ORDER ADOPTING REPORT AND RECOMMENDATION
ORLANDO L. GARCIA, District Judge.
On this date came to be considered the Report and Recommendation (docket no. 99) of United States Magistrate Judge Pamela Mathy, in which she recommends the Court DENY Defendant's Motion for Partial Summary Judgment Regarding Plaintiff's False Advertising and Unfair Competition Claims Under the Lanham Act and Common Law Unfair Competition Claim (docket no. 79).
Defendant filed objections thereto (docket no. 101). When a party objects to a Magistrate Judge's Report and Recommendation, the Court must make a de novo determination of those portions of the report or proposed findings or recommendations to which objection is made. Kreimerman v. Casa Veerkamp, S.A. de C.V., 22 F.3d 634, 646 (5th Cir.1994); 28 U.S.C. § 636(b)(1); FED. R. CIV. P. 72(b). After conducting an independent review of the entire record, a de novo review of the matters raised by Defendant's objections, and the applicable law, this Court concludes the Magistrate Judge's Report and Recommendations should be fully accepted.
Therefore, having considered all of the papers filed in this case, the Magistrate Judge's Report and Recommendation, and the Parties' objections to the report, it is ORDERED the United States Magistrate Judge's Report and Recommendation is ACCEPTED pursuant to 28 U.S.C. § 636(b)(1). Therefore, it is ORDERED that Defendant's Motion for Partial Summary Judgment on Plaintiff's False Advertising and Unfair Competition Claims (docket no. 79) is DENIED.
It is so ORDERED.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE1
PAMELA A. MATHY, United States Magistrate Judge.
Pursuant to the order of referral in the above-styled and numbered cause of action to the undersigned United States Magistrate Judge2 and consistent with the authority vested in United States Magistrate Judges under the provisions of 28 U.S.C. § 636(b)(1)(B) and Rule 1(d) of the Local Rules for the Assignment of Duties to United States Magistrate Judges in the Western District of Texas, the following report is submitted for your review and consideration regarding defendant's motion for partial summary judgment as to plaintiff's false advertising and unfair competition claims, filed on February 7, 2014,3 and related submissions.
TABLE OF CONTENTS
I. Jurisdiction
II. Summary of Procedural History and Claims
III. Issue
IV. Standards
A. Summary Judgment
B. False Advertising and Unfair Competition under the Lanham Act and
Common Law Unfair Competition
V. Factual Background
VI. Summary of Arguments
A. Virtus' Motion
B. Mission's Response
C. Virtus' Reply
VII. Discussion
VIII. Recommendation
IX. Instructions for Service and Notice of Right to Object/Appeal
I. JURISDICTION
Plaintiff asserts claims for patent infringement under the laws of the United States, false advertising and unfair competition under the Lanham Act, and common law unfair competition, invoking jurisdiction under 15 U.S.C. §§ 1116 and 1121, and 28 U.S.C. §§ 1331, 1338 and 1367.
II. SUMMARY OF PROCEDURAL HISTORY and CLAIMS
Plaintiff Mission Pharmacal Company ("Mission") initiated this suit on March 7, 2013, when it filed its four-page original complaint asserting a single claim of patent infringement under the laws of the United States against defendant Virtus Pharmaceuticals, LLC ("Virtus").4 More specifically, Mission's original complaint alleged that Mission is the owner as assignee of United States Patent No. 6,521,247 ("the '247 patent"), that issued on February 18, 2003, which
claims, among other things, a nutritional supplement containing both a slowly dissolving and a rapidly dissolving iron compound, a method of alleviating iron deficiency with the dual iron nutritional supplement, and a method of making the dual iron nutritional supplement.5
Mission alleged that it sells CitraNatal® prescription prenatal supplements covered by the '247 patent and it understands Virtus manufactures, imports, sells, offers to sell, and induces others to sell, offer to sell, and use certain prenatal supplements including Natalvirt CA and Natalvirt 90 DHA whose formulation, use, and method of making are covered by claims of the '247 patent.6 As relief, Mission sought the award of a permanent injunction, actual damages not less than a reasonable royalty, pre- and post-judgment interest, attorneys' fees, and such other relief as may be appropriate.7 Mission demanded a trial by jury.8
On March 27, 2013, Virtus filed its answer to the original complaint that included affirmative defenses and a counterclaim seeking a declaratory judgment of noninfringement.9 On April 17, 2013, Mission filed its answer to Virtus' counterclaim.10
On May 14, 2013, the parties submitted a "Discovery Plan with Proposed Scheduling Order."11 On June 5, 2013, the Court entered its initial scheduling order that essentially tracked the format of the proposed order submitted by the parties.12 Among other deadlines, the order established a discovery cut-off date of October 10, 2013, a deadline for dispositive motions of October 24, 2013, a pretrial conference date of January 30, 2014, with jury selection and trial to begin on February 3, 2014.13 On July 8, 2013, the Court entered a "Confidentiality and Protective Order."14
On July 1, 2013, Virtus filed an opposed motion to amend the scheduling order to provide, in sum, for certain "patent-specific deadlines" and a Markman hearing.15 Mission opposed the request.16 On September 4, 2013, the Court entered an order denying the motion to amend the scheduling order.17 On July 29, 2013, Virtus filed an amended answer and counterclaim.18 In the pleading, Virtus seeks declarations for both noninfringement and invalidity.19
Also on July 29, 2013, Mission filed its first amended complaint, asserting four claims in four separate counts: patent infringement, false advertising in violation of the Lanham Act, unfair competition in violation of the Lanham Act, and common law unfair competition.20 More specifically, Mission alleges that it "manufactures and sells" prescription prenatal and iron supplements, CitraNatal Assure, CitraNatal 90 DHA, and Ferralet 90, each covered by the '247 patent (collectively "Mission Products"),21 and Virtus is "engaged in the manufacture, distribution, marketing, sale and/or offer for sale in this district and elsewhere of alleged generic versions of... [the Mission Products] — which Virtus calls Natalvirt CA, Natalvirt 90 DHA, and Natalvirt FLT" (the "Virtus Products"), each of which "are covered by the claims of the '247 Patent."22 Mission alleges that "[t]hrough at least their labels, product inserts, and other marketing materials, Virtus has represented that Natalvirt CA, Natalvirt 90 DHA, and Natalvirt FLT use the same ingredients in the same amounts as" the Mission Products23 and "contain the same iron blend (carbonyl iron, ferrous gluconate)" as the Mission Products.24 Mission alleges Virtus markets the Virtus Products "as generic equivalents to and substitutes for" the Mission Products,25 "has had these knockoff products linked to" the Mission Products, and "has made no effort to differentiate" the Virtus Products from the Mission Products.26 Mission asserts the Virtus Products are not generic equivalents to, or substitutes for, the Mission Products because they are not bioequivalents.27
