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Ferring Pharmaceuticals Inc. v. Braintree Laboratories, Inc.

United States District Court, D. Massachusetts

August 4, 2014

FERRING PHARMACEUTICALS INC., Plaintiff/Counterclaim-Defendant,
BRAINTREE LABORATORIES, INC., Defendant/Counterclaim-Plaintiff

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Ferring Pharmaceuticals Inc., Plaintiff: Alissa A. Digman, Arne M. Olson, Dennis H. Ma, LEAD ATTORNEYS, PRO HAC VICE, Olson & Cepuritis, Ltd., Chicago, IL; Christine Vargas Colmey, Joseph J. Leghorn, Nixon & Peabody, LLP, Boston, MA.

For Braintree Laboratories, Inc., Defendant, Counter Claimant: Barry S. Pollack, Joshua L. Solomon, LEAD ATTORNEYS, Matthew B. Arnould, Pollock Solomon Duffy LLP, Boston, MA.

For Ferring Pharmaceuticals Inc., Counter Defendant: Alissa A. Digman, Arne M. Olson, LEAD ATTORNEYS, Dennis H. Ma, LEAD ATTORNEY, PRO HAC VICE, Olson & Cepuritis, Ltd., Chicago, IL; Christine Vargas Colmey, Joseph J. Leghorn, Nixon & Peabody, LLP, Boston, MA.

For Ferring Pharmaceuticals Inc., Counter Defendant: Alissa A. Digman, Arne M. Olson, Dennis H. Ma, LEAD ATTORNEYS, Olson & Cepuritis, Ltd., Chicago, IL; Christine Vargas Colmey, Joseph J. Leghorn, Nixon & Peabody, LLP, Boston, MA.

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Nathaniel M. Gorton, United States District Judge.

This case arises out of a dispute between pharmaceutical companies that promote and offer for sale competing bowel preparation drugs that are administered prior to colonoscopies. Plaintiff/counterclaim-defendant Ferring Pharmaceuticals Inc. (" Ferring" ), a Delaware corporation based in Switzerland, promotes and offers for sale a treatment under the name Prepopik. Defendant/counterclaim-plaintiff Braintree Laboratories, Inc. (" Braintree" ), a Massachusetts corporation with a principal place of business in Braintree, Massachusetts, promotes and offers for sale a treatment under the name Suprep.

Both parties allege that the other has engaged in false advertising in violation of the Lanham Act and unfair business practices in violation of M.G.L. ch. 93A. Ferring also alleges that Braintree has diluted its trademark in Prepopik by suggesting that it poses the same risks as a chemically-identical product promoted for sale in Canada, Pico-Salax. Braintree counterclaims for misappropriation of trade secrets based upon Ferring's possession of

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certain Braintree training documents related to Prepopik and Suprep.

Pending before the Court are Ferring's motion to dismiss Braintree's Amended Counterclaim and Braintree's motions for leave to file a Second Amended Counterclaim and for summary judgment on all claims asserted by Ferring.

I. Procedural History

Ferring filed its Complaint against Braintree in October, 2013. Braintree answered, filed a Counterclaim and moved for expedited limited discovery. Ferring moved to dismiss the Counterclaim for failure to state a claim in December, 2013 and Braintree thereafter filed an Amended Counterclaim in lieu of opposing the motion to dismiss. Shortly thereafter, Ferring moved to dismiss the Amended Counterclaim and Magistrate Judge Bowler denied the motion for expedited limited discovery for lack of good cause shown.

In May, 2014, Braintree moved for summary judgment on all claims in the Complaint and for leave to file a Second Amended Counterclaim that would supplement its allegations and add two new counts under New Jersey Consumer Fraud Act. The Court heard oral argument on the pending motions on July 14, 2014.

II. Ferring's Motion to Dismiss Braintree's Amended Counterclaim

Braintree's three-count Amended Counterclaim alleges 1) misappropriation of trade secrets and confidential information, 2) false advertising in violation of § 43(a) of the Lanham Act and 3) unfair and deceptive trade practices in violation of M.G.L. c. 93A. Ferring moves to dismiss for failure to state a claim upon which relief can be granted.

