De Simone v. VSL Pharmaceuticals, Inc. et al
Filing
929
MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 6/20/2019. (km4s, Deputy Clerk)
UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND
CLAUDIO DE SIMONE,
Plaintiff/Counterclaim
Defendant,
EXEGI PHARMA, LLC,
Plaintiff,
v.
VSL PHARMACEUTICALS,
INC.,
Defendant/Counterclaim
Plaintiff,
Civil Action No. TDC-15-1356
LEADIANT BIOSCIENCES, INC. and
ALF ASIGMA USA, INC.
Defendants,
v.
DANISCO USA, INC.,
Counterclaim Defendant.
MEMORANDUM OPINION
Having received a favorable jury verdict, Claudio De Simone and ExeGi Pharrna, LLC
("ExeGi") (collectively, "~he De Simone Parties") have filed a post-trial Motion in which (1)
ExeGi asks this Court to increase the jury's award of $15,000,000 against Alfasigma USA, Inc.
("Alfasigma") on its claim offalse advertising in violation of the Lanham Act, 15 U.S.C.
S 1125(a)
(2012); (2) ExeGi seeks a permanent injunction against Leadiant Biosciences, Inc. ("Leadiant")
and Alfasigma as an additional remedy on the false advertising claim; and (3) the De Simone
Parties ask the Court to award them attorney's fees, costs, and pre- and post-judgment interest.
Leadiant, Alfasigma, and VSL Pharmaceuticals, Inc. ("VSL") (collectively, "the VSL Parties")
oppose the Motion on all issues with the exception of costs and post-judgment interest. Having
reviewed the submitted materials, the Court finds no hearing necessary.
See D. Md. Local R.
105.6. For the reasons set forth below, the Motion is GRANTED IN PART and DENIED IN
PART.
DISCUSSION
I.
Enhanced Damages
At trial, ExeGi asked the jury to award it $27,843,149 on its false advertising claim against
Alfasigma, representing Alfasigma's profits from sales of VSL#3 from July 1,2016 through the
end of trial. Although the jury found Alfasigma liable for that claim, it awarded ExeGi only
$15,000,000.
ExeGi now asks this Court to increase that award to its originally requested
$27,843,149, supplemented
by an additional amount calculated by applying a daily rate of
$29,819.08 through January 31, 2019, the day this Motion became ripe.
When a plaintiff seeks the defendant's profits, "(i]f the court shall find that the amount of
the recovery ... is either inadequate or excessive(,] the court may in its discretion enter judgment
for such sum as the court shall find to be just, according to the circumstances of the case."
15
U.S.C. ~ 1117(a). Such adjusted damages must "constitute compensation and not a penalty." Id.
Beyond this provision, the Lanham Act "gives little guidance on the equitable principles to be
applied by a court" in determining whether to adjust a compensation award. Synergistic Intern.,
LLC v. Korman, 470 F.3d 162, 174 (4th Cir. 2006). In the absence of statutory instruction, courts
have developed a list of factors to consider when determining appropriate compensation under the
Lanham Act:
(1) whether the defendant had the intent to confuse or deceive,
(2) whether sales have been diverted,
2
(3)
(4)
(5)
(6)
the adequacy of other remedies,
any unreasonable delay by the plaintiff in asserting his rights,
the public interest in making the misconduct unprofitable, and
whether it is a case of palming off.
Id. at 175; Quick Techs., Inc. v. Sage Group PLC, 313 F.3d 338,349 (5th Cir. 2002) (applying this
test to an award of profits).
Here, upon consideration of the evidence and the factors identified in Synergistic, the Court
concludes that the jury award of profits in the amount of $15,000,000 was justified.
Simone Parties' expert witness on damages, Bryan Callahan, calculated Alfasigma's
The De
profits at
$27,843,149, significantly above the jury's award. Most of the factors support the jury's award.
As discussed in this Court's Memorandum
Opinion denying the VSL Parties' Motions for
Judgment as a Matter of Law and for a New Trial ("the VSL Parties' Post-Trial Motions"), De
Simone v. VSL, Rule 50 and 59 Mem Op.
