Antitrust Law Daily Wrap Up, ADVERTISING—ND Cal.: Medical device manufacturer not liable for implying that its product was FDA approved for certain uses, (Mar 28, 2014)

By Jody Coultas, J.D.

Zeltiq Aesthetics, Inc. could not state Lanham Act and California Unfair Competition Law (UCL) claims against competitor BTL Industries, Inc. for allegedly misleading consumers regarding Food and Drug Administration (FDA) approval of a medical device for certain uses, the federal district court in San Francisco has held (Zeltiq Aesthetics, Inc. v. BTL Industries, Inc., March 25, 2014, Spero, J.).

Zeltiq manufactures and markets a medical device known as CoolSculpting, which was clinically proven to reduce fat bulges in a sixty-minute procedure and approved by the FDA for cold-assisted lipolysis of the flank, or “love handles,” and the abdomen. BTL, a medical device manufacturer, was approved to sell its BTL Elite device for use in applying therapeutic deep heat in body tissues for the treatment of selected medical conditions. BTL has only promoted the device for use in fat reduction despite the fact this was not a FDA cleared use. Zeltiq alleged that BTL unlawfully advertised the BTL Elite for use in fat reduction and body contouring, which not a use that has been cleared by the FDA for the BTL Elite.

To obtain a preliminary injunction, a plaintiff must establish that he is likely to succeed on the merits, he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.

Zeltiq failed to demonstrate that it was likely to prevail on the merits of any of its Lanham Act or state law unfair competition claims based on false advertising, according to the court. An advertisement violates the Lanham Act if it is literally false, either on its face or by necessary implication, or literally true but likely to mislead or confuse consumers. Advertising that is literally true but conveyed a deceptive message must have actually deceived a significant portion of the public.

Zeltiq did not present evidence of any literally false statement. Rather, the statements pointed to by Zeltiq were literally true. None of the statements implied that the BTL Elite devise was cleared by the FDA for use in fat reduction and body contouring. Although BTL’s allusion to FDA clearance in promotional materials implied that FDA clearance was a material factor which influences physicians to buy the device, Zeltiq did not submit any evidence to show that any physician was actually deceived. In light of the high cost of the device, as well as the fact the only purchasers of the device were physicians, Zeltiq was not likely to be able to prove that physicians would be deceived into believing the device was FDA cleared for fat reduction.

The court also held that Zeltiq was not likely to succeed on the merits of its UCL unlawful prong claim. The UCL unlawful prong claim was based on allegations of specific violations of California’s Sherman Law. Under the Sherman Law, BTL would be prohibited from selling the devise had it not received FDA clearance. However, BTL received clearance for the device. Zeltiq also argued that the device was misbranded, in violation of the Sherman Law, because its labeling failed to include “adequate directions for use” in fat reduction procedures. Evidence in the record showed that whenever the device was sold, the purchaser was given the “Operator’s Manual,” which includes the “Instructions for Use” detailing the FDA cleared uses of the device and providing directions for such uses. Zeltiq could not cite any authority to suggest that a device may be “misbranded” by virtue of its overall promotional practices as opposed to the more obvious source of “labeling.” The court did, however, find that Zeltiq raised serious questions going to the merits of this issue.

Even if Zeltiq could prevail on the merits of its claims, the court found it was not likely that Zeltiq would suffer irreparable harm absent the injunction. Zeltiq failed to present any evidence that it actually lost market share as a result of the allegedly false advertising, and only stated that BTL had captured some undetermined amount of market share. Merely showing that the parties were competitors and that there was a logical connection between the false advertising and the plaintiff’s sales was insufficient to show a likelihood of irreparable harm without additional evidence.

The balance of hardships did not tip in Zeltiq’s favor, according to the court. Zeltiq’s requested injunction would prohibit BTL from selling the device for any use that is not FDA cleared, and from working with any physician who employs the device for fat reduction. The harm to Zeltiq done by the allegedly false advertising did not offset the harm that would be done to BTL by the injunction.

The case is No. 13-cv-054730-JCS.

Attorneys: Melissa Olivia Evidente (Sidley Austin LLP) for Zeltiq Aesthetics, Inc. Jeffrey E. Faucette (Skaggs Faucette LLP) for BTL Industries, Inc. and Saturn Consulting LLC.

Companies: Zeltiq Aesthetics, Inc.; BTL Industries, Inc.

Cases: Advertising CaliforniaNews