Further, Mission alleges Virtus has "falsely told national pharmaceutical databases that" the Virtus Products "use the ingredient ferrous gluconate and are therefore pharmaceutically equivalent."28 Mission asserts Virtus'"advertisements and promotional claims" about the Virtus Products "are literally and/or impliedly false and misleading" because the Virtus Products "are not `generic,' equivalent or substitutable for" the Mission Products "unless they have been demonstrated to deliver their active ingredients to patients at the same rate and in the same amount as" the Mission Products.29 Mission alleges Virtus intentionally and knowingly incorporated into the Virtus Products "a ferrous gluconate formulated to delay the absorption of the iron compound" instead of the rapid-release compound found in the Mission Products, which is "likely to cause confusion, mistake or deception about the nature, characteristics and qualities of their knock-off solution in comparison, connection, or association with the Mission Products."30 Specifically, Mission asserts the Virtus Products "cannot deliver iron to the patient at the same rate" as Mission Products because "[u]nlike the Mission Products, which contain[] a fast dissolving ferrous gluconate that absorbs quickly into the body," the Virtus Products "use[] a ferrous gluconate formulated to delay its absorption."31
As relief, Mission seeks, in sum, preliminary and permanent injunctive relief to prevent the manufacture, distribution, use, sale or advertising of the Virtus Products or representing the Virtus Products are pharmaceutically equivalent to the Mission Products or can be freely interchanged with or substituted for the Mission Products.32 Mission seeks corrective action to (a) require Virtus to remove information linking the Virtus Products to the Mission Products "in any drug information databases and/or pricing systems in the United States;" (b) include in any advertisement or promotion of the Virtus Products
a notice in location and typeface as prominent as the comparison itself, that `[the Virtus Product] is not equivalent to [the Mission Pharmacal product]. Therefore, the substitution of this product for [the Mission Pharmacal product] may violate state law,
and (c) take further "corrective action to correct any erroneous impression persons may have derived concerning the nature, characteristics or qualities" of the Virtus products, "including without limitation the placement of corrective advertising to prevent the inducement of others from substituting... [the Virtus Products] ... for prescriptions of ... [the Mission Products]...."33 Mission also seeks actual damages not less than a reasonably royalty, treble damages based on a finding of willful infringement, actual and consequential damages and any profits from advertising and marketing the Virtus Products; an award of three times the actual damages based on an exceptional case finding; pre and post-judgment interest; attorneys' fees; and costs.34
On August 14, 2013, Virtus filed its answer to the first amended complaint.35 Virtus' answer included four affirmative defenses36 and pleaded two counterclaims, one for a declaration of non-infringement of the '247 patent and a second for a declaration the '247 patent is invalid.37 On August 15, 2013, Mission filed its answer to Virtus' amended counterclaims.38
On September 25, 2013, the parties filed a joint motion to stay the case and amend the scheduling order, in which the parties informed the Court they
conducted in-person mediation with Eric Galton on September 23, 2013, and need additional time to conduct settlement negotiations resulting from the mediation.
The parties respectfully request that the Court stay this case for thirty (30) days and extend certain deadlines so that the parties may focus their efforts on settlement and avoid unnecessary expense.39
On September 27, 2013, the Court granted the motion and extended the discovery deadline to December 16, 2013, and the dispositive motions deadline to January 17, 2014.40 On October 29, 2013, the Court granted the parties' second motion to stay the case, extending the discovery deadline to January 10, 2014, and the dispositive motions deadline to February 7, 2014.41 On December 2, 2013, the Court denied defendant's motion for a further extension of the discovery period and lifted the stay implemented through the September 27, 2013 order.42
On December 20, 2013, Virtus filed its motion for partial summary judgment of noninfringement of the '247 patent, supported by an appendix of documents and evidence.43 On January 6, 2013, Mission filed its cross-motion for partial summary judgment of infringement, supported by twelve exhibits,44 and a motion to file its response to Virtus' motion for partial summary judgment under seal.45 On January 7, 2014, the District Judge referred the case to the undersigned for pretrial management.46 Thereafter, the parties submitted further briefing on their cross-motions regarding infringement and briefing closed on or about February 3, 2014.47 On February 26, 2014, the undersigned entered a report and recommendation on defendant's motion for partial summary judgment for non-infringement of the '247 patent and on plaintiff's motion for partial summary judgment for infringement.48 On March 28, 2014, the District Judge accepted the recommendations in the report.49
On February 7, 2014, Virtus filed a motion for partial summary judgment as to plaintiff's false advertising and unfair competition claims, supported by an appendix of documents and evidence.50 The same day, Virtus filed an unopposed motion to seal certain exhibits to its motion,51 which was granted on February 10, 2014,52 and the exhibits were filed under seal that same day.53 On February 21, 2014, Mission filed a response to Virtus's motion for partial summary judgment of false advertising and unfair competition.54 The same day, Mission filed a motion to file certain supporting exhibits under seal,55 which was granted on February 24, 2014,56 and the exhibits were filed under seals.57 On March 3, 2014, Virtus filed a reply in support of its motion.58 The same day, Virtus filed an unopposed motion to seal a supporting exhibit,59 which was granted on March 4, 2014,60 and the exhibit was filed under seal.61
III. ISSUE
Whether Virtus' motion for partial summary judgment on Mission's claims of false advertising under the Lanham Act, unfair competition under the Lanham Act, and common law unfair competition should be granted or denied.
