April 30, 2014
Westlaw Journal Intellectual Property
By B. Brett Heavner; Danielle Wright Bulger
Authored by Danielle Wright Bulger and B. Brett Heavner
Industries where advertising is regulated by U.S. federal agencies, such as the Food and Drug Administration, have been caught in a quandary over whether such regulation would preclude private false-advertising actions. Specifically, is a private party excluded from bringing its own false-advertising claim when a federal agency's regulation may govern some aspect of an allegedly deceptive label or advertisement?
An upcoming U.S. Supreme Court decision should resolve this issue. On April 21 the high court heard oral argument in POM Wonderful v. Coca-Cola Co.1 This case centers on the tension between how the FDA and the Lanham Act, which governs trademark false-advertising law in the United States, deal with factual statements on labeling.
POM Wonderful LLC is a beverage producer that markets and sells bottled pomegranate juice and pomegranate juice blends.2 Its success is based in part on the purported health benefits of pomegranate juice provides.
Coca-Cola Co. sells fruit juices under the Minute Maid brand.3 The lawsuit arose after Coca-Cola introduced its new Pomegranate Blueberry juice product in 2007.4 The label displayed on the juice stated that the product contained about "99.4 percent apple and grape juices, 0.3 percent pomegranate juice, 0.2 percent blueberry juice, and 0.1 percent raspberry juice."5
Generally, the Food, Drug and Cosmetic Act regulates food and beverage labeling. Under the FDA regulation, a manufacturer is permitted to name a beverage based on its flavoring, even if a specific flavor is not the predominant ingredient in the beverage.6
The FDCA prohibits the misbranding of a food or beverage product. According to the FDCA, a beverage is misbranded if "its labeling is false or misleading in any particular,"7 or if any word or statement required by the FDCA "is not prominently placed thereon with such conspicuousness . . . and in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase and use."8
The FDCA may only be enforced by the FDA or the Justice Department. Additionally, only criminal sanctions are imposed.
Private parties damaged by false statements or labels, on the other hand, can usually bring a private civil action under the Lanham Act. Specifically, the Lanham Act imposes civil liability against anyone who uses a false or misleading description or representation "in connection with any goods."9
In 2008, POM Wonderful brought a Lanham Act false-advertising suit against Coca-Cola, claiming that Coca-Cola's product misled consumers into believing that its juice primarily contained pomegranate and blueberry juices, when it in fact contained mainly cheaper apple and grape juices.10 POM claimed that the purple-colored drink and words "pomegranate" and "blueberry" on the package's label dwarfed the small font of the FDA-required disclaimer that the product is a blend of five juices.11
POM said Coca-Cola received a record number of complaints regarding its Pomegranate Blueberry product. And, in deposition testimony, a 14-year Coca-Cola employee stated that no other Minute Maid product has spurred more complaints from consumers.
Despite POM's arguments and Coca-Cola's admissions, the 9th U.S. Circuit Court of Appeals held that FDA regulations preempt Lanham Act claims relating to the false labeling of juices. When two federal statutes may possibly conflict, "[c]ourts try to give as much effect to both statutes as possible."12 However, the 9th Circuit said Congress entrusted the FDA alone with the task of interpreting and enforcing the FDCA.13 Therefore, if a party sues under the Lanham Act seeking to in effect enforce the FDCA or its regulations, the lawsuit will be preempted, especially where the FDA has failed to conclude that the alleged particular conduct violates the FDCA.14
Similarly, a suit will be preempted if the Lanham Act claim would require a court to interpret ambiguous FDA regulations.15 Although the pomegranate blueberry label in this case may not be accurate in POM's opinion, the FDA has not taken any stance. The 9th Circuit explained that if the FDA in fact believed the context misleads consumers, the agency could have acted through its comprehensive regulation of labeling.16 Because under the FDCA a manufacturer has the freedom to choose a product name that does not reflect a predominant juice, "as best [the court could] tell," the name Coca-Cola chose was authorized.17
The 9th Circuit's preemption decision could have broader implications for plaintiffs outside the field of food and drug labeling. The decision could lead to the preemption of Lanham Act claims in other industries where the government also regulates advertising and labeling.
For example, the Federal Deposit Insurance Corp. and the Federal Reserve have some say in banking advertisements, and the Federal Communications Commission has at times had some say in telecommunications advertising.
If the 9th Circuit holding stands "as is," would private litigants also be barred from bringing certain false-advertising suits related to banking because the advertising is not clearly prohibited by FDIC banking regulations? Similarly, would private Lanham Act claims relating to telecommunication advertising be barred because the FCC failed to object to those advertisements under its own regulations?
