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In a two-part decision in Heflin v. Coleman Music, Judge Doumar of the Eastern District of Virginia granted summary judgment of non-infringement to Coleman but dismissed Coleman's counterclaims of tortious interference and false advertising that were based on notices of potential infringement Heflin sent to Coleman's customers. Heflin v. Coleman Music and Entertainment, Case No. 2:10CV566, 2011 U.S. Dist. LEXIS 141579 (E.D.Va. Dec. 5, 2011), found here.

Summary Judgment

Judge Doumar's summary judgment ruling was straightforward. The patent-in-suit claimed a system for dispensing "collector cards." It was undisputed that Coleman's devices did not dispense cards which met the Court's construction of "collector cards," but Heflin argued that the devices still infringed because they were "capable of" dispensing collector cards. Judge Doumar held that the Federal Circuit has expressly disclaimed this logic in High Tech Medical Instrumentation, Inc. v. New Image Indus., Inc., 49 F.3d 1551 (Fed. Cir. 1995). There, the Federal Circuit held that "a device does not infringe simply because it is possible to alter it in a way that would satisfy all limitations of a patent claim." Capability of infringement, Judge Doumar found, must be coupled with intent to use the accused devices to dispense collector cards. Moreover, the devices at issue were not capable of dispensing collector cards and even if they were, such an interpretation of the patent would make it invalid over the prior art.

Tortious Interference and False Advertising

Perhaps the more interesting aspect of Judge Doumar's decision is his dismissal of Coleman's claims of tortious interference and false advertising under the Lanham Act. Coleman's counterclaims were based on Heflin's statements in letters, emails and telephone calls to several of Coleman's customers that Coleman's devices potentially infringed its patent. Judge Doumar made clear that Heflin's communications did not rise to the level of intentional misconduct necessary for a claim of tortious interference as long as Heflin had a good faith belief that Coleman's devices infringed.

While the Court ultimately held that the infringement claims were meritless, it could not say that Heflin knew his claims were false when suit was filed or that Heflin's suit constituted an "outrageous act." "[T]he filing of a lawsuit to enforce a patent does not constitute an 'improper method' unless there is bad faith and an improper purpose in bringing the suit."

Likewise, the Court dismissed Coleman's Lanham Act false advertising claims. The Court held that Heflin's statements were not literally false because he only stated that he was investigating a claim of potential infringement, not of actual infringement. Moreover, Coleman failed to produce any evidence that Heflin's statements were intended to mislead or confuse customers.

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On April 20, 2011, the Fourth Circuit affirmed the judgment and injunction entered by Chief Judge James R. Spencer in PBM Products, Inc. v. Mead Johnson & Co., Civil Action No. 3:09cv.269, on December 1, 2009. This lawsuit was the third chapter in a long-running combat between PBM and Mead Johnson relating to baby formula products. PBM sued Mead Johnson twice before, in 2001 and 2002, for similar false advertising, and settled both cases.

PBM filed the most recent suit in April 2009 claiming a false advertising in violation of the Lanham Act (15 U.S.C. § 1125) and product disparagement based on various Mead Johnson claims about its Enfamil product. Mead Johnson shot back with claims for breach of contract, false advertising, and civil contempt based on the prior settlement agreements between the parties, and a claim for defamation arising from PBM CEO Paul Manning’s public statement that “Mead Johnson Lies About Baby Formula … Again.”  None of Mead Johnson’s claims made it to the jury, as Judge Spencer granted PBM summary judgment on the defamation claim, and granted judgment as a matter of law after Mead Johnson’s case in chief on the other claims. PBM’s claim, on the other hand, resulted in a jury verdict and award of $13.5 million in damages, and a permanent injunction against advertising claims found to be false. 

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In the PBM Products v. Mead Johnson baby formula case (E.D. Va. case no. 3:09-cv-00269) followed on this blog (see prior posts here, here, and here), on Tuesday, Chief Judge James R. Spencer issued two opinions that resolve several post trial motions and offer useful pointers and reminders about expert witnesses and requests for enhanced damages and attorney's fees.

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            In the PBM Products v. Mead Johnson baby formula case (E.D. Va. case no. 3:09-cv-00269) twice previously mentioned on this blog (here and here), Chief Judge James R. Spencer delivered a gift to counsel on Christmas Eve, in the form of the second of two Christmas week opinions that provide a full discussion of and rationale for prior rulings. 

            This blog entry addresses a portion of that December 24th opinion [docket no. 243 on PACER/ECF, copy available here, also available at 2009 U.S. Dist. LEXIS 120200], which dealt with Mead Johnson’s summary judgment motion on PBM’s false advertising claims under the Lanham Act and for commercial disparagement under Virginia law.  The motion was denied on the former and granted on the latter.  A passage (on p.10) about the Virginia law claim may be somewhat startling at first:

            “As this Court has previously held, ‘the only claims for unfair competition recognized in Virginia are palming off and misappropriation of another's work.’  PBM Products. Inc. v. Mead Johnson & Co., 204 F.R.D. 71, 75 (E.D. Va. 2001).  Thus, Virginia does not recognize a cause of action for deceptive trade practices, such as false advertising.  See id.”