IV. STANDARDS
A. Summary Judgment
The standard to be applied in deciding a motion for summary judgment is set forth in Rule 56 of the Federal Rules of Civil Procedure, which provides in pertinent part as follows:
The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.62
Mere allegations of a factual dispute between the parties will not defeat an otherwise proper motion for summary judgment. Rule 56 requires that there be no genuine issue of material fact.63 A fact is material if it might affect the outcome of the lawsuit under the governing law.64 A dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.65 Therefore, summary judgment is proper if, under governing laws, there is only one reasonable conclusion as to the verdict; if reasonable finders of fact could resolve a factual issue in favor of either party, summary judgment should not be granted.66
The movant on a summary judgment motion bears the initial burden of providing the court with a legal basis for its motion and identifying those portions of the record which it alleges demonstrate the absence of a genuine issue of material fact.67 The burden then shifts to the party opposing the motion to present affirmative evidence to defeat a properly supported motion for summary judgment.68 All facts and inferences drawn from those facts must be viewed in the light favorable to the party resisting the motion for summary judgment.69 "The court need consider only the cited materials, but it may consider other materials in the record."70 Summary judgment motions permit the Court to resolve a lawsuit without the necessity of a trial if there is no genuine dispute as to any material facts and the moving party is entitled to judgment as a matter of law.71 "A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence."72
If "the burden of proof at trial lies with the nonmoving party, the movant may satisfy its initial burden by showing — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case."73 The movant "must demonstrate the absence of a genuine issue of material fact, but does not have "to negate the elements of the nonmovant's case.""74 "If the moving party fails to meet its initial burden, the motion for summary judgment must be denied, regardless of the nonmovant's response."75 On the other hand, if the movant meets its burden and the non-movant cannot provide some evidence to support its claim, summary judgment is appropriate.76 The Court may enter an order that does not grant all the relief requested by the motion, but states that "any material fact — including an item of damages or other relief — that is not genuinely in dispute and treating the fact as established in the case."77
If the nonmovant cannot adequately defend against a motion for summary judgment, the remedy is a motion for relief under Rule 56(d), which provides:
(d) When Facts Are Unavailable to the Nonmovant. If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may:
(1) defer considering the motion or deny it;
(2) allow time to obtain affidavits or declarations or to take discovery; or
(3) issue any other appropriate order.78
Discovery motions under Rule 56(d) are "broadly favored and should be liberally granted because the rule is designed to safeguard non-moving parties from summary judgment motions that they cannot adequately oppose."79 To be entitled to a continuance of a summary judgment proceeding to obtain further discovery prior to a ruling on a motion for summary judgment, the party opposing the motion must demonstrate how additional time and discovery will enable the party to rebut the movant's allegations there are no genuine issue of material fact.80
B. False Advertising and Unfair Competition under the Lanham Act and Common Law Unfair Competition
Section 43(a) of the Lanham Act provides in part:
Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which —
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such an act.81
To prove a claim of false advertising under the Lanham Act, a plaintiff must establish the following elements:
(1) a false or misleading statement of fact about a product;
(2) a statement which actually deceived or had the capacity to deceive a substantial segment of potential consumers;
(3) a material deception in that it was likely to influence a consumer's purchasing decision;
(4) the product was in interstate commerce; and
(5) plaintiff had been or was likely to have been injured as a result of the statement in issue.82
Failure to establish any element is fatal to a plaintiff's claim.83 When the statements of fact at issue are literally false, plaintiff is not required to introduce evidence on the issue of the impact the statements had on consumers and the Court will assume the statements actually misled consumers.84 If the statements are misleading, but either ambiguous or literally true, there is no such presumption, and plaintiff must present evidence of actual consumer deception.85 When seeking only injunctive relief, plaintiff must show that the statements have a tendency to deceive consumers by producing evidence that at least some consumers were confused.86 When seeking to recover money damages for a misleading advertisement that is not literally false, plaintiff must prove actual deception,87 which requires evidence that a substantial number of consumers were actually mislead by the advertisements.88
Unfair competition claims under the Lanham Act are governed by the same standard as those for trademark infringement, e.g., the likelihood of confusion.89 Therefore, to prove a claim of unfair competition under the Lanham Act, a plaintiff must demonstrate that there is a likelihood of confusion.90 "A `likelihood of confusion' means that confusion is not just possible, but probable."91
Unfair competition claims under Texas law are analyzed under the same standard as unfair competition claims under the Lanham Act.92 "[A]bsent an argument that there are differences between the federal and state versions of unfair competition claims, courts in the Fifth Circuit analyze these claims together."93 "Unfair competition under Texas law `is the umbrella for all statutory and nonstatutory causes of action arising out of business conduct which is contrary to honest practice in industrial or commercial matters.'"94 Plaintiff must show an illegal act by defendant which interfered with plaintiffs ability to conduct its business.95
V. FACTUAL BACKGROUND
Except as may be noted, the parties do not appear to contest the following facts, which are set forth to provide a background for the discussion of the motion addressed in this report:
Mission now owns the '247 patent which covers a nutritional supplement comprising an "iron compound selected to be slowly dissolving" and an "iron compound selected to be rapidly dissolving." Mission sells prescription prenatal dietary supplements marked by the '247 patent under the brand names CitraNatal Assure and CitraNatal 90 DHA and an iron supplement under the brand name Ferralet 90.96 The Mission Products contain folic acid, carbonyl iron, and ferrous gluconate.97
