The very name “intellectual property law” suggests it’s not for us. There are episodes of The Simpsons that seem too complicated for our pretty little heads. Anything deemed “intellectual” scares us away. We usually race right past the intellectual property section of Lexology, as those cases are seldom relevant to our practice.
Except sometimes they are. Innovative Health Solutions, Inc. v. DyAnsys, Inc., 2015 WL 2398931(N.D. Cal. May 19, 2015), is a Lanham Act/unfair competition case, but it makes a respectful nod in the direction of one of our favorite Supreme Court cases, Buckman, so we will make a respectful nod in its direction today. The plaintiff, Innovative Health Solutions (IHS) sells a medical device called P-STIM. According to IHS’s second amended complaint (the SAC), the defendants include a California corporation “engaged in a business that competes with IHS and which … has passed itself off as the source of P-STIM, and has deliberately endangered and continues to endanger patients throughout the United States by distributing and selling an Indian-made medical device that is not approved by, and has never been approved by, the FDA and for which the FDA has issued an import alert preventing its importation into the United States.” There is some fine, fiery rhetoric in that allegation, and it gives you an idea of the high quality of lawyering in this case. From what we can tell, it appears that both sides have exceptionally good lawyers.
The legal theories behind the claims focused on the federal Lanham Act as well as various provisions of California’s Bus. & Prof. Code, mostly involving allegations of unfair business practices, false advertising, etc. The plaintiff alleged that the defendants did not have FDA clearance to sell the “knockoff” P-STIM devices, that the defendants misrepresented to the public that their product was cleared under the same FDA 510(k) number assigned to IHS’s P-STIM medical device, and that the defendants “otherwise misbranded their product in violation of federal regulations.” The issue is whether the plaintiffs were alleging that the defendant had lied to the public or the FDA. Presumably, the plaintiffs wanted to get the benefit of both allegations. But not all of those allegations could make it through the Buckman sieve. There is also another interesting regulatory angle in the case. According to the SAC, in May 2014, the defendants appeared before the Centers for Medicare and Medicaid Systems (“CMS”) and “falsely claim[ed] standing as the ‘manufacturer’ and seller of the P-STIM medical device.”
The defendants move to dismiss the plaintiff’s claims on several grounds. One was that IHS could not bring its claims on
its own, because the trademark owner and other licensees were necessary parties. The issue of party joinder is not wholly foreign to what we do, though usually we are issuing a Jeremiad against fraudulent joinder. But in the IHS case the joinder issue did not go very far. The court held that joinder of the absent parties was not warranted. That decision turned on fact-specific issues that made our eyes glaze over. If you want to explore them, read the opinion. As for us, we will head to the main event in the case, the preemption defense. It turns out that some of the claims were preempted and some were not. The court drew the line in a way that is hard to fault.
The defendant contended that the Lanham Act and state law claims should be dismissed to the extent they were based upon the defendants’ alleged misuse of an FDA clearance number or violations of the Federal Food, Drug and Cosmetic Act (“FDCA”). The court concluded that to the extent the plaintiff alleged that the defendants falsely represented that they obtained FDA approval for their products, those claims are not precluded or preempted. That alleged fraud was directed at the public, not the FDA. But the SAC said a few other things, as well. Amended complaints always do. Here, the SAC also contained allegations that the defendants’ P-STIM device: (i) “undercuts the FDA regulatory framework,” (ii) is “unsafe and hazardous,” (iii) is “mislabeled,” (iv) is “ineffective,” (v) contains “numerous health risks,” and (vi) endangers patients and the consuming public.
The court recognized that Buckman “leaves no doubt that it is the federal Government rather than private litigants who are authorized to file suit for noncompliance with the medical device provisions [of the FDCA].” Buckman would preempt any state law claims alleging that the defendant duped the FDA. Federal claims, such as those under the Lanham Act, would not technically be preempted, but they would still be precluded. The plaintiff apparently did not put up much of a fight on this issue, making it relatively easy for the court to grant the defendants’ motion to dismiss those causes of action that smelled like fraud on the FDA. While the court was in a granting mood, it also granted the plaintiff leave to amend to clarify the nature and scope of its claims. Thus, it is hard to predict how this case will turn out and, given the subject matter, it is not inevitable that we will pay attention all that closely to its subsequent meanderings. But it is always nice when a court takes Buckman seriously.
The defendants also mounted another defense – one that we do not often see in our neck of the jurisprudential woods. The defendants argued that IHS’s claims should be dismissed to the extent that they are based upon the defendants’ petitioning of CMS and related communications with the government agency, as these are constitutionally-protected activities.
That is the Noerr-Pennington doctrine. That doctrine originally arose in the context of an antitrust case, but it is not limited thereto. The Noerr-Pennington doctrine is grounded on the first amendment rights of free speech and petitioning the government. There is a “sham” exception to the Noerr-Pennington doctrine. The court held that the defendants’ petitioning of the CMS was a constitutionally-protected activity because the defendants were seeking relief from a government agency. The court further held that the plaintiff had not shown that the defendants’ petitioning constituted a sham: it did “not appear that plaintiff could allege that defendants’ petitioning of CMS and related communications were objectively baseless.”
We’re not saying that any and every drug and device law defendant could “knock-off” these Buckman and Noerr-Pennington arguments, but one does not need to be an intellectual to see how they will be useful in more than a few of our cases.