Wednesday, October 24, 2012

FDA Targets Cosmeceutical Marketing Claims

By Kathy Grant 

On October 5, 2012, the FDA issued warning letters to two beauty and personal products companies—including multinational giant Avon Products—objecting to promotional claims that the companies make in connection with their “cosmeceutical” products.

In both cases, the FDA asserted that the advertising claims in question demonstrate the products are unapproved new drugs under the Federal Food, Drug, and Cosmetic Act (FDCA).

FDA Warns Avon New Cosmetic Products are New Drugs

The FDA letter to Avon warns that several of its products, “appear to be intended for uses that cause these products to be drugs under the [FDCA].” See Avon Warning Letter.

The FDA letter specifically asserts that the marketing of Avon’s Anew Clinical Advanced Wrinkle Corrector, Anew Reversalist Night Renewal Cream, Anew Reversalist Renewal Serum, Anew Clinical Thermafirm Face Lifting Cream, and Solutions Liquid Bra Toning Gel violate the FDCA’s regulations, by making claims that suggest that these products are intended to affect the structure or function of the human body. Claims of this type render the products “drugs under the Act.”

As examples, the FDA cited claims that these products “ rebuild collagen,” “stimulate elastin to improve elasticity and resilience,” and “regenerate hydroproteins to reduce skin creasing.”

Avon’s website also states that the products “tighten connections between skin layers, repair micro-injuries and fortify damaged skin tissue.” The FDA noted that Avon’s “products are not generally recognized among qualified experts as safe and effective for” the cited uses and, because of this, they “are new drugs” under the Act.

FDA Cites Bioque’s Marketing Claims as Violating the FDCA

A second FDA letter to Bioque Technologies, located in Blacksburg, Virginia, focuses on claims that Bioque made about its Serum XL, Serum Rejuvenate, C-Plus Moisturizing Cream, Rejuvenating Day Cream, Rejuvenating Night Cream, Pronto, Formula 9 Firming Gel, Vitamin K1 8% Intensive Serum, Gentle Purifying Skin Cleanser, and Liposome Cellulite Therapy. See Bioque Warning Letter.

The FDA warned the company that claims that its products “repair[] the structural damage that actually causes” wrinkles, “activate[] production of collagen and elastane critical to rebuilding and maintaining healthy skin structure,” and “provide BOTOX-like results without the needles,” “indicate that these products are drugs because they are articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or articles intended to affect the structure or any function of the body of man, rendering them drugs under the Act.”

Cosmetic or Drug Depends on Intended Use

The FDA has stated that whether a product is a cosmetic or a drug under the law is determined by a product’s intended use. See FDA Guidance, “Is It a Cosmetic, a Drug, or Both? (Or Is It Soap?).”

Under the FDCA, cosmetics are “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body...for cleansing, beautifying, promoting attractiveness, or altering the appearance.” FDCA, §321 (i).

Drugs on the other hand are “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease” and “articles (other than food) intended to affect the structure or any function of the body of man or other animals.” FDCA, §321(g)(1).

Cosmetic products and ingredients, with the exception of color additives, do not require FDA approval before they go on the market. Drugs, however, must generally either receive premarket approval by the FDA through the New Drug Application (NDA) process or conform to a “monograph” for a particular drug category, as established by FDA’s Over-the-Counter (OTC) Drug Review.

The “intended use” of a product can be established in a number of ways. Product claims—whether found on labeling or in traditional advertising—are a primary source of evidence the FDA considers in making this determination.

Claims like those appearing on the Avon and Bioque websites may cause a product to be considered a drug, even if the product is marketed by a cosmetics company, to cosmetics audience, using an otherwise typical cosmetic marketing approach.

Both Avon and Bioque were given 15 days to respond to the letter, identifying the specific steps the companies have taken to correct the stated violations.

FDA Cracking Down on “Cosmeceuticals”

The FDA warning letters to Avon and Bioque are the latest in a series of letters that the FDA has issued in the past few months to companies marketing so-called “cosmeceuticals.” Prior warning letters were sent to Lancôme USA (FDA Letter), Andes Natural Skin Care (FDA Letter), and Janson Beckett (FDA Letter). All of these letters alleged that cosmetic products were marketed using improper drug claims.

Until recently, warning letters to cosmetic companies complaining about their advertising claims have been relatively rare and seem generally to have focused on safety concerns to consumers.

For example, the maker of the popular Brazilian Blowout hair-smoothing treatment agreed to begin warning consumers and hairstylists that its products contain potentially hazardous formaldehyde after receiving attention from the FDA last year. See FDA Warning Letter to Brazilian Blowout.

Source: The U.S. Food & Drug Administration

This article was prepared by Kathy Grant ( / 210 270 7182) of Fulbright's False Advertising Practice.

Tuesday, October 23, 2012

Pay-For-Delay Enforcement Heats Up in the Wake of In re K-Dur Antitrust Litigation

The Third Circuit’s decision in In re K-Dur Antitrust Litigation breathed new life into the FTC’s fight against pay-for-delay settlement agreements. Since that decision, the FTC has acted with renewed vigor and sought to attack these agreements on a number of different fronts.