The '247 patent was filed on March 31, 2000, and issued on February 18, 2003. Mission is the assignee of the '247 patent. During prosecution of the '247 patent, the applicant amended various claims, including claim 1, at least twice. After the patent issued, it was reexamined and an ex parte reexamination certificate issued on July 12, 2011, which further amended the claims, including claims 1 and 17. As reexamined, independent claim 1 of the '247 patent requires the combination of (a) folic acid, (b) an iron compound selected to be slowly dissolving in the form of carbonyl iron,98 and (c) "an iron compound selected to be rapidly dissolving." Dependent claim 17 requires the third ingredient to be ferrous gluconate or a few other expressly identified iron compounds.99
Virtus developed "design-around" versions of the Mission Products100 sold under the names Natalvirt CA (allegedly equivalent to CitraNatal Assure), Natalvirt 90 DHA (allegedly equivalent to CitraNatal 90 DHA), and Natalvirt FLT (allegedly equivalent to Ferralet 90).101 As the Mission Products, the Virtus Products contain folic acid, carbonyl iron, and ferrous gluconate.102 Mission and Virtus also agree that the Virtus Products contain ferrous gluconate, a compound identified in the '247 patent as a rapidly dissolving iron compound.103 Mission and Virtus further agree that the Virtus Products "encapsulate" the ferrous gluconate they contain in "slow dissolving matrix," "use[] a formulated version of ferrous gluconate that captures the iron compound in a sustained release matrix," and "use[] a ferrous gluconate formulated for a delayed release."104 The parties disagree as to whether the Virtus Products infringe the '247 Patent, with Virtus arguing that the Virtus Products do not infringe based, in sum and part, on Virtus' intentional use of a formulated use of a version of ferrous gluconate that captures the iron compound in a sustained release matrix and because the ferrous gluconate in the Virtus Products is encapsulated in a slow dissolving matrix and is formulated for a delayed release, demonstrating that the Virtus Products are unlike the Mission Products which contain a fast-dissolving ferrous gluconate.105
Both Mission and Virtus agree that the Mission Products and the Virtus Products are regulated under the Food and Drug and Cosmetic Act ("FDCA").106 The parties agree that prescription prenatal vitamins are not subject to the FDA's premarket approval requirements that apply to "new drugs" and "approved products" and are not listed in the FDA's "Orange Book" that lists all FDA approved drugs that the FDA has determined can be marketed and sold as generic equivalent drugs.107 Mission contends, and Virtus appears to concede, that both the Mission Products and the Virtus Products are in interstate commerce.108 Mission and Virtus further agree that the FDCA comprehensively regulates labels for food and drug products, to include the labels of the Mission Products and the Virtus Products, but disagree as to the source of the applicable regulations. Mission argues, in sum, the Mission and Virtus Products are regulated as drugs, not as prescription dietary supplements;109 Virtus argues, in sum, the Mission and Virtus Products are regulated as prescription dietary supplements, not as drugs.110
VI. SUMMARY OF ARGUMENTS
A. Virtus' Motion
Virtus seeks partial summary judgment on three causes of action alleged in Mission's first amended complaint, that is, Mission's claim of false advertising in violation of the Lanham Act (count two), unfair competition under the Lanham Act (count three), and common law unfair competition (count four).111 At the threshold, Virtus argues that both the Mission Products and the Virtus Products are dietary supplements regulated under the FDCA, as amended by DSHEA.112 More specifically, Virtus argues the FDCA requires "five statements" to be made on the label for a regulated dietary supplement.113 Virtus argues it is entitled to entry of judgment as a matter of law on the three claims at issue based on, in sum and in part, the truth of the statements on the labels of the Virtus Products. Virtus submits an appendix with eleven exhibits in support of its motion.114
In support, Virtus presents five main arguments. First, Virtus argues the labels on the Virtus Products are not "literally false," because the labels "accurately list the ingredients and their respective amounts."115 Specifically, Virtus asserts
Virtus's labels truthfully comply with DSHEA and provide 1) the statement of identity (name of the dietary supplement), 2) the net quantity of contents statement (amount of the dietary supplement), 3) the nutrition labeling, 4) the ingredient list, and 5) the name and place of business of the manufacturer, packer, or distributor.116
Virtus asserts there is no regulatory requirement for labeling the ferrous gluconate in the Virtus Products as sustained release, therefore "the failure to make the affirmative statement does not constitute a false statement."117
Second, Virtus argues Mission's contention that the "fast dissolution of ferrous gluconate in the body" provides a "pharmaceutical benefit" is unsubstantiated.118 Virtus also argues "that Mission has been able to market rapid iron release as a benefit, does not make it scientifically supportable, much less make the failure to advertise its absence an improper action by Virtus."119
Third, Virtus argues "[t]he Virtus Products labels do not make any representation to any consumer that the Virtus Products are equivalent to" the Mission Products.120 Virtus further argues "[e]ven if Virtus did represent that the Virtus Products are similar to Mission's Products, that would not be a false representation because they do have the same active ingredients in the same amounts."121
Fourth, Virtus argues its products' labels are not implicitly false, because, in sum, Mission has presented no proof of actual deception.122 Specifically, Virtus contends "Mission has introduced no evidence that the dissolution rate of iron in a prenatal vitamin is material to a consumer,"123 nor has Mission "produced any evidence that ... [the relevant consumers]... are being confused or deceived by any Virtus labels, advertisement, or other representation."124
Fifth, Virtus argues "it is impossible for Mission to recover damages for these claims" because "there is no evidence that Virtus's labels caused any consumer to be confused or deceived."125 Virtus relies on "Mission's Damages report, which devoted only two of its 60 pages to the false advertising and unfair competition claims" and stated, in part, "[i]t is not possible to determine if there are patient complaints resulting from the lack of immediate relief provided by the ferrous gluconate in the Accused Products and if[,] as a result, there are decreases in doctors' prescriptions writing habits for ... [Mission's Products] ... and/or any other Mission product."126
