Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH , 843 F.3d 48 ( 2016 )

15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 UNITED STATES COURT OF APPEALS
2 FOR THE SECOND CIRCUIT
3
4 August Term, 2015
5
6 (Argued: March 11, 2016 Decided: September 9, 2016)
7
8 Docket No. 15-2411
9
10
11 _____________________________________
12
13 CHURCH & DWIGHT CO., INC.,
14
15 Plaintiff-Appellee,
16
17 v.
18
19 SPD SWISS PRECISION DIAGNOSTICS, GMBH,
20
21 Defendant-Appellant.
22 _____________________________________
23
24 Before:
25
26 LEVAL and WESLEY, Circuit Judges, and SANNES, District Judge.1
27
28 Defendant, a marketer of over-the-counter, home pregnancy tests, appeals from
29 the judgment of the United States District Court for the Southern District of New York
30 (Nathan, J.), which, following a bench trial, found Defendant liable for false advertising
31 in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and issued a
32 permanent injunction prohibiting Defendant from using certain advertising and packaging
33 and requiring it to issue corrective notices and advertising. The false advertising at issue
34 involves the “Weeks Estimator” feature of Defendant’s product, which informs the user
35 the number of the weeks elapsed since ovulation. The medical profession traditionally
36 measures the advancement of a pregnancy not from the date of ovulation or fertilization,
37 but rather from the date of last menstrual period, which generally occurs approximately
38 two weeks prior to ovulation. Plaintiff alleged, and the district court agreed, that
39 packaging and advertising messages used by Defendant were false because they implied
1
The Honorable Brenda K. Sannes, of the United States District Court for the Northern District
of New York, sitting by designation.
1
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 that Defendant’s product measures weeks of pregnancy in a manner consistent with the
2 metric used by doctors.
3 The Court of Appeals concludes that 1) Plaintiff’s Lanham Act claim is not
4 precluded by the Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq.; 2) the district
5 court did not err in finding falsity in Defendant’s original packaging; 3) the district court
6 did not err in finding the revised packaging impliedly false by reason of consumer
7 confusion; 4) the district court made no error in ruling that Defendant’s false messages
8 were material and likely to harm Plaintiff; and 5) the district court was within its
9 discretion in imposing an injunction requiring changes to Defendant’s packaging and
10 requiring Defendant to issue corrective notices and corrective advertising.
11 AFFIRMED.
12
13
14
15 PAUL D. CLEMENT, Bancroft PLLC,
16 Washington, DC (Jeffrey M. Harris, Amy O.
17 Nyberg, Bancroft PLLC, Washington, DC and
18 Richard M. Goldstein, Lawrence T. Weinstein,
19 Michael T. Mervis, Baldassare Vinti, Jeffrey H.
20 Warshafsky, Q. Jennifer Yang, Proskauer Rose
21 LLP, New York, NY, on the brief), for
22 Plaintiff-Appellee.
23
24 SETH P. WAXMAN, Wilmer Cutler Pickering
25 Hale and Dorr LLP, Washington, DC (Thomas
26 G. Saunders, Ari J. Savitzky, Wilmer Cutler
27 Pickering Hale and Dorr LLP, Washington,
28 DC; Hanna A. Baek, Wilmer Cutler Pickering
29 Hale and Dorr LLP, New York, NY; and Jeffrey
30 G. Knowles, Julia D. Greer, David Mehretu,
31 Alice H. Wang, Coblentz Patch Duffy & Bass
32 LLP, San Francisco, CA, on the brief), for
33 Defendant-Appellant.
34
35
36
37
38
39
40
41
42
2
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 LEVAL, Circuit Judge:
2 In an exceptionally well argued case, Defendant SPD Swiss Precision
3 Diagnostics GmbH, a marketer of over-the-counter pregnancy test kits, appeals
4 from the judgment of the United States District Court for the Southern District of
5 New York (Nathan, J.), in favor of Plaintiff Church & Dwight Co. Inc., a leading
6 competing marketer of over-the-counter pregnancy test kits. After a bench trial, the
7 district court found Defendant liable for false advertising, in violation of Section
8 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). The pregnancy tests of both
9 Plaintiff and Defendant detect pregnancy by the presence in the woman’s urine of
10 the hormone human chorionic gonadotropin (“hCG”), which is produced upon the
11 implantation of a fertilized egg in a woman’s uterus. In August 2013, following a
12 Food and Drug Administration (“FDA”) approval process, Defendant released its
13 new product, the Clearblue Advanced Pregnancy Test with Weeks Estimator (the
14 “Product”). Defendant’s Product, in addition to telling the woman whether she is
15 pregnant, is the first such product to also furnish information as to how long (how
16 many weeks) she has been pregnant, which it does by measuring the amount of
17 hCG in her urine.
18 Plaintiff’s claims focus on how Defendant’s Product packaging
19 characterized the advancement of pregnancy. The information communicated by
20 Defendant’s Product was the number of weeks passed since the woman’s
3
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 ovulation. (An egg is ripe and capable of fertilization only for twenty-four hours
2 following ovulation.2 Implantation of the fertilized egg in the uterine lining, which
3 causes the release of hCG, occurs between six and nine days after ovulation.)
4 For a number of reasons—partially historical, partially because of the
5 desirability of conformity—the metric commonly used by the medical profession
6 to describe how long a woman has been pregnant (notwithstanding its obvious
7 literal inaccuracy) speaks in terms of the number of weeks elapsed not since
8 ovulation, fertilization, or implantation of the egg, but since the woman’s last
9 menstrual period (the “LMP”) . A pregnant woman’s LMP normally occurs
10 approximately two weeks prior to her ovulation. Thus, the medical profession’s
11 conventional formula to describe how many weeks a woman has been pregnant
12 yields a number two weeks higher than the number furnished by the Product,
13 which measures weeks since ovulation. It is an uncontested given in this litigation
14 that, when the Defendant’s Product and the woman’s doctor are in complete
15 agreement in estimating how long the woman has been pregnant, the Product
16 would announce a number of weeks that is about two weeks lower than what the
17 doctor would say.3
2
Except when certain in vitro fertilization methods are used.
3
For example, if a doctor would tell a woman she is three weeks pregnant, then the Product
would indicate that the same woman is one week pregnant.
4
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 The gist of Plaintiff’s claim is that, in informing the user as to how long her
2 pregnancy had been in effect, Defendant’s Product communicated the false
3 impression that it uses the same metric and gives the same number of weeks of
4 pregnancy as a medical professional would do.
5 The district court ruled in favor of Plaintiff. It found, among other things,
6 that Defendant had advertised falsely in its packaging at the time of the Product
7 launch (the “Launch Package”) and launch advertising, and also in the revised
8 packaging that Defendant substituted after the FDA had expressed concerns about
9 the Launch Package (the “Revised Package”). The court relied on different theories
10 as between the messages associated with Launch Package and those accompanying
11 the Revised Package. For the Launch Package and its accompanying advertising,
12 the court found, among other things, that these materials unambiguously implied a
13 false message that the Product gives the duration of a pregnancy in terms that are
14 consistent with the metric used by doctors to estimate weeks-pregnant. For the
15 Revised Package, the court relied on survey evidence to support a finding that
16 Defendant communicated a misleading message.
17 The district court imposed an injunction on Defendant. The court’s order,
18 among other things, prohibited Defendant from distributing the misleading
19 materials and from using specified phrases. The order also required Defendant to
5
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 issue various corrective notices and advertising acknowledging that it had been
2 found to have engaged in false advertising.
3 We affirm the district court’s judgment. We agree with the district court that
4 Plaintiff’s Lanham Act claim is not precluded by the Food, Drug, and Cosmetic
5 Act, 21 U.S.C. §§ 301 et seq. (“FDCA”). We find no error in the court’s finding of
6 falsity in Defendant’s Launch Package and advertising messages associated with it
7 by reason of their unambiguous implication that Defendant’s Product measures
8 weeks-pregnant in a manner that is consistent with the measurement used by
9 doctors. Nor do we find fault in the district court’s finding, based on survey
10 evidence, that the message communicated by the Revised Package was impliedly
11 false. We also find no error in the district court’s findings that the falsity was
12 material and injurious to Plaintiff. Finally, we hold that the court did not abuse its
13 discretion in issuing the injunction.