S 1.B.2, the
evidence established that the VSL Parties'
senior management, specifically, Luca Guarna, the President and Chief Executive Officer ("CEO")
ofVSL, knew that in producing a new version ofVSL#3 in Italy ("Italian VSL#3"), they had not
been able to precisely replicate the original proprietary mix, so the false advertising was deployed
with the intent to confuse or deceive. The testimony of Dr. Anthony Fasano, an expert witness on
the use of probiotics for the management of gastroenterological
and immunological disorders,
supports the further inference that, although not easily quantified, sales were diverted away from
ExeGi to Alfasigma, particularly where the false advertising had the effect of "palming off' Italian
VSL#3 as the same as the original VSL#3 product now sold by ExeGi as Visbiome ("the De
Simone Formulation").
Where ExeGi was a new company such that a calculation of its own lost
profits would not adequately compensate it, there was no adequate remedy other than Alfasigma's
profits. ExeGi did not delay in asserting its claims. As for the public interest, where various expert
witnesses testified that Italian VSL#3 was not functionally
3
equivalent
to the De Simone
Formulation, there is a public interest in ensuring that the public not be misled into believing that
a particular product offered to address health needs will have the same efficacy as a trusted product
when that has not been established.
Notably, however, there was no evidence definitively
establishing that any functional difference between Italian VSL#3 and the De Simone Formulation
would render Italian VSL#3 unsafe or clinically ineffective for all of its users.
While the award was not excessive as a matter of equity, it was also sufficiently substantial.
Where ExeGi was a start-up company with limited marketing resources, the amount of sales
actually diverted, and the amount needed to compensate ExeGi for the harm of the false
advertising, would be difficult to quantify, such that an award ofless than all of Alfasigma' s profits
would be reasonable.
Under these circumstances, the Court declines to increase the award. See
Synergistic, 470 F.3d at 175.
II.
Permanent Injunction
A.
Issuance of an Injunction
The Lanham Act provides that courts "shall have power to grant injunctions, according to
the principles of equity and upon such terms as the court may deem reasonable, to prevent the
violation" of any of the Lanham Act's provisions.
15 U.S.C.
S
1116(a). A plaintiff seeking a
permanent injunction must demonstrate:
(1) That it has suffered an irreparable injury;
(2) That remedies at law, such as monetary damages, are inadequate to compensate
for that injury;
(3) That, considering the balance of hardships between the plaintiff and defendant,
a remedy is warranted; and
(4) That the public interest would not be disserved by a permanent injunction.
Ebay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006).
"The decision to grant or deny
permanent injunctive relief is an act of equitable discretion by the district court." Id
4
As to irreparable harm, the Court concludes that for the reasons set forth in the discussion
of causation in the Memorandum Opinion denying the VSL Parties' Post-Trial Motions, which the
Court incorporates into this Opinion by reference, the De Simone Parties have suffered an
irreparable injury. See De Simone v. VSL, Rule 50 and 59 Mem Op.
S LB.4.
In passing offItalian
VSL#3 as the De Simone Formulation, Alfasigma and Leadiant deprived the De Simone Parties
"of a legitimate competitive advantage and reduced consumers' incentive" to purchase Visbiome,
which actually contains the De Simone Formulation, rather than Italian VSL#3. McNeilab, Inc. v.
Am. Home Prods. Corp., 848 F.2d 34,38 (2d Cir. 1988) (affirming the district court's grant ofa
preliminary injunction on the plaintiffs false advertising claim).
In PBM v. Mead Johnson, 639
F. 3d 111 (4th Cir. 2011), the United States Court of Appeals for the Fourth Circuit upheld the
district court's issuance of a permanent injunction because, in relevant part, the plaintiff had
suffered an irreparable injury where the "entire goal" of the challenged advertising had been "to
influence [consumers] to not even consider a switch" to a competitor's product. Id. at 127. Here,
Alfasigma's and Leadiant's false insistence that Italian VSL#3 continued to use the De Simone
Formulation was aimed at the same goal: to convince customers not to even consider switching
from VSL#3 to Visbiome. The first factor is satisfied.
On the second factor, the inadequacy of other remedies, the Court finds that although
ExeGi has been awarded $15,000,000, that monetary award alone is inadequate to compensate it
for the false advertising. In PBM, the Fourth Circuit stated that even when "substantial damages"
have been awarded for false advertising, those monetary damages compensate for the direct, prior
harm caused by the false advertising but do not prevent the offender "from infecting the
marketplace with the same or similar claims in different advertisements in the future." Id. Where,
as here, Plaintiffs have asserted that Alfasigma continues to advertise a continuity between Italian
5
VSL#3 and the De Simone Formulation, and where ExeGi Chief Executive Officer Marc Tewey
provided uncontradicted trial testimony establishing that this false claim was hampering ExeGi's
ability "to leverage the benefits of the brand," 11/5/18 PM Tr. 72, the Court finds that the
retrospective remedy of money neither adequately protects ExeGi from future harm nor sanitizes
the infected marketplace.