B. Mission's Response
In response, at the threshold, Mission contends, contrary to Virtus' contention that the Virtus Products are dietary supplements subject to the DSHEA amendments to the FDCA, that even though prescription prenatal vitamins, such as the Mission Products and the Virtus Products, are exempt from the FDA's pre-market approval requirements that apply to "new drugs" or "approved drugs," they are subject to FDA regulations as drugs.127 Therefore, Mission argues, for Virtus to represent that the Virtus Products (a) are "generic equivalents" to the Mission Products or (b) can be substituted for the Mission Products, Virtus must satisfy the FDA's definition of "generic" and the Virtus Products "must be both pharmaceutically equivalent and bioequivalent" to the Mission Products.128 Mission argues there is "genuine issue of material fact" and "conflicting evidence regarding the truth or falsity of Virtus's generic drug advertising" that "preclude[s] summary judgment."129 Mission submits ten exhibits in support of its response.130
Mission sets out four main arguments in support. Mission argues each of its three causes of action at issue are premised on its allegation that Virtus' assertions the Virtus Products are generic to the Mission Products are, in sum, false and misleading.131 First, Mission argues both the Mission Products and the Virtus Products are drugs within the meaning of the FDCA, not dietary supplements, are "subject to the FDA's regulations pertaining to drugs," and Virtus'"citations to regulations related to dietary supplements and arguments related to Virtus's compliance with such regulations are inapposite to its Motion."132 Mission argues "the inclusion of folic acid in prescription prenatal vitamins renders the entire product a drug" within the meaning of the FDCA.133 As further support, Mission notes that both the Mission Products and the Virtus Products are assigned National Drug Code ("NDC") numbers and "the Natalvirt products [is listed] in [the FDA's] National Drug Code Directory."134
Second, Mission argues that, applying the FDA's definition of "generic," the Virtus Products are not the generic equivalents of the Mission Products because the products are not pharmaceutically equivalent nor bioequivalent.135 Mission argues the FDA's definition of "generic" should be used in connection with all drugs, regardless of their regulatory status.136 In support, Mission cites this Court's decision in Healthpoint, Ltd. v. Stratus Pharmaceuticals, Inc., in which the Court granted a preliminary injunction after finding plaintiff had demonstrated a likelihood of success in proving defendant falsely advertised a non-equivalent unapproved drug as a "generic."137 Mission contends the products are not pharmaceutically equivalent and bioequivalent because, in sum, "Mission's products have a dual-iron formulation that provides patients with a rapid and a slow release of iron," but "by Virtus's own admission, Virtus's products `den[y] the patient of a fast dissolving gluconate in the body' and are therefore not bioequivalent."138 Mission further argues:
Virtus freely admits that "Virtus intentionally uses a ferrous gluconate formulated for a delayed release," "Virtus denies the patient of a fast dissolving gluconate in the body," and "[t]he Accused Products are unlike Mission Products, which contain a fast dissolving ferrous gluconate." See Virtus's Motion for Partial Summary Judgment, Dkt. 70, 3-4 (Statement of Undisputed Facts). Given that Virtus acknowledges that its products provide a significant difference in the rate of release of the active ingredient iron Virtus essentially concedes that its products are not "generics" of Mission's products.139
Third, Mission emphasizes that "Mission does not contest (and has never argued) that there is anything false about Virtus's labels;" rather, "Mission's false advertising claims are premised on the fact that Virtus markets and promotes its products as generics of Mission's, which is itself a literally false statement."140 Mission notes deposition testimony that shows Virtus does not promote its products to physicians, who write prescriptions, but to wholesale distributors and retail pharmacy chains to promote a pharmacist to fill a prescription written for a Mission Product with a Virtus Product instead, as a generic equivalent.141 Virtus' website states Virtus is "focused on the development of generic prescription products," and "often sends its customers a form called a form produced by the Healthcare Distribution Management Association" ("HDMA") in which Virtus describes the Virtus Products — Natalvirt CA Combo, Natalvirt 90 DHA Combo, and Natalvirt FLT — as "generic" for Mission's Products — CitraNatal Assure, CitraNatal 90 DHA, and Ferralet 90 NF, respectively.142 The HDMA form lists the Mission Products as the "Brand Name Equivalent" and the Virtus Products as "Generic Name for Brand."143 Mission also argues Virtus has submitted new product information forms to the Red Book®, a database concerning prescription products, in which it indicates the Virtus Products are "generic" for the Mission Products.144 Mission argues Virtus makes other statements that "necessarily imply that its Natalvirt products are equivalent to, and substitutable for, Mission's CitraNatal products," including a "chart that lists its product, under a column heading "Virtus Name," right next to Mission's product, under a column heading "Brand Name.""145
Fourth, Mission argues "[b]ecause Virtus's statements that its products are generics of Mission's products are literally false, Mission need not introduce evidence that the statements actually misled consumers."146 Nevertheless, "[a]lthough evidence of actual deception is not required," Mission argues "Virtus's customers have actually been misled" because "Virtus has actually made sales of Natalvirt products," citing as evidence the fact "that Virtus has actually made sales of Natalvirt products."147 Namely, because Virtus communicates with distributors and retailers about selling to them the Virtus Products, "it would be reasonable for a jury to conclude that Virtus's statements actually mislead Virtus's [c]ustomers into believing that the Natalvirt products are equivalent to and substitutable for Mission's."148 Stated differently, Mission argues "every sale of a Virtus Natalvirt product deprives Mission of a sale."149
C. Virtus' Reply
Virtus' reply presents further arguments in support of its position that the Mission Products and Virtus Products at issue are each "dietary supplements, that Virtus complied with all regulations concerning dietary supplement labeling, and that none of its advertising is literally false."150 Virtus presents eight main arguments.