14 BACKGROUND
15 I. Parties
16 Plaintiff and Defendant are leading manufacturers of home, over-the-counter
17 pregnancy tests and direct competitors in the U.S. market. Plaintiff uses the brand
18 name “First Response,” while Defendant uses the “Clearblue” brand. Plaintiff’s
19 First Response products have generally led the home pregnancy test market, and
20 Defendant’s Clearblue products have been Plaintiff’s closest competitor.
6
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 II. Background Biology and Medical Conventions
2 The issues raised in this case involve the biology of the reproductive cycle
3 and, relatedly, the medical conventions used by doctors to measure and describe
4 the duration of pregnancy. The district court described these issues with a clarity
5 on which we cannot improve. We set forth the district court’s explanation here:
6 The Reproductive Cycle
7
8 ....
9
10 The typical menstrual cycle lasts 28 days and is marked by two
11 key events: the menstrual period and ovulation. The latter is the
12 release of a ripe egg (or ovum) from the ovary. The time from [LMP]
13 to ovulation, known as the follicular phase of the menstrual cycle, is
14 generally two weeks, but variance in the length of the follicular phase
15 can be “significant.” The time from ovulation to the next menstrual
16 period, known as the luteal phase of the menstrual cycle, is two weeks
17 and is subject to much less variance than the follicular phase.
18
19 For a successful pregnancy to proceed, the following steps must
20 take place. First, either through sexual intercourse or assisted
21 reproductive technology, sperm must fertilize an egg within 24 hours
22 of ovulation because a ripe egg can survive outside the ovary for only
23 about 12 to 24 hours.[4] In the case of sexual intercourse, fertilization
24 may occur several days after intercourse, but it will not occur more
25 than one day after ovulation. Second, the fertilized egg, now referred
26 to as a blastocyst, must travel down the fallopian tube to the uterus.
27 Third, the blastocyst must adhere to the endometrium (part of the
28 lining of the uterus), a process called implantation, which occurs
29 approximately six to nine days after ovulation. Once implantation
30 occurs, the blastocyst begins secreting [hCG], a hormone that, among
4
In this passage, the district court was not describing certain in vitro fertilization technologies
that permit preservation of an egg for fertilization at a later date.
7
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 other things, signals to a woman’s body that she is pregnant and
2 prevents menses.
3
4 Home pregnancy tests, including [Defendant’s] Clearblue brand
5 and [Plaintiff’s] First Response brand, determine whether a woman is
6 pregnant by detecting the presence (or absence) of hCG—the
7 hormone released following implantation—in urine.
8
9 The Multiple Methods Used to Determine Pregnancy Duration
10
11 Prior to advances in modern medicine, doctors had only one
12 way to determine a woman’s estimated date of delivery: the date of
13 her LMP, which occurs, on average, 40 weeks prior to delivery.
14 Before the development of more advanced medical technology, such
15 as ultrasound, a woman’s LMP provided the most readily available
16 and reliable estimate of pregnancy duration, which is also known as
17 gestational age. One of the disadvantages of using LMP for
18 determining pregnancy duration is that it assumes a standard 28-day
19 menstrual cycle and that ovulation occurs on day 14; [however], the
20 follicular phase of the menstrual cycle is prone to vary. In addition,
21 women often have a poor recollection of their LMP. These two
22 shortcomings mean that an estimate based on LMP may provide an
23 inaccurate prediction of the date of delivery.
24
25 Ultrasound technology provides doctors with a more
26 sophisticated way to determine pregnancy duration, and it is now
27 “standard practice to take an ultrasound scan of the developing fetus
28 about 8 to 12 weeks after the reported LMP.” An ultrasound scan is
29 used to measure a fetus’s crown-rump length, which, using a formula,
30 can be converted into an estimate of “embryonic age” (the number of
31 weeks that have passed since fertilization). Because fertilization
32 occurs, on average, two weeks after a woman’s LMP, a woman’s
33 estimated date of delivery is generally 38 weeks after fertilization.
34 Although ultrasound results are more accurate, “the date of the
35 LMP. . . remains the most commonly used method for estimating
36 gestational age and assigning a due date.”
37
8
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 . . . .[5]
2
3 The Standard Convention for Expressing Pregnancy Duration
4
5 Although there are multiple ways to determine a woman’s
6 estimated date of delivery, and thus the duration of her pregnancy,
7 there is a separate issue of how to express it—i.e., what words to use
8 to describe “how far along” the pregnancy is. And on this point, which
9 is the point that truly matters for resolution of this case, there is little
10 genuine dispute. Doctors and others use a standard convention to
11 express pregnancy duration. It is stated in terms of the number of
12 weeks since a woman’s LMP. As [Defendant]’s medical expert, Dr.
13 Kurt Barnhart, testified: “While doctors have long known that women
14 are not, and cannot be, pregnant at their LMP because ovulation does
15 not occur, on average, for another two weeks, LMP has continued to
16 be a reference point because, until relatively recently, it was either
17 impossible or impractical to estimate when ovulation occurred.” He
18 further noted that “even after the advent of ultrasound scanning
19 technology, the methods for estimating when ovulation (and hence
20 fertilization) occurred were generally intrusive, expensive, and/or
21 impractical, and obviously could not be self-administered by a woman
22 at home prior to becoming pregnant.” Thus, for both historical and
23 practical reasons, dating a woman’s pregnancy from her LMP has
24 been and remains a widely used method for determining pregnancy
25 duration. But more importantly, it has continued to be the standard—
26 indeed, universal—convention for expressing pregnancy duration.
27
28 In fact, even when pregnancy duration is determined using
29 other methods, such as ultrasound scans, most medical professionals
30 still convert to the LMP convention when communicating pregnancy
31 duration to patients and other medical providers. Ultrasound machines
32 are even programmed to automatically convert an estimate of
33 embryonic age based on crown-rump length into an estimate of
34 pregnancy duration based on weeks since LMP. . . .
35
5
We have not included a passage describing in vitro fertilization that is not pertinent to the
issues before us.
9
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 “[D]octors typically will date the pregnancy according to the
2 ultrasound results, but they will (by convention) express the duration
3 of pregnancy in terms of the time since LMP would have been
4 expected to occur in a normal menstrual cycle.” . . . In short, while
5 doctors may have multiple ways to arrive at the convention—e.g.,
6 LMP, ultrasound, date of embryo transfer—they use a standard and
7 uniform convention for expressing pregnancy duration: weeks since
8 LMP.
9
10 S.P.A. 5-9 (footnotes, citations, and original brackets omitted) (original emphases
11 omitted and emphasis added).
12 III. Defendant’s Product
13 a. The Weeks Estimator
14 Before Defendant’s Product was released, most pregnancy tests were binary,
15 expressing only whether or not a woman is pregnant, which was detected by the
16 presence of hCG in her urine. Defendant’s Product, by measurement of the amount
17 of hCG rather than only its presence, additionally estimates time elapsed since
18 implantation. The number of weeks stated by Defendant’s Product as having
19 passed is the number of weeks since ovulation. Depending on the Product’s hCG
20 measurement, its message to the user reads either “Not Pregnant” or “Pregnant”
21 and “1-2 [weeks]”; “2-3 [weeks]”; or “3+ [weeks].” If the result reads Pregnant, 1-
22 2 weeks, 2-3 weeks, or 3+ weeks, that means that the user is pregnant and that her
23 hCG levels indicate that the stated number of weeks have passed since ovulation.
24
10
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 b. The FDA Clearance Process
2 Home pregnancy tests are Class II medical devices and, as such, they are
3 subject to FDA regulation. Specifically, they are subject to the requirements of
4 § 510(k) of the FDCA, 21 U.S.C. § 360(k), known as the “§ 510(k) process.” See
5 Medtronic, Inc. v. Lohr, 518 U.S. 470, 478-79 (1996). Under the § 510(k) process,
6 a party seeking to market a Class II device must submit a “premarket notification”
7 to the FDA, which must include a description of the device, a statement of
8 intended use, the proposed labeling, and any other information necessary for the
9 FDA to determine if the device is “substantially equivalent” to an existing
10 authorized device. A determination that the new device is substantially equivalent
11 to a preexisting device is essentially a finding that the new device is as safe and
12 effective as the preexisting device, meaning the new device may be marketed
13 without further analysis. Id. Under § 513(i)(1)(E) of the FDCA, the FDA may,
14 notwithstanding a substantial equivalence determination, require changes to the
15 product’s labeling or promotional materials designed to discourage potential off-
16 label use of the product that might cause harm to consumers. 21 U.S.C.
