MEMORANDUM

BENSON EVERETT LEGG, Senior District Judge.

I. Introduction

This was a hard contested, but well contested, Lanham Act suit between two competitors in the urine drug testing ("UDT") industry, Millennium Laboratories, Inc. ("Millennium") and Ameritox, Ltd. ("Ameritox"). Each accused the other of false advertising. Midway through trial, after the Court had decided a number of claims, the parties, with the assistance of a United States Magistrate Judge, resolved the remaining issues by agreeing to a Consent Order. See Docket No. 321.

This resolution proved to be only a lull in the hostilities. After the Court formally approved the Consent Order, both sides issued press releases and other public statements concerning the litigation. Each side, taking offense at the other's public pronouncements, filed new Lanham Act lawsuits accusing the other of violating the Consent Order, mischaracterizing the trial, and misstating this Court's rulings. Each suit seeks monetary relief, injunctive relief, and mandatory corrective advertising.

After issuing corrective orders, the Court consolidated the new cases with the earlier suit. In a conference call confirmed by an Order, Docket No. 360, the Court advised the parties that it would issue a Memorandum that neutrally and objectively recounted the earlier litigation. Afterward, the Court would dismiss, with prejudice, the first suit and the newly filed suits.

The Court's decision to summarily dispose of the new suits is based on several propositions. The first involves the Consent Order. While a consent order is a contract between parties to a suit,1 it is also an order of the court that issued it. The issuing court has authority to resolve any disputes that bear upon its consent order. Moreover, a court has inherent authority to enjoin a party from making misleading statements concerning litigation on its docket. See Am. Sci. & Eng'g, Inc. v. Autoclear, LLC, 606 F.Supp.2d 617, 626 (E.D.Va.2008) (ordering removal of a press release that contained misleading statements about the court's rulings). This Court, therefore, has the authority needed to issue a clarifying memorandum.

Second, in the new suits, both sides have prayed a jury trial on all issues. These suits, therefore, contemplate a trial at which a jury would decide what happened in the earlier litigation, including the import of this Court's rulings, and whether the parties' statements violate the Lanham Act.2 Empaneling a jury to review the extensive history and conduct of the earlier litigation, which included thousands of pages of pleadings, orders, exhibits, and transcripts, would be unconscionably wasteful of both judicial and private resources. For these reasons, this Court and not a jury is the only feasible arbiter of disputes concerning the earlier litigation.

Third, in false advertising cases under the Lanham Act, the characteristic relief is equitable rather than monetary. This follows because of the inherent difficulty in attributing economic injury to a competitor's false advertisements. Either side's effort to prove that the accused press releases caused lost sales or eroded goodwill would necessarily require speculation.3

In their new suits, the parties accuse one another of mischaracterizing the earlier litigation. This Memorandum, which recounts the history of that litigation neutrally and objectively, affords both sides with appropriate equitable relief. With the publication of this Memorandum, there is nothing more to decide, the entire case will be at an end, and the Court will dismiss all suits with prejudice.

II. The Earlier Litigation

This Lanham Act case involves allegations of false advertising in the urine drug testing ("UDT") industry. The litigants, Millennium and Ameritox, are competitors. Their laboratories process urine samples using sophisticated equipment. The target audience for their advertisements consists of doctors ("pain doctors") who prescribe powerful opioids such as oxycodone and hydrocodone for patients suffering from chronic pain. Opioids can be a dangerous tool in the doctor's black bag. Studies indicate that as many as 75% of pain patients fail to take their medications as prescribed.

There are many reasons for patient non-compliance. Some patients, afflicted with pain and tempted by the remaining pills in the bottle, take too much. Others sell their pills into the thriving black market for illegal narcotics. Still others, especially the elderly, may simply forget to take their pills, meaning that their pain is not assuaged.

Determining whether pain patients are taking their medication as prescribed poses a problem for pain doctors. Typically, physicians receive little formal training in methods for monitoring their pain patients effectively. Monitoring is also time consuming, requiring periodic office visits during which the doctor might count the patient's remaining pills, examine the patient for physical signs of misuse, and consult with the patient. Such time-consuming monitoring is at odds with the business model (twelve to fifteen minutes per patient) that the pressure of modern medicine has forced on many practices. Insurance further complicates the issue; insurance companies and the government ultimately decide how much monitoring they will pay for, and, therefore, how much monitoring patients will receive.