First, Virtus argues "the words `generic' and `brand' have different meanings depending on the context (commercial v. regulatory)" as do the terms "drug" and "generic" which "are used loosely and do not mean the same thing in one context as another context."151 That Virtus completed HDMA forms that identify the Virtus Products as "generic name for brand" and link its products with the Mission Products identified as "brand name equivalents," "does not mean the product has an NDA and the `Generic Name For Brand' has an [Abbreviated New Drug Application ("ANDA")]" and "the FDA's regulatory framework does not become operative depending on how products are listed on this form."152 Virtus notes that it makes clear to its customers that the Virtus Products are not Orange Book products, the "USC codes" identify them as multivitamins, and "[t]herefore, Virtus does not hold these products out to be generics of approved drugs."153
Second, Virtus argues the Mission Products and Virtus Products "are clearly defined as dietary supplements and not drugs under Title 21[,] Food and Drugs Chapter 9, Federal Food, Drug, and Cosmetic Act," referencing the definition of "dietary supplement" in the FDCA.154 Virtus also notes that the FDCA's definition of drug provides that a dietary supplement "is not a drug solely because the label or the labeling contains such a claim."155 Without further explanation, Virtus concludes "[t]he FDCA clearly defines the Relevant Products as dietary supplements and clearly excludes them from being defined as a drug" such that the Virtus Products "are to be governed by regulations under dietary supplements and not Orange Book drugs."156 Virtus notes that claim 1 of the '247 patent addresses a "nutritional supplement," not a drug.157
Third, Virtus asserts the Mission and Virtus Products "lack required drug claims," and "are simply indicated as dietary supplements for `improving the nutritional status of women.'"158 Virtus emphasizes that the FDA's letter to Mr. Allera, submitted as an exhibit to Mission's response, provides "that combining a drug product (having drug/efficacy claim — e.g., reducing neural tube defect risks) with vitamins still makes the drug a drug that requires FDA approval []," but it does not stand "for the proposition that folic acid (Vitamin B9) is always a drug or products with folic acid are always Orange Book drugs"159 and "was not stating that all prenatal vitamins with 1 mg of folic acid are prescription (Orange Book) drugs."160 Virtus argues Mission's arguments that "all generic drugs, including unapproved drugs, must be bioequivalent to be considered `generic,'" "cannot be supported" because the Eleventh Circuit withdrew its opinion in Solvay, Solvay was distinguishable in any event because it involved drug products, not nutritional supplements," and neither the Mission Products or the Virtus Products "were required to go through ... an approval process" with the FDA.161
Fourth, Virtus argues "a product that requires a prescription does not make it a drug."162 Virtus argues the Virtus and Mission Products "are prescription products, not because they are drugs, but because these products contain more than 1 mg of folate."163
Fifth, Virtus argues "Mission tests its products as dietary supplements."164 Specifically, Mission uses a "[m]icrobiological test method according to USP 2021, USP 2022, and USP 2040, which are methods for dietary supplements," not the "microbial tests for pharmaceutical drug products [which] are USP method 61 and 62."165
Sixth, Virtus argues "Mission's labels do not comply with labeling rules for approved drugs," "lack the required `side effects statement,'" and "[a]pproved drug labeling is HIGHLY regulated."166 Thus, Virtus appears to argue the labels for the Mission Products support the conclusion those products are not approved drugs.
Seventh, Virtus argues "a product with a... [NDC] ... is not necessarily a drug," noting that "[t]he FDA allows Unapproved Products to receive NDCs."167 Thus, Virtus appears to argue that simply because the Mission and Virtus Products have NDCs does not mean the products are new drugs or approved drugs.168
Eighth, Virtus argues "bioavailability equivalence is only required for ANDAs" and NDAs, but the Mission and Virtus Products are neither.169 Virtus acknowledges that, under Axcan, "the proper market definition" of "generic" can support a false advertising claim but asserts, with no supporting authority, that as "the products at issue are dietary supplements and bioequivalence is of no relevance, there is no `proper market definition' of `generic.'"170 Virtus argues:
Since Mission cannot demonstrate that Virtus's advertising is literally false, it must prove implict[] falsity under some industry, market standard of bioequivalence (not the FDA's standard for Orange Book drugs). However, implicitly false advertising requires evidence of actual confusion — and evidence of a different industry/market standard of bioequivalence.
