Antitrust Law Daily Wrap Up, ADVERTISING—S.D. N.Y.: Injunction blocking pregnancy test maker’s false marketing not stayed, (Aug 27, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in New York City has declined to stay or modify its permanent injunction, requiring a product recall that was entered against a home pregnancy test manufacturer found liable for the intentional false and misleading advertising of one of its products (Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics GmbH, August 26, 2015, Nathan, A.).

SPD Swiss Precision Diagnostics, GmbH is the manufacturer of the home pregnancy test “Clearblue Advanced Pregnancy Test with Weeks Estimator.” In 2014, competing pregnancy test manufacturer Church & Dwight (C&D) filed a complaint against SPD, alleging that SPD engaged in false advertising in violation of the Lanham Act by advertising that the product provided an estimate of weeks pregnant that was consistent with a physician’s estimate of weeks pregnant.

In July 2015, after a trial on liability, the court found that SPD’s advertising conveyed a false message and the advertising was the result of intentional deception. The court also indicated that a permanent injunction would be entered at a later date, which would require SPD to recall the product and begin a corrective advertising campaign. SPD moved to stay or modify any injunction pending appeal.

Irreparable injury. The court determined that SPD’s claims of injury, absent a stay, did not rise to the level of irreparable harm. Although it was undeniable that the injunction would cause SPD some harm, the monetary cost of implementing the injunction, standing alone, was insufficient to justify a stay. While SPD described the cost of the recall in detail, it presented no evidence about what effect such expenditures would have on the company. Moreover, SPD’s claimed losses of consumer trust and goodwill were speculative and were attributable to SPD’s underlying conduct.

Likelihood of success. Additionally, SPD failed to show a substantial possibility of success on the merits. SPD’s argument that a “serious legal question was involved” was rejected. According to the court, C&D’s false advertising claim did not require a direct interpretation and application of the Food, Drug, and Cosmetics Act as to preclude the claim; instead, it involved fact-intensive questions of consumer confusion. C&D presented evidence of the likelihood of consumer confusion based on independent surveys, which rebutted SPD’s claim that the presumption of consumer confusion was a serious legal question in the cause. Furthermore, SPD’s intentional deception in advertising weighed against a stay of an injunction requiring correction of the false advertising.

Public interest. The public interest was served by preventing customer confusion or deception, the court noted. The packaging of SPD’s product currently on shelves in retail locations was misleading, and the public interest weighed in favor of removing the misleading advertising as soon as possible.

Temporary stay. Finally, SPD was not entitled to a stay of the injunction while it sought Food and Drug Administration (FDA) approval for its new packaging. SPD could have taken steps to seek FDA approval after the court’s July order, but did not do so. Allowing intentionally false and misleading packaging to remain on store shelves for a longer time frame in order to accommodate SPD’s FDA approval schedule was not an appropriate solution, the court concluded.

The case is No. 1:14-cv-00585-AJN.

Attorneys: Jeffrey H. Warshafsky (Proskauer Rose LLP) for Church & Dwight Co., Inc. Jeffrey G. Knowles (Coblentz, Patch, Duffy & Bass, LLP) for SPD Swiss Precision Diagnostics GMBH.

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

Cases: Advertising NewYorkNews