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From Antitrust Law Daily, August 20, 2013

Advertising of generic acne gel not literally false, did not support Lanham Act claim

By Jody Coultas, J.D.

Stiefel Laboratories, Inc. could not state a Lanham Act false advertising claim against competitor Brookstone Pharmaceuticals, L.L.C. for falsely marketing its acne gel as a generic version of Stiefel’s acne gel, the U.S. Court of Appeals in Atlanta has held (Stiefel Laboratories, Inc. v. Brookstone Pharmaceuticals, L.L.C., August 19, 2013, Per Curiam).

Stiefel alleged that Brookston falsely advertised that its acne gel, BPO Gel, was the generic equivalent to Stiefel’s Brevoxyl acne gel. Because the acne gels are generally recognized as safe and effective (GRAS/E), Brookstone did not need approval from the Food and Drug Administration (FDA) before calling itself a “generic” for a name-brand drug, such as Brevoxyl. The FDA does not regulate the labeling of generics for GRAS/E drugs.

A district court found that Stiefel failed to prove that Brookstone’s marketing statements were false or misleading. Although the labeling statements and the Texas Medicaid form were shown to be false, the court concluded that Stiefel did not present enough evidence of the material impact of these false statements to survive summary judgment.

To establish a Lanham Act false advertising claim, Stiefel was required to establish that the ads at issue were false or misleading, deceived, or had the capacity to deceive, consumers, had a material effect on purchasing decisions, affected interstate commerce, and injured Stiefel.

Literal falsity. The district court did not err in finding that Stiefel only alleged a literal falsity theory, according to the court. Stiefel argued that the district court erred in only considering whether Brookstone’s statements were literally false. The district court concluded that Stiefel was alleging literal falsity because Stiefel had not alleged that the ads were misleading. Stiefel’s use of the word “misleading” in a number of places in the complaint did not clearly support the conclusion that Stiefel was advancing a theory that Brookstone’s statements were misleading within the meaning of the Lanham Act. Stiefel also did not clearly identify an expert report as supporting the misleading theory of the case. Rather, the report was cited to advance arguments in support of the falsity theory.

Stiefel did not produce sufficient proof for a reasonable jury to conclude that Brookstone’s statements were literally false, according to the court. Marketing statements made by Brookstone that its BPO Gel was a generic for Brevoxyl were submitted by Stiefel as proof of false advertising. However, Stiefel failed to show that, in the context of drugs not regulated by the FDA, pharmacists understand the term “generic” to have the same meaning as it does in the regulated context. Even if the court found that generic had the same meaning, Stiefel did not present equivalency tests to show that Brookstone’s BPO Gel was not a generic. Therefore, a jury could not reasonably find that Brookstone’s statements concerning its product being a generic were literally false.

Impact on purchasing decision. The district court correctly found that the false statements in the Texas Medicaid form and the labeling statements did not have a material impact on the consumer’s purchasing decision, according to the court. Brookstone submitted “Labeling Statements” to a pharmaceutical database listing the product name as “Benzoyl Peroxide 4% Gel” and “Benzoyl Peroxide 8% Gel” instead of “BPO 4% Gel” and “BPO 8% Gel” and a Texas Medicaid Form in which Brookstone indicated that BPO Gel was graded an “A” in the “Orange Book.” Stiefel’s evidence only showed that Brookstone captured some of Stiefel’s market share. It did not show that Brookstone’s false statements influenced pharmacists’ purchasing choices.

The case is No. 12-14309.

Attorneys: Jonathan S. Franklin (Fulbright & Jaworski, LLP) for Stiefel Laboratories, Inc. L. Matt Wilson (The Wilson Law Firm, PC) for Brookstone Pharmaceuticals, L.L.C.

Companies: Stiefel Laboratories, Inc.; Brookstone Pharmaceuticals, L.L.C.

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