17 § 360c(i)(1)(E).
18 Defendant began the § 510(k) process for the Product in 2008. The FDA
19 issued a “hold letter” in August 2012, expressing a concern that the “weeks
20 indicator feature may provide misleading information to lay population of users.”
11
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 J.A. 7581. The letter noted that “[f]or example, the output of this test is not aligned
2 with gestational aging done by healthcare professionals (i.e. it will under-estimate
3 gestational age by an average of 2 weeks).” Id. The letter also expressed concern
4 that “users [may] misinterpret the weeks results to be a substitution for gestational
5 age determination or may misinterpret weeks results to mean they are pregnant and
6 their pregnancy is progressing in a healthy manner.” Id. Among other things, the
7 hold letter required that Defendant remove the phrase “Also Tells you How Far
8 Along you Are” from the Product’s box. J.A. 7581-83.
9 After additional communication between Defendant and the FDA, the FDA
10 issued a final “clearance letter” on December 10, 2012. The clearance letter stated
11 that Defendant could begin marketing the device but also invoked the FDA’s
12 § 513(i)(1)(E) authority to impose limitations on the Product’s advertising and
13 labeling. The clearance letter required, among other things, that Defendant include
14 a specific “conversion chart” explaining how a doctor would date the pregnancy
15 compared to the Product’s results, using language provided by the FDA. It also
16 specified that the Product’s results not be expressed as “weeks pregnant,” but only
17 as the number of weeks since ovulation. J.A. 3368-69.
18 Additionally, the clearance letter required that the Product include the
19 following Indications for Use Statement:
12
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 The Clearblue Advanced Pregnancy Test with Weeks Estimator
2 is an over-the-counter urine hCG test which is intended for the
3 detection of pregnancy. The test detects hCG in some cases from four
4 days before the expected period (which is 5 days before the day of the
5 missed period).
6
7 This test is only intended for individual use at home. It is not
8 intended for use in a healthcare setting.
9
10 This test contains a “Weeks Estimator.” The “Weeks
11 Estimator” is meant solely as an estimate for the consumer and is not
12 intended as a substitute for a doctor’s clinical diagnosis. The “Weeks
13 Estimator” is not intended for multiple pregnancies. The estimate
14 provided by the device may be inaccurate in these cases.
15
16 This test cannot be used to determine the duration of pregnancy
17 or to monitor the progression of pregnancy. Your doctor determines
18 how many weeks pregnant you are based on the first day of your last
19 menstrual period and ultrasound results. This test provides a different
20 estimate that cannot be substituted for a doctor’s determination of
21 gestational age. Only your doctor can provide a reliable estimate of
22 gestational age and only your doctor can monitor pregnancy
23 progression. You should seek qualified prenatal care if you suspect
24 you are pregnant.
25
26 J.A. 3370.
27 The clearance letter stated that the “FDA’s issuance of a substantial
28 equivalence determination does not mean that FDA has made a determination that
29 your device complies with other requirements of the [FDCA] or any Federal
30 statutes and regulations administered by other Federal agencies.” Id. Additionally,
31 the letter reminded Defendant that it must obtain FDA approval before modifying
32 or removing any of the required labeling.
13
15-2411--cv
Church & Dwight Co
o., Inc. v. SP
PD Swiss Preecision Diaggnostics, Gm
mbH
1 c. The Launch
h Packagee and Adveertising C
Campaign
2 Defendant
D launched
l th
he Productt in Augustt 2013. Thhe Launch P
Package
3 containeed the Prod
duct’s nam blue Advannced Pregnnancy Test with Weeks
me—Clearb
4 Estimattor—in larg
ge font, alo
ong with a picture off the Produuct. The Laaunch Packkage
5 also exh
hibited fou
ur windowss, designed
d to appearr similar to the windoow that apppears
6 on the Product
P itseelf. One window sho
owed the w
word “Pregnnant” on thhe first linee
7 and “1-2
2 weeks” on
o the seco
ond; the seccond show
wed the word “Pregnaant” on thee
8 first linee and “2-3 weeks” on
n the secon
nd; the thirrd showed the word ““Pregnant”” on
9 “ weeks”” on the second; and the fourth read “Nott Pregnant.”
the firstt line and “3+
10 (See im
mage below
w.) The worrd “ovulatiion” did noot appear oon the frontt or back oof
11 the Launch Package to descrribe the Product. Onee side paneel of the Laaunch Packkage
12 containeed the full FDA-requ
uired Indicaations for U
Use Statem
ment in sm
mall font. (S
See
13 image below.)
b
14
14
15-2411--cv
Church & Dwight Co
o., Inc. v. SP
PD Swiss Preecision Diaggnostics, Gm
mbH
1
2 The
T Producct launch was
w accomp
panied by a marketinng campaiggn. One feaature
3 of the campaign was
w a fifteeen-second television
t ccommerciaal that ran from Auguust
4 28, 2013 to Decem V Commercial”). Thhe commerrcial showed
mber 2, 2013 (the “TV
5 two wom
men sitting
g at a kitch
hen table, engaging
e inn the follow
wing dialoogue:
6 Woman
W 1: I’m
I pregnaant.
7 Woman
W 2: Really?
R
8 Woman
W 1: Two
T week
ks.
9 Woman
W 2: You
Y alread
dy went to the doctorr?
10 Woman
W 1: Not
N yet, bu his new Cleearblue tesst. It’s like two
ut I took th
11 teests in one.
12
13 Woman
W 2: Oh
O my God, I think I’m
I going tto cry!
14 84-85. Durring and affter this diaalogue, thee screen shiifted to exaamples of tthe
J.A. 338
15 various results thaat can appeear on the device,
d succh as “Preggnant / 1-2 Weeks.” F
For
16 two seconds of thee commerccial, the wo
ords “ESTIIMATED WEEKS S
SINCE
17 OVULA
ATION” ap
ppeared on
n the screen
n, and for nnine seconnds the folllowing
18 appeareed at the bo
ottom of th
he screen:
19 Word
W “weeeks” on dissplay is forr illustratioon only. F
For home uuse only.
15
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 Always consult a doctor if you suspect you are pregnant and to
2 confirm, date and monitor pregnancy. Not for multiple pregnancies.
3 Estimates weeks since ovulation up to 3+ weeks. Do not use to
4 monitor pregnancy progress or duration.
5
6 The commercial closed with a voiceover: “The new Clearblue pregnancy test also
7 estimates how many weeks. Weeks Estimator. Only from Clearblue.” Id.
8 Defendant maintained a webpage dedicated to promoting the Product. A
9 banner at the top of the page stated: “The ONLY Pregnancy Test that Estimates
10 Weeks.” A large photo of the Product appeared with the window reading “Pregnant
11 / 1-2 weeks.” The webpage stated that the Product “is the FIRST and ONLY
12 pregnancy test that not only tests you if you are pregnant but also estimates the
13 number of weeks. It’s like 2 tests in 1!” J.A. 3415.
14 Defendant also promoted the Product through product placement in the
15 television program “The Doctors.” Additionally, Defendant marketed the Product
16 in retailer presentations, web banners, retailer circulars and websites, and in-store
17 advertising. For example, one advertisement that appeared in Walgreens stated
18 “How Far Along Am I? Clearblue Advanced Pregnancy Test with Weeks
19 Estimator tells you in words if you are pregnant, and estimates how many weeks
20 by measuring the pregnancy hormone level.” J.A. 3418-19.
21 d. The FDA’s Response
22 After receiving complaints from Plaintiff, the FDA emailed Defendant in
16
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 November 2013 stating, “[i]t has come to our attention that [Defendant] is
2 marketing the ‘Clearblue Advanced Pregnancy Test with Weeks Estimator’ device
3 in violation of the limitations in FDA’s clearance letter.” J.A. 2152. During a
4 November 18, 2013 conference call with Defendant, the FDA related its concerns.
5 Among other things, the FDA complained that the Launch Package included
6 display windows with the word “weeks.” It instructed Defendant to remove the
7 word “weeks” from the windows and replace it with “weeks along” outside the
8 windows.
