In an important recent false advertising decision in a suit brought by home pregnancy test manufacturer Church & Dwight against its principal competitor SPD Swiss Precision Diagnostics, a Second Circuit panel unanimously affirmed orders by Judge Alison Nathan of the Southern District of New York, following a bench trial on liability, (i) holding that SPD labeling and other advertising for its Clearblue Advanced Pregnancy Test with Weeks Estimator (the “Weeks Estimator” or “Product”) constituted intentional and egregious false advertising in violation of the Lanham Act, and (ii) granting permanent injunctive relief that included a nationwide recall of all Weeks Estimator packaging, a prohibition on all Weeks Estimator advertising that was the subject of the complaint, and a corrective advertising campaign. Proskauer represented Church & Dwight.

When SPD launched the Weeks Estimator in the U.S. in August 2013, it unleashed an extensive advertising campaign that the trial court found “was intentionally designed to mislead consumers” by communicating the false message that the Product “provides an estimate of weeks pregnant that is consistent with a doctor’s estimate of weeks pregnant.” In truth, the Weeks Estimator estimates the number of weeks that have passed since a woman last ovulated. Doctors, by contrast, use a “universal [] convention for expressing pregnancy duration” in terms of “the number of weeks since a woman’s [last menstrual period],” which generally occurs approximately two weeks before ovulation. “Thus, the Weeks Estimator provides an estimate of ‘weeks’ that is expressed differently from the standard convention for expressing pregnancy duration,” contrary to the message communicated in SPD’s advertising for the Product. On this basis, Judge Nathan found that SPD’s advertising – including the packaging, television advertising, in-store advertising, and other promotional materials – was false and misleading, and ordered the injunctive relief described above, setting the stage both for the damages phase of the case and SPD’s appeal.

On appeal, a unanimous Second Circuit panel affirmed the District Court’s liability and injunction orders in their entirety. The Second Circuit first agreed with Judge Nathan that SPD’s original (or “launch”) advertising for the Weeks Estimator was literally false in that it unambiguously communicated “the false message that the Product provides a measurement of weeks-pregnant that is consistent with the measurement a doctor would provide.” The Court of Appeals also agreed that the District Court “correctly found the launch advertising to be impliedly false,” as supported both by survey and other evidence of actual consumer confusion and by the “extensive evidence in the record” of “Defendant’s intent to deceive,” which was “sufficient to support a presumption of consumer confusion.” Second, the Court of Appeals affirmed the District Court’s finding that SPD’s revised Weeks Estimator packaging, which SPD began using after the FDA expressed concerns about the launch package, was also impliedly false. Like the launch package, the revised package “did not adequately communicate that its measurement was not consistent with the metric used by doctors.” The Second Circuit noted “the ample evidence that [SPD] was aware of [the] widespread consumer ignorance” about the conventional medical practice of dating the beginning of pregnancy from a woman’s last menstrual period, and that SPD nevertheless “took no effective steps to guard against misunderstanding of [its] messages attributable to that ignorance.”

Noting that the evidence supported the conclusion that the falsity of SPD’s advertising was both material and likely to cause injury to Church & Dwight, the Second Circuit affirmed the District Court’s finding that Church & Dwight had met its burden of proving each of the elements of a Lanham Act false advertising claim, and was entitled to the District Court’s award of injunctive relief. The Court of Appeals also rejected SPD’s argument that Church & Dwight’s Lanham Act claim was precluded by the FDA’s regulation of the Product through the Food, Drug & Cosmetics Act § 510(k) process, and the FDA’s acceptance of the revised package. Citing the Supreme Court’s 2014 decision in POM Wonderful v. Coca-Cola, the panel noted “that a Lanham Act claim is not precluded by FDA regulation under the FDCA because the two statutes serve distinct and complementary purposes.”

The Second Circuit also affirmed the permanent injunction that, among other things, enjoined SPD from communicating in any advertising that the Weeks Estimator provides an estimate of weeks pregnant that is the same as a doctor’s estimate; required SPD to remove all Weeks Estimator packaging from points of sale; enjoined SPD from using certain phrases, such as “weeks pregnant,” in the marketing of the Product; and required SPD to distribute corrective advertisements and notices acknowledging, among other things, that it had been found to have engaged in false advertising. The panel rejected SPD’s argument that the terms of the injunction were excessively harsh and that the District Court had abused its discretion.

The damages phase of the case is now proceeding, with trial scheduled to take place next year. In the meantime, SPD has petitioned the Second Circuit for rehearing or rehearing en banc, despite the unanimity of the panel decision. We will let you know of future developments.