Antitrust Law Daily Wrap Up, ADVERTISING—2d Cir.: Clearblue pregnancy test maker falsely advertised ‘weeks pregnant’, (Sep 9, 2016)

By Greg Hammond, J.D.

A leading manufacturer of home pregnancy tests falsely and intentionally conveyed that its "Clearblue Advanced Pregnancy Test with Weeks Estimator" estimated the number of weeks a woman was pregnant consistent with how a doctor would make such an estimate. In affirming a lower court’s order finding that the manufacturer violated the Lanham Act and granting injunctive relief, the U.S. Court of Appeals in New York City concluded that the Lanham Act was not precluded by the Food, Drug, and Cosmetic (FDC) Act and that the district court did not err in finding the packaging was false, the messages were material and likely to harm a competitor, and was within its discretion to impose an injunction requiring the manufacturer to change its packaging and issue corrective notices (Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH, September 9, 2016, Leval, P.).

SPD Swiss Precision Diagnostics, GmbH is the manufacturer of the Weeks Estimator, which was cleared by the U.S. Food and Drug Administration (FDA) for the intended use of telling a woman whether she is pregnant and, if she is pregnant, how many weeks have passed since she last ovulated.

Competing pregnancy test manufacturer Church & Dwight Co., Inc. filed suit against SPD, claiming that SPD engaged in false advertising by conveying the false message that the Weeks Estimator tells a woman how many weeks pregnant she is consistent with how a doctor would estimate weeks pregnant. However, Church argued that doctors estimate pregnancy duration based on how many weeks have passed since a woman’s last menstrual period, whereas the Weeks Estimator approximates weeks since ovulation. On average, ovulation occurs two weeks after a woman’s last menstrual period.

The district court concluded that SPD engaged in false advertising, in violation of the Lanham Act, and in intentional deception of an egregious nature. Consequently, the district court imposed an injunction requiring changes to SPD’s packaging and requiring SPD to issue corrective notices and advertising. SPD appealed.

Preclusion. The appellate court first determined that the Lanham Act false advertising claim was not precluded by Congress’ provision for intensive regulation of SPD’s product by the FDA. Finding that the Supreme Court’s decision in POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014), was controlling, the appellate court noted that regardless of the fact that the FDC Act and Lanham Act sometimes overlap in scope and effect, each statute nonetheless has a distinct purpose, and in carrying out its FDC Act duties, the FDA is not charged with protecting the interests of its subject’s competitors. The lower court consequently did not err in determining that the Lanham Act false advertising claim was not precluded by FDA regulation under the FDC Act.

Lanham Act, falsity. The lower court also did not err in concluding that the initial package, television commercial, and other advertising were literally false by necessary implication. Contrary to SPD’s arguments, the issue was whether SPD’s measurement of weeks would be understood by reasonable consumers to measure by a different metric than used by the medical profession. The appellate court noted that the launch package did not indicate in any visible or clear way that the product provides a different measurement from a doctor’s, but referred to the product as a "Weeks Estimator" and included sample windows listing possible results. No reference to ovulation was included on the front of the packaging. Similarly, the TV commercial unambiguously implied the false message that the product provides a measurement of weeks-pregnant that was consistent with the metric used by medical professionals, and the website, web banners, and in-store advertising utilized the same misleading "weeks" language. The appellate court therefore concluded that a reasonable consumer, based on the initial package, commercial, and other advertising, would have assumed that the product was not giving a different number than a medical professional would give.

The appellate court also found that the lower court did not err in concluding that the messages were impliedly false. The finding was supported by actual evidence of consumer confusion and by SPD’s intent to deceive, which the lower court found sufficient to give rise to a presumption of consumer confusion.

SPD’s argument that the lower court erred in finding that the revised package was impliedly false was also rejected. Although the revised package added the phrase "Only Test That Estimates Weeks Since Ovulation*," with the asterisk directing to the "indications for use" statement on the side, and changed the windows, consumer surveys were sufficient evidence of consumer confusion. SPD claimed that the survey was flawed because it failed to test whether respondents held the preexisting erroneous beliefs about the way pregnancy was measured. The appellate court agreed that consumer confusion could have been attributable to preexisting consumer ignorance, but nevertheless found no error because there was ample evidence that SPD was aware of this widespread consumer ignorance, but took no effective steps to guard against misunderstanding of SPD’s messages.

The appellate court also concluded that the evidence amply supported the determination that the falsity of SPD’s advertising was both material and likely to cause injury to Church & Dwight. In addition, the lower court acted within its discretion in imposing an injunction requiring changes to SPD’s packaging and requiring SPD to issue corrective notices and advertising.

The case is No. 15-2411.

Attorneys: Michael T. Mervis (Proskauer Rose LLP) and Paul D. Clement (Bancroft PLLC) for Church & Dwight Co., Inc. Jeffrey G. Knowles (Coblentz Patch Duffy & Bass LLP) and Hanna Baek (Wilmer Cutler Pickering Hale and Dorr LLP) for SPD Swiss Precision Diagnostics GmbH.

Companies: Church & Dwight Co., Inc.; SPD Swiss Precision Diagnostics GmbH

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