9 After some back and forth with the FDA, Defendant submitted a “mitigation
10 proposal” to address the FDA’s concerns, which ultimately resulted in the Revised
11 Package and advertising.
12 e. The Revised Package and Advertising Campaign
13 The Revised Package, which was launched in February 2014, differed from
14 the Launch Package in several ways. The Revised Package included a gray strip in
15 the top right corner with the phrase “Only Test That Estimates Weeks Since
16 Ovulation*”. The asterisk linked to the Indications for Use Statement on the side
17 panel. The four screens on the front of the package no longer contained the word
18 “weeks”; instead, “weeks along” was printed below the screens, as specified by the
19 FDA. (See image below.)
17
15-2411--cv
Church & Dwight Co
o., Inc. v. SP
PD Swiss Preecision Diaggnostics, Gm
mbH
1
2 Defendant
D stopped
s airring the TV
V Commerrcial and reeplaced it w
with an
3 Internett-Only Com
mmercial. The
T Intern
net-Only Coommerciall was simillar to the T
TV
4 Commeercial, but the
t dialogu
ue was chaanged to rem
move the ddiscussion of a doctoor
5 and Wo
oman 1’s declaration of how farr along shee was. Defeendant alsoo launchedd a
6 new weebpage whiich essentiaally made the same cchanges as those madde in the
7 Revised
d Package. The first paragraph
p on
o the webbpage was also modiffied to readd:
8 “Clearb
blue Advan
nced Pregn
nancy Test with Weekks Estimatoor is the FIIRST and
9 ONLY pregnancy
y test that not
n only tellls you if yyou are preggnant but aalso estimaates
10 the num
mber of weeeks since ovulation.
o It’s
I like 2 ttests in 1!”” J.A. 31655.
11 IV
V. Proceedings Below
12 a. Prreclusion Argument
A ts
13 Plaintiff
P iniitiated this action by a complainnt filed on January 299, 2014 annd
14 moved for
f a prelim
minary inju moved to ddismiss the complaintt.
unction. Defendant m
18
15-2411-cv
Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 Defendant’s main argument on its motion to dismiss was that the FDCA precluded
2 Plaintiff’s Lanham Act claim. On June 3, 2014, the district court denied
3 Defendant’s motion to dismiss, finding, among other things, that Plaintiff’s
4 Lanham Act claim would not usurp the FDA’s role in enforcement of the FDCA
5 and its associated regulations. The district court also directed that the preliminary
6 injunction hearing would be consolidated with the bench trial on liability. See Fed.
7 Rawle Civ. Proc. 65(a)(2).
8 Before trial, Defendant submitted a motion in limine renewing its preclusion
9 argument in light of the Supreme Court’s recent decision in POM Wonderful LLC
10 v. Coca-Cola Co., 134 S. Ct. 2228 (2014). The district court adhered to its position
11 that there was no preclusion, finding that POM Wonderful reinforced, rather than
12 undermined, the district court’s original decision.
13 b. Bench Trial on Liability
14 At the parties’ request, the district court bifurcated trial, as between liability
15 and damages. It then conducted a two-week bench trial on liability in April 2015.
16 The court issued an opinion on July 1, 2015 finding Defendant liable for falsely
17 advertising in the Launch Package and its associated advertising, as well as in the
18 Revised Package. The court also determined that, at least around the time the
19 Launch Package was created, Defendant had deliberately set out to deceive
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 consumers into believing that the Product could provide a measure of weeks-
2 pregnant consistent with what doctors provide.
3 c. Injunction
4 The district court concluded that Plaintiff was entitled to an injunction
5 because, among other things, it had demonstrated irreparable harm—the parties
6 were clearly competitors and there was a logical causal connection between
7 Defendant’s false advertising and Plaintiff’s sales.
8 On August 26, 2015, the district court entered a permanent injunction. The
9 court’s order: (a) enjoined Defendant from communicating in any advertising that
10 the Product provides an estimate of weeks pregnant that is the same as a doctor’s
11 estimate; (b) enjoined Defendant from distributing or communicating any of the
12 Launch or Revised Packaging or advertising and required Defendant to remove all
13 current products from points of sale within forty-five days; (c) required Defendant
14 to include with the Product a specified forty-one-word statement clarifying the
15 difference in the estimates, in a particular position and font size; (d) prohibited
16 Defendant from using several phrases in its advertising, such as “weeks pregnant,”
17 “weeks along,” or “Weeks Estimator”; (e) required Defendant to deliver within
18 seven days to all retailers and distributors a specified written notice (“Corrective
19 Notice”) with a copy of the injunction; (f) required Defendant, for one year, to
20 make available copies of the Corrective Notice with copies of the injunction in
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 prominent locations at all U.S. trade shows and professional meetings attended by
2 Defendant or any of its representatives; (g) required Defendant within seven days
3 to set up and maintain for a year a stand-alone page on its website with a specified
4 messaging about the lawsuit and what the court found to be Defendant’s history of
5 providing misleading information about the Product; (h) required Defendant to
6 publish a statement in retailer circulars to the same effect; (i) required Defendant to
7 publish Internet-banner advertising prominently displaying its logo and stating that
8 a federal court has determined that Defendant “engaged in false advertising”; (j)
9 required Defendant to publish in three parenting magazines full-page
10 advertisements including a statement similar to the one on the standalone webpage;
11 and (k) required Defendant to produce a video explaining the difference between
12 the Product’s and medical profession’s pregnancy length estimates and stating that
13 “a federal court found the manufacturer . . . to have engaged in false advertising,”
14 and to make it prominently available on Defendant’s webpages, YouTube
15 channels, and Facebook page. S.P.A. 55-60.
16 DISCUSSION
17 On appeal, Defendant raises several challenges to the district court’s
18 conclusions. First, Defendant renews its argument that the Plaintiff’s Lanham Act
19 claim is precluded by the FDCA. Second, Defendant challenges the district court’s
20 finding of Lanham Act liability by arguing that the district court misapplied the
21
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1 literal falsity and implied falsity analyses to the Launch Package, TV Commercial,
2 and other advertising, that the district court erred in relying on flawed survey
3 evidence to find implied falsity with respect to the Revised Package, and that the
4 district court erred in finding injury and materiality. Finally, Defendant contends
5 that the injunction is inappropriately broad in scope and overly punitive.
6 Defendant’s preclusion argument presents a question of law, which we
7 review de novo. Cf. Goodspeed Airport LLC v. E. Haddam Inland Wetlands &
8 Watercourses Comm’n, 634 F.3d 206, 209 n.3 (2d Cir. 2011) (“We review de novo
9 a district court’s application of preemption principles.”). When reviewing a district
10 court’s judgment following a bench trial, we review the court’s findings of fact for
11 clear error and its conclusions of law de novo. Merck Eprova AG v. Gnosis S.p.A.,
12 760 F.3d 247, 255, 261-62 (2d Cir. 2014); see also Time Warner Cable, Inc. v.
13 DIRECTV, Inc., 497 F.3d 144, 158 (2d Cir. 2007). We review the scope of a
14 permanent injunction for abuse of discretion. Merck Eprova, 760 F.3d at 265.
15 I. Preclusion
16 Defendant contends that Plaintiff’s Lanham Act claim is precluded by
17 Congress’s provision for intensive regulation of Defendant’s Product by the FDA.
18 Defendant argues that it cannot be held liable for its labeling and promotional
19 materials because those materials were under FDA “control,” having been
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1 reviewed and approved by the FDA through the FDCA § 510(k) process.
2 Appellant’s Br. 23.
3 We hold that Plaintiff’s Lanham Act claim is not precluded.
4 Notwithstanding certain differences, the Supreme Court case of POM Wonderful
5 LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014) presents similar facts, and the
6 Court’s ruling is instructive. POM Wonderful concerned a Lanham Act challenge
7 between two marketers of fruit juice. The plaintiff alleged that the defendant’s
8 practice of calling its juice blend “pomegranate blueberry,” when it only contained
9 0.3% pomegranate juice and 0.2% blueberry juice, was deceptive. The defendant
10 argued that a Lanham Act suit regarding the labeling of its product was precluded
11 by the FDCA, which regulates the labeling of food products to protect the public
12 against false labeling. 21 U.S.C. §§ 331, 343.