A. FTC’s Attempt to Expand K-Dur Ruling

In the past three months, after the Third Circuit’s K-Dur decision, the FTC has sought to appear amicus curiae in two cases pending in the District of New Jersey.[1] See Lamictal Amicus Brief. The FTC has filed these motions in an attempt to convince the district courts to take an expansive interpretation of the Third Circuit’s K-Dur ruling.

1. Third Circuit’s K-Dur Ruling

In In re K-Dur Antitrust Litigation, the Third Circuit rejected the scope-of-the-patent test and adopted a “quick look” approach, finding pay-for-delay settlement agreements prima facie unlawful.[2] See Aug.10, 2012 Amicus Brief. The Third Circuit’s holding, however, was limited. Specifically, the Third Circuit stated that “the only settlements subject to antitrust scrutiny are those involving a reverse payment from the name brand manufacturer to the generic challenger.” And, “nothing in the rule of reason test [that the court adopted] limits the ability of the parties to reach settlements based on a negotiated entry date for marketing of the generic drug.” Accordingly, an argument can be made that to find a violation of antitrust law, the court must be persuaded that a payment (i.e., monetary transfer) was made.

2. Professional Drug Co. v. Wyeth Inc. and In re Lamictal Direct Purchaser Antitrust Litigation

The settlement agreements challenged in Professional Drug Co. v. Wyeth Inc. and In re Lamictal Direct Purchaser Antitrust Litigation did not involve a monetary transfer from the brand patent holder to the generic drug maker. Instead, the brand patent holder negotiated a settlement under which the generic drug maker agreed to delay entry of its generic product for a fixed period of time in exchange for the brand patent holder’s promise not to compete with the generic’s product by introducing an authorized generic product into the market. These types of agreements are typically known as “no-authorized generic” commitments. 

In briefing in support of motions to dismiss, the defendants in both cases argued that the pay-for-delay claim should be dismissed under K-Dur precisely because their settlements did not involve a monetary transfer. But the plaintiffs urged the court to adopt a broader view. The plaintiffs argued that the “quick look” rule should apply whenever the patent holder provides the challenger with economic value in any form, including value in the form of a no-authorized generic commitment.

3. FTC’s Attempt to Appear Amicus Curiae

The FTC filed its motions for leave to appear amicus curiae in an attempt to bolster and expound on the plaintiffs’ position. In its proposed amicus briefs, the FTC stressed that a promise not to compete is indeed a “payment,” given the economic realities it entails. Those economic realities, according to the FTC, were underscored by its 2011 Authorized Generic Report.[3] That report found that no-authorized generic promises are “common form[s] of compensation to generics” to induce delayed entry and substantially increase a generic’s revenue by shielding it from competition by an authorized generic.

FTC Chairman Jon Leibowitz, in commenting on the report, stressed the agency’s concern with no-authorized generic commitments:

[T]he clearest and most disturbing finding is that some brand companies may be using the threat of launching an authorized generic as a powerful inducement for generic companies to delay bringing their drugs to the market. When companies employ this tactic it is a double whammy for consumers. Consumers have to pay the high brand prices while the generic delays its entry and, once generic entry does occur, consumers pay higher prices without the benefits of competition from the authorized generic.[4] See FTC Report.

The FTC’s filing of the amicus briefs marks the first time in which it has argued that no-authorized generic commitments constitute an antitrust violation and may signal a broader enforcement strategy on behalf of the agency. But the FTC must overcome the fact that it has appeared to condone no-authorized generic agreements in the past. It must also demonstrate that a rule based on “economic realities,” as opposed to one based on a bright line monetary payment, is workable.

What is evident, though, is that the agency remains undeterred in its new strategy to expand pay-for-delay rulings to no-authorized generic commitments. This was most clearly expressed by the FTC’s decision to file an amicus in In re Lamictal even after the court denied its motion in Wyeth.[5] See. Aug.3, 2012 Order.

B. FTC’s Petition for Certiorari in FTC v. Watson Pharmaceuticals, Inc.

The Third Circuit is not the only arena in which the FTC continues its battle against pay-for-delay agreements. On October 4, 2012, the FTC, through the Solicitor General, petitioned for certiorari in FTC v. Watson Pharmaceuticals, Inc.[6] The petition seeks to overturn the Eleventh Circuit’s dismissal of the FTC’s challenge to a reverse payment settlement agreement between Solvay Pharmaceuticals, Inc., and several generic manufacturers over a drug called Androgel. See Certiorari Petition.

The FTC’s petition is the third petition in front of the Supreme Court. The two other petitions were brought by the brand patent holder and generic drug manufacturer in K-Dur. The FTC argued that its Androgel petition is a more preferable vehicle for the Court to decide the case than the petitions from the Third Circuit because it “is brought by an agency charged by Congress with challenging unfair methods of competition.”

The Court will now have to decide whether it will address the issue, and if it does, whether it will hear both cases or hear just one. Eagerly awaiting the court’s decision will be the FTC, the state attorneys general, and the drug manufacturers.

