, respectively.

The Antitrust Action

The settlement agreements incited litigation from both the FTC and private plaintiffs.1 The Third Circuit case arose from a series of actions brought by private plaintiffs that were consolidated in New Jersey. 

In those actions, plaintiffs alleged that the K-Dur settlement agreements violated the Sherman Act as unreasonable restraints on trade. The district court, however, did not agree and granted the defendants' motion for summary judgment.

In so doing, the court applied the scope-of-patent test and found that the settlement agreements did not extend the permissible monopoly granted to Schering-Plough by its K-Dur patent.

The Third Circuit rejected the District Court's application of the scope-of-the-patent test and reversed the grant of summary judgment.

According to the Court, "[the scope-of-the-patent test] improperly restricts the application of antitrust law and is contrary to the policies underlying the Hatch-Waxman Act and a long line of Supreme Court precedent . . . ."

The purpose of the Hatch-Waxman Act is to increase the availability of low-cost generic drugs. And, according to the court, pay-for-delay settlements do just the opposite.

An FTC report, cited by the Court, found that reverse payment settlements cost consumers $3.5 billion annually. "Thus while [the scope-of-the-patent test] might be good policy from the perspective of the name brand and generic pharmaceutical producers, it is bad policy from the perspective of the consumer."

Instead of the scope-of-the-patent test, the court instructed the district court to apply a "quick look" rule of reason analysis.

Under that analysis, "the finder of fact must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit."

Circuit Split

The Third Circuit's decision reverses a trend among the courts to shield pay-for-delay settlements from antitrust liability when they do not exceed the scope of the patent.

The three most recent circuit courts to decide the issue, the Eleventh Circuit, Second Circuit, and Federal Circuit, all applied the scope-of-the-patent test in finding that particular pay-for-delay settlement agreements, including the very ones at issue in the Third Circuit case, did not violate antitrust laws.2 Instead of being influenced by those decisions, the Third Circuit joined the D.C. Circuit and the Sixth Circuit in applying stricter antitrust scrutiny to these types of agreements.3


The court's decision creates an even divide among the circuits that have decided the issue. Although FTC Chairman Jon Leibowitz applauded the Third Circuit for having "gotten it just right," the fight may not be over.4 This may be the case in which the Supreme Court will finally decide the issue.

This is especially true now that the Eleventh Circuit has denied the FTC's petition for rehearing en banc in its most recent pay-for-delay case, FTC v. Watson Pharmaceuticals, Inc.

This article was prepared by Layne E. Kruse ( or 713 651 5194), Pamela Jones Harbour (, 202 662 4505 or 212 318 3324), Erika Brown Lee ( or 202 662 0398) and John J. Byron( or 713 651 5261) from Fulbright's Antitrust and Competition Practice.

To learn more about our antitrust and competition practice, please go to and to learn more about our pharmaceutical and medical devices practice, please go to

[1] The FTC's litigation resulted in an Eleventh Circuit opinion, Shering-Plough v. FTC, 402 F.3d 105 (11th Cir. 2005), that found that pay-for-delay settlements do not violate the antitrust laws unless they exceed the scope of the patent.
[2] See In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323 (Fed. Cir. 2008);In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187 (2d Cir. 2006);  Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005); Valley Drug Co. v. Geneva Pharms., Inc., 344 F.3d 1294 (11th Cir. 2003).
[3] See In re Cardizem CD Antitrust Litig., 332 F.3d 896 (6th Cir. 2003); Andrx Pharms., Inc. v. Biovail Corp. Int'l, 256 F.3d 799 (D.C. Cir. 2001).
[4] See Melissa Lipman, 3rd Cir. Pay-For-Delay Ruling Opens Door to High Court, (July 16, 2012)

Thursday, August 2, 2012

Trademark Infringement Suit Continues Despite Bankruptcy of Defendant

The Sixth Circuit, in Dominic’s Restaurant of Dayton Inc. v. Mantia, No. 10-3376, July 7, 2012, affirmed a District Court decision to continue contempt proceedings against a defendant in a trademark infringement action after the defendant initiated bankruptcy.

The automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a)(1), was not implemented.

The Sixth Circuit opinion, beyond its recounting of the history of the proceedings, was brief and succinctly focused on its conclusion that this was not a case to be treated under the general rule of staying proceedings commenced prior to a petition for bankruptcy.

At the District Court, there was the complaint, a TRO order, a preliminary injunction, four contempt motions (three successful) and a default judgment.

The last contempt motion and the default judgment were granted separately, both over one of the defendants’ objection that the automatic stay under the Bankruptcy Code should apply.

The only issue on appeal before the Sixth Circuit was whether the automatic stay provisions precluded further action on the last contempt motion.