13 The Supreme Court addressed the interaction between the Lanham Act’s
14 unfair competition provisions and the FDCA. The Court concluded that the
15 Lanham Act claim was not precluded. POM Wonderful, 134 S. Ct. at 2238-39.
16 Applying principles of statutory interpretation, the Court found, among other
17 things, that the Lanham Act and the FDCA complement one another because “each
18 [statute] has its own scope and purpose.” Id. at 2238. The Lanham Act “protects
19 commercial interests against unfair competition, while the FDCA protects public
20 health and safety.” Id. The Court noted that Congress’s intent in maintaining the
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1 distinction between these goals can be further seen in the fact that the FDCA’s
2 enforcement is by the FDA, which does not have a mission to protect the concerns
3 of a competitor harmed by the regulated entity’s misleading advertising or
4 labeling. Id.
5 The Court also rejected an alternative position, proposed by the government
6 as amicus curiae, that Lanham Act claims are not precluded by the mere fact that
7 the FDCA covers a product generally, but are precluded in situations when the
8 FDCA or the FDA, through its regulations, have “specifically require[d] or
9 authorize[d]” a challenged aspect of a label. Id. at 2240. The Court rejected the
10 proposition that the FDCA’s or FDA’s regulation of a label creates a “ceiling” that
11 precludes any further challenges to that label under other statutes. Id. The Court
12 concluded that even the government’s limited preclusion theory would distort
13 Congress’s intent to allow the Lanham Act and the FDCA to exist in tandem to
14 serve the distinct interests each statute protects. Id. at 2240-41.
15 We agree with the district court that POM Wonderful is controlling here. We
16 see no reason why the subjugation of Defendant’s Product labeling to FDA
17 regulation through the § 510(k) process should categorically immunize it from
18 Lanham Act claims by competitors regarding the regulated labeling. As the POM
19 Wonderful opinion noted, regardless of the fact that the FDCA and Lanham Act
20 sometimes overlap in scope and effect, each statute nonetheless has a distinct
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 purpose, and in carrying out its FDCA duties, the FDA is not charged with
2 protecting the interests of its subject’s competitors. Id. at 2238-39.
3 The fact that the FDA has satisfied itself that a product’s labeling is
4 sufficiently accurate to secure FDA approval gives no assurance that the
5 intervention of a competitor would not reveal problematic misleading messaging
6 that is harmful to the competitor’s interests, which the federal agency either
7 overlooked or failed to appreciate as important. POM Wonderful is clear: FDA
8 approval is no substitute for the intervention of a competitor, which by dint of its
9 “market expertise” is uniquely qualified to “provide incentives for manufacturers
10 to behave well.” Id. FDA approval of the accuracy of a subject’s representations
11 does not create a ceiling that bars still better protections against the capacity of the
12 representations to mislead. Indeed, the FDA explicitly warned Defendant in its
13 clearance letter that its approval “does not mean that FDA has made a
14 determination that your device complies with other requirements of the [FDCA] or
15 any Federal statutes and regulations administered by other Federal agencies.” J.A.
16 3370.
17 Notwithstanding that the FDA’s regulation of Defendant’s labeling
18 addressed the same issue as raised by Plaintiff in its Lanham Act suit—the risk that
19 consumers will misunderstand Defendant’s messages as implying that the Product
20 utilizes the same metric for pregnancy duration as used by medical professionals—
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1 there is no reason to assume that Congress would see the FDCA’s precautions as
2 undermined by a court’s decision, upon a competitor’s suit, that protection of the
3 competitor against unfair competition through false advertising requires still
4 greater protection against consumer miscomprehension than was mandated by the
5 FDA.
6 We see no merit in Defendant’s efforts to distinguish POM Wonderful.
7 Although the FDA did not preapprove the juice labels at issue in POM Wonderful,
8 as it did here pursuant to its more proactive, extensive, and focused role in drug
9 regulation, the Supreme Court explicitly rejected the government’s argument that a
10 Lanham Act claim is precluded to the extent that the FDCA or FDA regulations
11 “specifically require or authorize” aspects of a label that are then challenged under
12 the Lanham Act, noting that the FDA’s requirements are a floor, not a ceiling. 134
13 S. Ct. at 2235.
14 Defendant’s reliance on PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011) is also
15 misplaced. At first glance, PLIVA appears to share much in common with this case.
16 PLIVA involved consumer lawsuits against generic drug manufacturers under state
17 tort laws requiring drug manufacturers to label their drugs so as to reveal to
18 consumers the dangers posed by the drugs. Id. at 608-09. The defendant generic
19 drug manufacturers asserted that the state law tort claims were preempted by FDA
20 regulations, which require generic drug labels to be the same as their brand-name
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 equivalents. Id. at 613. The Supreme Court agreed, reasoning that it would be
2 “impossibl[e]” for the defendants to comply with the FDA’s rules and also provide
3 the more robust warning that state law required. Id. at 618. The Court found
4 impossibility even though the defendants could have requested permission from
5 the FDA to change their labels so as to comply with the state laws. The Court held
6 that when a party must affirmatively seek permission from the federal agency in
7 order to comply with a state law requirement, the state law is preempted. Id. at
8 620-24.
9 It is true that Defendant here, like the defendants in PLIVA, could have
10 marketed the Product under a label that differed from the label approved by the
11 FDA only by obtaining permission of the FDA. This was required by the FDA’s
12 clearance letter and the § 510(k) process generally. Nonetheless, we conclude that
13 PLIVA is not controlling here because this dispute does not involve the question
14 whether a state law is preempted by a federal agency’s regulation; rather, this
15 dispute involves the question whether the application of a federal agency’s
16 regulation, promulgated under one federal statute, precludes a private action under
17 another federal statute. While federal law-state law preemption principles can be
18 “instructive” in the federal law-federal law preclusion context, “the Court’s
19 [preemption] precedent does not govern preclusion analysis.” POM Wonderful,
20 134 S. Ct. at 2236. In a preemption case, concerns about the primacy of federal law
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 and the “state-federal balance . . . frame the inquiry,” but that is not so in a
2 preclusion case. Id. The uniformity concerns that drive preemption doctrine are not
3 necessarily applicable when two federal statutes overlap. Our analysis must be
4 governed by POM Wonderful, which establishes that a Lanham Act claim is not
5 precluded by FDA regulation under the FDCA because the two statutes serve
6 distinct and complementary purposes.6
7 II. Lanham Act Liability
8 a. Falsity
9 Defendant contends that the district court erred in finding falsity in its
10 packaging and advertising. To prevail on a Lanham Act false advertising claim, a
11 plaintiff must establish that the challenged message is (1) either literally or
12 impliedly false, (2) material, (3) placed in interstate commerce, and (4) the cause
13 of actual or likely injury to the plaintiff. Merck Eprova AG v. Gnosis S.p.A., 760
14 F.3d 247, 255-56 (2d Cir. 2014).7
15 A plaintiff may establish falsity in two different ways. To establish literal
16 falsity, a plaintiff must show that the advertisement either makes an express
6
Defendant further argues that, at minimum, the district court’s injunction is precluded because
Defendant cannot comply with it without violating the FDA’s instructions. Defendant notes that,
for example, the district court enjoined Defendant from using the words “Weeks Estimator” in
the Product’s name unless it is modified to refer to ovulation, even though Defendant cannot
change the Product’s name without the FDA’s approval. This argument fails as a preclusion
argument for the reasons explained above.
7
As the parties do not dispute that Defendant has placed the Product in interstate commerce, we
do not address that issue.
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1 statement that is false or a statement that is “false by necessary implication,”
2 meaning that the advertisement’s “words or images, considered in context,
3 necessarily and unambiguously imply a false message.” Time Warner Cable, Inc.
