Cytyc Corp. v. Neuromedical Systems, Inc.

• Decision Date: 15 June 1998
• Docket Number: No. 97 Civ. 4642(BDP).,97 Civ. 4642(BDP).
• Citation: 12 F.Supp.2d 296
• Parties: CYTYC CORPORATION, Plaintiff, v. NEUROMEDICAL SYSTEMS, INC., Mark R. Rutenberg and Laurie J. Mango, M.D., Defendants.
• Court: U.S. District Court — Southern District of New York

12 F.Supp.2d 296

CYTYC CORPORATION, Plaintiff, v. NEUROMEDICAL SYSTEMS, INC., Mark R. Rutenberg and Laurie J. Mango, M.D., Defendants.

No. 97 Civ. 4642(BDP).

United States District Court, S.D. New York.

June 15, 1998.

COPYRIGHT MATERIAL OMITTED

Dierdre M. Daly, Gage & Pavlis, New York City, for Plaintiff.

Joseph Savage, Testa Hurwitz & Thibeault, LLP, Boston, MA, Mark Mester, Latham & Watkins, New York City, for Defendants.

MEMORANDUM DECISION AND ORDER

PARKER, District Judge.

INTRODUCTION

Plaintiff Cytyc Corporation ("Cytyc") commenced this action against Neuromedical Systems, Inc. ("NSI") and two of its officers (the "individual defendants"), asserting, among other things, claims under the Lanham Act, 15 U.S.C. § 1125(a), and New York General Business Law §§ 349 and 350. Cytyc has moved to dismiss NSI's First Amended Counterclaim (the "Counterclaim"), in which NSI asserts claims under the Lanham Act, for defamation, and for statutory and common law unfair competition under New York State law. For the reasons that follow, Cytyc's motion is granted in part and denied in part.

BACKGROUND

Both Cytyc and NSI manufacture and sell products used in the screening of cervical cells to diagnose and detect cervical cancer. Cytyc sells the ThinPrep system, an automated system for the selection of cervical cells. ThinPrep has been approved by the United States Food and Drug Administration ("FDA"). NSI manufactures the Papnet system, a computer imaging device that reexamines cervical cells collected through a conventional pap smear. The Papnet system is used in conjunction with the conventional pap smear. ThinPrep provides an alternative to the pap smear. Cytyc filed this lawsuit on the grounds that NSI and the individual defendants unlawfully disparaged Cytyc and the ThinPrep system. This Court has previously denied NSI's motion to dismiss the complaint for failure to state a claim.

NSI asserts four "counts" in its Counterclaim.¹ Count 1 alleges that Cytyc violated § 43(a) of the Lanham Act by making false and misleading representations in connection with its promotion of the ThinPrep test. Count 2 charges Cytyc with unfair competition through false advertising and deceptive acts, in violation of New York General Business Law §§ 349 and 350. Count 3 asserts a claim for defamation, in part based on a press release issued by Cytyc on August 8, 1997. Count 4 accuses Cytyc of common law unfair competition as a result of Cytyc's initiation of two lawsuits against NSI.

The core of NSI's Counterclaim is that Cytyc has made numerous false or misleading statements regarding Cytyc, the ThinPrep system, NSI, and Papnet. In support of its Counterclaim, NSI identifies thirty statements in Cytyc advertisements, press releases, or publications that NSI alleges are false or misleading. NSI's presentation of these statements is set forth in Appendix A. In general, NSI criticizes both Cytyc's own representations and the FDA procedures pursuant to which ThinPrep was approved. NSI challenges the integrity, validity, and sufficiency of Cytyc's research and testing in support of its claims about the efficacy of the ThinPrep system. For example, NSI contends that the clinical data on the basis of which the FDA approved ThinPrep was "seriously flawed." NSI identifies numerous potentially serious deficiencies in Cytyc's research. For example, Cytyc's clinical trial, according to NSI, did not "contain a statistically significant number of cases of invasive cervical cancer." NSI further contends that Cytyc's clinical tests did not replicate the conditions under which the ThinPrep system is actually used.

NSI also criticizes the FDA's procedures in reviewing ThinPrep. NSI contends that the medical community did not have an opportunity to respond to Cytyc's application for approval of ThinPrep because the FDA did not hold a public hearing on the application. The FDA failed, according to NSI, to identify numerous shortcomings in the clinical testing of ThinPrep.

As a result of the deficiencies in Cytyc's testing of ThinPrep and the FDA's lack of scrutiny, the medical community, according to NSI, continues to question the efficacy and safety of ThinPrep. Numerous members of the medical community, including individuals affiliated with NSI, have petitioned the FDA for administrative review of ThinPrep.