            So, does this passage really mean that those who want to sue for “deceptive trade practices, such as false advertising,” are out of luck under Virginia law?  No, as explained below.

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After an eight-day jury trial and a $13.5 million damages award last month in its favor, Chief Judge James R. Spencer this week granted PBM Products’ request for injunctive relief in PBM Products, LLC v. Mead Johnson Nutrition Company, et al., no. 3:09-cv-269 (E.D. Va., Richmond Div.). PBM, the maker of store-brand baby formula, had sued Mead Johnson for, among other things, false advertising. At the center of the dispute were Mead Johnson’s advertisements that its more expensive baby formula is clinically proven to improve brain and eye development, among other representations about the unique nutritional advantages of its formula in comparison to store brand formula. At trial, however, PBM was able to prove that its store-brand formula has the same nutritional values as Mead Johnson’s formula.

After the resolution of Mead Johnson’s laches defense and in light if the jury’s verdict in PBM’s favor, Judge Spencer granted PBM’s request for injunctive relief and enjoined Mead Johnson from publishing and circulating any advertisement or promotional material with any false representation about its formula and from making any false statement or representation about its formula, including “It may be tempting to try a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development,” and “There are plenty of other ways to save on baby expenses without cutting back on nutrition.” Finally, the Court directed Mead Johnson to retrieve all advertisements, materials or literature with such claims already in the public forum.

While this may not be the last we hear of this case, the verdict is a warning to companies to be careful about comparative advertising claims that might leave a false impression even if they are not literally false.
 

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Your baby is priceless. Her formula’s advertising just cost $13.5 million in damages.

Yesterday, after a multi-day trial before Chief Judge James R. Spencer, the jury returned a verdict in favor of plaintiffs in PBM Products, LLC v. Mead Johnson Nutrition Company, et al., no. 3:09-cv-269 (E.D. Va., Richmond Div.).

The defendant, Mead Johnson, is the maker of one of the two Goliaths of baby formula brands – Enfamil. PBM makes store-brand formulas. This case was the third legal tangle between PBM and Mead Johnson over claims made in advertising for Enfamil, in an effort to entice parents to choose it over store brands.

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On May 7, Judge Spencer, Chief Judge of the Eastern District of Virginia, issued an opinion denying a Motion for a Temporary Restraining Order and a Preliminary Injunction in the third round of the ongoing false advertising battle between baby formula makers PBM Products, based in Gordonsville, Virginia, and industry giant, Mead Johnson. See PBM Products v. Mead Johnson Nutrition Co., Civil Action No. 3:09cv269 (Spencer, J.). In doing so, the Court made clear that it moving away from the longstanding rule for preliminary injunctions in the Fourth Circuit set forth in Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189 (4th Cir. 1977).

Since 2001, PBM, the largest manufacturer of “store brand” or private label infant formulas in the U.S., and Mead Johnson, the maker of Enfamil®, have fought about the falsity of statements made by Mead Johnson about the nutritional value of PBM’s infant formula. The first two suits, in 2001 and 2002, ended with the entry of temporary restraining orders in favor of PBM that directed Mead Johnson to stop making the disputed statements and to retrieve materials it had sent containing those statements.

On April 27, PBM filed a third suit against Mead Johnson, regarding statements by Mead Johnson about two fats, DHA and ARA, in its Enfamil® product which Mead Johnson calls “LIPIL®.” The parties agreed that both companies’ products contained the same levels of DHA and ARA obtained from the same source. Mead Johnson was careful to make sure, however, that it did not make any statements comparing Enfamil®LIPIL® to any other manufacturer’s product. Rather, all of Mead Johnson’s statements just compared Enfamil® without LIPIL® to Enfamil® with LIPIL®. Mead Johnson also included a disclaimer that it was comparing Enfamil®LIPIL® to the prior formulation of the same product without DHA and ARA. Thus, the Court held that the statements were not literally false. Further, PBM did not present evidence of consumer confusion, and so the Court found that there was no evidence that the statements were implicitly misleading. Since PBM failed to prove a likelihood of success on the merits, the Court found that neither the balance of irreparable harm or the public interest favored PBM and so denied PBM’s motion for preliminary relief.

Like almost all decisions regarding preliminary injunctions in the Fourth Circuit, Judge Spencer began by reciting the preliminary injunction standard from Blackwelder. Blackwelder, however, has come under increasing criticism on the grounds that it overemphasizes the balance of irreparable harm and undervalues the importance of the likelihood of success on the merits. Judge Spencer appeared to agree with that criticism, noting that he had previously cautioned against using the Blackwelder test as “contrary to Supreme Court precedent” and citing a recent Supreme Court decision that emphasized that a plaintiff must show a likelihood of success to obtain a preliminary injunction. Munaf v. Geren, 128 S.Ct. 2207, 2219 (2008).

It is likely that litigants and courts in the Fourth Circuit will continue to cite the Blackwelder test as the standard for preliminary injunctions, but decisions such as Munaf, PBM and others make increasingly clear that a plaintiff seeking a preliminary injunction will have difficulty without a strong showing of a likelihood of success on the merits.
 

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