IP Law Daily, TRADEMARK—S.D. Cal.: Lanham Act claim not precluded by FDCA in compounding pharmacy dispute, (Apr 21, 2023)

By Seth Abrams, J.D., M.A.

Plaintiff cannot argue for violation of UCL based on embedded FDCA claim.

A federal district court in San Diego, California denied ImprimisRx, LLC’s (ImprimisRx) motion to strike two affirmative defenses raised by competing compounding pharmacies OSRX, Inc. and Ocular Science, Inc. (OSRX) in a suit alleging OSRX failed to disclose risks and misrepresented FDA compliance. The court also granted OSRX’s motion for partial judgment on the pleadings with respect to ImprimisRx’s copyright infringement claim with leave to amend. The court held: (1) the motion to strike OSRX’s affirmative defenses was denied because OSRX would have been granted leave to amend; (2) the Lanham Act claims are not precluded by the Food, Drug, and Cosmetic Act (FDCA); (3) ImprimisRx cannot argue for Unfair Competition Law (UCL) liability based on an embedded FDCA claim; (4) the primary jurisdiction doctrine does not bar the Lanham Act and UCL claims; and (5) court took judicial notice that ownership of copyright was different than on complaint and claim for copyright infringement was dismissed with leave to amend (ImprimisRx, LLC v. Osrx, Inc., April 12, 2023, Bashant, C.).

Both ImprimisRx and OSRX are “compounding pharmacies focused on medications used in optometry and ophthalmology.” On July 20, 2021, ImprimisRx filed a complaint against OSRX alleging multiple claims, three of which are relevant to the motion. ImprimisRx alleged false advertising under the Lanham Act, which was comprised of “failing to disclose risks, deceiving customers with respect to safety and efficacy, and misrepresenting FDA compliance.” It also asserted unfair competition under California’s Unfair Competition Law (UCL) and copyright infringement. ImprimisRx’s UCL claim was based on violations of the Food, Drug, and Cosmetic Act (FDCA), as well as the unauthorized use of trademarks. ImprimisRx eventually filed an amended complaint and OSRX added two affirmative defenses in its answer, which ImprimisRx has now moved to strike. Also, at issue before the court was OSRX’s motion for partial judgment on the pleadings.

Motion to strike. ImprimisRx moved to strike two of OSRX’s affirmative defenses. The first defense was that ImprimisRx’s Lanham Act claim was precluded or preempted by the FDCA. The second defense was that ImprimisRx lacked standing to sue for copyright infringement. The court relied upon the “moderate approach” to adding new affirmative defenses to an amended answer. The question is whether the “amended complaint changes the theory or scope of the case, and then, the breadth of the changes in the amended response must reflect the breadth of the changes in the amended complaint.”

Here, the court found that the new defenses “clearly exceeded the scope” of ImprimisRx’s amendments, which added two additional trademarks to the case. However, the court determined that it need not strike the defenses if OSRX would have been granted leave to amend to answer. The court found that they would have been granted leave to amend because of changes in the law and new discovery. As a result, it denied ImprimisRx’s motion to strike.

Preclusion and preemption. OSRX argued that the FDCA precluded ImprimisRx’s Lanham Act claim and preempts its UCL claim. The court first noted that in Pom Wonderful LLC v. Coca-Cola Co., 573 U.S. 102 (2014), the Supreme Court held that the FDCA does not preclude causes of action under the Lanham Act. However, the Ninth Circuit recently held that the “FDCA preempts state law claims that seek to privately enforce the FDCA” in Nexus Pharms., Inc. v. Central Admixture Pharmacy Servs. Inc., 48 4th 1040 (9th Cir. 2022). It first found that this case presents an unsettled issue – “whether a Lanham Act claim with an embedded FDCA issue is precluded by the FDCA’s prohibition on private enforcement.” The court determined that it did not because the “FDCA and its regulations are not ‘a ceiling’ on the regulation of advertising.” As a result, the court found that FDCA does not “preclude Lanham Act claims, even when an FDCA violation is embedded.”

The court next considered whether the FDCA violation was “integral” to ImprimisRx’s UCL claim to determine whether it is preempted by the FDCA under Nexus. The court pointed out that ImprimisRx’s claims under the Lanham Act and UCL are comprised of separate theories of liability, of which there is no embedded FDCA claim in two of them: (1) “falsely representing that their drugs are safe and effective and appropriate for treatment of certain conditions despite a lack of FDA approval” or (2) “rel[ying] on unreliable studies to represent benefits and safety.” The third theory—that OSRX “falsely asserted that they comply with Section 503A of the FDCA”—does rely, however, on an embedded FDCA claim. As a result, the court granted, in part, OSRX’s motion for judgment on the pleadings. In doing so, it precluded ImprimisRx from relying on the third theory to establish liability under the UCL. It specifically noted that ImprimisRx may still rely on the first and second theories of liability or other theories “unrelated to false advertising” and denied OSRX’s motion with respect to the Lanham Act claim.

Primary jurisdiction doctrine. OSRX argued that the primary jurisdiction doctrine barred ImprimisRx from proceeding with its claims under the Lanham Act and UCL. The court disagreed, finding that the doctrine, which defers to the relevant administrative agency to take first action in a matter, is “reserved for a ‘limited set of circumstances.’” The court found no reason to issue a stay for agency action at this juncture, although remained open to the possibility that the issues may appear to be “better suited to agency expertise” at summary judgment. However, based on the pleadings, the court found that the case appears to be well within its competence.

Copyright claim standing. The court took judicial notice of the ownership of a copyright at issue in the case. The copyright indicated that a different entity than ImprimisRx was the owner of the copyright. Despite being the exclusive licensee of the copyright that has standing to sue, the court found the complaint to be factually incorrect. As a result, the court granted the motion for partial judgment on the pleadings regarding ImprimisRx’s copyright infringement claim, but also granted ImprimisRx leave to amend the complaint to only add “its status as the exclusive licensee of the copyright rather than the owner.”

The Case is No. 21-cv-01305-BAS-DDL.

Attorneys: Keith J. Wesley (Ellis George Cipollone O'Brien Annaguey LLP) for ImprimisRx, LLC. Carolynn Kyungwon Beck (Eisner, LLP) for Osrx, Inc. and Ocular Sciences, Inc.

Companies: Osrx, Inc.; Ocular Sciences, Inc.

Cases: Copyright Trademark CaliforniaNews