In conclusion, Virtus argues "Mission cannot support a claim for literal falsity, and cannot meet the requirements of implicit falsity."171 Therefore, Virtus asserts Mission's "false advertising claims fail as a matter of law."172 Virtus further argues if the "federal false advertising claims fail, then the related unfair competition claims must be dismissed also as Mission failed entirely to even present a separate argument supporting unfair competition under the Lanham Act and Texas law."173 Virtus submits seven exhibits in support.174
VII. DISCUSSION
Virtus moves for partial summary judgment on Mission's Lanham Act false advertising and unfair competition claims and common law unfair competition claim.175 Mission's allegations in support of its claims of common law and Lanham Act unfair competition are the same as those alleged for false advertising in violation of the Lanham Act.176 Virtus' motion expressly addresses only the first element of a claim for false advertising under the Lanham Act — whether Virtus has made literally or implicitly false or misleading statements of fact about the Virtus Products, and specifically, whether Virtus has made false or misleading statements of fact that the Virtus Products are generic equivalents to the Mission Products.177
Prior to addressing Virtus' central arguments in support of its request for partial summary judgment, as a threshold matter, the Court notes Virtus has not cited, expressly applied, or distinguished this Court's prior rulings addressing false advertising claims regarding unapproved drugs. In Healthpoint v. Stratus Pharmaceuticals, the Court addressed claims based on false representations defendant's products were "generic" to plaintiff's and could be substituted for prescriptions written for plaintiff's products.178 The Court noted that the question of whether two products are generic is best left to the FDA, but "a drug manufacturer making a claim that a non-approved drug is `generic' to or a `generic equivalent of' another nonapproved drug must use the FDA's definition of `generic' and, when such a representation is challenged, as here, through a Lanham Act false advertising claim with specific allegations that the use of the terms is false and unsubstantiated, must defend and be prepared to demonstrate why it stated that its drug is a `generic equivalent,' that is, is `identical or bioequivalent to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.'"179 The Court explained:
The primary jurisdiction of the FDA would not appear to bar a court from deciding Healthpoint's false advertising claim that Stratus has made false claims of "generic equivalence" or "bioequivalence" and has allegedly falsely represented that Kovia and Ziox have the "same ingredients" or the "same active ingredients." There is a distinction, on the one hand, between respecting the FDA's primary jurisdiction to determine in the first instance whether a drug is lawfully marketed, "generic," "bioequivalent," "therapeutically equivalent," "pharmaceutically equivalent" and, on the other hand, a Lanham Act claim that a false statement has been made about a product. Even though the FDA has not required Stratus to demonstrate the equivalence of Kovia to Accuzyme or the equivalence of Ziox to Panafil White, Stratus is not free to make false or misleading statements about its product. To hold to the contrary would mean that an administrative scheme could eviscerate a Lanham Act or related common law claim over which the agency has no jurisdiction. For example, if Stratus represents that its two ointments are "bioequivalent," "generically equivalent," "equivalent" or have "the same active ingredients" or "the same ingredients" or "the same active ingredients in the same amounts," consumers and competitors have a right to expect that such. representations have factual support and the Lanham Act provides a vehicle to enforce that expectation.180
The Court stressed that Healthpoint was not alleging that Stratus had falsely implied FDA approval, but instead the claims were "of false or misleading comparisons between two specific products in the context of comparative advertising and promotion relating to whether one drug can be substituted for another under state law."181 Later in the case, at the summary judgment stage, the Court concluded — "[s]etting aside the questions of whether under the FDA standards, Kovia and Ziox are generics for Accuzyme and Panafil, questions for the FDA and not for the Court" — it was a "question[] of fact" whether defendant had marketed its products in such a way to suggest they were interchangeable with plaintiff's products but had no evidence to show they were.182
In Healthpoint, Ltd. v. Ethex Corporation, the Court addressed whether Ethex had falsely advertised its product as an alternative to plaintiff's product, that is, had made false and misleading statements that its ointment was "a generic form of, the same as, a substitute for, an alternative to, a therapeutic equivalent to or substitute for" plaintiff's ointment.183 The Court concluded that the underlying question of whether Ethezyme is a "generic" to Accuzyme is an issue "committed to the FDA" that the Court should not address,184 and, further, "the Court should not change the FDA's definitions of such related terms of art as `pharmaceutical equivalent,' `therapeutic equivalent,' `bioequivalence,' and `pharmaceutical alternative,'"185 as "[n]ew definitions of FDA terms would undercut national uniformity regarding federal laws regulating the drug market or would confuse the public and undermine confidence in the drug supply in general and generic drugs in specific."186 The Court recognized that Ethex's witnesses testified that there are "generic alternatives" that do not need to be approved by the FDA and that the term "generic" may be used "without confusion with respect to drugs that are similar but not necessarily therapeutically equivalent," but noted that it is in the FDA's interest to ensure that "only one definition of FDA terms of art, such as `therapeutically equivalent' and `generic,' is used in the context of drug approval, acceptance and use."187 The Court ultimately enjoined Ethex from including in further print advertisements comparing Ethezyme to Accuzyme language that "neither brand nor generic papain-urea compounds are subject to FDA approval or rating," because, in the context of other representations, it was misleading and inconsistent with its claim that Ethezyme is a "generic" equivalent.188 "The over-all effect [was] to create the misleading impression that Accuzyme is the `brand' and Ethezyme is a `generic substitute for Accuzyme, when it has not been determined that Ethezyme is a `generic' alternative to Accuzyme."189
Virtus argues the Virtus and Mission Products are "clearly defined as dietary supplements and not drugs under the" FDCA,190 but Virtus fails to provide any evidence, argument, or authority demonstrating the products fit any applicable definition of a dietary supplement, or countering Mission's argument that the inclusion of a prescription-level amount of folic acid renders the products drugs.191 Instead, Virtus quotes the FDCA's definition of a dietary supplement and, without analysis or attempting to distinguish the exception stated in the definition,192 summarily states "[t]he FDCA clearly defines the [Virtus Products and Mission Products] as dietary supplements and clearly excludes them from being defined as a drug."193 Virtus presents no authority or argument for why the Court must consider the Virtus Products and the Mission Products are dietary supplements, are not drugs, and cannot be both dietary supplements and drugs at the same time.