C. Conclusion

In re K-Dur Litigation prompted a series of events that will further shape the appropriate antitrust treatment of pay-for-delay settlement agreements. It is now clearer than ever that the FTC will continue to challenge pay-for-delay agreements (in the broadest sense) until the Supreme Court resolves the issue. In a recent speech made by FTC Chairman Jon Leibowitz, he asserted that if certiorari is not granted in Watson, “we’ll simply be forced to bring pay-for-delay cases in the Third Circuit for years to come”—a circuit in which the vast majority of pharmaceutical companies that engaged in pay-for-delay settlements are headquartered.[7] See Leibowitz Remarks

[1] Federal Trade Commission Brief as Amicus Curiae, In re Lamictal Direct Purchaser Antitrust Litig., No. 2:12-cv-00995 (D.N.J. Oct. 5, 2012), ECF No. 89; Federal Trade Commission Brief as Amicus Curiae, Professional Drug Co. v. Wyeth Inc., No. 3:11-cv-05497 (D.N.J. Aug. 10, 2012), ECF No. 173.
[2] In re K-Dur Antitrust Litig., 686 F.3d 197 (3d Cir. 2012), petition for cert. filed, 81 U.S.L.W. 3090 (U.S. Aug. 24, 2012).
[3] Fed. Trade Comm’n, Authorized Generic Drugs: Short-Term Effects and Long-Term Impact (Aug. 2011).
[4] Fed Trade Comm’n, FTC Report Examines How Authorized Generics Affect the Pharmaceutical Market, (Aug. 31, 2011),
[5] Order, Professional Drug Co. v. Wyeth Inc., No. 3:11-cv-05497 (D.N.J. Oct. 3, 2012), ECF No. 187.
[6] Petition for a Writ of Certiorari, FTC v. Watson Pharmaceuticals, Inc., No. 12-416 (U.S. Oct. 4, 2012).
[7] Jon Leibowitz, Chairman, Fed. Trade Comm’n, Remarks Prepared for Delivery at the Sixth Annual Georgetown Law Global Antitrust Enforcement Symposium (Sept. 19, 2012).

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.

Friday, October 19, 2012

FDA Says Wellbutrin Generic Really Isn’t Generic After All

By Bob Rouder and Saul Perloff

The federal government both grants and restricts marketing advantages. For example, the patent protection and market exclusivity the government affords some pharmaceutical compounds lays the groundwork for a new drug to become a blockbuster brand. On the other hand, FDA approval of a generic can presage the demise of a brand drug. Pharmaceutical companies and consumers alike depend upon the government getting it right in both granting and eliminating market exclusivity. The story of Wellbutrin XL illustrates this point.

Wellbutrin Becomes a Blockbuster Drug

Wellbutrin (bupropion HCl) was a blockbuster brand for GlaxoSmithKline (GSK). Invented in 1969 and first approved for use in treating clinical depression in 1985, it has generated brand sales in excess of $10 billion. Originally, Wellbutrin was formulated as an immediate release drug requiring thrice daily administration. A sustained release version introduced in 1996 permitted twice daily dosing. In 2003, an extended release formulation, Wellbutrin XL (bupropion HCl extended-release tablets), reduced the dosing to once per day.

Wellbutrin XL is dispensed in both 150 mg. and 300 mg. strengths. The dosing is significant, insofar as the compound is considered to have a “narrow therapeutic index”: Too low a dose is ineffective in addressing the disease state while too high a dose can promote seizures.

Welllbutrin Yields the Market to Generic Competition

In December 2006, FDA approved several generic versions of Wellbutrin XL. One of these was Budaprion XL, made by Impax Laboratories and marketed by Teva Pharmaceuticals. FDA News Release. The FDA approves a drug as a generic provided that it and the innovator drug are therapeutically equivalent wherein (i) the proposed generic is pharmaceutically equivalent to the innovator drug (e.g. has the same active ingredients, dosage form, route of administration, quality and labeling); and (ii) the proposed generic is bio-equivalent to the brand (i.e. exhibits a similar rate and degree of bioavailability to the body). FDA Facts About Generic Drugs.

Once the patent(s) applicable to the brand drug have expired, it is difficult for a brand company to challenge the FDA’s decision to approve a generic version of the drug in court. Not surprisingly, by 2008 most of the twenty million prescriptions written for Wellbutrin XL were filled with an FDA-approved generic version of the drug.

Patients Report Treatment Failures

In early 2007, patients began reporting treatment failures after taking the 300 mg dose of Budaprion XL. An online consumer newsletter – The People’s Pharmacy –publicized these failures. Oct. 3, 2012 Commentary. This lead to comparative dissolution testing of Wellbutrin XL 300 mg. and Budaprion XL 300 mg. by Consumer Lab. Testing Results.

Those tests seemed to demonstrate that Impax/Teva’s approved generic released its active ingredient in an amount and at a rate different from Wellbutrin XL 300 mg.

The testing and treatment failures were brought to the attention of FDA. The agency cited the relatively small numbers of reported adverse events and the fact that the nature of the disease state lends itself to intermittent return, as reasons to uphold its original assessment of therapeutic equivalence.

In response to inquiries the FDA stated at the time it “cannot offer any examples where generics have been shown to not perform as expected. FDA has many years of experience in the review of generic drugs and has great confidence in the quality and equivalence of generic drug products.” See Pharmalot Article.