The 9th Circuit's POM Wonderful decision is somewhat of a departure from past holdings of other federal courts, and it therefore created some uncertainty about when and if Lanham Act claims are preempted. Prior to the 9th Circuit's decision, courts generally held that a Lanham Act claim can proceed when the court was not required to interpret, or to apply, FDA regulations. In a separate but factually similar Lanham Act case launched by POM Wonderful against Tropicana Product the U.S. District Court for the Central District of California held that Lanham Act claims alleging deceptive labeling are not based on a technical violation of the FDCA or FDA regulations, and thus are not preempted.18
The court said the FDA does not have exclusive enforcement power over any and all claims related to a juice label,19 and, thus, the two statutes can both be given full effect.
Similarly, in Merck Eprova AG v. Gnosis S.p.A.,20 the U.S. District Court for the Southern District of New York held that FDA regulations did not preempt a Lanham Act false-advertising claim because the truthfulness of a defendant's labels could be evaluated exclusively on accepted standards in the scientific and dietary supplement community and did not require a review of FDA regulations. In that case, the court held that falsely listing an "active" ingredient as the folate source in vitamin supplements, when the true folate source was "inactive," could form the basis for civil liability, even though FDA had approved the labels.
The court held that the falsity of the claim could be determined without reference to the FDA regulations at all. Therefore, preemption of the Lanham Act was not an issue.21
These cases illustrate that federal courts have found that regulations are not applicable to particularized false-advertising claims and do not preempt the Lanham Act.
Given the apparent split in authority and the broad implications of the 9th Circuit's preemption holding, the Supreme Court granted certiorari and agreed to hear POM's appeal.
In its court filings, POM argues that the 9th Circuit is wrong because Coca-Cola could have easily complied with both the Lanham Act and the FDCA and that courts have a duty to give effect to all federal statutes unless Congress has directed otherwise.
Citing the legislative history of the Lanham Act, POM argues that Congress intended the act to secure to a business owner "the good will of his business and protect[] the public against spurious and falsely marked goods."22
Whereas the Lanham Act is intended to protect against unfair competition, the FDCA's misbranding provision is sought to only protect public health and safety; thus, the two statutes serve different purposes and should be allowed to successfully coexist, POM says.
POM contends that the 9th Circuit's conclusion that the Pomegranate Blueberry name is allowed by the FDA, as best as the court can tell, is a flawed standard that precludes application of the Lanham Act to a broad range of potentially misleading statements.
Coca-Cola, on the other hand, says the 9th Circuit made the right decision. The beverage company argues that Congress intended to have national uniformity in juice labeling and that to "bar private lawsuits that undermine that goal."23
Coca-Cola also argues that the FDCA, unlike the Lanham Act, specifically addresses food and juice labeling and that it is appropriate to "infer" Congress intended to preclude Lanham Act Section 43(a) suits to protect national uniformity.
In its amicus brief submitted to the Supreme Court in support of POM, the International Trademark Association argues that the 9th Circuit's holding and "sweeping reasoning" should not stand because the Lanham Act and the FDCA serve two different purposes.24
Although courts have entrusted the FDA to interpret and enforce the FDCA,25 INTA says, for years the Lanham Act has served as a weapon for the honest businessman to combat unfair competition. In particular, INTA argues that Section 43(a) protects sellers from having their customers "lured away . . . by deceptive ads," contrasted by the FDCA's overriding purpose to protect public health.26
While the Lanham Act protects against false advertising and promotes a fair marketplace, INTA says, the FDCA's ban on the introduction of misbranded foods and drinks into commerce focuses solely on public safety.
If the precedent is set that courts should always defer to administrative agencies to make decisions that could affect the purchasing public, private litigants will face significant hurdles when seeking monetary damages for conduct that may have directly affected their business.
In support of neither party in its amicus brief to the Supreme Court, the American Intellectual Property Law Association argues the 9th Circuit interpreted the potential conflict between the two regulations too broadly.
Where regulations completely govern the express requirements of a product's labeling or give an agency priority to review a label, Lanham Act challenges should be barred, AIPLA argues. However, where product labelling is not expressly governed by regulations, private litigants should have the ability to assert Lanham Act claims where appropriate, the association contends.
Although it is hard to read too much into the court's questioning during the April 21 oral argument, the Supreme Court justices appeared skeptical of Coca-Cola's argument that FDA preemption of private Lanham Act claims was necessary to avoid beverage makers facing a "logistical nightmare" of nonuniform labelling requirements.
