Supreme Court Observations: Lexmark Int’l v. Static Control Components

Villafranco_John_web Lynch_Michael_web Garcia_Paul_webGuest Commentary

by John E. Villafranco, Michael C. Lynch, and Paul R. Garcia, Kelley Drye & Warren LLP*

(Ed. Note: Villafranco and Lynch authored an October 2013 WLF Legal Opinion Letter previewing the Lexmark case which can be accessed here)

On March 25, 2014, a unanimous Supreme Court in Lexmark Int’l, Inc. v. Static Control Components, Inc. ruled that a manufacturer of components for use in refurbished toner cartridges has standing under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), to sue the maker of printers in which the cartridges could be used for false advertising. Static Control Components, Inc., the component manufacturer, alleged that Lexmark International, Inc., the printer company, falsely told consumers that they could not lawfully purchase replacement cartridges made by anyone other than Lexmark, and falsely told companies in the toner cartridge remanufacturing business that it was illegal to use Static Control’s components.

The question before the Court was not whether Static Controls has constitutional standing under Article III, but whether it has so-called “prudential standing.” The Court initially noted that “prudential standing” is a misnomer, and that the real question “is whether Static Control falls within the class of plaintiffs whom Congress authorized to sue under § 1125(a).” Slip Op. 8-9. If it does, a court “cannot limit a cause of action that Congress has created because ‘prudence’ dictates.” Slip Op. 9. Rejecting the various approaches of the lower courts—from the competitor-only test, to antitrust standing, to the reasonable interest inquiry—the Supreme Court instead adopted a two-party inquiry.

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WLF Media Briefing Program Focuses on Government’s Regulation of Information on “Off-Label” Drug Uses

Coleen Klasmeier, a partner with Sidley Austin LLP, Geoffrey M. Levitt, Senior Vice President and Associate General Counsel of Pfizer, Inc., and Jonathan L. Diesenhaus, a partner with Hogan Lovells US LLP discussed the impact of the Second Circuit’s December, 2013 Caronia decision on federal health product regulation and identify the latest developments and trends to follow in 2014 for public and private law enforcement targeted at off-label speech.

FDA’s Disrespect for the First Amendment (and Federal Courts) Dips to a New Low

cnbcCross-posted at WLF’s Forbes.com contributor page

The Food and Drug Administration (FDA) has long had “commitment issues” in its relationship with the First Amendment.  It possesses statutory authority to prevent the sale and distribution of drugs whose intended use and labeling are not FDA-approved, but in doing so it routinely treads on manufacturers’ speech.  Federal courts have held repeatedly that the First Amendment severely restricts FDA’s regulation of truthful speech about approved drugs.  The agency has responded with assurances that it will comply fully with those court decisions.  Recent actions make clear, however, that FDA shows little or no respect for those rulings and apparently believes it is not bound by the First Amendment.

The latest example of FDA’s defiance took the form of a Warning Letter issued by FDA’s Office of Prescription Drug Promotion (OPDP) on November 8, 2013 to Aegerion Pharmaceuticals.  OPDP’s letter objected to an appearance by Aegerion’s CEO on a CNBC talk show directed to the financial community.  During the course of his interview, the CEO suggested that Juxtapid, a drug manufactured by Aegerion, was safe and effective for several off-label uses that are closely related to its approved uses.  For example, the CEO could reasonably have been understood to say that the drug, when taken by itself, was effective in reducing a patient’s “bad” cholesterol levels, even though FDA has approved Juxtapid as a treatment for reducing “bad” cholesterol only as an “adjunct” to a “low-fat diet and other lipid lowering treatments.”  The Warning Letter did not contend that the CEO’s statement regarding efficacy was false, but it nonetheless charged that the statement was illegal because it rendered Juxtapid “misbranded.”  The letter demanded that Aegerion “immediately cease misbranding Juxtapid” and to issue “corrective messages” to rectify the situation.

So how did OPDP reach the remarkable conclusion that truthful statements made on a television talk show aimed at the financial community can render an otherwise lawful drug “misbranded?”  OPDP noted that a “misbranded” drug is defined to include a drug that lacks adequate directions for all intended uses.  It is safe to assume that a drug’s approved labeling does not include adequate directions for uses that have not been approved by FDA.  So if a manufacturer distributes a drug with the objectively verifiable intent that it be sold for an off-label use, the drug can be deemed “misbranded.”  So far so good.  Continue reading

Update: EA Sports Takes a Knee, Settles Right to Publicity Suit by Collegiate Athletes

EA SportsIn our August 5 post, Former NCAA Athletes Still “In The Game” As Court Finds No First Amendment Immunity For EA Sports, we discussed a U.S. Court of Appeals for the Ninth Circuit ruling that allowed a suit against video game producer EA Sports, the NCAA, and Collegiate Licensing Company to proceed. The court held, 2-1, that the defendants could not assert a First Amendment defense to the state-based “right to publicity” claims.