However, FDA did ask Impax/Teva to study its 300 mg. product to compare its bioequivalence to Wellbutrin XL 300 mg. According to FDA, Impax/Teva began the study, but terminated it in late 2011, “reporting that, despite efforts to enroll patients, Impax/Teva was unable to recruit a significant number of affected patients to generate the necessary data.” See FDA Update

FDA Withdraws Its Approval of Impax’s Generic Wellbutrin

In 2010, “in light of the public health interest in obtaining bioequivalence data” FDA undertook its own testing. It found that Budaprion XL 300 mg. was not in fact bioequivalent to Wellbutrin XL 300 mg. See FDA Review.

That finding was accompanied by an admission: The original approval did not involve testing of the 300 mg. dosage form. Rather, only the 150 mg. version was tested and the results, which showed bioequivalence, were extrapolated to the higher dose. That methodology was chosen because it was viewed as unethical to expose volunteers to the higher dose – and the possibility of seizure – when dose proportional testing had always been deemed valid. See FDA Update. In this instance, however, it was not scientifically appropriate to extrapolate the results. This month, Teva voluntarily ceased marketing the 300 mg. product. See FDA Withdrawal Q&A.

Further Fallout

Although FDA has stated that it believes that the failure of the Impax/Teva product “may reflect the product’s formulation, which is unique,” the agency has nevertheless asked the other manufacturers of 300 mg. extended-release bupropion tablets to conduct their own studies to assess the bioequivalence of their products to Wellbutrin XL 300 mg. The results of these studies should be available early next year.” FDA is also revising its guidance to industry for how to conduct premarket bioequivalence studies in generic bupropion products. Exactly how the testing standards will change and whether FDA applies them to other drug compounds remains to be seen.

Sources: FDA News Release: FDA Approves First Generic Bupropion Hydrochloride Extended-Release Tablets (Dec. 14, 2006); FDA Questions and Answers Regarding Market Withdrawal of Budeprion XL 300 mg Manufactured by Impax and Marketed by Teva (Oct. 3, 2012); FDA Update: Budeprion XL 300 mg Not Therapeutically Equivalent to Wellbutrin XL 300 mg (Oct. 3, 2012); FDA Website: Review of Therapeutic Equivalence Generic Bupropion XL 300 mg and Wellbutrin XL 300 mg (Oct. 3, 2012);; Consumer Lab website; Pharmalot website.

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

Thursday, October 18, 2012

It’s Not Easy Being Green: FTC Cautions Marketers About “Eco-Friendly” Brand Claims

By Sue Ross

On October 1, 2012, the FTC issued its revised “Green Guides,” which “apply to environmental claims in labeling, advertising, promotional materials, and all other forms of marketing in any medium, whether asserted directly or by implication, through words, symbols, logos, depictions, product brand names, or any other means.” 16 CFR § 260.1(c). See FTC Release.

The Green Guides provide guidance to the marketplace describing the types of environment claims the FTC may find constitute deceptive advertising in violation of Section 5 of the Federal Trade Commission Act. The “Green Guides” cover a wide array of topics ranging from general environmental benefit claims, to carbon offsets, to degradable claims, to renewable energy claims.[1]

The FTC provided an example of an environmental claim involving a brand name. The FTC stated:

The brand name “Eco-friendly” likely conveys that the product has far-reaching environmental benefits and may convey that the product has no negative environmental impact. Because it is highly unlikely that the marketer can substantiate these claims, the use of such a brand name is deceptive.

16 CFR § 260.4(d), example 1.

The FTC further explained that a broad claim such as “Eco-friendly” may be difficult for consumers to interpret and “likely to convey a wide range of meanings.” 16 CFR § 260.4(b). The FTC concluded: “Because it is highly unlikely that marketers can substantiate all reasonable interpretations of these claims, marketers should not make unqualified general environmental benefit claims.” Id. Instead, marketers “should use clear and prominent qualifying language that limits the claim to a specific benefit or benefits.”

With respect to the term “eco-friendly,” the FTC recommended the marketer take several steps in order to avoid a deceptive environmental claim:

A claim, such as “Eco-friendly: made with recycled materials,” would not be deceptive if: (1) the statement “made with recycled materials” is clear and prominent; (2) the marketer can substantiate that the entire product or package, excluding minor, incidental components, is made from recycled material; (3) making the product with recycled materials makes the product more environmentally beneficial overall; and (4) the advertisement’s context does not imply other deceptive claims.

16 CFR § 260.4(d), example 1.

The FTC also provided guidance on substantiating environmental marketing claims:

[A] reasonable basis often requires competent and reliable scientific evidence. Such evidence consists of tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results. Such evidence should be sufficient in quality and quantity based on standards generally accepted in the relevant scientific fields, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that each of the marketing claims is true.

16 CFR § 260.2.

Although the Green Guides constitute neither law nor regulation, the FTC cautioned that compliance with other federal, state or local laws—such as labeling requirements—will not necessarily preclude the FTC from taking action under the FTC Act for failing to abide by the Greed Guides. 16 CFR 260.1(b). The FTC also stated that the Green Guides is not limited to business-to-consumer transactions, but also apply to business-to-business transactions. 16 CFR § 260.1(c).