4 v. DIRECTV, Inc., 497 F.3d 144, 158 (2d Cir. 2007). A message can only be
5 literally false if it is unambiguous. Id. If an advertising message is literally false,
6 the “court may enjoin the use of the message without reference to the
7 advertisement’s impact on the buying public.” Tiffany (NJ) Inc. v. eBay Inc., 600
8 F.3d 93, 112 (2d Cir. 2010) (quoting McNeil–P.C.C., Inc. v. Bristol–Myers Squibb
9 Co., 938 F.2d 1544, 1549 (2d Cir. 1991)).
10 If a message is not literally false, a plaintiff may nonetheless demonstrate
11 that it is impliedly false if the message leaves “an impression on the listener or
12 viewer that conflicts with reality.” Time Warner Cable, 497 F.3d at 153 (quoting
13 Schering Corp. v. Pfizer Inc., 189 F.3d 218, 229 (2d Cir. 1999), as amended on
14 reh’g (Sept. 29, 1999) (brackets omitted)). Courts have, at times, required a claim
15 of implied falsity to be supported by extrinsic evidence of consumer confusion. Id.
16 Alternatively, courts have allowed implied falsity to be supported by evidence that
17 the defendant intended to deceive the public through “deliberate conduct” of an
18 “egregious nature,” in which case a rebuttable presumption of consumer confusion
19 arises. Merck Eprova, 760 F.3d at 255-56.
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1 The district court engaged in separate falsity analyses as between the Launch
2 Package, together with its associated TV Commercial and additional advertising,
3 and the Revised Package. As the district court relied on the same theories with
4 respect to the Launch Package, TV Commercial, and additional advertising, we
5 address those together before turning to the Revised Package.
6 i. The Launch Package, Television Commercial, and Other
7 Advertising
8
9 The district court found that the Launch Package, TV Commercial, and other
10 associated advertising were literally false by necessary implication, as well as
11 impliedly false. The court found that although none of these materials expressly
12 stated that the Product estimates weeks-pregnant using a metric consistent with the
13 metric doctors would use, these materials included statements and images, which,
14 when considered in context, unambiguously implied that false message.
15 Defendant primarily argues that the district court erred in finding literal
16 falsity because these materials were “susceptible to more than one reasonable
17 interpretation” and thus not unambiguous. Appellant’s Br. at 45 (quoting Time
18 Warner Cable, 497 F.3d at 158). Defendant argues that a reasonable ordinary
19 person in the market for a home pregnancy test could understand Defendant’s
20 advertising regarding the Product’s ability to measure “weeks” as weeks-since-
21 ovulation/fertilization without forming a belief about whether that measure is the
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1 same or different from the convention used by doctors.
2 This argument is not persuasive. The issue is not whether Defendant’s
3 measure of weeks could have been understood to measure from LMP versus from
4 ovulation/fertilization. The issue is whether Defendant’s measurement of weeks
5 would be understood by reasonable consumers to measure by a different metric
6 than used by the medical profession. If an advertising message means something
7 different from what reasonable consumers would understand it to mean, that
8 message can be considered false. Time Warner Cable, 497 F.3d at 158 (citing
9 Novartis Consumer Health, Inc. v. Johnson & Johnson–Merck Pharm. Co., 290
10 F.3d 578, 586-87 (3d Cir. 2002) (“A ‘literally false’ message may be either explicit
11 or ‘conveyed by necessary implication when, considering the advertisement in its
12 entirety, the audience would recognize the claim as readily as if it had been
13 explicitly stated.’ ”)). The district court found that the medical profession has a
14 “standard—indeed universal—convention for expressing pregnancy duration.”
15 S.P.A. 8. It was undisputed that Defendant’s Product does not utilize the medical
16 profession’s standard, universal convention. The crucial point is that a reasonable
17 consumer would have assumed from the text of the Launch Package, TV
18 Commercial, and other associated advertising that the Product was not giving a
19 different number than a medical professional would give. The district court
20 concluded that message was false. We can see no error in the court’s reasoning.
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1 The Launch Package did not indicate in any visible or clear way that the
2 Product provides a different measurement from a doctor’s. The packaging referred
3 to the Product as a “Weeks Estimator” and included sample windows listing
4 possible results such as “Pregnant / 2-3 Weeks.” No reference to ovulation was
5 included on the front of the packaging. The only mention of ovulation and of the
6 difference in dating conventions was contained in the small Indications for Use
7 Statement on the side of the box, which, the district court found, was too wordy
8 and “minuscule” to render ambiguous the Launch Package’s message that the
9 Product provides an estimate of weeks-pregnant that is consistent with the
10 measurement provided by doctors. S.P.A. 31.
11 Similarly, the TV Commercial unambiguously implied the false message
12 that the Product provides a measurement of weeks-pregnant that is consistent with
13 the metric used by medical professionals. Like the Launch Package, the
14 commercial discussed the Product’s ability to estimate “weeks” without clarifying
15 that it measures weeks since ovulation—and, more importantly, without clarifying
16 that it measures weeks differently from how a doctor would measure. A voiceover
17 in the commercial states, “The new Clearblue pregnancy test also estimates how
18 many weeks.” J.A. 3384-85. The commercial also includes shots of the misleading
19 digital screens from the Launch Package. Its references to ovulation in the
20 disclaimers were too fleeting and small to affect a consumer’s understanding, and,
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 furthermore, made no reference to the fact that the Product uses a different metric
2 from the medical profession’s universal standard.
3 Finally, the additional associated advertising—including, among other
4 things, the website, web banners, and in-store advertising—utilized the same
5 misleading “weeks” language as the Launch Package and TV Commercial without
6 revealing in any meaningful way that the number of weeks differs from the number
7 a doctor would provide.
8 As the Launch Package, TV Commercial, and other advertising all
9 unambiguously implied the false message that the Product provides a measurement
10 of weeks-pregnant that is consistent with the measurement a doctor would provide,
11 we find no error in the district court’s findings of literal falsity.
12 It makes no difference, however, whether the Defendant’s messages were
13 literally false, because the district court also correctly found the messages to be
14 impliedly false.8 The court’s finding of implied falsity was supported by actual
15 evidence of consumer confusion (to the effect that consumers understood from the
8
Implied falsity should not be confused with literal falsity by necessary implication. A court may
find a statement literally false by necessary implication, without considering extrinsic evidence,
when the advertisement’s “words or images, considered in context, necessarily and
unambiguously imply a false message.” Time Warner Cable, 497 F.3d at 158. A message—even
a message that is ambiguous—is impliedly false if it leaves “an impression on the listener or
viewer that conflicts with reality.” Id. at 153. Implied falsity is often demonstrated through
extrinsic evidence of consumer confusion, id., or though evidence of the defendant’s deliberate
deception, which creates a rebuttable presumption of consumer confusion. Merck Eprova, 760
F.3d at 255-56.
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1 Defendant’s messaging that the Product gives the same number of weeks as a
2 doctor would give), and by evidence of Defendant’s intent to deceive, which the
3 court found sufficient to give rise to a presumption of consumer confusion. The
4 court found that Defendant engaged in intentional deception because Defendant’s
5 “staff recognized and understood that the Weeks Estimator’s result did not align
6 with how doctors express pregnancy duration and that this misalignment could
7 confuse consumers.” S.P.A. 19. The court cited to extensive evidence in the record
8 supporting this conclusion. We briefly highlight some of the more significant
9 evidence credited by the district court.
10 Some of this evidence showed that Defendant was clearly aware that LMP is
11 the metric used by doctors. Dr. Sarah Johnson, Defendant’s Head of Clinical and
12 Medical Affairs, stated in a peer-reviewed article that pregnancy was historically
13 dated in reference to LMP. Several studies and documents that Defendant
14 submitted to the FDA stated that this was the traditional or conventional practice.