This factor therefore weighs in favor of ExeGi as to Alfasigma.
Although Leadiant asserts that an injunction against it is not an appropriate remedy because
it no longer distributes VSL#3, "it is well established that the voluntary discontinuance
of
challenged activities by a defendant does not necessarily moot a lawsuit." Lyons P'ship, L.P. v.
Morris Costumes, Inc., 243 F.3d 789, 800 (4th Cir. 2001) (citation omitted).
To avoid an
injunction based on such cessation of activity, a defendant bears the "heavy burden" to show that
"there is no reasonable expectation that the wrong will be repeated." Id. Here, Leadiant cites the
testimony of its in-house counsel David Sandoval, who stated that as of June 30, 2016, Leadiant
sold its division that marketed VSL#3 and no longer had any rights to manufacture, market, or sell
VSL#3. While this evidence might ordinarily establish that there is no reasonable expectation that
Leadiant will engage in false advertising relating to VSL#3, Leadiant is entirely owned by
members of the Cavazza family, Alfasigma is partially owned by the Cavazzas, and the Cavazzas
have a two-thirds ownership interest in VSL. With the Cavazzas maintaining control or influence
over all of the VSL Parties, they could respond to an injunction against Alfasigma by arranging
for the transfer back to Leadiant of the rights to market and sell VSL#3. Thus, under the present
circumstances, the Court cannot conclude that Leadiant has met its burden of establishing that
there is no reasonable expectation that the wrong will be repeated.
Lyons, 243 at 800.
As to the third factor, the balance of hardships, the Court again finds PBM instructive.
There, the Fourth Circuit agreed with the district court's assessment that a defendant found liable
6
for false advertising "simply has no equitable interest in perpetuating the false and misleading
claims."
PBM, 639 F.3d at 127. Instead, the equities lie with ExeGi, which "cannot fairly
compete" until Alfasigma and Leadiant "stop[] infecting the marketplace
advertising."
with misleading
Id. Alfasigma's arguments on the equities center not on whether an injunction is
warranted, but on the adverse consequences
of particular provisions
injunction, and thus do not alter this threshold analysis.
See id.
of ExeGi' s proposed
(finding that because the
defendant's "main contentions" about the balance of hardships "concern the nature of injunctive
relief, not whether that relief should be granted in the first instance," those contentions do not alter
the conclusion that the balance of hardships favored the prevailing plaintiff).
The equities
therefore weigh in favor of ExeGi.
As for the fourth and final factor, the public interest, the Court finds that it, too, weighs in
favor of ExeGi because "it is self evident that preventing false or misleading advertising is in the
public interest in general," and that interest is particularly salient here because the false information
being circulated "pertains to issues of public health and ... well-being." PBM, 639 F. 3d at 12728. As with the third factor, Alfasigma's contrary arguments generally focus on the scope and
nature of the injunction that ExeGi seeks, rather than on the question whether any injunction is
appropriate.
The Court therefore finds that the VSL Parties have identified no compelling public
interest that can act as an adequate counterweight to the public interests aligned with ExeGi. The
Court therefore concludes that the public interest factor weighs in favor of ExeGi.
Alfasigma's
remaining
arguments
against
an injunction
generally
duplicate
their
arguments in support of their Rule 50 motion, including their assertion that the jury's verdict was
merely advisory and that the De Simone Parties failed to prove the elements of a Lanham Act false
advertising claim. The Court rejects those arguments for the reasons set forth in the accompanying
7
Memorandum Opinion denying Alfasigma's Rule 50 Motion. See De Simone v. VSL, Rule 50 and
59 Mem Op.
S I.B.
Where all four factors weigh in favor of an injunction, the Court will grant injunctive relief
on terms set forth below.
B.
Scope of the Injunction
"It is well established that injunctive relief should be no more burdensome to the defendant
than necessary to provide complete relief to the plaintiffs," and thus "an injunction should be
carefully addressed to the circumstances of the case." PBM, 639 F.3d at 128 (citations omitted).