FTC Chairman Jon Leibowitz stated that the Green Guides will benefit the competitive marketplace: “The FTC’s changes to the Green Guides will level the playing field for honest business people and it is one reason why we had such broad support.” See Oct. 1, 2012 Environment News Service Article.

The FTC first issued its Green Guides in 1992 to help marketers avoid making misleading environmental claims. The agency revised the Guides in 1996 and again in 1998, and proposed further revisions in October 2010. According to the FTC, this month’s revised Guides take into account thousands of comments FTC received since releasing the proposed revised Guides in the fall of 2010. They also include information from public workshops and a study of how consumers perceive and understand environmental claims.

Sources: Federal Trade Commission Release: “Issues Revised ‘Green Guides,’ Will Help Marketers Avoid Making Misleading Environmental Claims” (Oct. 1, 2012); Environment News Service, “Feds Update Truth-in-advertising Guides for Green Marketing” (Oct. 1, 2012)

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

[1] The FTC provided guidance in 15 different areas of environmental areas: general environmental benefit claims, carbon offsets, certifications and seals of approval, compostable claims, degradable claims, free-of claims, non-toxic claims, ozone-safe and ozone-friendly claims, recyclable claims, recycled content claims, refillable claims, renewable energy claims, renewable materials claims, and source reduction claims. 16 CFR §§ 260.4-260.17.

Tuesday, October 16, 2012

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

We previously reported on the proposed amendment to the Trademark Dilution Revision Act, H.R. 6215 (on Aug. 9), which would amend the Lanham Act relating to the effect of federal trademark registration on state law claims. 

The bill passed the U.S. House of Representatives on September 11 and, on September 12, was referred to the Senate Committee on the Judiciary. The full Senate passed the bill on September 21, and it was signed into law on October 5.

The House Committee on the Judiciary issued a short report on the bill (Report 112-647) stating that the bill is intended to clarify that federal trademark registration “only constitutes a complete bar to a state claim based on dilution, or actual or likely damage or harm to the distinctiveness or reputation of a mark.” 

The report provided a brief history of the Trademark Dilution Revision Act and described how the error appeared in the law. In short, the report stated that the Senate reformatted the House version of the Trademark Dilution Revision Act “in such a way as to create a bar against state action claims for dilution as well as a state or Federal action based on a claim of actual or likely damage or harm to the distinctiveness or reputation of a mark.” 

The report concluded:

Congress could not have intended such an outcome. If all dilution claims, including Federal claims, are barred by registration, it becomes difficult to cancel a diluting mark that is registered. This only encourages illegitimate mark holders to register diluting marks, which forces legitimate mark holders to expend greater resources monitoring registrations as well as other marks being used in commerce.

The correction to the federal trademark law by H.R. 6215 would apply to any action that commenced on or after the date of enactment of the law.

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

Thursday, October 11, 2012

OIG Report Finds that Structure/Function Claims on Dietary Supplement Labels Fail to Meet Federal Requirements

By Megan Fanale Engel

The OIG’s report entitled Dietary Supplements: Structure/Function Claims Fail to Meet Federal Requirements analyzed structure/function claims that manufacturers may use on dietary supplement labels to promote their products.

A structure/function claim describes how an ingredient in the dietary supplement will affect or maintain a structure or function in the human body.

Manufacturers must ensure that the structure/function claims they make are truthful and accurate, but the FDA does not preapprove such claims.

Although the FDA does not require manufacturers to submit documentation substantiating the claims to the agency, some manufacturers voluntarily disclose this information. However, manufacturers are required to notify the FDA when they use a structure/function claim on the product’s label and include the text of the structure/function claim.

In addition, manufacturers must include a disclaimer on the product’s label stating that the claim has not been reviewed by the FDA, and “the product is not intended to diagnose, treat, cure, or prevent any disease.”

The OIG’s study reviewed 378 structure/function claims on the labels of 127 dietary supplements to determine whether the claims complied with current FDA regulations.

The OIG found that 66 of the 104 manufacturers voluntarily submitted documentation substantiating the claims on their products’ labels.

According to FDA guidance, most of the information consisted of background information. In addition, of the 34 percent of documentation that involved human studies, none met the FDA’s guidance regarding reliable scientific evidence.

The OIG also found that seven percent of the supplements in the sample (nine supplements) did not have the required disclaimer regarding structure/function claims on their labels. Last, 20 percent (26 supplements) in the sample had claims on the labels stating that the supplements could treat diseases, which is prohibited by the FDA.

The OIG provided three recommendations to the FDA:

  1. that the FDA seek explicit authority from Congress to require dietary supplement manufacturers to submit documentation substantiating their structure/function claims.
  2. that the FDA improve the system through which manufacturers notify the agency regarding structure/function claims.
  3. that the FDA increase its surveillance activities over the dietary supplement marketplace to ensure that disclaimers are included on all dietary supplement labels and to discover any prohibited disease claims.

The blog was prepared by Megan Fanale Engel, an attorney in Fulbright's health care practice.

