Health Law Daily Wrap Up, ADVERTISING (FOOD, DRUG & MEDICAL DEVICES)—S.D.N.Y.: Preliminary injunction granted to halt pet product Zesty Paws’ sales superiority claims, (Jun 7, 2024)

By Leah S. Poniatowski, J.D.

Pet supplement competitors in “#1 Brand” dispute the scope of the term “brand.”

A pet supplement manufacturer whose total sales objectively exceeded those of its competitor successfully demonstrated that a preliminary injunction was necessary to stop the competitor’s advertising claim that it was the “#1 Brand” in the US market, including Costco stores, a federal district court in New York ruled (Zesty Paws LLC v. Nutramax Laboratories, Inc., No. 23 Civ. 10849 (LGS) (S.D.N.Y. June 4, 2024)).

Background. Direct competitors in the pet supplement product market, Nutramax and Zesty Paws each offer joint health, behavioral health, skin and coat health, and gut health products. In July 2023, Zesty Paws launched an advertising campaign in which it claimed to be the “#1 Brand of Pet Supplements in the USA,” “USA’s #1 Brand of Pet Supplements,” and “#1 selling Pet Supplement Brand in the USA.” To back up their claims, Zesty Paws engaged Euromonitor, International LTD., a market research company, which certified the claim. The “#1” claims appeared on the website, on certain social media pages, in a promotional video, and on several in-store displays. In the pet supplement market, e-commerce represents 64 percent, veterinary represents 20 percent, and brick-and-mortar represents 17 percent.

Injunction actions. In order to retain its ability to continue the ad campaign, Zesty Paws filed a motion in December 2023 seeking a declaration that these claims are not false or misleading under law. Nutramax filed an answer and counterclaims for false advertising against Zesty Paws’ parent company, Health and Happiness US International Incorporated (H&H). Nutramax also filed a preliminary injunction to enjoin Zesty Paws from using or displaying the claims.

A few weeks later, Nutramax filed for a temporary restraining order to restrict Zesty Paws from using the claims at Costco stores, which was granted. The companies then undertook expedited discovery in advance of an evidentiary hearing on the preliminary injunction motion. Both companies called expert witnesses, other witnesses, and provided dozens of exhibits.

Analysis. In the present motion for a preliminary injunction, the court explained that Nutramax only needed to show that it would be likely to succeed on the merits of at least one claim in order to merit relief, and that because the relief would not disrupt the status quo ante, it sought a prohibitory preliminary injunction. Under that standard, Nutramax is not required to meet a heightened standard of showing a clear or substantial likelihood of success on the merits.

False advertising. The court concluded that Nutramax showed a likelihood of success on four elements of a Lanham Act false advertising claim: (1) literal falsity; (2) materiality; (3) placed in interstate commerce; and (4) the cause of actual or likely injury to the plaintiff. There is no dispute as to the interstate commerce requirement.

Definition of “brand”. The crux of the motion is whether Nutramax as a whole or if each of Nutramax’s individual product names is a brand. If Nutramax is a brand, there is no dispute that its total sales of pet supplement products exceed Zesty Paws’ total sales. Thus, Zesty Paws argued that Nutramax is not a brand and that its claim to be the best-selling company is true when comparing total sales of all of its pet supplement products against the sales of the individual products sold by Nutramax.

Under the American Marketing Association and other leading branding textbooks, a brand is defined as “any distinctive feature like a name, term, design, or symbol that identifies goods or services.” Two Ivy League business school professors testified as expert witnesses for Nutramax, opining that Nutramax meets this definition because the name differentiates its products from other sellers. The registered trademark for Nutramax Laboratories is physically on every product. Zesty Paws’ expert focused on the ”driver brand” concept, which is “the brand name that plays the primary driver role in a consumer’s purchase decision.” The court was not persuaded, stating that the ordinary meaning of “brand” does not include the primary driver concept, and there was no evidence that consumers understand the”#1” claims to refer to the driver brand. The survey conducted to evaluate whether consumers identified Nutramax or the specific product as the brand did not really evaluate whether Nutramax was its own brand. Additionally, Zesty Paws’ internal brand awareness studies showed that Nutramax often scored higher than Zesty Paws when both names were listed. Finally, the branding classifications used by the predominant market research organizations, including Euromonitor, do not support Zesty Paws’ “driver brand” definition. Therefore, Nutramax established a likelihood of proving that Nutramax is a brand, and that its supplement sales are higher than Zesty Paws, rendering the “#1” claim false.

Materiality. Additionally, Nutramax showed that the “#1” marketing would likely influence purchasing decisions. One of the Ive League experts testified that such claims have been long studied and there is consistent evidence that the “number one” claim enhances the perception of the product and depresses the perception of a competing product. In the context of a pet product, consumers do not directly experience the effect of the product so consumers then rely on the claims thereto.

Injury. Finally, both professors testifying for Nutramax opined that the “#1” claims would increase the sales of Zesty Paws, which would hurt Nutramaz’s sales in both the short and long term.

Remaining factors. Accordingly, Nutramax carried its burden of showing it would experience irreparable harm but for the injunction. Further, Zesty Paws did not rebut the presumption and the court was not persuaded by the claim that Nutramax’s five-month delay in filing the preliminary injunction rebutted a finding of irreparable harm in light of both the ongoing correspondence between the companies and expert testimonies. The court held that the balance of hardship weighed in favor of Nutramax because it would suffer from lost sales and damage to its goodwill. Finally, the court agreed that the public interest would not be served by allowing for the consequences of false advertising.

The case is No. 23 Civ. 10849 (LGS).

Judge: Schofield, L.

Attorneys: Richard Aframe Edlin (Greenberg Traurig, P.A.) for Zesty Paws LLC. Alan Pryor (Alston & Bird LLP) for Nutramax Laboratories, Inc. and Nutramax Laboratories Veterinary Sciences, Inc.

Companies: Zesty Paws LLC; Nutramax Laboratories, Inc.; Nutramax Laboratories Veterinary Sciences, Inc.

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