ExeGi seeks a sweeping injunction that not only would prohibit Alfasigma and Leadiant
from making certain statements suggesting that VSL#3 continues to contain the De Simone
Formulation, but also would require them to make affirmative statements about Visbiome and to
issue corrective advertising.
The Court finds that such broad relief is not warranted by the
circumstances of this case and would unduly burden the VSL Parties.
As discussed above in
relation to monetary relief and in the Court's Memorandum Opinion on the VSL Parties' PostTrial Motions, the crux of this case-and
the essential injury to ExeGi-is
the VSL Parties'
repeated false assertions in their advertising that Italian VSL#3 continues to be composed of the
De Simone Formulation.
Accordingly, the Court concludes that an injunctive remedy carefully
addressed to the circumstances of this case is one focused on curtailing such claims of continuity
between Italian VSL#3 and the De Simone Formulation.
See PBM, 639 F.3d at 128 (citations
omitted). The Court will thus permanently enjoin Alfasigma and Leadiant from making any claims
in VSL#3 promotional materials that state or suggest a false continuity between Italian VSL#3 and
the De Simone Formulation, including but not limited to statements claiming that VSL#3 continues
to contain the "original proprietary blend" or the "same mix in the same proportions."
8
The VSL Parties will also be permanently
enjoined from citing any clinical study
performed on the De Simone Formulation or implying that any such study was conducted on Italian
VSL#3. Where the CEO ofVSL has acknowledged that Italian VSL#3 was the result of an attempt
to reverse engineer the De Simone Formulation and that the VSL Parties could not actually
replicate the original proprietary mix, and the scientific evidence established that the products are
not the same, such a remedy is necessary to prevent further harm to ExeGi. Although Alfasigma
argues that there is no basis to enjoin citations to clinical studies performed on the De Simone
Formulation because the composition of Italian VSL#3 and how it compares to the composition
of the De Simone Formulation is a matter of bona fide scientific debate and thus not properly
actionable under the Lanham Act, the Court has already considered and rejected that argument in
its Memorandum Opinion on the VSL Parties' Post-Trial Motions. See De Simone v. VSL, Rule
50 and 59 Mem Op.
S 1.B.2.
However, the Court finds no basis to grant the other permanent injunctive relief requested
by ExeGi.
ExeGi seeks an order that Alfasigma affirmatively issue corrective advertising
distinguishing Italian VSL#3 from the De Simone Formulation and reporting the results of this
lawsuit. The Court finds that where the harm to ExeGi was the promoting of a false continuity
between Italian VSL#3 and the De Simone Formulation, not false statements about Visbiome,
there is no independent need to require the VSL Parties to make specific statements distinguishing
between Italian VSL#3 and Visbiome.
An injunction requiring such comparative statements
would essentially require the VSL Parties to favorably advertise their competitor's product, a result
that would be inequitable when they engaged in no express negative comparative advertising.
Cf
Group SEB USA, Inc. v. Euro-Pro Operating, LLC, 774 F.3d 192, 206 (3rd Cir. 2014) (finding
that the district court's preliminary injunction was not overbroad where the court ordered the
9
defendant to cover package advertising containing the specific false statements underlying the
false advertising claims).
For the same reasons, the Court finds that the proposed remedy of
requiring statements about the results of this lawsuit would be inequitable.
Cf Frisch's
Restaurants, Inc. v. Elby's Big Boy of Steubenville, Inc., 670 F. 2d 642, 650 (6th Cir. 1986)
(affirming the district court's issuance of a preliminary injunction requiring corrective advertising
where the defendant's trademark infringement "affirmatively misrepresented" through the use of
the plaintiff s protected marks that the defendants' restaurants were affiliated with the Big Boy
restaurant franchise and sold Big Boy food products).
Thus, the injunction will be limited to the
restrictions on statements linking Italian VSL#3 to the De Simone Formulation and the clinical
trials performed on the De Simone Formulation.
III.
Attorney's
Fees
The De Simone Parties also seek attorney's fees for the work performed on both the VSL
Parties' Lanham Act claims and the De Simone Parties' Lanham Act false advertising claims.
Under the Lanham Act, "[t]he court in exceptional cases may award reasonable attorney fees to
the prevailing party."
15 U.S.C.
S
1117(a). As the outset, the Court finds that ExeGi was the
prevailing party on all Lanham Act claims.