Wednesday, October 10, 2012

Brand Protection Developments in the Medical Device Field

By Bob Rouder

We have been following recent brand protection developments in the medical device sector, an effort challenged by the long shadows cast by the FDA. Two recent cases lead to an interesting paradox:

A company harmed by FDA action may find a seat at the plaintiff’s table while a company harmed by a competitor who benefits from FDA action may find the courthouse doors locked.

Prevor Imbues Its Brand With Manageable Regulatory Oversight Despite FDA Opposition

Prevor manufactures Diphoterine™ Skin Wash (DSW), a highly pressurized spray can filled with a liquid compound of 96% water and 4% Diphoterine. Spraying the liquid washes away chemicals accidentally spilled on industrial workers. It also neutralizes and dilutes chemicals at the extreme ends of the pH scale, although the company asserts the neutralizing effect to be incidental.

Because DSW has a physical and chemical mechanism, the FDA classifies it as a combination product (i.e. medical device/drug). Under Title 21 §353(g)(1) of the Federal Food, Drug and Cosmetic Act the FDA assesses a combination product’s “primary mode of action” in order to determine whether it will be regulated as a drug or a device.

Brand manufacturers generally prefer their combo products to be regulated under the less burdensome device regime rather than under the drug rules.

FDA Classification of Prevor’s Diphoterine™ Skin Wash Ipse Dixit

Thus, when the FDA ruled DSW would be regulated as a drug, Prevor challenged the decision. Granting Prevor’s motion for summary judgment, the D.C. District Court found that:
  1. FDA’s dismissal of Prevor’s claim that DSW’s chemical activity was incidental had no basis in reason or science and as such was unacceptably ipse dixit;
  2. the FDA’s position that any chemical activity made the product a drug was at cross purposes with its statutory duty to find the primary mode of action; and
  3. the FDA’s prior device classification of a product with “an ephemeral distinction” from DSW made its decision in the Prevor matter “arbitrary and capricious.”
The Court struck down FDA’s determination and sent the matter back to the agency. See Prevor Opinion (Sep. 25, 2012).

Labor Pains Continue in Resolving the Conflict Between Brands in the HPT Market

The home pregnancy test (HPT) market is approximately $300 million per year, 90% of which is vested with pregnancy testing, while 10% is devoted to ovulation and pregnancy aid kits. Two of the largest brand manufacturers in the market have been in legal conflict for almost a decade.

Church & Dwight (C&D”) manufactures the First Response® brand pregnancy tests. Swiss Precision Diagnostics (SPD), a joint venture between Inverness Medical Innovations (n/k/a Alere, Inc.) and Proctor & Gamble, manufactures the CLEARBLUE® Easy™ brand.

In January 2009, SPD filed a Lanham Act suit alleging that C&D’s advertising—which claimed that First Response® yields accurate results earlier than competitive products—are false and misleading. SPD also alleged that C&D’s claim that First Response® detects “a hormone variant that better predicts early pregnancy” was unsubstantiated. See SPD Complaint (Jan. 22, 2009).

A companion suit was filed when the technology and products changed but the gravamen of the complaint remained. See C&D Complaint (Jan. 15, 2010).

Church & Dwight Gives Up Claims of “First and Only”

In support of its original petition, SPD noted that the National Advertising Division (NAD) of the BBB, concluded in 2001 that C&D misled consumers by affiliating the accuracy claim and the early detection claim in too close a proximity to each other. More recently, the NAD, responding to a challenge by SPD, recommended that C&D cease making claims of being the “only” or “first and only” product to “predict ovulation based on the user’s individual LH hormone level.”

Although it disagreed with the finding, C&D agreed to cease making those claims. See Sep. 21, 2012 Press Release by the Advertising Self-Regulatory Council.

The Lanham Act Case Reaches The Summary Judgment Phase

After 27 depositions, exchanging a million pages of document discovery and 23 expert reports, C&D filed a motion for summary judgment on August 15, 2012. See Mem. in Support of MSJ.

The motion seeks a finding that SPD’s allegation that the First Response® ads are literally false and misleading fail because expert opinions SPD offered are unreliable and cannot survive a Daubert challenge.

C&D also argues that in clearing First Response® on a 510(k) application which demonstrated “substantial equivalence” the FDA reviewed data supporting the challenged advertising claims.

Lanham Act Preclusion

C&D’s last argument may find at least some support from case law which holds that courts are precluded from effectively reconsidering a previous FDA determination to clear or approve a product.

In Photomedex, for example, the Ninth Circuit noted that a Lanham Act plaintiff could challenge a defendant’s assertion that its product had been approved by the FDA when in fact it had not. However, the plaintiff could not challenge an advertising claim whose falsity rested on matters decided by the FDA, even if that decision could presumably be deemed arbitrary and capricious. See PhotoMedex Opinion.

Thus, SPD’s false advertising allegations in this case may survive or fall based on a determination whether they require the judge or jury to second guess the FDA’s decision to clear First Response®.