These difficulties have created a market for an efficient biological test that can assist pain doctors in their efforts to determine whether their patients are prescription compliant. As used in this litigation, the phrase "prescription compliance" means taking the right medication (e.g., hydrocodone) in the right dosage (e.g., a 20 mg tablet) at the right time (e.g., three times per day).

By processing patients' urine samples through sophisticated laboratory equipment, Millennium and Ameritox can provide doctors with considerable information. Their tests can determine the presence (and, by necessary implication, absence) of the prescribed pain medication and a wide variety of other drugs, whether prescription, non-prescription, legal, or illegal. The tests can also quantify the amount of pain medication or its metabolite present in the urine.4

Even using this advanced technology, however, UDT has its limitations. First, it provides only a snapshot of current drug use; drugs and their metabolites remain in a person's urine only for so long. Additionally, because individuals metabolize drugs at different rates, UDT cannot determine the dosage taken by the patient or when he took the dosage. During the litigation, Millennium and Ameritox agreed that UDT can determine whether certain drugs are present or absent, but it cannot determine prescription compliance.

As rivals in the UDT industry, Millennium and Ameritox aggressively market their respective services to pain doctors. Their marketing efforts include print and electronic advertisements as well as face-to-face presentations delivered by trained sales representatives.

In 2010, Millennium sued Ameritox under the Lanham Act. Ameritox counterclaimed. The parties accused each other of making false advertising promises. During the course of the litigation, a number of claims and counterclaims were dismissed by the Court or abandoned by the parties. The case that went to the advisory jury only included four Ameritox advertisements that Millennium accused as being literally false under the Lanham Act.5

As will be explained in detail herein, the Court asked the advisory jury to examine the accused ads one-by-one from the perspective of a pain doctor. For each ad, the jury was asked whether the advertisement contained the literally false message that Ameritox's services could determine a patient's prescription compliance.

At this point, a brief description of Ameritox's first-and second-generation services, Rx Guardian and Rx Guardian CD is required.6 The patient provides a urine sample, which the doctor forwards to one of Ameritox's laboratories in Midland, Texas or Greensboro, North Carolina. Ameritox first measures the amount of any specified drugs (or their metabolites) present in the patient's urine. Then, Ameritox "normalizes" the patient's results by means of an algorithm to account for the patient's hydration and lean body mass. Finally, Ameritox plots the patient's normalized results against a reference range.

Ameritox describes the reference range as a band within which a prescription-compliant patient's result would be expected to fall.7 Thus, if a patient has been prescribed 60 mg per day of hydrocodone, Ameritox will compare the patient's normalized score to its "hydrocodone — 60 mg daily dose" reference range. According to Ameritox, 95% of patients who are compliant with their prescription regimens will see their results fall within the applicable reference range. By definition, then, Ameritox also expects 5% of prescription-compliant patients to fall outside the applicable reference range.

Apart from minor changes to its algorithm, the main difference between Rx Guardian and Rx Guardian CD involves the manner in which the reference ranges are derived. The Rx Guardian reference ranges were developed through the research of Dr. Michael Kell. The Rx Guardian CD reference ranges are calculated on an ongoing basis from a database of pain patients being treated at the Marshfield Clinic in Minocqua, Wisconsin.

Millennium's original Complaint accused Ameritox of disseminating false and misleading advertising statements about the capabilities of Rx Guardian.8 According to Millennium, Ameritox falsely advertised that Rx Guardian test results could, by themselves, tell a doctor whether the patient was compliant with his prescription regimen. Ameritox disputed with this reading of its ads, agreeing with the proposition that UDT cannot, by itself, determine prescription compliance. Properly read in context, Ameritox stated, the ads promised only that Rx Guardian afforded doctors with another tool to "help" or "assist" them in monitoring their pain patients.

In the spring of 2011, while the suit was pending, Ameritox transitioned from Rx Guardian to Rx Guardian CD. At that time, Ameritox ceased running advertisements for Rx Guardian and began running advertisements for Rx Guardian CD.