The jury's verdict establishes that ExeGi was a
prevailing party on its false advertising claim against Alfasigma and Leadiant.
Parties'
Lanham Act claims, those claims include VSL's
trademark
As for the VSL
infringement,
unfair
competition, and false advertising claims against De Simone and ExeGi; Leadiant's claims of
trademark infringement, unfair competition, and false advertising against ExeGi and its claims of
unfair competition and false advertising against De Simone; and Alfasigma's
claim of false
advertising against De Simone and ExeGi. When a party is a defendant to a Lanham Act claim,
the party prevails for purposes of becoming eligible for attorney's fees "whenever the plaintiffs
10
challenge is rebuffed," such that a defendant can be considered a prevailing party "even if the
court's final judgment rejects the plaintiffs claim for a nonmerits reason." CRST Van Expedited,
Inc. v. Equal Employment Opportunity Comm 'n, 136 S. Ct. 1642, 1651 (2016). Here, during trial,
the VSL Parties moved to voluntarily dismiss their Lanham Act claims with prejudice, and the
Court granted that motion. See ECF Nos. 800 and 805. Thus, as no party disputes, the De Simone
Parties are prevailing parties on all of the Lanham Act claims asserted in this case.
On the issue of what constitutes an exceptional case under the Lanham Act, the legislative
history of the statute provides that fee shifting is appropriate "where the acts of infringement can
be characterized as 'malicious,'
'fraudulent,'
'deliberate,'
or 'willful.'"
S. Rep. 93-1400, 1974
u.S.C.C.A.N. 7132, 7133 (1974). In interpreting a similar fee-shifting provision under the Patent
Act, 35 U.S.C. 9285 (2012), the United States Supreme Court set forth a less stringent test, finding
that "an 'exceptional' case is simply one that stands out from others with respect to the substantive
strength of a party's litigating position (considering both the governing law and the facts of the
case) or the unreasonable manner in which the case was litigated." Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 572 U.S. 545, 554 (2014). Applying the guidance of Octane Fitness to the
Lanham Act fee-shifting provision, the Fourth Circuit has stated that in making a determination
whether a case is exceptional for purposes of awarding attorney's fees, courts should consider
whether, in the totality of the circumstances:
(1) there is an unusual discrepancy in the merits of the positions taken by the parties,
based on the non-prevailing party's position as either frivolous or objectively
unreasonable;
(2) the non-prevailing party has litigated the case in an unreasonable manner; or
(3) there is otherwise the need in particular circumstances to advance considerations
of compensation and deterrence.
Georgia-Pacific v. von Drehle, 781 F.3d 710, 721 (4th Cir. 20 15) (citations omitted). These factors
are non-exclusive, and "a case presenting either subjective bad faith or exceptionally meritless
11
claims may sufficiently set itself apart from mine-run cases to warrant a fee award."
Fitness, 572 U.S. at 554-55.
Octane
"(T]he losing party's conduct need not have been independently
sanctionable or taken in bad faith in order to merit an award of attorney fees to the prevailing party
under the Lanham Act."
Verisign, Inc. v. XYZ.COM LLC, 891 F.3d 481, 487 (4th Cir. 2018).
However, it is the "rare case in which a party's unreasonable conduct-while
independently
sanctionable-is
nonetheless so 'exceptional'
not necessarily
as to justify an award of fees."
Octane Fitness, 572 U.S. at 555.
On the first factor, a party's position is frivolous or objectively unreasonable where "no
reasonable litigant could believe it would succeed." Old Reliable Wholesale, Inc. v. Cornell Corp.,
635 F.3d 539, 544 (Fed. Cir. 2011) (interpreting the attorney fee provision of the Patent Act).
Under this standard, the Court concludes that there was no unusual discrepancy in the merits of
the parties' positions. First, the VSL Parties' positions on their Lanham Act trademark and false
advertising claims were clearly reasonable.
Indeed, the Court granted to the VSL Parties two
preliminary injunctions, which required this Court to find that the VSL Parties were likely to
succeed on the merits of, as relevant here, their Lanham Act counterclaims.
See Winter v. Natural
Res. Defense Council, Inc., 555 U.S. 7, 20 (2008) (identifying likelihood of success on the merits
as a prerequisite for a preliminary injunction); De Simone v. VSL Pharm., Inc., 133 F. Supp. 3d
776, 798 (D. Md. 2015) (finding that the VSL Parties were likely to succeed on their trademark
infringement claims); De Simone v. VSL Pharm., Inc., No. TDC-15-1356, 2016 WL 3466033 at
*20 (D. Md. June 20, 2016) (finding that the VSL Parties were likely to succeed on their false
advertising claim relating to statements made on the Visbiome website).