Sources and References
  1. Prevor v. Food and Drug Administration, Case No. 1:11-cv-01187-RMC (D. DC) (Sep. 25, 2012 Opinion)
  2. SPD Swiss Precision Diagnostics GmbH v. Church & Dwight Co., Inc., Case No. 3:09-cv-01802-MAS-TJB (D. N.J.) (Jan. 22, 2009 Complaint) (Aug. 15, 2012 Mem.)
  3. Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics GmbH, Case No. 3:10-CV-00276 (D. N.J.) (Jan. 15, 2010 Complaint)
  4. The Advertising Self-Regulatory Council (ASRC)
  5. PhotoMedex, Inc. v. Dean Stewart Irwin and RA Medical Systems, Inc., Case No. 07-56672, D.C. No. 04-00024-JLS (Apr. 14, 2010)

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

Tuesday, October 9, 2012

Federal Circuit Affirms TTAB’s Refusal to Register “JPK Paris 75”

By Charles B. Walker, Jr.

Last Thursday, the U.S. Court of Appeals for the Federal Circuit affirmed a decision of the Trademark Trial and Appeal Board refusing to register the logo “JPK PARIS 75” for handbags as a trademark because it was primarily geographically deceptively misdescriptive under 15 USC 1052(e)(3). See Published Opinion.

According to the Federal Circuit, a mark is primarily geographically deceptively misdescriptive—and barred from registration—if:
  1. the primary significance of the mark is a generally known geographic location; 
  2. the consuming public is likely to believe the place identified by the mark indicates the origin of the goods bearing the mark, when in fact the goods do not come from that place; and 
  3. the misrepresentation was a material factor in the consumer’s decision to purchase the goods.
In this case, the bags in question were designed in Miami and made in Asia. With respect to the question of origin, the Court noted:
It is undisputed that Paris is famous for fashion and fashion accessories, including the types of goods identified in the application. Because relevant purchasers are likely to think of Paris as a known source for fashion accessories, we agree with the Board that there is sufficient evidence of a goods/place association between Paris and the goods listed.
The applicant argued that while its bags were not made or designed in Paris, they nevertheless “originated” there because they were designed by a man who had lived and worked in Paris for over twenty years. In rejecting this argument, the CAFC said the focus should be the connection between the bags and Paris, not between the designer and Paris. In this case, the handbags were not designed while in Paris or exhibited at Parisian trade shows.

The Court noted that while it was not endorsing a rule that goods must always be manufactured in the named place to “originate” there, there must be some “direct connection” between the goods and the place identified in the mark. Here, “there [was] no evidence of a current connection between the goods and Paris.”

In finding deception, the CAFC relied on an inference of materiality for goods associated with a famous place for those goods, and distinguished case law that required a heightened standard to show an association between service marks and a geographic location.

Case: In re Miracle Tuesday, LLC, Case No. 2011-1373 (Fed. Cir.)

This article was prepared by Charles B. Walker, Jr. ( / 713 651 5203) of Fulbright’s Intellectual Property practice.

Friday, October 5, 2012

What’s In a Name? NY Court Comes Down Hard on Gnosis for its “Calculated Decision” to Use Improper Chemical Name to Describe a Product

By Saul Perloff

On September 30, 2012, United States District Judge Richard J. Sullivan ruled in favor of Merck Eprova AG (n/k/a Merck & Cie) in its 2007 false advertising lawsuit against Gnosis S.P.A. and Gnosis Bioresearch SA (“Gnosis”). See Opinion After Bench Trial.

Metafolin® vs. Extrafolate®

Merck Eprova, a Swiss subsidiary of Germany’s Merck KGaA, manufactures and sells Metafolin®, a synthesized form of L-methylfolate, a naturally occurring folate. Folate helps the body produce healthy cells. It is particularly important in fetal development. L-methylfolate, is believed to be superior to folic acid—commonly found in supplements and fortified food—because it is easily absorbed by the body. Metafolin can be found a variety of pharmaceutical products including dietary supplements and medical foods.

Metafolin is one of Merck Eprova’s most important products. According to the opinion, the company and its licensees have spent $100 million marketing Metafolin. Merck’s customers often tout as a selling point the fact that the Metafolin in their products is the substantially pure “L” isomer of methylfolate.1

Gnosis began marketing a competing folate product, Extrafolate™, in 2006. However, according to the Merck Opinion, unlike Metafolin, which is the “L” isomer of methylfolate, Extrafolate is a racemic mixture of both the “L” and “D” isomers. According to the opinion the “D” isomer is not active in the body and is arguably unhealthy. In its suit, Merck Eprova claimed that Gnosis falsely promoted its racemic folate product as the pure L isomer folate product.

Merck Eprova Has Article III Standing

In his ruling, Judge Sullivan quickly dispensed with Gnosis’s contention that Merck Eprova lacked Article III standing. The judge concluded, “Plainly, a manufacturer such as Merck is injured when a competitor falsely advertises that its chemically distinct product is identical to the manufacturer’s product.”

Gnosis’s “Calculated Decision” to Falsely Advertise Extrafolate

On the substance of the false advertising claims, the Judge found that specification sheets and product brochures Gnosis used to promote Extrafolate constituted commercial advertising and were literally false. In some of these materials, Gnosis described Extrafolate using the formal chemical name and number of the L isomer product. In other materials, Gnosis used the common name and abbreviation of the L isomer product.