DISCUSSION

A district court's function on a motion to dismiss under Fed.R.Civ.P. Rule 12(b)(6) is to assess the legal feasibility of the challenged claims. Kopec v. Coughlin, 922 F.2d 152, 155 (2d Cir.1991). The issue "is not whether [the claimant] will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). Dismissal is warranted only where "it appears beyond doubt that the [claimant] can prove no set of facts in support of his claim which would entitle him to relief." Ricciuti v. NYC Transit Authority, 941 F.2d 119, 123 (2d Cir.1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (footnote omitted)). Allegations contained in the challenged pleading must be accepted as true and construed favorably to the plaintiff. Walker v. New York, 974 F.2d 293, 298 (2d Cir.1992). Of course, in ruling on a 12(b)(6) motion in a defamation case, the Court may also consider documents beyond the pleadings, provided that the parties have received notice of the documents. See Bio-Technology General Corp. v. Genentech, Inc., 886 F.Supp. 377, 381 (S.D.N.Y.1995). On a Rule 12(b)(6) motion, the Court may determine as a matter of law whether the alleged statements are in fact actionable. Church of Scientology v. Eli Lilly & Co., 778 F.Supp. 661, 666 (S.D.N.Y. 1991). If the statements are not actionable, the claims must be dismissed. Trump v Chicago Tribune, 616 F.Supp. 1434, 1435 (S.D.N.Y.1985).

Lanham Act & General Business Law Claims

"Section 43(a) of the Lanham Act proscribes false designations of origin or false or misleading descriptions of fact in connection with any goods in commerce that are likely to cause confusion or that misrepresent the nature, characteristics, qualities, or geographic origin of the goods." Groden v. Random House, 61 F.3d 1045, 1051 (2d Cir.1995). To state a claim under the Lanham Act, a party must allege that the challenged statements are "either literally false or ... though literally true ... likely to mislead and confuse consumers." McNeil-P.C.C., Inc. v. Bristol-Myers Squibb Co., 938 F.2d 1544, 1549 (2d Cir.1991). "Subjective claims about products, which cannot be proven either true or false, are not actionable under the Lanham Act." Lipton v. Nature Co., 71 F.3d 464, 474 (2d Cir.1995) (internal quotation and citations omitted). Along the same lines, sections 349 and 350 of the New York General Business Law prohibit, respectively, deceptive acts or practices in the conduct of business and false or misleading advertisements. See Nordisk A/S v. Becton Dickinson and Co., No. 96 Civ. 9506(BSJ), 1998 WL 119691, *8 (S.D.N.Y. Mar.12, 1998) (analysis under § 43(a) of Lanham Act same as under New York General Business Law) (citing Princeton Graphics Operating, L.P. v. NEC Home Electronics (U.S.A.), Inc., 732 F.Supp. 1258, 1267 (S.D.N.Y.1990)).

As a threshold matter, the Court notes that NSI's recounting of purportedly false, misleading, or deceptive assertions, reproduced in Appendix A, distorts many of Cytyc's statements through omitting crucial text, taking statements out of context or otherwise misleadingly excerpting them. For example, NSI states, in Statement 7 from Appendix A, that "Cytyc has made the false and misleading statement that the ThinPrep test `significantly improve[s] gynecological screening and diagnostic accuracy.'" In fact, the article from which the quote was taken simply states that the "Cytyc system introduces a new method of sample collection and slide preparation designed to significantly improve gynecological screening and diagnostic accuracy." Presumably, NSI does not dispute that ThinPrep was designed to improve gynecological screening and diagnostic accuracy.

To take another example, NSI states that Cytyc "has made the false and misleading statement that in clinical trials, the ThinPrep test achieved a sixty-eight percent (68%) increase in cases positively diagnosed `[a]t a typical screening site.'" Statement 4, Appendix A. In the actual statement, contained in a press release, Cytyc identified the specific screening site, and the numbers of positive cases diagnosed with the pap smear and with ThinPrep. The inclusion of such specific evidence means that this statement could not be found to be misleading. Nor is the statement false, because it merely restates clinical results accepted by the FDA and on the basis of which the FDA approved ThinPrep.

Notwithstanding NSI's abbreviated and misleading recounting of Cytyc's statements, the sufficiency of the Counterclaim is to be judged on the basis of the challenged statements read in their entirety and in context. See Sandoz Pharmaceuticals v. Richardson-Vicks, Inc., 902 F.2d 222, 229-230 (3d Cir.1990) (context is important in evaluating the message conveyed) (internal citations and quotations omitted).

Many of the challenged statements are either opinion or puffing, neither of which is actionable. See, e.g., Lipton v. Nature Co., 71 F.3d 464, 474 (2d Cir.1995) (finding claim of "thorough" research to be mere puffing and therefore not actionable); Bose Corp. v. Linear Design Labs, Inc., 467 F.2d 304, 310-311 (2d Cir.1972) (finding claim that "countless hours of research" had produced superior product to be nonactionable puffing). For example, one Cytyc advertisement, referenced by Statement 3 in Appendix A, describes ThinPrep as "the new `Gold Standard' for cytology laboratories." Similarly, Cytyc elsewhere claims that the ThinPrep system "presents cells with unprecedented clarity." Statement 6, Appendix A....