The De Simone Parties argue that even if the VSL Parties' Lanham Act counterclaims were
not objectively unreasonable at the outset of the litigation, they became so over the course of the
12
case. See Design Resources, Inc. v. Leather Indus. of Am., No. 1:lOCV157, 2016 WL 5477611 at
*4 (M.D.N.C. Sept. 29,2016) ("[O]ver time, a party's position and litigation approach may move
from being objectively reasonable to becoming unreasonable and perhaps exceptional.").
This
argument, however, is primarily based on the fact that the VSL Parties dismissed their Lanham
Act claims with prejudice after the start of trial, with the explanation that where the Court's
preliminary injunctions had prevented the alleged violations from causing significant damages, the
litigation costs outweighed the possible benefits of taking those claims to the jury. This rationale
for dismissal in no way undermines the reasonableness of the VSL Parties' position that the De
Simone Parties were liable for trademark infringement and false advertising. See Web Printing
Controls Co., Inc. v. Oxy-Dry Corp., 906 F.2d 1202,1204 (7th Cir. 1990) (in reversing the district
court's entry of judgment on a Lanham Act false advertising claim, distinguishing between "two
stages of inquiry-violation
of the law [and] remedies for the violation"); De Simone, 133 F. Supp.
3d at 798; De Simone, No. TDC-15-1356, 2016 WL 3466033 at *20.
As for ExeGi' s false advertising claims' against Alfasigma and Leadiant, the Court
concludes that even though the jury found in favor of ExeGi on those claims, there was not an
unusual discrepancy in the merits of the opposing parties' positions.
Had the VSL Parties
successfully recreated the De Simone Formulation through a reverse engineering process, their
statements regarding the continuity between the De Simone Formulation and Italian VSL#3 may
have been true. The fact that the jury did not credit their evidence on the genetic and functional
equivalence of the products does not mean that their arguments were frivolous or objectively
unreasonable.
Simone
In an effort to establish that the VSL Parties acted with subjective bad faith, the De
Parties claim that the VSL Parties
acted willfully
and that they intentionally
"misrepresented their product, including its composition, history of clinical use, and history of
13
clinical studies."
Mot. at 24, ECF No. 879. Notably, however, the jury was instructed that to
establish liability for false advertising, it was not necessary for the De Simone Parties to prove that
Alfasigma or Leadiant had the intent to deceive or acted in bad faith. Jury Instruc. No. 23. See
Proctor & Gamble Co. v. Chesebrough-Pond's,
Inc., 747 F.2d 114,118-19 (2d Cir. 1984). Where
the jury did not necessarily find bad faith, and where the VSL Parties' positions in claiming that
they did not engage in false advertising were neither frivolous or objectively unreasonable, the
Court does not find a sufficient disparity in the positions of the parties to render the case
exceptional for purposes of attorney's fees.
This conclusion is not altered by Employers Council on Flexible Compensation v. Feltman,
384 F. App'x
Pharmaceuticals,
201 (4th Cir. 2010) (per curiam),
or Merck Eprova AG v. Brookstone
LLC, 920 F. Supp. 2d 404 (S.D.N.Y. 2013), on which Plaintiffs rely.
In
Employers Council, the Fourth Circuit found that the district court had not clearly erred in finding
a Lanham Act trademark infringement case exceptional for purposes of awarding attorney's fees
where the defendants had exhibited a clear animus towards the plaintiffs and had conducted only
minimal research into their assertion, offered as a defense, that the plaintiffs had lost their rights
to the trademark in question. Here, the Court does not find that there was a comparably clear basis
to find bad faith in the dissemination of the false advertising, nor does it find support for a
conclusion that the VSL Parties conducted insufficient legal research to properly assess the
propriety of those statements.
In Merck Eprova, a Lanham Act case stemming from allegations of false advertising based
on the labeling of generic vitamin substitutes, Merck was the only company to have developed a
pure form of a specific synthetic folate, which it licensed to various companies to include in their
vitamins. Merck Eprova, 920 F. Supp. at 413. The defendants then began to market a vitamin that
14
they deliberately manufactured to contain a non-pure, or hybrid folate but altered the packaging
label to make it appear as though it contained only a single, pure form of folate, and copied Merck's
ingredient labels, in an effort to co-opt Merck's customer base. Id. at 413-15,420-21.