Gnosis had attempted to show, through expert testimony, that the common name and abbreviation it used were ambiguous and could reasonably refer to its racemic product. While the court found the expert’s “esoteric” testimony “fascinating” at times, it concluded Gnosis failed to demonstrate any ambiguity.

According to Judge Sullivan, Gnosis’s witnesses could not “point to a single organization or a single article that uses the common name or abbreviation in the manner Gnosis does.” The judge concluded that it was “obvious” that Gnosis’s use of these terms in its marketing efforts was a “calculated decision to copy Merck’s advertising and capture a portion of Merck’s market share, knowing full well that its [racemic] Mixture Product was materially distinguishable from Merck’s pure [L] Isomer Product.”

Gnosis Liable for Contributory False Advertising

In addition to finding Gnosis directly liable for false advertising, the Court also ruled that Gnosis was liable for “contributory false advertising.” Relying on the Supreme Court’s 1982 decision in Inwood Labs., Inv. V. Ives Labs, Inc., Judge Sullivan held that Gnosis’s false use of the common name caused its distributors to also falsely advertise Extrafolate.

Gnosis’s Bad Conduct Merits Award of Treble Damages and Attorneys’ Fees

Turning to damages, Judge Sullivan concluded there was “little doubt” Merck was entitled to Gnosis’s profits on the sale of Extrafolate. Under the law of the Second Circuit, profits may be awarded where a defendant acted willfully. In this case, the Court found the “record is clear that Gnosis deliberately and willfully engaged in false advertising as part of a strategy designed to gain its market share in the lucrative vitamin and nutritional supplement industry through deception.” Furthermore, in calculating Gnosis’s profits the court used Gnosis’s gross sales and refused to accept Gnosis’s evidence of costs.

On top of this, the Court found “that the award of Gnosis’s profits must be increased in order to fully compensate Merck for the improved market position Gnosis enjoyed solely as a result of its false advertising.” Thus, Judge Sullivan trebled the award to $526,994.13.

The Judge also enjoined Gnosis from advertising Extrafolate using the name of the L-isomer product and ordered Gnosis to engage in corrective advertising. Finally, the Judge concluded this was an “exceptional case.” Pointing to Gnosis’s conduct during the litigation, including “withholding documents in discovery and obstructing depositions” as well as “Gnosis’s utter lack of respect for the judicial process,” the Court found that “this case is one justifying the award of attorney’s fees.”

Case: Merck Eprova AG vs. Gnosis S.P.A. and Gnosis Bioresearch S.A., Case No. 1:07-cv-05898-RJS-JCF (S.D. N.Y.)

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

1The opinion contains a thorough discussion of stereochemistry and stereoisomers.

Thursday, October 4, 2012

Mobile Advertising and Augmented Reality Devices: Challenges and Opportunities

By Tara Vold

Geolocation technology has provided brand owners with a game-changing ability to engage consumers directly and selectively by allowing for advertising that is geographically and temporally relevant.

The application of geolocation technology to mobile devices, in particular, is yielding important results as research shows consumers are more likely to engage with location relevant advertising and that an increasing number of consumers have GPS-enabled devices.

One of the most novel applications of mobile advertising has been in the area of Augmented Reality (“AR Devices”).  AR Devices such as Google’s “Project Glass” present a live view of an environment with elements augmented through computer-generated information.

In essence, Google’s “Glass” is a set of eye-glasses with access to the internet via voice commands, drawing on geolocation technology to allow users to search for local services, view maps, interact with friends via social media and record video.  A representation of the technology can be found here.

Google has stated that Glass will not feature advertising. However, that position could change as the technology matures and becomes commercially available.

Although widespread use of AR technology would appear to be at least several years away, brand owners may wish to be proactive in addressing the practical and legal issues that will affect the use of their brands in  the AR context.

To that end, trademark owners should consider:

  • Taking steps to understand the AR Device technology and the opportunities for brand use and misuse;
  • Reviewing existing franchising and licensing agreements to ensure such agreements address mark and logo use in mobile advertising; and/or
  • Engaging with developers of the AR Devices to discuss how trademarks will be used and possibly taking an active hand in the development of advertising policies

This last point may present the greatest challenge given the demonstrated difficulties in drawing lines between fair and unfair advertising and use of competitors’ trademarks in the keyword advertising context.

While some of these parameters may be defined by analogy as the substantive case law on keyword advertising develops, there are issues unique to AR advertising that would have to be considered.

For example, what if advertisers pay AR service providers for the ability not just to place advertisements but to superimpose their advertisements on top of what consumers see, i.e. a virtual ad on a physical bill board (already containing an ad)?

What about possible right to publicity issues that might arise in virtual advertisements displaying a public figure? See "AR, Nascar Score for Budweiser Fans hung out (virtually) with Nascar star Kevin Harvick" by Christopher Heine.

While much remains speculative in this area, one conclusion can be drawn.

Any successful brand protection strategy in the AR sphere will require an application of traditional trademark guidelines coupled both with an informed understanding of specific opportunities for use (and misuse) created by the AR technology and a realistic expectation of the types of unmonitored consumer brand interactions which may have to be tolerated.

This article was prepared by Tara Vold ( / +1 202 662 4657) of Fulbright's Intellectual Property and Technology Practice.