A. Legal Standard

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to " state a claim to relief that is plausible on its face. Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In considering the merits of a motion to dismiss, the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Langadinos v. Am. Airlines, Inc., 199 F.3d 68, 69 (1st Cir. 2000). Yet " [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements," do not suffice to state a cause of action. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Accordingly, a complaint does not state a claim for relief where the well-pled facts fail to warrant an inference of anything more than the mere possibility of misconduct. Id. at 679.

B. Count I: Misappropriation of Trade Secrets

1. Relevant Background

In June, 2013, Howard Dorfman (" Dorfman" ), the Vice President and General Counsel of Ferring, contacted Braintree to express his concerns about certain Braintree training materials that he had come to possess. Dorfman told Braintree that the subject materials were " sent in from the field" by an unknown source and denied that they had been provided to Ferring by a former Braintree employee. Ferring has returned the six pages of training materials to Braintree and denies possessing additional pages. Nevertheless, Braintree believes that Ferring possesses the full scope of its training materials because it is unaware of any plan to disseminate only the six pages that Ferring returned to Braintree. It asserts that Ferring has misappropriated an undisclosed number of

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pages of Braining training materials and the trade secrets contained therein.

2. Legal Standard

A trade secret is

any formula, pattern, device or compilation of information which is used in one's business, and which [provides] an opportunity to obtain an advantage over competitors who do not know or use it.

Burten v. Milton Bradley Co., 763 F.2d 461, 463 (1st Cir. 1985). On the other hand, " [m]atters of public knowledge or general knowledge in an industry" are not trade secrets. J.T. Healy & Son, Inc. v. James A. Murphy & Son, Inc., 357 Mass. 728, 260 N.E.2d 723, 729 (Mass. 1970) (quoting Restatement of Torts § 757 cmt. b). Courts consider several factors when determining whether particular information qualifies as a trade secret, including:

1) the extent to which the information is known outside of the business; 2) the extent to which it is known by employees and others involved in the business; 3) the extent of measures taken by the employer to guard the secrecy of the information; 4) the value of the information to the employer and to his competitors; 5) the amount of effort or money expended by the employer in developing the information; and 6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 282 N.E.2d 921, 925 (Mass. 1972). Ultimately, whether information qualifies as a trade secret " depends on the conduct of the parties and the nature of the information." Id.

To prevail on a claim of misappropriation of trade secrets, a party must show: 1) the existence of a trade secret, 2) that it took reasonable steps to preserve secrecy, and 3) that the other party " use[d] improper means in breach of a confidential relationship" to acquire the secret. Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1165 (1st Cir. 1994), abrogated on other grounds by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 159-60, 130 S.Ct. 1237, 176 L.Ed.2d 18 & n.2 (2010). The party asserting the claim must identify with adequate specificity the trade secret or proprietary information that was allegedly misappropriated by the defendant. See Sutra, Inc. v. Iceland Express, EHF, No. 04-11360-DPW, 2008 WL 2705580, at *3-4 (D. Mass. July 10, 2008) (explaining that it is " hornbook law" that a plaintiff must identify the trade secret at issue with adequate specificity).

3. Analysis

Based upon that standard, Braintree has failed to state a claim for misappropriation of trade secrets. Its claim based upon its entire set of training materials cannot proceed because it has not identified with adequate specificity any trade secrets in materials that have not been submitted with the pleadings. See Sutra, 2008 WL 2705580, at *3-4; cf. Aware, Inc. v. Centillium Comm'c'ns, Inc., 604 F.Supp.2d 306, 313 (D. Mass. 2009) (denying motion for more definite statement of misappropriation because the parties had exchanged materials and therefore knew which materials the other possessed).

Moreover, the pages which Ferring has admitted to possessing do not contain protectable trade secrets. The six pages include publicly available information about Prepopik such as its ingredients and recommended dosage. Information within the public domain is not a trade secret. J.T. Healy & Son, 260 N.E.2d at 729.

