United States: Federal Circuit Upholds RevitaLash Unfair Competition Violation

In Allergan, Inc. v. Athena Cosmetics, Inc., the Federal Circuit decided an appeal that did not present any patent issues, finding that the allegations of patent infringement in the underlying complaint gave it exclusive jurisdiction over the appeal. On the merits, the court found that the Federal Food, Drug, and Cosmetics Act (FFDCA) did not preempt Allergan's claims under California's Unfair Competition Law (UCL) and affirmed the district court's grant of summary judgment of the RevitaLash unfair competition violation, but vacated the district court's injunction as overly broad.

The Underlying Patent Claim

Allergan sued Athena Cosmetics for infringing its U.S. patent 6,262,105 and violating the UCL by the marketing of Athena's RevitaLash line of products, which include a prostaglandin derivative. (Allergan markets its own prostaglandin derivative product, Latisse, as an approved drug product for promoting eyelash growth.)

As the Federal Circuit summarized, after the district court's final claim construction order, "the parties proposed that the court grant summary judgment of noninfringement of the '105 patent, while preserving their full appellate rights regarding claim construction." The court entered summary judgment, and then, again pursuant an agreement between the parties, "dismissed all of the patent claims 'without prejudice.'"

According to the Federal Circuit:

We have jurisdiction over this case because the parties were not left in the same legal position as if the '105 patent claim had never been filed. The court's dismissal "without prejudice" merely reflects the parties' agreement that the '105 patent claim could be re-filed in future litigation between these parties. Should that occur, however, the parties will be bound by the court's summary judgment ruling—which the court did not vacate.

The Unfair Competition Claim

Allergan's UCL claim alleged that "Athena competed unfairly by ... 'marketing, selling, and distributing [its] hair and/or eyelash growth products without [a new drug] application approved by the FDA or California State Department of Health Services.'"

Athena had argued that the FFDCA preempted Allergan's UCL claim, but the district court disagreed. The Federal Circuit also found no preemption:

We do not find a clear purpose by Congress to preempt the state law claim at issue. Congress expressed its intent to preempt state-law causes of action regarding, for example, non-prescription drugs and medical devices. Allergan's contention, however, is that the products at issue must ultimately be regulated as prescription drugs—about which Congress "declined to enact such a provision." .... Moreover, the California Health Code is not an obstacle to realizing federal objectives. To the contrary, it contains provisions that parallel the FDCA, such that the statutes have consistent goals.

Turning to the merits of the UCL claim, the Federal Circuit noted that California law defines "drug" in line with the FFDCA, as including "any article other than food that is used or intended to affect the structure . . . of the body of human beings," and determines intended use with reference to "the objective intent of the persons legally responsible for the labeling of drugs," considering such factors as "labeling claims, advertising matter, or oral or written statements by such persons or their representatives."

The district court had granted summary judgment against Athena, finding that "Athena objectively intended to market past and present formulations of the products at issue to affect the structure of eyelashes—i.e., as drugs." Although Athena argued that its "marketing of the most recent formulation discussed [only] eyelash appearance," the district court concluded this "did not negate an objective intent to cause growth."

The Federal Circuit agreed:

Athena's marketing of the products at issue consistently discusses physical changes to eyelashes. There is no dispute that Athena made drug-related claims about an early formulation—and it never expressly disavowed such claims as it reformulated its products. Instead, the company continued to suggest that the products at issue change eyelash structure. .... Athena's claims invariably link eyelash appearance to physical changes caused by the products at issue.

Thus, the Federal Circuit affirmed the grant of summary judgment.

The Injunction

The district court entered a permanent injunction "barring Athena from manufacturing, marketing, selling, and/or offering for sale 'any and all' 'eyelash growth product(s)' 'anywhere within the United States.'" Not surprisingly, Athena challenged the injunction as overly broad. On this issue, the Federal Circuit agreed with Athena:

We agree with Athena and hold that the district court abused its discretion by entering an injunction that regulates any and all out-of-state conduct. .... The injunction impermissibly imposes the UCL on entirely extraterritorial conduct regardless of whether the conduct in other states causes harm to California. ....
Neither the California courts nor the California legislature are permitted to regulate commerce entirely outside of the state's borders. To do so would violate the Commerce Clause, which "precludes" such extraterritorial application of state law "whether or not the commerce has effects within the state."

The Federal Circuit therefore vacated the permanent injunction and noted that, on remand, "the district court should limit the scope of the injunction to regulate conduct occurring within California."

What Makes a Drug a Drug?

I was surprised to learn in my law school FDA class that what makes a drug a "drug" can depend more on marketing than chemistry. Now I know that companies who want to market foods, supplements, nutraceuticals, and other products as having certain health benefits have to be careful to avoid making claims or promotional statements that could lead to classification as a drug. Indeed, my colleagues in our FDA Regulatory practice can spend as much time counseling clients on how to avoid FDA regulation as they do counseling clients through the FDA drug approval process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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