Millennium filed an Amended Complaint challenging certain advertisements for Rx Guardian CD. Millennium contended that the new ads, like the old ads, falsely promised that Ameritox's service could determine prescription compliance. Millennium also added a new claim that focused on Ameritox's description of the patients in the Marshfield cohort as "known to be adherent" to their prescription regimens. According to Millennium, the adjective "known" rendered the advertisements false because the Marshfield patients are not monitored in a controlled in-patient setting. Rather, the Marshfield patients are "assessed" for compliance using a protocol that relies in part on patient interviews and the subjective judgment of clinic staff.9

Ameritox denied that the word "known" carries a false connotation. It riposted that, in the context of a growing database that includes over 1,000 patients, any reasonable pain doctor would read "known" to mean "clinically assessed."

There are two basic ways in which an advertisement can violate the Lanham Act. The advertisement can be either literally false or literally true but misleading. "To constitute a violation of § 43(a) [of the Lanham Act], ... `the contested statement or representation must be either false on its face or, although literally true, likely to mislead and to confuse consumers given the merchandising context.'" C.B. Fleet Co., Inc. v. SmithKline Beecham Consumer Healthcare, L.P., 131 F.3d 430, 434 (4th Cir.1997) (quoting Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1138 (4th Cir.1993)).

For an advertisement to be literally false, the falsity must be evident from the face of the ad itself.10 An advertisement cannot be said to be literally false if the advertising message is ambiguous, meaning that it is susceptible to two reasonable readings, one of which is literally true. Moreover, an advertisement is not literally false if the advertising message is literally true but misleading.

If a plaintiff accuses an advertisement as literally true but misleading, it must offer extrinsic evidence showing that the challenged advertisement tends to mislead or confuse consumers. PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111, 120 (4th Cir.2011). In almost all Lanham Act cases, such extrinsic evidence consists of a scientific survey demonstrating that target consumers were actually misled by the challenged advertising. In rare instances, stark evidence of a defendant's intent to deceive the purchasing public may relieve a Lanham Act plaintiff of its obligation to present evidence of confusion. See Scotts Co. v. United Indus. Corp., 315 F.3d 264, 281 (4th Cir.2002). In either case, consumer confusion or intent to deceive must normally be resolved by the finder of fact, meaning a jury unless both sides consent to a bench trial.

As the case stood at the summary judgment deadline, Millennium was challenging five of Ameritox's ads as literally false, two additional ads as literally true but misleading, and a final ad as containing some statements that were literally false and others that were misleading although literally true.

The ads challenged as literally false were:

The ads challenged as literally true but misleading were:

The ad challenged as containing both literally false and literally true but misleading statements was:

The Court's Daubert rulings narrowed Millennium's case. The Court granted summary judgment in Ameritox's favor on the ads that Millennium challenged as being literally true but misleading. To demonstrate consumer confusion, Millennium had offered surveys that purported to show significant levels of consumer confusion. The first survey tested the "The Pain Was Still There" ad, and the second survey tested both the "Know Where They Stand" ad and the Webpage. Both surveys asked pain doctors to look at the challenged advertisements and answer questions about their understanding of the claims made therein.

Ameritox filed a motion in limine to exclude the surveys.11 After carefully reviewing them, the Court had reservations about their validity and reliability.12 Significantly, both surveys lacked any meaningful form of control. The Federal Judicial Center's Reference Guide on Survey Research, authored by Dr. Shari Diamond and cited heavily by both parties, describes the purpose and necessity of a control group or question.13 To be valid, a survey must demonstrate consumer confusion attributable to the challenged advertisement rather than some other source. Absent a proper control, it is nearly impossible to determine how much of the reported confusion is attributable to the survey participants' preexisting beliefs or other background "noise" created when, for example, a participant misunderstands the survey questions or responds to them inarticulately.14

To test its preliminary views, the Court engaged Dr. Diamond to serve as a technical advisor.15 After independently reviewing the surveys, Dr. Diamond opined that they were fatally flawed, primarily because of the absence of proper controls.16 Based on its independent evaluation of the surveys, which included Dr. Diamond's input, the Court excluded both for failing to meet the standards for admissibility articulated in Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 592, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).17