Here, there
was no evidence that Italian VSL#3 was a deliberate deception from the outset.
In fact, the
evidence establishes that the VSL Parties made extensive, though ultimately unsuccessful, efforts
to exactly replicate the De Simone Formulation through reverse-engineering.
As to the second factor of an unreasonable manner of litigation, the De Simone Parties
assert that the VSL Parties engaged in vexatious litigation tactics tinged by bad faith. The Court
takes seriously the De Simone Parties' complaints about the sheer volume oflitigation in this case,
and the Court is acutely aware of how strenuously this case has taxed the more limited resources
ofthe De Simone Parties. For example, the VSL Parties filed a bloated set of counterclaims, many
of which were dismissed; engaged in unreasonable, obstructionist tactics in several depositions;
filed more than 15 motions in limine; and continued to pursue their trademark and false advertising
claims until late in the trial before voluntarily seeking their dismissal.
While the Court in no way
condones the excesses of the VSL Parties' litigation strategy, it notes that the De Simone Parties
initiated the litigation among the parties, a significant portion of the litigation related to claims
separate from the Lanham Act claims that could be subject to attorney's fees, and the VSL Parties'
late decisions, including to dismiss their Lanham Act claims, do not necessarily reveal bad faith
but instead were more likely the consequence of the inefficiencies created by the VSL Parties'
determination of trial strategy by a committee of three different legal teams, including a new law
firm engaged by VSL only for the trial.
Moreover, the De Simone Parties themselves engaged in an aggressive litigation strategy
with certain questionable tactics that may have triggered some of the VSL Parties' criticized
15
actions. For example, the De Simone Parties were found in contempt for continuing to infringe
the VSL#3 mark despite this Court's preliminary injunction, see De Simone, No. TDC-15-1356,
2016 WL 3466033 at *18, and De Simone was sanctioned for spoliation and ordered to pay related
costs and fees based on his destruction of certain documents, see De Simone v. VSL Pharm., Inc.,
Mot. Sanctions Mem. Op. at 13, 16, ECF No. 556 (Sullivan, J). The numerous motions in limine
were filed in response to the De Simone Parties engagement of eight expert witnesses. Where the
VSL Parties' litigation posture was not markedly more bellicose than that of the De Simone Parties,
and where some of the assertedly unreasonable litigation practices are plausibly a response to
aggressive tactics by the De Simone Parties or the result of poor strategy and coordination rather
than vexatious intent or bad faith, the Court concludes that the VSL Parties did not engage in an
unreasonable manner of litigation warranting the awarding of attorney's fees. See Octane Fitness,
572 U.S. at 555 (emphasizing that it is the "rare case in which a party's unreasonable conductwhile not necessarily independently sanctionable-is
nonetheless so 'exceptional'
as to justify an
award of fees"); Cava Grp, Inc. v. Mezeh-Annapolis, LLC, No. GJH-14-0355, 2017 WL 2493099
at *2 (D. Md. June 7, 2017) ("[C]onduct triggering relief must go beyond an aggressive litigation
strategy.") (citation omitted).
As for the third factor, the need for compensation or deterrence, the De Simone Parties
argue that it is satisfied because Alfasigma's
false advertising "continues unabated" and that
without the imposition of attorney's fees, it might "escape from litigation relatively unscathed."
Mot. at 35-36.
Where the jury awarded the De Simone Parties over $15,000,000 and where the
Court is ordering permanent injunctive relief, the Court is unpersuaded that attorney's fees are a
necessary additional remedy to make the De Simone Parties whole. Nor does the Court see a
particular need for deterrence where, as discussed above, the VSL Parties proceeded in this
16
litigation with viable claims of their own, even if those claims were later abandoned, and mounted
a substantive, non-frivolous defense to the De Simone Parties' claims.
This case has been hard-fought and costly for both sides, but it has also presented real
questions for adjudication.
Such a case is not the kind of exceptional one that warrants an award
of attorney's fees.
IV.
Costs and Interest
The Lanham Act provides that a prevailing plaintiff is entitled to recover the costs of the
action. 15 U.S.C.
S ll17(a).
