Obesity Research Inst., LLC v. Fiber Research Int'l, LLC, Case No. 15–cv–00595–BAS–MDD

• Decision Date: 21 February 2018
• Docket Number: Case No. 15–cv–00595–BAS–MDD
• Citation: 310 F.Supp.3d 1089
• Parties: OBESITY RESEARCH INSTITUTE, LLC, Plaintiff, v. FIBER RESEARCH INTERNATIONAL, LLC, Defendant. And Related Counterclaim.
• Court: U.S. District Court — Southern District of California

310 F.Supp.3d 1089

OBESITY RESEARCH INSTITUTE, LLC, Plaintiff,

v. FIBER RESEARCH INTERNATIONAL, LLC, Defendant.And Related Counterclaim.

Case No. 15–cv–00595–BAS–MDD

United States District Court, S.D. California.

Signed February 21, 2018

Richard P. Sybert, Sean Flaherty, Yuo–Fong C. Amato, Patrick J. Mulkern, Gordon & Rees LLP, San Diego, CA, for Plaintiff.

Christopher Sullivan, Pro Hac Vice, Jason Kerr, Pro Hac Vice, Ronald F. Price, Pro Hac Vice, David R. Parkinson, Pro Hac Vice, Price Parkinson & Kerr PLLC, Salt Lake City, UT, Jack Fitzgerald, Tran Hai Thi Nguyen, Melanie Rae Persinger, Trevor Flynn, The Law Office of Jack Fitzgerald, PC, San Diego, CA, for Defendant.

ORDER:

(1) GRANTING IN PART AND DENYING IN PART FIBER RESEARCH INTERNATIONAL, LLC'S MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF No. 339)

AND

(2) GRANTING IN PART AND DENYING IN PART OBESITY RESEARCH INSTITUTE, LLC'S CROSS MOTION FOR SUMMARY JUDGMENT (ECF No. 345)

Hon. Cynthia Bashant, United States District Judge

Presently before the Court is Defendant/Counterclaimant Fiber Research International, LLC's ("FRI") motion for partial summary judgment (ECF No. 339) and Plaintiff/Counterdefendant Obesity Research Institute, LLC's ("ORI") cross motion for summary judgment (ECF No. 345). Both parties also submit related requests for judicial notice and evidentiary objections.

The Court finds these motions suitable for determination on the papers submitted and without oral argument. See Civ. L. R. 7.1 (d)(1). For the following reasons, the Court GRANTS IN PART AND DENIES IN PART FRI's motion for partial summary judgment (ECF No. 339) and GRANTS IN PART AND DENIES IN PART ORI's motion for cross summary judgment (ECF No. 345).

I. BACKGROUND¹

1. Factual Background

a. Introduction

Both ORI and FRI sell, or seek to sell, glucomannan dietary supplements. According to both parties, glucomannan is a soluble-viscous fiber derived from the Konjac plant root. (JSUMF ¶ 4; FACC ¶ 24; ECF No. 345 at 2.) Glucomannan is used to manufacture fiber-based weight loss supplements. (See JSUMF ¶ 1; see also FACC ¶ 24; FAC ¶ 10.) Both parties also represent that numerous studies have shown that at least some types of glucomannan are effective for losing weight. (See JSUMF ¶¶ 5–7; see also FACC ¶ 24; FAC ¶ 10). One of the main disputes between the parties is whether different types, grades, places of origin, processing procedures, and/or characteristics, including viscosity, of the specific glucomannan products alter its effectiveness on weight loss. (ECF No. 339 at 7–11, 13–15; ECF No. 345 at 3–5, 6–9.)

b. ORI and Lipozene

"In 2002, Fiber Thin, LLC entered into an agreement with its contract manufacturer, Natural Alternatives, Inc. (‘NAI’), to manufacture a fiber-based weight loss supplement also called FiberThin." (FACC ¶ 1.) "At the time of the 2002 agreement between Fiber Thin, LLC and NAI, NAI had an agreement to source all glucomannan from Shimizu [Chemical Corporation (‘Shimizu’) ]." (Id. ¶ 2.) According to ORI, in 2003, Fiber Thin, LLC's contractual rights to sell glucomannan were assigned to ORI, who eventually sold glucomannan as a supplement under the product names of "Propolene" and "Lipozene." (ECF No. 345 at 4 (citing to Ex. 22² ); JSUMF ¶ 1.) For the Fiber Thin and Propolene products, ORI contracted with NAI to manufacture these products, and NAI sourced its glucomannan from Shimizu. (JSUMF ¶ 8.)

