Eli Lilly & Co. v. Arla Foods, Inc.

• Decision Date: 15 June 2018
• Docket Number: No. 17-2252,17-2252
• Citation: 893 F.3d 375
• Parties: ELI LILLY AND COMPANY and Elanco US, Inc., Plaintiffs-Appellees, v. ARLA FOODS, INC., and Arla Foods Production LLC, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

893 F.3d 375

ELI LILLY AND COMPANY and Elanco US, Inc., Plaintiffs-Appellees,

v.ARLA FOODS, INC., and Arla Foods Production LLC, Defendants-Appellants.

No. 17-2252

United States Court of Appeals, Seventh Circuit.

Argued September 13, 2017

Decided June 15, 2018

Rehearing and Rehearing En Banc Denied July 17, 2018

Travis Jason Tu, Steven A. Zalesin, Attorneys, Patterson, Belknap, Webb & Tyler LLP, New York, NY, Daniel Janssen, Johanna Wilbert, Attorneys, Quarles & Brady LLP, Milwaukee, WI, for Plaintiffs–Appellees.

Lawrence J. Bracken, II, Attorney, Hunton Andrews Kurth LLP, Atlanta, GA, Daniel T. Flaherty, Attorney, Godfrey & Kahn S.C., Appleton, WI, Phyllis H. Marcus, Michael A. Oakes, Attorneys, Hunton Andrews Kurth LLP, Washington, DC, for Defendants–Appellants.

Before Bauer, Rovner, and Sykes, Circuit Judges.

Sykes, Circuit Judge.

In 2017 Arla Foods, a global dairy conglomerate based in Denmark, launched a $30 million advertising campaign aimed at expanding its cheese sales in the United States. Branded "Live Unprocessed™," the campaign covers all major media platforms and targets the growing market for all-natural foods. To that end, the ads assure consumers that Arla cheese contains no "weird stuff" or "ingredients that you can't pronounce"—in particular, no milk from cows treated with recombinant bovine somatotropin ("rbST"), an artificial growth hormone. The flagship ad in the campaign features a vivid rhetorical flourish implying that milk from rbST-treated cows is unwholesome. Narrated by a seven-year-old girl, the ad depicts rbST as (among other things) a cartoon monster with razor sharp horns and electric fur.

Enter Eli Lilly & Company and its subsidiary, Elanco US, Inc. (collectively, "Elanco"). Elanco makes the only FDA-approved rbST supplement and markets it under the brand name Posilac®. Soon after the Arla ad campaign debuted, Elanco filed suit alleging that the ads contain false and misleading statements in violation of the Lanham Act. Elanco simultaneously moved for a preliminary injunction and supported the motion with copies of the ads, scientific literature documenting rbST’s safety, and evidence that a major cheese producer had decreased its demand for rbST in response to the ad campaign. The district judge concluded that Elanco has a reasonable likelihood of success on the merits and issued the requested injunction. The judge later modified his order to cure technical deficiencies.

Arla appeals, arguing that Elanco (1) failed to produce consumer surveys or other reliable evidence of actual consumer confusion; and (2) did not submit adequate evidence linking the ad campaign to decreased demand for its rbST. Arla also challenges the modified injunction as vague and overbroad and lacking adequate factual findings.

We affirm. Consumer surveys or other "hard" evidence of actual consumer confusion are unnecessary at the preliminary-injunction stage. And the evidence of causation is sufficient at this stage of the proceedings: the harm is easily traced because Elanco manufactures the only FDA-approved rbST supplement on the market. Finally, the modified injunction is sufficiently definite and adequately supported by the record and the judge’s findings.

I. Background

On April 25, 2017, Arla rolled out a $30 million advertising campaign designed to expand its presence in the United States. Dubbed "Live Unprocessed™," the campaign centers on "Americans' increasingly voracious desire to know more about the products they're eating and feeding their families." The campaign spans all platforms: television commercials, YouTube advertisements, social-media outreach, in-store advertising, and a website.

Two 30-second television commercials form the centerpiece of Arla’s campaign. One is specifically at issue here. The commercial opens with this caption: "Arla Cheese Asked Kids: What is r[b]ST?" As the audience watches a cartoon of a six-eyed monster and a fisherman, a seven-year-old girl named Leah narrates: "RbST has razor sharp horns. It's so tall that it could eat clouds. You may want to pet it but the fur is electric." The commercial then cuts to a scene of Leah enjoying a cheese sandwich, and the narrator’s voice switches to that of an adult woman: "Actually, rbST is an artificial growth hormone given to some cows, but not the cows that make Arla cheese. No added hormones. No weird stuff. Arla, live unprocessed." A small written disclaimer appears for a few seconds toward the end of the commercial: "Made with milk from cows not treated with r[b]ST. No significant difference has been shown between milk derived from r[b]ST-treated and non r[b]ST-treated cows."