Justice Anthony Kennedy expressed doubt that national uniformity required the courts to allow "labels that cheat the consumer like [Coca-Cola's label] did." Chief Justice John Roberts posited that a label could comply with FDA regulations and still be challenged as misleading to consumers for reasons different from the policy concerns of those regulations.
Taking a practical approach, Justice Ruth Bader Ginsburg said the FDA had limited resources to protect public health and safety and that labels for juices are not high on its list of duties. Given that the courts do not review FDA regulations, Justice Ginsburg said, it was hard for her to conceive of Congress intending to bar all private rights of action for competitor false advertising in the food-labeling field.
A final possible bad sign for Coca-Cola was Justice Kennedy's humorous admission that he himself was confused and thought that the Coca-Cola product was pomegranate juice.
Whatever its ultimate decision in POM Wonderful, the Supreme Court should provide valuable guidance in determining whether different federal statutes and regulations governing advertising can both be given full effect when they serve different purposes. The POM Wonderful decision could also clarify the high court's previous Lanham Act preemption holding in Dastar Corp. v. Twentieth Century Fox Film Corp.27
As a practical matter, Dastar held that copyright law preempts a Lanham Act false-advertising claim arising from misleading claims as to the "origin" or "authorship" of the copyrighted work. The court held that the Lanham Act's Section 43(a) reference to "origin" did not encompass concepts, ideas, artwork or communications.
The court's rationale was that it did not want the Lanham Act to be used as a vehicle to pursue what should have been a copyright claim, after the copyrighted work had fallen into the public domain.
If the Supreme Court holds in POM Wonderful that the FDA regulations do not preempt the Lanham Act and that both statutes can be given full effect, it may open the door to an interpretation of Dastar that would allow the Lanham Act to apply to false statements of "origin" regarding concepts, ideas, artwork or communications that do not contradict copyright policies embodied in federal statutes.
Should the 9th Circuit's decision be affirmed, plaintiffs will likely need to find ways to creatively assert Lanham Act false-advertising claims so that those claims fall outside the regulated advertising, and thus outside the preemption zone.
If, on the other hand, the Supreme Court overrules the 9th Circuit decision, perhaps a multiple-industry precedent will be set that federal regulations and Lanham Act claims relating to the same advertising and labelling are not mutually exclusive.
The Supreme Court's decision should be issued by early summer.
Endnotes
1 No. 12-761, oral argument held (U.S. Apr. 21, 2014).
2 POM Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1172 (9th Cir. 2012).
3 Id.
4 Id. at 1172-73.
5 Id. at 1173.
6 See 21 C.F.R. § 102.33(c).
7 15 U.S.C. § 343(a)(1).
8 Id. § 343(f).
9 Id. § 1125(a)(1).
10 POM Wonderful, 679 F.3d at 1174.
11 Id. at 1177.
12 Schering-Plough Healthcare Prods. v. Schwarz Pharma Inc., 586 F.3d 500, 508 (7th Cir. 2009).
13 POM Wonderful, 679 F.3d at 1175-76.
14 Id.; see PhotoMedex Inc. v. Irwin, 601 F.3d 919, 924 (9th Cir. 2010).
15 POM Wonderful, 679 F.3d at 1176; see, e.g., Mylan Labs. v. Matkari, 7 F.3d 1130, 1139 (4th Cir. 1993).
16 POM Wonderful, 679 F.3d at 1178.
17 Id. at 1176.
18 POM Wonderful LLC v. Tropicana Prods., 2010 WL 3590162 (C.D. Cal. Sept. 7, 2010). 19 Id. at *6.
20 901 F. Supp. 2d 436 (S.D.N.Y. 2012).
21 Id. at 455.
22 Brief for Petitioner at 4, POM Wonderful LLC v. Coca-Cola Co., No. 12-761 (U.S. Feb. 24, 2014) (alteration in original) (quoting S. Rep. No. 79-1333, at 3 (1946), reprinted in 1946 U.S.C.C.A.N. 1274)).
23 Brief for Respondent at 15, POM Wonderful LLC v. Coca-Cola Co., No. 12-761 (U.S. Mar. 26, 2014).
24 Brief for Amicus Curiae International Trademark Association in Support of Petitioner at 4-5, POM Wonderful LLC v. Coca-Cola Co., No. 12-761 (U.S. Mar. 3, 2014).
25 See Schering-Plough, 586 F.3d at 508.
26 Brief for Amicus Curiae International Trademark Association at 8 (quoting Schering-Plough, 586 F.3d at 512).
27 539 U.S. 23, 37 (2003).
©2014 Thompson Reuters. Originally published by Westlaw Journal Intellectual Property. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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