United States: Recent Dismissal Of False Advertising Litigation Due To Unclean Hands And Lack Of Causation

A California district court granted summary judgment in favor of defendant Avicenna Nutraceutical LLC in a false advertising case brought by competitor Certified Nutraceuticals, Inc., under the federal Lanham Act and California's Business and Professions Code. ¹ The case provides a lesson for companies alleging unfair competition under California law: A plaintiff must prove not only that pecuniary injury has occurred, but also that the injury was directly caused by the defendant's actions. Litigants claiming damage from a competitor's false advertising should also be sure they are not engaging in the same type of conduct themselves.

Both parties in Certified Nutraceuticals, Inc. v. Avicenna Nutraceutical, LLC are involved in the manufacture, distribution and sale of raw ingredients for use in various dietary and nutritional supplements. Plaintiff Certified alleged that Avicenna had falsely advertised its collagen products as "patented." Certified, which was also engaged in the sale of collagen products, claimed it suffered damages in the form of diversion of business and loss of goodwill. 

Avicenna's motion for summary judgment relied on three arguments: (i) Certified failed to raise a genuine issue of material fact that it suffered actual injury due to Avicenna's allegedly false statements; (ii) Certified was guilty of "unclean hands"; and (iii) Certified could not recover under the Lanham Act for what is essentially a claim for the false marking of an unpatented product, which can only be brought under Section 292 of the Patent Act.

The court held that Avicenna was entitled to summary judgment on the Lanham Act claim under the unclean hands doctrine, showing that Certified had itself engaged in false advertising by promoting a patented product before the patent was issued. As for the remaining state-law claims—where unclean hands is not a defense—the court found that Certified failed to establish that it suffered actual injury (in this case, lost customers) as a result of Avicenna's alleged false statements that its products are "patented." Certified's supporting evidence showed no causal connection between customers' decisions not to do business with Avicenna and the alleged claim that the product was patented.

If you are pursuing, or defending against, claims of false advertising or other unlawful business practices, or if you have any questions about this case, Dentons' lawyers are always available to discuss your needs.

Footnote

1. Certified Nutraceuticals, Inc. v. Avicenna Nutraceutical, LLC, Case No.: 3:16-cv-02810-BEN-BGS (S.D.Cal., July 30, 2018).

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