Other parts of the ad campaign reiterate the claim that Arla cheese contains "no weird stuff." Arla defines "weird stuff" on its website:

No artificial additives. No ingredients that you can't pronounce. No ingredients that sound confusing or in any way like a made-up word. No ingredients with names that sound like they may be aliens with nine arms, beasts with electric fur, gigantic robots[,] or bears in disguise. No artificial growth hormones like r[b]ST.* ... Nor anything else artificial[ ] because our cheese has always been made with simple ingredients and never anything weird.

The asterisk directs readers to another part of the website containing the same disclaimer that appears in small print in the television commercial.

Elanco produces and sells the only FDA-approved rbST supplement under the brand name Posilac®. On May 19, 2017, Elanco filed suit against Arla and simultaneously moved for a preliminary injunction. The suit alleges that Arla’s ad campaign makes false and misleading statements concerning the composition, health, and safety of dairy products made from milk from rbST-treated cows. The complaint asserts claims for violation of the Lanham Act, 15 U.S.C. § 1125(a), and the Wisconsin Deceptive Trade Practices Act, WIS. STAT. § 100.20(1).

As factual support for a preliminary injunction, Elanco submitted copies of the advertisements themselves, scientific studies and expert testimony about the safety of rbST, the FDA’s regulatory guidance regarding rbST-related advertisements, and confidential information that a major cheese producer chose to terminate its use of rbST partially in response to Arla’s advertisements.

The judge held an evidentiary hearing and thereafter granted Elanco’s motion for preliminary injunctive relief. After reviewing the scientific evidence submitted by the parties, the judge found that milk from rbST-treated cows is equally safe and healthy for human consumption as other milk. He then concluded that Arla’s ads contain a "misleading message that cheese from cows treated with rbST is dangerous, unhealthy, and something that you should not feel good about feeding to your family." The judge preliminarily enjoined Arla from disseminating the ads and any others "substantially similar thereto." The order also prohibited Arla from making claims disparaging rbST or Posilac®.

Arla sought interlocutory review as permitted under 28 U.S.C. § 1292(a)(1). In its opening brief, Arla identified two technical defects in the judge’s order: it impermissibly incorporated documents by reference, and it failed to specify which advertisements or specific promotional claims were enjoined. In response Elanco returned to the district court and asked the judge to cure the technical problems in a modified order. The judge did so, issuing a modified injunction pursuant to Rule 62(c) of the Federal Rules of Civil Procedure.

II. Discussion

To win a preliminary injunction, the moving party must establish that (1) without preliminary relief, it will suffer irreparable harm before final resolution of its claims; (2) legal remedies are inadequate; and (3) its claim has some likelihood of success on the merits. BBL, Inc. v. City of Angola , 809 F.3d 317, 323–24 (7th Cir. 2015). If the moving party makes this showing, the court balances the harms to the moving party, other parties, and the public. Id.

For purposes of this appeal, Arla concedes that rbST-derived dairy products are of the same quality, nutrition, and safety as other dairy products.¹ Arla instead focuses on whether Elanco produced sufficient evidence to establish a likelihood of success on the merits of its Lanham Act claim. We review an order granting a preliminary injunction for abuse of discretion. Id. at 324. Arla also challenges the scope of the injunction, arguing that it is vague and overbroad and does not meet various formal requirements of Rule 65(d) of the Federal Rules of Civil Procedure. We review these questions of law de novo. Lineback v. Spurlino Materials, LLC , 546 F.3d 491, 504 (7th Cir. 2008).

A. Likelihood of Success on the Merits

To prevail on a deceptive-advertising claim under the Lanham Act, a plaintiff must establish that (1) the defendant made a material false statement of fact in a commercial advertisement; (2) the false statement actually deceived or had the tendency to deceive a substantial segment of its audience; and (3) the plaintiff has been or is likely to be injured as a result of the false statement.² Hot Wax, Inc. v. Turtle Wax, Inc. , 191 F.3d 813, 819 (7th Cir. 1999). We have recognized two types of actionable statements under the Lanham Act: those that are literally false and those that are literally true but misleading. Id. at 820. The evidence required to satisfy the first two elements of the claim varies according to the type of statement at issue.

A literally false statement will necessarily deceive consumers, so extrinsic evidence of actual consumer confusion is not required. Id. We have characterized statements in this category as "bald-faced, egregious, undeniable, [and] over the top." Schering-Plough Healthcare Prods., Inc. v. Schwarz Pharma, Inc. , 586 F.3d 500, 513 (7th Cir. 2009). The inquiry asks whether the defendant made an explicit representation of fact that on its face conflicts with reality. See BASF Corp. v. Old World Trading Co. , 41 F.3d...