The documents also include information about Ferring's marketing strategy. For

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instance, a set of Powerpoint slides entitled " Prepopik Battle Plan" discloses where Ferring will focus its marketing efforts, the number of doctors each Ferring representative will target, and the steps Ferring took to market Prepopik before its official launch. Braintree cannot plausibly claim that information it has obtained about the marketing strategy of a competitor is a protectable trade secret. Cf. Banner Indus. v. Bilodeau, No. 3-236-C, 2003 WL 831974, at *3-4 (Mass. S.Ct. Feb. 27, 2003) (explaining that information that a company learned from other manufacturers and distributors was not " confidential" under Massachusetts law).

Braintree asserts that information its own marketing strategy means that the documents are a protected " compilation" of propriety information. Burten, 763 F.2d at 463. It is true that the materials recommend marketing strategies for Suprep in light of the marketing strategy for Prepopik. For instance, they state that Suprep is more effective, less expensive and safer for patients with low renal function than Prepopik (" SUPREP does not sacrifice efficacy for volume" ), urge sales representatives to emphasize the link between Prepopik and the Canadian drug Pico-Salax (" Don't hide from the fact that Pico is out there and discuss this with accounts" ) and suggest leveraging existing relationships (" BLI has been servicing these accounts for over 3 decades, don't be fooled by a foreigner!" ).

While at least one court in this District has suggested that marketing strategies may be protectable trade secrets under Massachusetts law, see Diomed, Inc. v. Vascular Solutions, Inc., 417 F.Supp.2d 137, 144-45 (D. Mass. 2006), Braintree offers no evidence that the information about differences in price, efficacy and safety is proprietary to Braintree. Furthermore, it is implausible that platitudes such as " Cash in on relationships!" are the product of significant effort or investment or are valuable to Braintree's competitors. See Jet Spray, 282 N.E.2d at 925. In sum, while the materials contain some information about Braintree's marketing strategy, that information is not protected by Massachusetts law.

C. Count II: False Advertising (Lanham Act)

Braintree alleges that Ferring has violated the Lanham Act by making four false or misleading claims about Prepopik related to: " superior cleansing efficacy" , " lowest volume" , " flexible dosing" and " helps achieve success" .

1. Legal Standard

Braintree's claim arises under Section 43(a)(1)(B) of the Lanham Act. A party violates that provision by

us[ing] in commerce [on or in connection with any goods or services] 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 ... 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....

15 U.S.C. § 1125(a)(1)(B). To prevail on a claim brought under that statute, a plaintiff must prove the following elements:

(1) [the defendant] made a false or misleading description of fact or representation of fact in a commercial advertisement about [its] own or another's product; (2) the misrepresentation is material, in that it is likely to influence the purchasing decision; (3) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience; (4) [the defendant]

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placed the false or misleading statement in interstate commerce; and (5) [the plaintiff] has been or is likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its products.

Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d 302, 310-11 (1st Cir. 2002), cert. denied, 537 U.S. 1001, 123 S.Ct. 485, 154 L.Ed.2d 396 (2002).

A plaintiff can satisfy the first element by proving either that the subject advertisement is " false on its face" , i.e. " literally false" , or that it is " literally true or ambiguous but likely to mislead and confuse consumers." Clorox Co. P.R. v. Proctor & Gamble Commercial Co., 228 F.3d 24, 33 (1st Cir. 2000) (citations omitted). While mere " exaggerated advertising, blustering and boasting upon which no reasonable buyer would rely" is not actionable, " specific and measurable claims of product superiority" are not puffery and may be literally false under the Lanham Act. Id. at 38-39 (citations omitted).

Whether an advertisement is literally false is a question of fact. Id. at 34. A fact-finder must determine 1) what claim is conveyed by the advertisement and 2) whether that claim is false. Id. The challenged statement should be viewed in the context of the advertisement as a whole. Pernod Ricard USA, LLC v. Bacardi U.S.A., Inc., 653 F.3d 241, 253 (3d Cir. 2011) (citations omitted). Furthermore, " only an unambiguous message can be literally false." Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharms. Co., 290 F.3d 578, 587 (3d Cir. 2002). Thus, an advertisement that relies upon the consumer or viewer to " integrate its components and draw the apparent conclusion" is less likely to be found literally false. Id. The sophistication of the viewing audience is ...

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