The ruling, as well as the loss of backing by the NCAA and numerous college conferences, has now led EA Sports to not only drop its college football game from its product line, but also to settle the lawsuit. EA Sports, along with Collegiate Licensing Company, filed papers in the federal court in Oakland, California. The terms of the settlement remain confidential, but an ESPN report indicated that each athlete who is a member of the class of plaintiffs, including current NCAA players would receive “something substantive.”

According to the ESPN report, the NCAA was “not prepared to compromise on this case.”

Proposed Use of Tax Code to “Protect” Food Consumers Is Bad Policy and Unconstitutional

EnglishChip_lowGuest Commentary

by Chip English, Davis Wright Tremain LLP

Childhood obesity is a substantial problem worthy of serious discussion.  Unfortunately, legislators also appear to see it as an issue worthy of unsound and unconstitutional legislative action.  On July 25, 2013, Representative DeLauro, together with Representatives Lee, Defazio, Clay and Grijalva, introduced the most recent example of this food police problem.   H.R. 2831 would “deny any [IRS tax] deduction for marketing directed at children to promote the consumption of food of poor nutritional quality.”  The proposed legislation is both vague and overbroad and, more importantly, is an unconstitutional content, speaker, and audience targeted “tax on knowledge.”  H.R. 2831 cannot withstand First Amendment scrutiny.  Moreover, the proposal raises equal protection and arbitrary and capricious government action issues because government Speech Police would determine which marketing is “directed at children” and which food is of “poor nutritional quality.”

HR 2831 would amend the Internal Revenue Code to deny a broad array of travel, goods or services, gifts and other promotional expense deductions associated with “marketing directed to children” (persons under the age of 18)  of “poor nutritional quality” foods.  The Secretary of the Treasury, in consultation with the Secretary of Health and Human Services, would determine which foods are of poor nutritional quality by considering which foods are “inconsistent with the most recent Dietary Guidelines for Americans under section 301 of the National Nutrition Monitoring and Related Research Act of 1990 (7 U.S.C. § 5341).”  Leaving aside the policy question of whether the IRS, which is still dealing with determinations of which organizations qualify for charitable organization status, should be involved in determining which foods are of poor nutritional quality, government determinations of what marketing is “directed at children” and what food products are “inconsistent” with Dietary “Guidelines”, will inevitably be arbitrary and capricious because those terms are vague and ambiguous. Continue reading

Update: Court Allows Energy Drink Maker’s Defensive Lawsuit Vs. San Francisco to Advance

GoldenGateIn a post last June, FDA And Caffeine: Selective Regulation By Unsubtle Threat, we mentioned San Francisco Attorney Dennis Herrera’s suit against energy-drink maker Monster Beverage Corp. for allegedly marketing to children. This suit was in fact filed after Monster had already filed its own declaratory judgment action against Attorney Herrara on April 18. In it, Monster urged the District Court for the Central District of California to declare Herrara’s pre-suit actions, which included letters to Monster and FDA, in violation of the First Amendment and preempted by federal law.

On August 22, Judge Virginia Phillips rejected Herrara’s effort to dismiss Monster’s these claims. She found that Monster’s First Amendment claims regarding Herrara’s labeling demands were viable. She found that the warnings Herrara’s letter referenced were in addition to what FDA already requires, and would thus be preempted. She then ruled that the prudential doctrine of primary jurisdiction would also bar the warnings Herarra sought.

This past summer, Monster successfully removed Attorney Herrara’s May 6 lawsuit against the company to the Northern District of California. Monster is currently petitioning that court to transfer the suit to Judge Phillips’ chambers in the Central District, arguing that the claims and defenses in the Monster v. Herrara case are substantially similar to those in Herrera v. Monster.

Proponents of paternalism in and outside of government have seemingly chosen energy drinks as their poster child/whipping boy for targeting (non-coffee related) foods and beverages with caffeine. The need for regulatory action is debatable, but as we argued in June, an on-the-record process at FDA is by far preferable to bureaucratic sabre rattling. And it certainly is preferable to a City Attorney’s regulation by letter and lawsuit.

Former NCAA Athletes Still “In The Game” As Court Finds No First Amendment Immunity For EA Sports

EA SportsCross-posted at WLF’s Forbes.com contributor page

A little over three years ago, in For Video Gaming Likenesses, If “You’re in the Game,” Are Your Rights Being Violated?, we highlighted an interesting lawsuit in California federal court in which former collegiate athletes were suing EA Sports. Last week, the U.S. Court of Appeals for the Ninth Circuit ruled on the appeal by EA Sports, affirming that the First Amendment does not protect it from liability for violating athletes’ “right of publicity” (In Re: NCAA Student-Athlete Name & Likeness Litigation).

The Lawsuit. The athletes alleged that EA Sports’s use of their images in NCAA football and basketball video games without permission violated California statutory and common law rights. EA Sports countered that the First Amendment protected them from liability, and moved to dismiss the class action as an unlawful strategic lawsuit against public participation (SLAPP). The trial court ruled that because the NCAA basketball and football video games failed to transform either the players themselves or the settings and circumstances through which they achieved their notoriety, EA Sports could not assert a First Amendment defense.

