395 F.Supp.3d 617
D. Maryland2019Background
- After a 14-day jury trial, the jury found: De Simone liable on breach and unjust enrichment counts against VSL/Leadiant (awards to De Simone), ExeGi liable on Lanham Act false advertising against Alfasigma (award $15,000,000), and De Simone defeated VSL's counterclaim for breach of fiduciary duty.
- ExeGi alleged Alfasigma (and Leadiant) falsely advertised that the Italy-made VSL#3 ("Italian VSL#3") retained the "original proprietary mix of eight strains" and was made at the original facility, when it allegedly had different strains/proportions and different manufacture.
- De Simone contended VSL/Leadiant sold Danisco-manufactured VSL#3 after his Know-How license was terminated and without paying him, supporting unjust enrichment claims; he had previously licensed patent and know-how rights with royalties tied to post-patent periods.
- Defendants moved under Rule 50 and for a new trial under Rule 59, arguing insufficient evidence on Lanham Act elements, scientific debate precluding literal falsity, lack of proximate causation/injury, evidentiary errors, and that disgorgement is equitable (not for jury).
- The district court denied the renewed JMOLs and new-trial motions, finding sufficient evidence for literal falsity (on at least two communications), materiality, likelihood of injury/proximate causation, and that jury could assess profits; it also upheld unjust enrichment verdicts against VSL and Leadiant.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| False advertising elements under Lanham Act (literal falsity, materiality, deception, interstate commerce, injury) | ExeGi: Alfasigma/Leadiant published literal false statements (website, press release, HCP letter) that Italian VSL#3 lacked same strains/proportions and used different facility; statements are material and caused likely injury | Alfasigma/Leadiant: Statements are not literally false, are scientific questions (reasonable expert disagreement), not commercial advertising, and causation of injury is not shown | Court: Sufficient evidence that at least VSL#3 webpage and HCP letter were literally false, material, in interstate commerce, and likely caused injury; JMOL/new trial denied |
| Scientific disagreement and literal falsity standard | ExeGi: Experts and regulatory filings show differences (7 vs 8 strains, proteomic/functional differences) so statements were literally false | Defs: Scientific dispute and expert support (Barrangou) preclude literal falsity under In re GNC — need consensus among experts | Court: GNC does not require dismissal when defendants present contrary experts; jury instructed to find literal falsity only absent reasonable expert disagreement and could reasonably find no such reasonable disagreement |
| Causation / proximate injury and disgorgement of profits | ExeGi: False claims induced clinicians to continue prescribing VSL#3 and withheld trade from Visbiome; expert testimony showed clinicians rely on clinical data; disgorgement appropriate because defendants benefited | Defs: Evidence shows correlation not causation; no direct testimony that purchasers chose VSL#3 because of ads; disgorgement is equitable and not for jury | Court: Evidence (experts, dietician, regulatory filings) sufficient to infer likely injury and that defendants benefited; jury properly calculated profits; equitable balancing can be addressed by judge without new trial |
| Unjust enrichment for post-patent sales / royalties (Kimble/Brulotte issue) | De Simone: Continued sale of VSL#3 after patent expiry without royalty/payment for his Know-How unjustly enriched defendants | VSL: Brulotte/Kimble bar post-patent royalties so unjust enrichment claim fails as matter of law | Court: Kimble allows post-patent royalties tied to non-patent rights (know-how); jury could reasonably find defendants were unjustly enriched and liable for De Simone's share; JMOL/new trial denied |
Key Cases Cited
- Price v. City of Charlotte, 93 F.3d 1241 (4th Cir.) (Rule 50 legal-sufficiency standard)
- Anheuser-Busch, Inc. v. L & L Wings, Inc., 962 F.2d 316 (4th Cir.) (view evidence in light most favorable to nonmovant)
- Scotts Co. v. United Indus. Corp., 315 F.3d 264 (4th Cir.) (Lanham Act false-advertising elements and literal-falsity rule)
- C.B. Fleet Co. v. SmithKline Beecham Consumer Healthcare, 131 F.3d 430 (4th Cir.) (literal falsity as question of fact)
- Verisign, Inc. v. XYZ.Com, LLC, 848 F.3d 292 (4th Cir.) (cannot mix statements to satisfy different Lanham elements; injury/causation principles)
- In re GNC Corp., 789 F.3d 505 (4th Cir.) (treatment of scientific claims in Lanham Act contexts)
- Dairy Queen, Inc. v. Wood, 369 U.S. 469 (U.S.) (jury trial right and legal vs equitable remedies)
- Lexmark Int'l v. Static Control Components, 134 S. Ct. 1377 (U.S.) (standing and Lanham Act injury/withholding trade concept)