The Sixth Circuit opinion noted:
  1. statutory and non-statutory exemptions exist; 
  2. the court with jurisdiction decides whether the automatic stay applies; 
  3. the plaintiffs were neither creditors or claimants to defendant’s property; 
  4. the automatic stay was “intended to prevent interference with a bankruptcy court’s orderly disposition of the property of the estate,” not to prevent injunctive relief permitting the bankrupt business to operate post-petition to violate a plaintiff’s rights with impunity; 
  5. quoting Seiko Epson Corp. v. Nu-Kote Int’l, Inc., 190 F.3d 1360, 1364 (Fed. Cir. 1999), “the statutory stay of proceedings as to [defendant] did not free [defendant] of the contempt orders and the injunctions upon which contempt was based, all of which were entered before [defendant] suggested bankruptcy”; and 
  6. application of the automatic stay would permit defendant to continue his tort of trademark infringement, and the commission of a tort is not protected by the Bankruptcy Code. 
Certainly, there is good language here for trademark owners going after infringers who try to use bankruptcy to shield ongoing activity. However, the particular circumstances of this case have to be kept in mind. There were contempt orders in place before the bankruptcy proceeding was initiated restricting what the defendant could do.

A default judgment granting plaintiffs injunctive relief on their trademark claims was not appealed by the defendant even though it was entered after bankruptcy commenced. These facts support the Sixth Circuit’s conclusions. How far the Court’s opinion should extend beyond similar circumstances is an open question.

The U.S. Court of Appeals, Sixth Circuit case is Dominic’s Restaurant of Dayton, Inc. vs. Christie L. Mantia, et al., case nos. 10-3376/3377. The appeal is from the U.S. District Court, Southern District of Ohio, case no. 3:09-cv-131.

This article was prepared by Paul Williamson ( / 202 662 4545), Tara Vold ( / 202 662 4657) and Tracy DeMarco ( / 202 662 4653) of Fulbright’s Trademark Practice.

Wednesday, August 1, 2012

Can a Drug Company Require the FDA to Protect the Market Exclusivity of its Brand Drug?

This is the key question currently pending in the D.C. District Court.

On July 5, 2012, K-V Pharmaceuticals and Ther-Rx (“KV”) sued the FDA alleging failure to enforce KV’s right to market exclusivity for its drug, Makena®. See the Complaint.

Among other remedies, KV seeks a PI requiring the FDA to take “sufficient enforcement actions” to prevent compounding pharmacies from “unlawful[ly] compet[ing]” with Makena®.

The FDA moved to dismiss KV’s suit and responded to KV’s PI motion. See the Response.

List Price of Makena® at Issue

The active ingredient in Makena®, 17-HPC, has been used for years to treat women with at-risk pregnancies. 

After the original commercial version of the drug (Delalutin®) was withdrawn in 1999, 17-HPC was available in the U.S. only through compounding pharmacies. 

However, in 2011, the FDA approved KV’s New Drug Application (NDA) for Makena® and granted Makena® orphan drug status extending exclusivity of the NDA to compensate investments in low-volume drugs that treat rare disease states.

17- HPC/Makena® is administered in a series of injections. KV initially offered Makena® at a list price of about $1,500 per dose while, according to the FDA, compounded doses of 17-HPC were available for $10-20 per dose. (KV subsequently reduced the list price to $690 per dose.)

Makena’s® pricing sparked news stories, Congressional interest, and inquiries to the FDA.

FDA Declares its Enforcement Intent

On March 30, 2011, the FDA issued a statement
FDA does not intend to take enforcement action against pharmacies that compound [17-HPC] based on a valid prescription for an individually identified patient unless the compounded products are unsafe, of substandard quality, or are not being compounded in accordance with appropriate standards for compounding sterile products.

KV Suit Challenges FDA Decision and Identifies Risks

KV’s suit argues that FDA’s statement was unprecedented and impermissibly based upon political pressure surrounding pricing rather than upon safety and efficacy issues.

KV claims among other things that absent injunctive relief, “Plaintiffs will be effectively deprived of their statutory market exclusivity; and, consequently will be unable to survive as ongoing concerns.”

Further, KV argues the health and safety of at-risk pregnant women is “subject[] to significant avoidable risks” because, as KV claims, testing has shown that compounded 17-HPC often has “unacceptable potency and/or impurities.”

FDA Argues Enforcement Decisions Are Within Its Discretion and Denies Risks

In its opposition, the FDA argued that its statement is not subject to judicial review because the FDA’s decisions not to take enforcement action are within its discretion.

The FDA also contends its statement does not state a violation of the FDCA.

Finally, the FDA challenges KV’s safety arguments concerning compounded 17-HPC. According to the FDA’s brief, its testing of compounded drug samples and of the active ingredient did not demonstrate any major safety concerns.

The FDA argues that “Forcing FDA to reject its enforcement priorities in favor of Plaintiffs’ commercial interests would be both inappropriate and contrary to the public interest.”

Timing Crucial for KV

Timing may be a significant factor in this case.

According to KV’s complaint, unless the company is immediately able to generate “significantly higher market share and revenues from Makena®,” it may run out of cash in less than three months.

The case is K-V Pharmaceutical Company and THER-Rx Corp. v. U.S. Food and Drug Administration, et al., case no. 1:12-cv-01105, in the U.S. District Court, District of Columbia.

This article was prepared by Saul Perloff ( / 210 270 7166) and Bob Rouder ( / 512 536 2491) from Fulbright’s False Advertising Practice.