With no survey evidence, Millennium lacked competent proof that the ads it accused as literally true but misleading had, in fact, misled pain doctors. Accordingly, the Court excluded the "The Pain Was Still There" and "Know Where They Stand" advertisements from the case.18

The Webpage also fell from the case. Without the proffered survey evidence, Millennium could not prove that the Webpage was misleading. The Court ruled that Millennium could, however, proceed to trial on its accusation of literal falsity, which did not require proof of consumer confusion. Millennium elected to drop its claims against the Webpage, however.19

The Court's pretrial rulings also winnowed Ameritox's case against Millennium. After being sued, Ameritox counterclaimed by accusing five of Millennium's advertisements as being deceptive under the Lanham Act:

The Court will consider these claims in turn. Ameritox asserted that Millennium's "RADAR Report" mislead doctors as to the capabilities of Millennium's UDT services. To test consumer confusion, Ameritox commissioned a survey. Ameritox eventually abandoned its RADAR Report counterclaim because the survey showed extremely high levels of "noise" in the marketplace.

Considering the second and third claims, Ameritox contended that Millennium falsely claimed (i) to have the fastest turn-around time in the industry, and (ii) to be able to provide final quantitative lab results by the "next business day." Ameritox sought to support its claims with survey evidence purporting to show physician confusion concerning Millennium's advertisements on these subjects.

The Court granted summary judgment in Millennium's favor on these two counterclaims, concluding that Millennium's advertising claims were literally true and clear. Ameritox could point to no competing lab that had a faster turn-around time. Ameritox also failed to demonstrate how Millennium's claim that it usually provides results the "next business day" could be false or misleading. Millennium cannot process a urine specimen that it does not have; hence, "next business day" can only mean the day after Millennium receives the specimen. Because the advertising claims are unambiguously true, the Court never had to consider the validity of Ameritox's survey evidence, which purported to demonstrate confusion in how physicians understood the terms "turn-around time" and "next business day." The Court's preliminary review of the surveys, however, identified serious flaws that called their viability into question.

The Court also granted summary judgment in Millennium's favor on the fourth counterclaim issue, finding that Millennium's advertising that it is the only major lab to use exclusively "LC-MS/MS technology" in the processing of samples is accurate. Ameritox could not point to another major lab that tested samples using only LC-MS/MS.

Ameritox's final counterclaim asserted that Millennium's characterization of its services as "therapeutic drug monitoring," or "TDM," was false and misleading. As used in the medical community, the terms properly apply only to drug testing by blood or serum, not urine, Ameritox maintained. The Court denied Millennium's Motion for Summary Judgment, ruling that a dispute of fact existed as to the meaning of "TDM" that could only be resolved by expert testimony at trial. During trial, Ameritox voluntarily dismissed its TDM claim with prejudice, electing not to pursue it.

Thus, none of Ameritox's counterclaims went to the jury. The only ads that were ultimately tested at trial were four Ameritox ads that Millennium challenged as being literally false: the "Lifetree Information Sheet," the "Booth Backdrop Display," the "Can You Tell ..." brochure, and the "Rx Guardian CD Fact Sheet."

Before trial, the Court bifurcated the issues of liability and damages, with the liability phase to be tried first.20 It was contemplated that during the liability phase the jury would first decide several preliminary factual issues.21 Having done so, the jury would then render an advisory verdict on the literal falsity of each of the four ads. After the jury had returned its verdict, the Court would then review the record, including the advisory verdict, and independently decide whether each of the four ads conveyed a message that was literally false.22

If the Court found one or more of the ads to be literally false, then the trial would proceed to the second phase, during which Millennium would present evidence of injury and damages. Because injury is a requirement imposed by the statute, a determination of literal falsity in phase one would not, by itself, establish a Lanham Act violation; Millennium would still be required to prove that it had suffered harm. Thus, in phase two, the jury, as the trier of fact, would decide whether the literally false ads had injured Millennium, and, if so, whether to award monetary damages.

