Opinion ID: 77996
Heading Depth: 2
Heading Rank: 2

Heading: Likelihood of Success on the Merits of the False Advertising Claims

Text: The district court did not clearly err in its factual findings that Axiom's representations are literally false and material to consumers' purchasing decisions, and thus NAM and Adagen demonstrated a likelihood on success on the merits of their false advertising claims. Regarding false advertising, section 43(a) of the Lanham Act provides, in relevant part, as follows: (1) 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  (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 or is likely to be damaged by such act. 15 U.S.C. § 1125(a) (2006). To establish a likelihood of success on the merits of a false advertising claim under this section, the movant must demonstrate the following: (1) the ads of the opposing party were false or misleading, (2) the ads deceived, or had the capacity to deceive, consumers, (3) the deception had a material effect on purchasing decisions, (4) the misrepresented product or service affects interstate commerce, and (5) the movant has been  or is likely to be  injured as a result of the false advertising. Johnson & Johnson, 299 F.3d at 1247. Axiom only challenges the district court's conclusions regarding the first and third elements  that is, whether Axiom's statements are literally false [11] and whether the statements have a material effect on purchasing decisions.
The district court did not clearly err when it concluded that Axiom made literally false statements in its advertising. [12] First, the district court did not clearly err when it ruled that Axiom's claims about an affiliation with NASA are literally false. Although one engineer with NASA training or experience participated in Axiom's development of the DRX 9000, this does not constitute a joint collaboration between NASA and Axiom, nor does it support the claim that NASA engineers developed the DRX 9000 or discovered part of the DRX 9000. Similarly, although the DRX 9000 used some components that NASA also uses, that does not mean the DRX 9000 contains or embodies NASA technology. Perhaps these statements could properly be characterized as misleading rather than literally false, but it is a fine line, and we will only reverse the district court if its findings are clearly erroneous. Based on the entire evidence, we are not left with the definite and firm conviction that the district court clearly erred. [13] Second, the district court likewise did not clearly err when it ruled that Axiom's claims about the DRX 9000 being FDA approved are literally false. The DRX 9000 is a Class II medical device, which is only eligible for FDA clearance rather than FDA approval; FDA approval is a separate process that applies only to Class III devices. [14] See 21 U.S.C. §§ 360c, 360e (2006). Compare 21 C.F.R. § 807.81(a)(1) (2006), with 21 C.F.R. § 814.1(c) (2006). As such, Axiom's statements that the DRX 9000 is FDA approved are literally false. In fact, FDA regulations state that it is misleading and constitutes misbranding to claim FDA approval when a device is merely FDA cleared. See 21 C.F.R. § 807.97 (2006). Although these regulations use the term misleading, they also describe such a misrepresentation as misbranding, and again, it is often a matter of degree whether a statement is literally false or merely misleading. Based on the entire evidence, we are convinced that the district court did not clearly err in judging Axiom's statements literally false. [15]
The evidence amply supports the district court's conclusion that Axiom's statements are material to consumers' purchasing decisions. Even when a court finds that a defendant's ads are literally false, the plaintiff, to succeed on a claim of false advertising, must still establish that `the defendant's deception is likely to influence the purchasing decision.' Johnson & Johnson, 299 F.3d at 1250 (quoting Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d 302, 311 (1st Cir.2002)). The materiality requirement is based on the premise that not all deceptions affect consumer decisions. Id. The types of false claims that the district court enjoined  regarding NASA affiliation and FDA approval  logically would influence a doctor's decision to purchase the DRX 9000 over a competing machine without those qualities. These statements not only represent the quality of the device, but they provide marketing opportunities to the purchasing doctor when he or she in turn is advertising to prospective patients. In fact, after the onset of litigation against Axiom, several doctors who had purchased DRX 9000s sent letters to Axiom expressing their dissatisfaction with the possibility that they might not be able to use Axiom's claims, if the claims proved untrue, to attract patients. These letters provide clear evidence that Axiom's representations would affect doctors' decisions whether to purchase a DRX 9000. Based on this and all other evidence currently in the record, the district court did not err in its conclusion that these false statements are material to consumers' purchasing decisions.