Antitrust Law Daily Wrap Up, ADVERTISING—DMd: Court Clarifies Ruling and Consent Order on Literal Falsity of Drug Testing Ads, (Feb 27, 2013)

By Tobias J. Gillett, J.D., LLM.

The federal district court in Baltimore has issued a memorandum clarifying a decision in Lanham Act false advertising litigation between two drug testing companies that concluded that four advertisements issued by one of the companies were literally false, and resulted in a negotiated consent order requiring the company to inform customers of the litigation and correct possible misconceptions stemming from the advertising (Millennium Laboratories, Inc. v. Ameritox, Ltd., January 18, 2013, Legg, B.).

The parties, Millennium Laboratories, Inc. and Ameritox, Ltd., had resolved their previous Lanham Act false advertising litigation through an agreed consent order. However, following the order both parties issued press releases about the litigation, and then both parties filed new Lanham Act false advertising claims asserting that the other side’s press releases had mischaracterized the litigation.

In its present memorandum, the court recounted the course of the previous litigation and the court’s rulings to resolve any ambiguity. The court noted that it had authority to resolve disputes related to its consent order, and to enjoin parties from making false statements regarding litigation on its docket. Issuing a clarifying memorandum rather than permitting the new litigation to proceed would also avoid the costs of a jury trial and speculation regarding monetary damages.

Ameritox and Millennium compete in the field of urine testing to determine patient compliance with pain medication regimens. Ameritox’s service would tell doctors whether their patients’ urine testing results fell within a range within which 95% of patients who are compliant with their medications would fall.

In 2010, Millennium sued Ameritox, asserting that some of Ameritox’s advertising was false or misleading in violation of the Lanham Act. Millennium claimed that certain Ameritox advertisements falsely claimed that Ameritox’s Rx Guardian product could by itself inform a doctor whether a patient was compliant with his or her prescription regimen, rather than merely assist the doctor in making that determination.

While the suit was pending, Ameritox began advertising its Rx Guardian CD product instead. Millennium amended its claims to assert that this advertising contained the same false claims as the previous advertising, and also that the advertising contained the claim that patients in a study of Ameritox’s product were “known” to be adherent to their prescription plans, rather than merely assessed for compliance based on “patient interviews and the subjective judgment of clinic staff.”

Ameritox claimed that any reasonable doctor would know that “known” meant “clinically assessed,” and that its advertising merely conveyed that its products could assist doctors in evaluating compliance. Ameritox counterclaimed, asserting that a Millennium report misled doctors regarding the capabilities of Millennium’s service; that Millennium falsely claimed “(i) to have the fastest turn-around time in the industry, and (ii) to be able to provide final quantitative lab results by the ‘next business day’”; that Millennium falsely claimed to be the only major lab exclusively employing “LC-MS/MS technology”; and that Millennium mischaracterized its services as “therapeutic drug monitoring” when that term only referred to blood or serum testing, not urine testing.

Millennium challenged five Ameritox advertisements as literally false, two as literally true but misleading, and one as containing both literally false and literally true but misleading statements. Millennium employed a survey to test consumer confusion regarding the literally true but misleading claims, but in a Daubert hearing the court excluded the survey, finding it lacked a proper control. Since Millennium lacked proof regarding the literally true but misleading advertisements, the court dismissed its claims as to those advertisements.

The court also concluded that the same lack of survey evidence doomed Millennium’s claim regarding the advertisement that allegedly contained both literally false and literally true but misleading statements. Although the court found Millennium could proceed to trial on a claim of literal falsity, Millennium chose to drop that claim.

The court also addressed Ameritox’s counterclaims. Ameritox also attempted to present survey evidence regarding Millennium’s allegedly misleading report, but Ameritox later dropped this counterclaim “because the survey showed extremely high levels of ‘noise’ in the marketplace.”

The court granted summary judgment to Millennium on the counterclaims regarding Millennium’s statements that it had “the fastest turn-around time in the industry,” that it was “able to provide final quantitative lab results by the ‘next business day,’” and that it was the only lab to exclusively use “LC-MS/MS technology.” Ameritox had not shown that any other competing lab had a faster run-around time. Moreover, Millennium’s “next business day” claim was not misleading, because, since Millennium could not “process a urine specimen that it does not have,” “next business day” could only refer to “the day after Millennium receives the specimen.” Finally, Ameritox did not demonstrate that any other lab tested samples only using “LC-MS/MS technology.”

The court did deny summary judgment to Millennium on Ameritox’s final counterclaim regarding the characterization of Millennium’s services as “therapeutic drug monitoring,” concluding that the meaning of that term would have to be resolved through expert testimony at trial. However, Ameritox dropped the claim during trial.

Thus, ultimately only Millennium’s challenges to four Ameritox advertisements as literally false went to the jury. After deliberating, the jury issued an advisory verdict concluding that all five advertisements conveyed a literally false message. The court then decided, using the verdict as one source of information, that the advertisements were literally false.

The court concluded that three of the advertisements “were literally false because they unequivocally claimed that Rx Guardian could ‘tell,’ ‘verify,’ or ‘determine’ whether patients were taking their pain medications in the prescribed dosages.” Moreover, the fourth advertisement’s description of the patients in the study of Ameritox’s product as “known adherent” was also literally false. Although a doctor would understand that the word “known” did not mean “that every conceivable doubt regarding the patent’s adherence had been removed,” the phrase “known adherent…suggested that the patients had been rigorously monitored in a controlled clinical setting.” As this had not occurred, the court considered Ameritox’s advertisement to be literally false.

However, the court concluded that Millennium’s claim for money damages was too speculative. Following negotiations with the aid of a magistrate judge, the parties agreed to a consent order that resolved their remaining issues.

The order “provided that Ameritox would no longer state in promotional materials or advertisements that its services can ‘verify compliance,’ or ‘confirm adherence,’ nor would it use similarly definitive.” The order also required Ameritox to refer to the patients in the study as “clinically assessed to be adherent” rather than “known adherent.” Finally, Ameritox would have to send to its customers and post on its website a letter disclosing the advisory jury verdict and the court’s ruling, which would state that “no urine drug test can definitively determine whether a patient has taken the dosage of medicine prescribed,” and that doctors should “always use their clinical judgment in combination with all available information” in assessing prescription compliance. The court approved the consent order.

The court determined that this review of the previous litigation set forth in its memorandum mooted the parties’ new disputes, and therefore the court stated that it would issue a separate order that would dismiss all pending cases with prejudice.

The case is Nos. L-10-3327, L-12-1753, and L-12-1797.

Attorneys: Steven P. Hollman (Hogan Lovells US LLP) for Millennium Laboratories, Inc. James P. Ulwick (Kramon and Graham PA) for Ameritox, Ltd.

Companies: Millennium Laboratories, Inc.; Ameritox, Ltd.

Cases: Advertising MarylandNews