During the trial, the Court took pains to explain to the jury what questions were and were not before it. The principal ground rules, which the Court repeated frequently, included the following:

At the close of the evidence, the Court prepared a simple Verdict Form that framed the questions the jury was asked to decide. After deliberating, the jury found that each of the accused Ameritox ads communicated a literally false message.24

Using the advisory verdict as one source of information, the Court independently decided as a matter of law that the challenged advertisements were, in fact, literally false as alleged.

The Court held that the "Booth Backdrop Display," the "Lifetree Information Sheet," and the "Can You Tell ..." brochure were literally false because they unequivocally claimed that Rx Guardian could "tell," "verify," or "determine" whether patients were taking their pain medications in the prescribed dosages.

The Court also held that the "Rx Guardian CD Fact Sheet" was literally false because of its description of the Marshfield cohort patients as "known adherent." A reasonable doctor reading the ad would understand that nothing in medicine is ever known with 100% certainty. Thus, a doctor would not expect the word "known" to mean that every conceivable doubt about the patient's adherence had been removed. "Known adherent," however, suggested that the patients had been rigorously monitored in a controlled clinical setting. Instead, the Marshfield protocol only assessed the pain patients to eliminate those who showed certain indicia of non-compliance.25

Following these rulings, two issues remained for resolution. First, to establish liability under the Lanham Act, Millennium still needed to prove that the literally false ads had caused injury. If Millennium proved injury, then the Court would consider the appropriate remedy, which might include injunctive relief, damages, or both.

The Court tabled the first issue (injury) but partially resolved the second by ruling that Millennium's case for money damages was too speculative to proceed. As the Court observed supra, monetary damages are often difficult to obtain in Lanham Act cases due to the challenge of tracing monetary losses to specific advertisements. This difficulty is compounded for a company like Millennium, that has enjoyed steady increases in market share and profitability. The Court's exclusion of Millennium's damages claim did not, however, impair its ability to seek injunctive relief against Ameritox.26

With the remainder of the case thus narrowed, the Court continued the proceedings and arranged for the parties to attend a conference with United States Magistrate Judge Stephanie Gallagher. Following negotiations that lasted long into the night, the parties agreed to a Consent Order that resolved the remaining issues.

Inter alia, the Consent Order provided that Ameritox would no longer state in promotional materials or advertisements that its services can "verify compliance," or "confirm adherence," nor would it use similarly definitive phrasing. The Consent Order also required Ameritox to refer to the patients in the Marshfield database as "clinically assessed to be adherent" rather than "known adherent."

Ameritox was also required to send to its customers and post to its website a letter from its CEO, disclosing the jury's advisory verdict and the Court's ruling that the four challenged advertisements were literally false. The letter would reiterate that "no urine drug test can definitively determine whether a patient has taken the dosage of medication prescribed," and state that pain doctors should "always use their clinical judgment in combination with all available information" in assessing prescription compliance. The parties agreed that the final language of the letter would be subject to pre-approval by Judge Gallagher.

The next day, the Court approved the Consent Order, dismissed the jury, and thanked Judge Gallagher for midwifing the Consent Order. The Court also cautioned the parties that it had no intention of refereeing the advertising war that would likely follow the Order's publication. This proved a vain hope. Hostilities resumed within hours. New suits were filed demanding jury trials and seeking injunctive relief and damages. As mentioned supra, this Memorandum moots the disputes by providing a neutral account of the earlier litigation. The Court will, therefore, by separate order, dismiss all pending cases with prejudice, with each side to bear its own costs.27

FINAL ORDER OF DISMISSAL

Before the Court are matters involving Lanham Act false advertising allegations by Millennium Laboratories, Inc. and Ameritox, Ltd. Upon consideration, it is hereby:

ORDERED that the complaints originally filed under Civil Action Nos. 1:12-cv-01753 and 1:12-cv-01797, including any and all claims and counterclaims, are DIMISSED WITH PREJUDICE, with each side to bear its own costs and attorneys' fees; and

The Clerk shall CLOSE the Consolidated Civil Action No. 1:10-cv-03327.

This final adjudication on the merits is DONE and ORDERED in Chambers this 18th day of January, 2013.