15 Defendant’s witnesses at trial, including Dr. Joanna Pike, Defendant’s Senior
16 Global Pregnancy Product Manager, and Mark Gittens, Defendant’s Chief
17 Compliance Officer, acknowledged the LMP convention. Some evidence also
18 indicated that Defendant was aware that consumers would likely become confused
19 if the distinction between the Product’s ovulation metric and the conventional LMP
20 metric was not made explicit. For example, Dr. Pike stated in an email: “I think
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1 FDA would NOT approve if we used ‘Weeks Pregnant’ in any materials and we
2 are very likely to also confuse consumers and might end up with
3 challenge/complaint.” J.A. 4384. Similarly, one of Defendant’s board members
4 raised concerns at a board meeting about the digital display, and expressed that the
5 Defendant “[n]eed[ed] to be clearer what this means i.e. from time of conception
6 NOT LMP, we are Not saying what we are doing.” J.A. 6215.
7 The district court also found that statements by Kristen Suarez, Clearblue’s
8 Brand Manager, “suggest a deliberate attempt both to evade FDA limitations and
9 convey a false message about the [P]roduct.” S.P.A. 24. For example, when
10 discussing promotional materials for CVS, Suarez stated that “we can’t actually
11 link together the weeks and pregnant in the way it was on the last couple. What
12 you can say is the only test that estimates weeks, or the only test that also estimates
13 weeks, then the consumer will see Pregnant 1-2 Weeks in the windows and put it
14 together.” J.A. 8554. In another email, in response to a suggestion that an
15 advertisement say “Find out how far along you are,” Suarez stated, “This is a
16 tricky one, but the FDA doesn’t actually want us to say that. I think it can be
17 phrased as a question . . . , or we need to use the ‘estimate weeks’ language.” J.A.
18 8989-90.
19 This evidence, together with other evidence noted by the district court,
20 S.P.A. 19-27, supports the district court’s finding that the Defendant, at least at the
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 time the Launch Package, TV Commercial, and additional associated advertising
2 were under development, intended to deceive the public into believing that the
3 Product provides a measurement of weeks-pregnant consistent with the metric used
4 by doctors. This evidence was sufficient to support a presumption of consumer
5 confusion supporting a finding of implied falsity.
6 ii. The Revised Package
7 Defendant also challenges the district court’s finding that the Revised
8 Package was impliedly false. In the Revised Package, Defendant set forth more
9 clearly that the Product measures weeks since ovulation. Among other things, the
10 Revised Package added the phrase “Only Test That Estimates Weeks Since
11 Ovulation*” (with the asterisk directing to the Indications for Use Statement on the
12 side) at the corner.9 The package also replaced the windows that said “Pregnant”
13 and “1-2 weeks,” “2-3 weeks,” or “3+ weeks” with windows that said “Pregnant”
14 and “1-2,” “2-3,” or “3+,” with the phrase “Weeks Along” placed below the
15 windows.
16 To support its finding of implied falsity, the district court relied, in part, on
17 the consumer surveys of Plaintiff’s expert witness, Hal Poret. With respect to the
18 Revised Package, “Poret concluded that 16.0% or 17.3% of participants. . .
9
The Indications for Use Statement on the side of the Revised Package (as well as the Launch
Package) included an acknowledgement that doctors measure pregnancy from LMP, but did so in
an inconspicuous manner, making it “unlikely to be noticed by consumers.” S.P.A. 31-32.
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1 answered both that the [P]roduct estimates the number of weeks a woman is
2 pregnant and that the [P]roduct’s estimate of weeks is the same as a doctor’s
3 estimate of weeks-pregnant.” S.P.A. 36-37. The district court found this to be
4 sufficient evidence of consumer confusion to support finding the Revised Package
5 impliedly false.
6 Defendant’s most forceful argument is that the Poret survey was flawed
7 because the main survey questions at issue failed to test whether survey
8 respondents were confused into thinking that the Product’s measurements were the
9 same as a doctor’s because of the Product’s packaging or because of the survey
10 respondents’ preexisting erroneous beliefs about the way pregnancy is measured.
11 We agree that the consumer confusion revealed by the survey could have
12 been attributable to preexisting consumer ignorance about the conventional
13 medical practice of dating the beginning of pregnancy from LMP. Poret derived his
14 16.0% or 17.3% deception rate by looking at the number of survey respondents
15 who expressed the belief that the Product measures the number of weeks a woman
16 is pregnant and also answered that “the [P]roduct’s estimate of weeks is telling you
17 . . . [t]he same thing as when a doctor gives you an estimate of weeks.” J.A. 6680
18 (emphases omitted); see also J.A. 1576. A survey respondent might have given this
19 answer not because the Revised Package confused her into believing that the
20 Product provides the same measurement as provided by a doctor, but because she
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1 was already under the preexisting mistaken belief that a doctor measures
2 pregnancy from the date of ovulation, rather than LMP, and, therefore, any product
3 that purports to “Estimate[] Weeks Since Ovulation” would provide the same
4 estimate as a doctor.
5 However, in light of the ample evidence that Defendant was aware of this
6 widespread consumer ignorance and took no effective steps to guard against
7 misunderstanding of Defendant’s messages attributable to that ignorance, we find
8 no error in the court’s use of the Poret survey. Considering the counterintuitive
9 nature of the LMP pregnancy measurement used by doctors (which includes about
10 two weeks prior to ovulation, during which it is biologically impossible for a
11 woman to be pregnant), it must have been obvious to Defendant, a seasoned
12 manufacturer of home pregnancy tests, that many women are not aware that the
13 medical profession measures pregnancy as starting approximately two weeks prior
14 to ovulation and fertilization. The record demonstrates furthermore that Defendant
15 was in fact aware that most consumers do not understand the nature of ovulation
16 and its relation to pregnancy duration. For example, in an email exchange, Brand
17 Manager Suarez stated that “American women just aren’t that in tune” with the
18 concept of ovulation, that the concept “doesn’t really make sense to them,” and
19 that American women “don’t have a knowledge of the right days, poor
20 understanding of the details, etc. and it’s not common vernacular of how we would
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1 talk [sic] anything.” J.A. 4709-10. Similarly, a document summarizing a meeting
2 involving Dr. Johnson, notes as an “[a]dditional discussion point[]” that the
3 “[o]verall lack of consumers’ understanding of ovulation may cause confusion”
4 and points to the “[n]eed to address the reason why [doctor]s use [a] different
5 method.” J.A. 4506.
6 Defendant misses the point in its argument that the court should not have
7 relied on Poret’s survey because the survey failed to test for whether consumer
8 confusion resulted from preexisting ignorance, rather than Defendant’s message.
9 Widespread consumer ignorance as to how the medical profession measures the
10 advancement of a pregnancy was the fact—a fact that was known by the
11 Defendant. In the face of consumer ignorance as to how the medical profession
12 measures the advancement of a pregnancy, Defendant’s message that the Product
13 estimates weeks since ovulation did nothing to tell ignorant consumers that weeks
14 since ovulation is a different measurement from that used by doctors. It makes no
15 difference whether the widespread consumer ignorance predated the Defendant’s
16 Revised Package or was caused by it. The message of the Revised Package—that
17 the Product tells you the degree of advancement of your pregnancy in terms of
18 “weeks since ovulation”—implies a message that this is how the advancement of a
19 pregnancy is measured by medical professionals. The Revised Package did not
20 adequately communicate that its measurement was not consistent with the metric
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1 used by doctors. We therefore conclude that the evidence, including the Poret
2 Survey, amply supported the district court’s finding of falsity.
3 b. Materiality and Injury
4 Defendant contends the district court failed to make findings necessary to
5 support the court’s conclusion that Defendant’s misrepresentations were material
6 to Plaintiff’s claim. Defendant also contends that the district court failed to find a
7 logical causal connection between any falsity in Defendant’s messages and injury
8 to Plaintiff.
9 Plaintiff and Defendant disagree about what exactly is required to satisfy the
10 materiality requirement for a Lanham Act false advertising claim. They agree that
11 for a false message to be material, the defendant must have at least
12 “misrepresented an inherent quality or characteristic of the product.” Merck
13 Eprova, 760 F.3d at 255. Defendant argues, however, that, according to our
14 precedents, there is an additional requirement that the deception be “likely to
15 influence [consumer] purchasing decisions,” citing NBA v. Motorola, Inc., 105
16 F.3d 841, 855 (2d Cir. 1997). Appellant’s Br. 52-53. The district court expressly
17 found that “[t]he Weeks Estimator’s ability to estimate weeks is, as the [P]roduct’s
18 name conveys, an inherent quality or characteristic of the [P]roduct as it is the key
19 feature that differentiates it from the many other home pregnancy tests on the
20 market.” S.P.A. 40. Defendant points out, however, that, in its discussion of the
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1 materiality element, the court made no express finding that Defendant’s
2 misrepresentation was likely to influence purchasing decisions.