Next, Virtus argues the meaning of "generic," when used to compare an equivalent to a drug, does not apply to the Virtus Products, as they are dietary supplements, not drugs or approved drugs. But, Virtus does not provide argument or authority to support any other definition of the term "generic" when it is applied to prescription prenatal vitamins and the products at issue.194 Nor does Virtus present authority to support its apparent contention that the specific meaning of the term "generic," when used in reference to equivalents of approved drugs is not applicable to equivalents of dietary supplements.195 Again, Virtus does not attempt to distinguish case law cited by Mission, including this Court's prior precedent.196 Even if the labels of the products at issue show the "same ingredients" in the "same amounts," Virtus admits "it has not published or commissioned any studies demonstrating that the Virtus Products deliver their active ingredients to patients at the same rate and in the same amount as" the Mission Products.197
Further, Virtus contends marketing the Virtus Products as equivalent to the Mission Products "would not be a false representation because [the Virtus Products] do have the same active ingredients in the same amounts."198 Therefore, Virtus argues the labels are true, and furthermore, "Mission has introduced no evidence that the dissolution rate of iron in a prenatal vitamin is material to a consumer."199 These arguments are unavailing. First, Virtus has presented no authority to support its position that those marketing products can make false statements about a product so long as the misrepresentation is about a product characteristic not important to (some, most, or all) consumers. Second, even if the labels on the Virtus Products "do not make any representation to any consumer that the Virtus Products are equivalent to" the Mission Products,200 Virtus has presented no authority to show false or misleading claims of equivalency are not actionable under the Lanham Act or the common law.
Mission has presented competent summary judgment evidence to show Virtus has made allegedly false or misleading statements about the equivalency of the Virtus Products and the Mission Products. Mission has submitted the testimony of Virtus employee, Louis Saenz, who explains Virtus' use of HDMA forms, which are "standard form[s] that tell[] you our product name, case size, case dimensions, item size."201 Specifically, Mr. Saenz stated Virtus has marketed the respective Virtus Products as equivalent to the respective Mission Products to wholesalers, distributors, and retailers, such as "McKesson, Cardinal, ABC, Walgreens."202 Mr. Saenz verified that the HDMA form lists a "brand name product," for example, Mission's Ferralet 90, for a "brand name equivalent," for example, Virtus' Natalvirt FLT, and he sent that form to Walgreens, through Walgreens' primary wholesaler, Cardinal.203
Virtus argues that HDMA forms that identify the Virtus Products as "generic name for brand" and link its products with the Mission Products identified as "brand name" products, "does not mean the product has an NDA and the `Generic Name For Brand' has an ANDA," and further contends "the FDA's regulatory framework does not become operative depending on how products are listed on this form."204 Virtus also argues that it makes clear to its customers that the Virtus Products are not Orange Book products, the "USC codes" identify them as multivitamins;205 "[t]herefore, Virtus does not hold these products out to be generics of approved drugs."206 But, whether the Virtus Products are, in fact, equivalent to the Mission Products remains a contested issue of fact. Further, there is a genuine issue of material fact whether Virtus' representing that the Virtus Products — whether as drugs, unapproved drugs, or dietary supplements — are "brand name equivalents" to the Mission Products is a false or misleading statement of fact about the Virtus Products because Virtus has adduced no evidence of equivalence other than the identity of the corresponding product labels, has cited no authority to show the identity of the corresponding product labels is dispositive as a matter of law, and Mission contests the equivalency of the corresponding products based, in part, on Virtus' own claims about the dissolution rate of the ferrous gluconate (or other identified iron compound "selected to be rapidly dissolving") in Virtus' relevant products.
In sum, Virtus has not demonstrated there are no genuine issues of material fact that preclude entry of judgment as a matter of law on Mission's claims of false advertising under the Lanham Act, unfair competition under the Lanham Act, and common law unfair competition. Because Virtus does not provide specific argument, evidence and authority to require an analysis of Mission's Lanham Act and common law unfair competition claims that is distinct from the analysis of Mission's Lanham Act false advertising claim, for the same reasons Mission has raised a genuine issue of material fact to preclude summary judgment on its false advertising claim, there is a genuine issue of material fact to preclude entry of judgment as a matter of law on Mission's two unfair competition claims.207 There is a genuine issue of material fact whether Virtus makes false or misleading statements when it states the Virtus Products are equivalent to the Mission Products.208
VIII. RECOMMENDATION
Based on the foregoing discussion, it is RECOMMENDED that Virtus' motion for partial summary judgment as to Mission's false advertising and unfair competition claims under the Lanham Act and common law unfair competition claim, filed February 7, 2014,209 should be DENIED.
IX. INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO OBJECT/APPEAL
The United States District Clerk shall serve a copy of this Report and Recommendation on all parties by either: (1) electronic transmittal to all parties represented by an attorney registered as a Filing User with the Clerk of Court pursuant to the Court's Procedural Rules for Electronic Filing in Civil and Criminal Cases; or (2) by certified mail, return receipt requested, to any party not represented by an attorney registered as a Filing User.
As provided in 28 U.S.C. § 636(b)(1) and FED. R. CIV. P. 72(b), any party who desires to object to this Report must file with the District Clerk and serve on all parties and the Magistrate Judge written Objections to the Report and Recommendation within 14 days after being served with a copy, unless this time period is modified by the District Court. A party filing Objections must specifically identify those findings, conclusions or recommendations to which objections are being made and the basis for such objections; the District Court need not consider frivolous, conclusive or general objections.
A party's failure to file timely written objections to the proposed findings, conclusions and recommendations contained in this Report will bar the party from receiving a de novo determination by the District Court.210 Additionally, a party's failure to file timely written objections to the proposed findings, conclusions and recommendations contained in this Report will bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Court.211
SIGNED and ENTERED this 10th day of April, 2014.