28 U.S.C.
S 1920, in tum,
provides that:
A judge or clerk of any court of the United States may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees for printed or electronically recorded transcripts necessarily obtained for
use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and the costs of making copies of any materials where
the copies are necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of interpreters, and
salaries, fees, expenses, and costs of special interpretation services under section
1828 of this title.
Here, the DeSimone Parties seek $87,397.35 in costs.
Where the VSL Parties have raised no
objection, the Motion will be granted as to costs and the Court will award the requested amount.
De Simone asserts that he is entitled to pre-judgment interest on the $1,874,602 awarded
by the jury on his claim of unjust enrichment against VSL. "[P]re-judgment interest as a matter
of right is the exception rather than the rule." Ver Brycke v. Ver Brycke, 843 A.2d 758, 777 (Md.
2004).
It is allowable "when the obligation to pay and the amount due had become certain,
definite, and liquidated by a specific date prior to judgment so that the effect of the debtor's
withholding payment was to deprive the creditor ofthe use of a fixed amount as of a known date."
Harford Cty. v. 8aks Fifth Ave., 923 A.2d 1, 13 (Md. 2007) (citation omitted).
17
Because of the
requirements that the obligation to pay and the amount due are certain prior to judgment, such
interest is typically awarded only in, as relevant here, breach of contract actions such as those
involving "contracts in writing to pay money on a day certain," "actions under contracts providing
for the payment of interest," or "cases upon sums payable as rent." 1 W Berman Prop. v. Porter
Bros., Inc., 344 A.2d 65, 75 (Md. 1975).
Here, De Simone's claim of unjust enrichment-in
which he sought money damages for
the VSL Parties' continued sales ofVSL#3 after the expiration of the Patent License Agreementis necessarily not a breach of contract action, so it would seem to be a case where there is no
prejudgment interest as of right.
See County Com'rs of Caroline Cty. v. J Roland Dashiell &
Sons, Inc., 747 A,2d 600,610 (Md. 2000) ("We hold that, generally, quasi-contract claims such as
quantum meruit and unjust enrichment cannot be asserted when an express contract defining the
rights and remedies of the parties exists."). De Simone, however, asserts that it still falls within
the category of cases for which prejudgment interest is a matter of right because "the jury
determined that VSL owed [him] sums certain" and, in awarding damages, the jury adopted the
calculations of De Simone's damages expert, who, De Simone asserts, arrived at his figure by
using the royalty terms of the Patent License Agreement.
Reply at 4, ECF No. 914. During the
period of time at issue, however, there was no written contract between the parties governing the
purchase ofVSL#3, and there were bona fide disputes as to the equities of access to VSL#3, with
De Simone asserting his intellectual property rights and the VSL Parties countering with
allegations of breach of fiduciary duty. De Simone ultimately prevailed on those disputes, but the
fact that the jury found VSL and Leadiant liable for unjust enrichment and, at least as to VSL,
valued that unjust enrichment on terms tracking the royalty payment terms of the Patent License
Agreement does not establish that VSL's or Leadiant's obligation to pay and the amount owed
18
were certain as of a known date prior to the jury's verdict. See Harford Cty., 923 A.2d at 13. The
Court therefore concludes that there was not the requisite certainty on VSL's or Leadiant's
obligation to pay, or the amounts owed, to support a finding that De Simone is entitled to prejudgment interest as a matter of right. The Motion will be denied as to pre-judgment interest.
As to post-judgment interest, the De Simone Parties are entitled by statute to such postjudgment interest as calculated under federal law, so the Court need not specifically award it. See
28 U.S.C.
9
1961(a) (2012) ("Interest shall be allowed on any monetary judgment in a civil case
recovered in a district court.").
CONCLUSION
For the foregoing reasons, the De Simone Parties' Post-Trial Motion is GRANTED IN
PART and DENIED IN PART. It is GRANTED as to the Motion for Costs, and the De Simone
Parties will be awarded $87,397.35 in costs. It is GRANTED IN PART as to the Motion for PreJudgment and Post-Judgment
specified in 28 U.S.C.
9
Interest, with the judgment to accrue post-judgment interest as
1961(a) and consistent with any other agreements of the Parties.
It is
GRANTED IN PART as to the Motion for a Permanent Injunction, with an injunction to issue on
terms consistent with this Opinion and set forth in the accompanying Order.
DENIED.
Date: June 20,2019
THEODORE D. CHUA
United States District J dge
19
It is otherwise
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