No Presumption of Irreparable Harm for Lanham Act Plaintiffs

No Presumption of Irreparable Harm for Lanham Act Plaintiffs Carmen Natale Michael Chagares

Lanham Act plaintiffs seeking preliminary injunctive relief are not entitled to a presumption of irreparable harm, the U.S. Court of Appeals for the Third Circuit held Aug. 26.

The precedential decision in Ferring Pharmaceuticals v. Watson Pharmaceuticals upheld a lower court’s refusal to halt the use of advertising that allegedly contains false and misleading statements about a competing product.

The appeals panel based its ruling on a pair of U.S. Supreme Court cases that have been interpreted by courts around the country as disallowing the once widely recognized presumption.

The dispute in Ferring involves two Parsippany N.J.-based drug companies that make competing progesterone products used in in vitro fertilization to help women become and stay pregnant.

While most progesterone products are injected into muscles, the only two that aren’t are Ferring Pharmaceuticals’ Endometrin and Watson Pharmaceuticals’ Crinone, which are both inserted vaginally and are available only by prescription, according to the opinion.

Endometrin comes in a capsule taken two or three times per day, while Crinone is a gel applied once daily via an applicator, the opinion said.

Ferring sued Watson over presentations given Sept. 11, 2012, that compared Endometrin unfavorably with Crinone, according to the Third Circuit’s opinion.

Ferring alleged that a paid consultant for Watson—which is now known as Actavis—made false statements to doctors and other health-care professionals who had been invited to attend the presentations, which were also streamed over the Internet to others throughout the United States.

Ferring took issue with statements made by Dr. Kaylen Silverberg, who gave the PowerPoint presentations, the opinion said.

Silverberg said the Endometrin package insert contained a black box warning that its efficacy “‘has not been demonstrated’” for those 35 and older, according to the opinion.

The insert actually made the slightly different statement that such efficacy had not been “‘clearly established’” and did not make it in a black box warning, which is typically used to warn about a significant risk of serious, even life-threatening, adverse effects, the opinion said.

When alerted to the error after the first webcast, according to the opinion, Silverberg did not repeat it in the second one and also certified to Ferring and to the U.S. District Court for the District of New Jersey that he would not repeat the statement in the future.

Ferring claimed Silverberg also told the audiences that certain percentages of patients found Crinone easier, more convenient and more comfortable to use than Endometrin, even though the accompanying slides indicated the figures were answers from Crinone users and not comparative assessments, according to the opinion. In addition, Silverberg allegedly did not accurately describe the results of studies comparing the products’ efficacy when used by women over 35.

Silverberg’s certification specified that in future presentations he would say only what was on the package insert, the opinion said.

Ferring sued in federal court in Newark on Sept. 17, 2012, six days after the presentations, claiming violation of the Lanham Act’s false advertising provisions and New Jersey’s Consumer Fraud Act, as well as claims under state common law.

On Nov. 9, 2012, Ferring moved for a preliminary injunction to enjoin Watson from making further false statements and for corrective advertising.

U.S. District Judge Dennis Cavanaugh of the District of New Jersey denied the motion April 4, holding that Ferring was not entitled to a presumption of irreparable harm, nor had it alleged facts sufficient to prove irreparable harm.

Cavanaugh did not rule on the likelihood of success but opined that it was not clear that Watson’s statements were “completely unsubstantiated.”

On appeal, Third Circuit Judge Michael Chagares, joined by Judges Patty Shwartz and Ruggero Aldisert, pointed out that the Third Circuit had never held that a Lanham Act false-advertising plaintiff requesting injunctive relief was entitled to a presumption of irreparable harm but had repeatedly done so in Lanham Act trademark actions where a likelihood of success was shown.

Chagares also noted that several sister circuits had recognized a presumption of irreparable harm in the false advertising context, citing cases from the Second, Seventh and Ninth circuits.

Chagares explained that the presumption was justified for false advertising claims because a misleading comparison to a specific product necessarily harms a product by reducing its value to customers in a way that is virtually impossible to quantify in terms of money damages.

In trademark infringement cases, the presumption was similarly justified because of the per se injury to an owner who loses control of its own marks, Chagares said.

But Chagares went on to discuss how the “analytical framework” changed as the result of two U.S. Supreme Court holdings: eBay v. MercExchange, from 2006, and Winter v. Natural Resources Defense Council, from 2008.

In eBay, a patent case, the Supreme Court vacated a permanent injunction, holding that the lower court erred in applying a categorical rule that injunctions should issue upon a showing that a valid patent has been infringed.

Winter was an environmental case in which the court held that the “possibility of harm” standard for granting a preliminary injunction was too lenient.

In the wake of those rulings, the Federal Circuit jettisoned the presumption of harm and the Second and Ninth circuits extended eBay’s analysis to copyright cases, Chagares noted.

The eBay and Winter rationales are “equally applicable in other contexts, including cases arising under the Lanham Act,” because, like the U.S. Patent Act, its injunctive relief provision “is premised upon traditional principles of equity,” Chagares said.

Chagares also found no clear error in Cavanaugh’s ruling that Ferring failed to show irreparable harm.

David Bernstein of Debevoise & Plimpton in New York represents the International Trademark Association, an amicus in Ferring that advocated that the presumption should apply in Lanham Act cases where likelihood of success on the merits has been shown.

Bernstein called the Ferring decision “disappointing but not unexpected” since other courts have come out the same way, including the Ninth Circuit last December in Herb Reed Enterprises v. Florida Entertainment Management.

The Supreme Court has been asked to grant certiorari in that case and Bernstein has filed a supporting brief on behalf of the association.

Ferring’s lawyer, Arne Olson of Olson & Cepuritis in Chicago, and Watson’s attorney, David Phillips of LeClairRyan in Newark, did not return calls seeking comment.

Contact the reporter at mgallagher@alm.com.

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