A wide spectrum of professional and business interests, understanding the potential impact of the Ninth Circuit’s decision, participated as amicus curiae. Professional sports unions, TV and movie studios, online gossip sites, and comic book and newspaper publishers contributed their views. Continue reading

Free (Speech for) Alcohol!: Government Allows Voluntary Nutrition Labels

TTBGuest Commentary

by Stephanie Chipley, a 2013 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

On May 28, 2013, the Treasury Department, via the Alcohol and Tobacco Tax and Trade Bureau (TTB), issued Ruling 2013-2, a temporary, voluntary labeling regulation that aims to help alcohol companies “provide truthful, accurate, and specific information to consumers about the nutrient content of their products on a per serving basis” in “Serving Facts” statements on labels and in advertisements of wine, distilled spirits, and malt beverages. For those companies who choose to use the new labels on their product packaging, the ruling allows the labels to include “serving size, the number of servings per container, and the number of calories and the number of grams of carbohydrates, protein, and fat per serving size.” In addition, companies may include the alcohol content of a product as a percentage of alcohol by volume and a statement of the fluid ounces of pure ethyl alcohol per serving.

TTB’s ruling shows just how far companies’ ability to share truthful information with consumers has come since Rubin v. Coors Brewing Co., 514 U.S. 476 (1995). In Rubin v. Coors, Coors Brewing Company applied to the Bureau of Alcohol, Tobacco and Firearms (BATF) for approval of labels and advertisements that revealed “truthful, verifiable, and nonmisleading factual information about alcohol content in its beer labels.” Id. at 478, 483. BATF rejected the application because it believed that § 205(e)(2) of the Federal Alcohol Administration Act (FAAA) “prohibited disclosure of the alcohol content of beer on labels or in advertising.” Id. Further, BATF argued that “the ban was necessary to suppress the threat of ‘strength wars’ among brewers, who, without the regulation, would seek to compete in the marketplace based on the potency of their beer.” Id. Coors argued that the § 205(e)(2) violated the First Amendment’s protection of commercial speech. Id. Ultimately, the United States Supreme Court held that although the Government had a “substantial interest in suppressing strength wars in the beer market,” the ban nevertheless failed to “directly and materially advance [the Government’s] asserted interest.” Id. at 488, 491. Consequently, the ban violated the First Amendment. Id. at 478. TTB’s viewpoints on allowing companies to share truthful information with consumers has come a long way since Rubin v. Coors, and its recent ruling reflects that change. Continue reading

In Attack On Commercial Speech, Law Professor Sadly Supports Selective Rights

censorsip

Cross-posted at WLF’s Forbes.com contributor page

Those who support increased government regulation of free enterprise have been doing quite a bit of hand-wringing lately about purported obstacles to their agenda that are imposed by the First Amendment.  To their way of thinking, this is a faux First Amendment being flacked by powerful businesses intent on undermining the democratic process.  The latest such complaint comes from Columbia Law Professor (and former senior adviser to the Federal Trade Commission) Tim Wu in a New Republic article, “The Right to Evade Regulation: How Corporations Hijacked the First Amendment.”

What such critics fail to confront, however, is that the rule of law requires that constitutional rights be applied in a consistent manner.  Unless Professor Wu is willing to sacrifice his own First Amendment rights, he is in no position to complain when those rights are extended to everyone, including those whose agenda he apparently opposes.

Wu labels as “extreme” a D.C. Circuit decision holding that the First Amendment prevents the government from forcing tobacco companies to include gruesome pictures of dying smokers on their product labels.  Yet in the next breath, he applauds other “compelled speech” decisions, such as the Supreme Court decision that prevents the government from forcing individuals to recite the Pledge of Allegiance.  Continue reading

Unanimous Court, Differing Views In Comcast v. FCC Appeals Ruling

tenniscourtGuest Commentary

by John Andren, Washington Legal Foundation*

The U.S. Court of Appeals for the D.C. Circuit released its eagerly awaited decision in Comcast Cable Communications v. FCC last week. Although the decision was unanimous, all three judges on the panel had something to say on the matter.

The case concerned whether or not Comcast violated section 616 of the Communications Act of 1934 by refusing to provide the same carriage for the Tennis Channel, which Comcast has no ownership in, as it does for the Golf Channel and Versus (now NBC Sports Network), both of which Comcast has ownership in. The FCC and Tennis Channel accused Comcast of “unreasonably restraining” Tennis Channel from competing fairly with Comcast’s own proprietary sports networks, while Comcast contended their decision to not offer Tennis Channel more broadly was based on nothing more than “a straight up financial analysis.”

The court’s opinion was authored by Senior Circuit Judge Stephen F. Williams, while Circuit Judge Brett M. Kavanaugh and Senior Circuit Judge Harry T. Edwards each filed concurring opinions. Continue reading