In the latest of the Supreme Court’s recent decisions in intellectual property law, the Court today ruled that a Lanham Act claim premised on allegedly misleading packaging or labeling statements that are the subject of specific regulatory review can proceed notwithstanding the fact that another federal statute also governs the subject matter of the claim. In a unanimous¹ decision reversing the Ninth Circuit, the Court concluded that the Lanham Act’s goal of providing competitors with a means for challenging perceived misleading labelling or advertising survives even where an accused consumer-facing communication may comply with the requirements of another federal statute.
Background and Procedural History
POM Wonderful LLC (POM) produces, markets, and sells pomegranate juice and juice blends, including a pomegranate-blueberry juice blend. In 2007, The Coca- Cola Company, under its Minute Maid® brand name, began marketing a juice blend it called “Pomegranate Blueberry Flavored Blend of 5 Juices.” POM sued Coca-Cola in 2008 under Section 43(a) of the Lanham Act² and California’s false advertising and unfair competition statutes,³ alleging that Coca-Cola’s pomegranate blueberry juice blend was falsely named, labeled, and advertised, and was therefore misleading to consumers. As a result, according to POM, Coca-Cola was competing unfairly with POM in the sale of pomegranate juice. In support of its argument, POM pointed to the fact that Coca-Cola’s product was actually 99.4% apple and grape juice; that the words “pomegranate” and “blueberry” appeared in large font on the label dwarfing the FDA required disclaimer explaining that the juice was, in fact, a “flavored blend of 5 juices”; and that the label’s images of a pomegranate and oversized blueberries dwarfed the images of apples and grapes.
The District Court for the Central District of California granted partial summary judgment to Coca-Cola dismissing POM’s Lanham Act claim on the basis that the Federal Food, Drug, and Cosmetic Act (FDCA)⁴ preempts Lanham Act challenges to names and labeling associated with beverages regulated under the FDCA. The Court of Appeals for the Ninth Circuit affirmed. On January 10, 2014, the Supreme Court granted certiorari to decide whether the Ninth Circuit “erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the [FDCA].”
The Parties’ Positions
POM argued that the FDCA neither expressly precludes false advertising claims brought under the Lanham Act nor creates an irreconcilable conflict, allowing Coca- Cola to comply with both the Lanham Act and the FDA’s regulations. According to POM, the two statutes serve distinct yet complementary purposes: the Lanham Act protects against unfair competition, providing a private remedy to commercial plaintiffs such as POM whose “commercial interests” have been harmed by another party’s false advertising; the FDCA’s misbranding provisions are designed to protect the public’s health and safety, with the responsibility for enforcement resting with the FDA, not private parties. As such, both statutes work in tandem to ensure that products are packaged and marketed in ways that are both safe and not misleading for consumers, and are not unfair to competitors.
Coca-Cola argued that a specific federal law such as the FDCA – and, in particular, the 1990 amendment to the FDCA entitled the “Nutrition Labeling and Education Act” – can and did narrow the scope of the more general Lanham Act even if it does not expressly so indicate, and even if the two laws are not in irreconcilable conflict. According to Coca-Cola, Congress’ clear intent to achieve national uniformity in food and juice naming and labeling would be defeated to the extent a competitor, such as POM, is permitted to assert a Lanham Act claim against a name and label authorized under the FDA’s regulations. Here, the accused Coca-Cola juice label technically complied with the FDCA regulations: those regulations expressly permitted Coca-Cola to name its juice-blend with the minority components and to display the fruit images it used on its labels. Even if Coca-Cola’s name and labels had not been specifically reviewed by the FDA, because they were technically compliant there was no possibility that they presented a misleading representation of fact giving rise to a misrepresentation of the nature, characteristics or qualities of the Coca-Cola product. Thus, in Coca-Cola’s view, complying with the FDCA insulated it from liability under the Lanham Act.
The Supreme Court’s Ruling
In reversing the Ninth Circuit, the Supreme Court established that, at least in the false advertising/unfair competition context, manufacturers cannot hide behind one Federal statute in order to avoid liability under another. The mere fact that a product name or label may comply with the provisions of the FDCA does not mean that the chosen name or label is not misleading or otherwise deceptive under the Lanham Act. The Court makes clear that competitors are entitled to challenge consumer-facing representations – even where such representations are consistent with another Federal statute – in order to ensure that marketplace competition remains fair.
The Court viewed the issue presented as one of statutory interpretation and one of preclusion, not one of pre-emption. Pre-emption relates to the state law-Federal law interaction; here, the interaction is between two Federal statutes, and thus the appropriate inquiry is whether one precludes a cause of action or claim under the other. Interpreting the FDCA the Court concluded that the Act, by its terms, does not preclude Lanham Act suits, thus making it clear that lawsuits of the type brought by POM were not statutorily “off limits”. Indeed, the court recognized that over the course of the 70-year co-existence of these two Federal statutes Congress has not seen fit to amend the FDCA to prohibit the application of the Lanham Act to situations governed by the FDCA. This is true notwithstanding the fact that Congress has made amendments to the FDCA over the years. The Court felt that this was telling evidence that there was no intention on Congress’s part to prohibit the type of Lanham Act claim asserted by POM here. The FDCA and the Lanham Act “impose different requirements and protections”, and they complement each other. The statutes must work together to ensure that products – in this case juices – are not only clearly named but that those names and the labels associated with them are not portrayed in a manner that gives rise to a misrepresentation as to the nature, characteristics or qualities of the product.
The question of whether an ad, label or claim violates Lanham Act §43(a) inherently begs for a more in-depth analysis than merely whether it complies with certain listed rules. Section 43(a) looks to gauge the impact the statements made in the ad, label or claim – whether express or implied – on the business of others and on consumers in general. Permitting Lanham Act challenges to labelling that technically complies with the FDCA is the only logical way to ensure that the Lanham Act remains viable in these situations.
The fact that a label technically complies with FDCA requirements may be a relevant factor in evaluating whether a particular label is misleading, but it should not be the determining factor. Moving forward, it will be important for businesses to know that they cannot rely only on regulatory approval when it comes to the manner in which they name and portray their products. The POM Wonderful decision serves as a reminder that compliance with §43(a) is not excused merely because a particular name or consumer-facing graphic or statement may comply with another regulatory requirement.