3 Although the essential elements of the materiality standard indeed appear to
4 be somewhat unsettled in our circuit,10 we need not resolve the issue now. We
5 assume for purposes of this ruling that a defendant’s false advertising is not
6 material to a plaintiff’s Lanham Act claim unless that falsity had the capacity to
7 adversely affect the plaintiff’s business by influencing consumer purchasing
8 decisions. While the materiality of the falsity and the likelihood of injury to the
9 plaintiff resulting from the defendant’s falsity are separate essential elements, in
10 many cases the evidence and the findings by the court that a plaintiff has been
11 injured or is likely to suffer injury will satisfy the materiality standard—especially
12 where the defendant and plaintiff are competitors in the same market and the
13 falsity of the defendant’s advertising is likely to lead consumers to prefer the
14 defendant’s product over the plaintiff’s. See Johnson & Johnson v. Carter-
15 Wallace, Inc., 631 F.2d 186, 190 (2d Cir. 1980) (In Lanham Act claims, the injury
16 “standard is whether it is likely that [defendant]’s advertising has caused or will
10
In NBA, we defined “material” as “an inherent quality or characteristic of the product.” 105
F.3d at 855 (internal quotation marks omitted). In so doing, we cited three other circuits and a
treatise, and included parentheticals for each citation that defined “material” as “likely to
influence purchasing decisions.” Id. However, our post-NBA cases do not mention this “likely to
influence purchasing decision” feature of the standard; they focus instead on the “inherent
quality or characteristic” descriptor. See, e.g., Merck Eprova, 760 F.3d at 255; Time Warner
Cable., 497 F.3d at 153 n.3; S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 238 (2d Cir.
2001).
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 cause a loss of [plaintiff’s] sales,” which can be established when defendant and
2 plaintiff “are competitors in a relevant market” and plaintiff demonstrates a
3 “logical causal connection between the alleged false advertising and its own sales
4 position.”). In discussing the essential element of likelihood of harm to Plaintiff’s
5 business resulting from Defendant’s false advertising, the district court expressly
6 found that Plaintiff “lost sales on account of [Defendant’s] false advertising.”
7 S.P.A. 45. The court concluded its discussion of likelihood of injury stating,
8 “[Plaintiff] established a logical causal connection between [Defendant]’s false
9 advertising and its market harm that is sufficient to establish [Defendant]’s liability
10 for false advertising under the Lanham Act.” Id.
11 In our view, the district court’s conclusion, although uttered in connection
12 with the element of likely injury, also constituted a finding that Defendant’s
13 misrepresentations were likely to influence purchasing decisions and were
14 therefore material to Plaintiff’s claim. If consumers, faced with the choice to
15 purchase either the plaintiff’s product or the defendant’s, are likely to prefer the
16 defendant’s product by reason of the defendant’s false advertising, the falsity of the
17 defendant’s advertising is material to the plaintiff’s Lanham Act claim.
18 The evidence furthermore amply supported the conclusion that the falsity of
19 Defendant’s advertising was both material and likely to cause injury to Plaintiff. It
20 is entirely reasonable to expect that, for a significant number of women interested
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1 in learning whether they are pregnant—especially those who have not previously
2 been pregnant or are otherwise ignorant of the details of the reproductive cycle—
3 the information that Defendant’s Product will tell them something different from
4 what a doctor would provide would make them less likely to trust Defendant’s
5 Product, and more likely to purchase from Plaintiff, Defendant’s closest
6 competitor. The district court’s finding is further supported by the evidence that
7 this was precisely the risk that motivated Defendant to avoid making clear to
8 consumers that its Weeks Estimator gave information different from what a doctor
9 would give.
10 We conclude that both the evidence and the district court’s findings, to the
11 effect that Plaintiff likely suffered a loss of sales by reason of Defendant’s false
12 advertising, adequately supported both the materiality element and the likely injury
13 element. With respect to the injury element, Defendant argues that the district
14 court’s reasoning was fallacious because the court relied in part on statistics
15 showing that Plaintiff’s share of the market decreased, while the Defendant’s share
16 increased upon Defendant’s introduction of the Product. Defendant argues that this
17 redistribution of consumer preference was attributable to the important new feature
18 Defendant was offering, and that there is no reason to attribute any diminution in
19 Plaintiff’s market share to the falsity of Defendant’s advertising. Even assuming,
20 however, that Defendant is correct in discrediting an aspect of the district court’s
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1 reasoning, the district court’s finding that Plaintiff likely lost market share to
2 Defendant attributable to the falsity of Defendant’s concealment was amply
3 supported by the evidence, as explained above.11 Furthermore, as the trial was
4 bifurcated, the district court went only so far as to find liability. The trial
5 conducted did not encompass the issue of damages awardable to Plaintiff. At the
6 liability stage, the Lanham Act “demands only proof providing a reasonable basis
7 for the belief that the plaintiff is likely to be damaged as a result of the false
8 advertising.” Johnson & Johnson, 631 F.2d at 190 (emphases added). We find no
9 fault in the district court’s conclusion that Plaintiff suffered a likelihood of loss of
10 sales of its product, attributable to Defendant’s false concealment that its Product
11 gave information about the advancement of a pregnancy that was inconsistent with
12 the information that the medical profession would give.
13 Accordingly, we reject Defendant’s contention that the district court erred in
14 finding either the materiality of Defendant’s false advertising or the likelihood of
15 injury to Plaintiff’s sales resulting from Defendant’s false advertising.
16
17
11
Furthermore, “where . . . a plaintiff has met its burden of proving deliberate deception in the
context of a two-player market, it is appropriate to utilize a presumption of injury.” Merck
Eprova, 760 F.3d at 259. Defendant and Plaintiff are direct competitors in a sparsely populated
market. Plaintiff has been the market leader, followed closely by Defendant. Other home
pregnancy test brands (which are manufactured by a co-owner of Defendant) represent only a
small portion of the market.
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Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH
1 III. The Injunction
2 Finally, Defendant contends the district court abused its discretion in
3 fashioning an injunction that is excessively broad and unreasonably punitive.
4 “It is axiomatic that the contours of an injunction are shaped by the sound
5 discretion of the trial judge and, barring an abuse of that discretion, they will not be
6 altered on appeal.” Merck Eprova, 760 F.3d at 265. At the same time, injunctive
7 relief should be “no broader than necessary to cure the effects of the harm caused
8 by the violation,” Forschner Group, Inc. v. Arrow Trading Co., 124 F.3d 402, 406
9 (2d Cir. 1997), and “should not impose unnecessary burdens on lawful activity,”
10 Patsy’s Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209, 220 (2d Cir. 2003).
11 Defendant argues first that the injunction’s prohibition of further use of the
12 advertising Defendant devised for the Revised Package was abusive because the
13 court’s findings never explicitly focused on the contents of this advertising, finding
14 it to be false. We reject the contention. Even if the district court did not explicitly
15 focus on the wording of this advertising in its express findings of falsity, the
16 advertising had the same capacity to mislead as the Revised Package materials that
17 the district court extensively discussed. There is no doubt the district court
18 intended its discussion of the misleading aspects of the Revised Package to refer to
19 the associated advertising as well.
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1 Defendant contends further that the injunction terms were excessively harsh
2 in that they require Defendant to distribute corrective notices that expressly
3 acknowledge that the court found Defendant to have engaged in false and
4 misleading advertising. We disagree. Especially in view of the district court’s
5 findings that Defendant was intentionally deceptive in its advertising, we cannot
6 say that the relief ordered by the district court went beyond curing the effects of the
7 harm caused by Defendant’s falsity.
8 Finally, Defendant contends that the court abused its discretion in the
9 sweeping scope of the relief it ordered, especially in view of such factors as the
10 relatively brief time the public was exposed to the deceptive materials and the time
11 passed since their withdrawal. Although Defendant’s argument is not
12 unreasonable, and less intrusive requirements might well have sufficed, we cannot
13 say the court’s orders constituted an abuse of the court’s wide discretion to fashion
14 the terms of injunctive relief.
15 We have considered Defendant’s other arguments, and find them to be
16 without merit.
17 CONCLUSION
18 The judgment of the district court is hereby AFFIRMED.
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