In sum, ORI's former glucomannan products were branded as Fiber Thin and Propolene, sourcing glucomannan from Shimizu through NAI. Currently, ORI sells its glucomannan supplements branded as Lipozene, which is not manufactured with Shimizu's glucomannan.

c. Relevant Clinical Testing

"In 2003, ORI and NAI agreed to jointly fund a clinical study [ (the "Kaats Study") ] and NAI hired Dr. Gilbert Kaats and his clinical research organization, Health & Medical Research Foundation." (JSUMF ¶ 5.) "When comparing those in the placebo group to those in the treatment group Dr. Kaats found ‘a highly significant reduction in scale weight ... % body fat ... and fat mass ... without a loss of fat-free mass or bone density.’ " (Id. ¶ 6.) "The difference in mean weight lost was 4.93 pounds, and in fat lost was 3.86 pounds; thus, Dr. Kaats found that 78% of weight lost was attributable to fat." (Id. ¶ 7.) ORI's references in its Lipozene advertising to clinical findings of "78% fat loss" and its "holiday study" relate to the Kaats Study. (Id. ¶¶ 15–16.) "The Kaats Study was neither developed nor paid for by either Shimizu or FRI." (Id. ¶ 25.) An additional glucomannan study referenced by the parties is a 1984 study completed by Dr. David Walsh (the "Walsh Study"). (Ex. 118.) Yoshi Shimizu, the Chief Executive Officer of Shimizu, represents that Shimizu supplied the glucomannan studied in the Kaats Study (Propol KW) and Walsh Study (Propol A). (ECF No. 360–15 ("Shimizu Opp. Decl.") ¶¶ 4–9.)³

When advertising Lipozene, ORI makes several claims about its effectiveness and composition, and uses the Kaats Study to support some of these claims. (JSUMF ¶¶ 10–15.) For example, Lipozene's packaging advertises that it "Helps Reduce Body Fat." (Id. ¶ 10.) More specifically, Lipozene's advertising references the Kaats Study as showing that seventy-eight percent of the weight lost while taking Lipozene was fat. (Id. ¶ 15; see also Exs. 2–4, 99⁴ (showing the difference in the mean weight lost was 4.93 of which 3.86 pounds were fat).) Lipozene also states in its commercials that the study's participants "were asked not to change their diet or exercise." Lipozene also characterizes the study as "major university double blind study." (JSUMF ¶ 11.) Additionally, Lipozene's packaging stated that there are "[n]o known allergens in this product." (Id. ¶ 13.)

d. FRI and Shimizu

FRI is a Nevada limited liability corporation that was formed on December 22, 2014. (JSUMF ¶ 20.) Shimizu and FRI entered into a Distribution and Claims Assignment Agreement on February 21, 2015 ("February 2015 Agreement"). (Ex. 94.)⁵ Under Section I, titled "Assignment of Legal Claims," the agreement states "Shimizu hereby assigns to Fiber Research all rights title and interest it has to any legal claim related to the false advertising claims relying on Shimizu's studies for the products with improper Glucomannan ingredients against Obesity Research Group (Lipozene)." (Id. § I(a).) The assignment section also states that "[t]his assignment of legal claims, which is incidental to the distribution rights under Section II [Assignment of Distribution Rights in the United States], shall have a term of Three (3) years." (Id. § I(d).) Section II, titled "Assignment of Distribution Rights in the United States," states "Shimizu hereby grants to Fiber Research the right to distribute its propriety Glucomannan product in the United States in retail, on the internet and to end users." (Id. § II(a).) Further, the agreement states "[a]s to this Section II only, this assignment of distribution rights in the United States shall have a terms of Three (3) years." (Id. § II(c).) This section also includes an exclusivity provision that states "Fiber Research agrees only to sell, handle or use only Shimizu provided Glucomannan powder, Konjac powder, Yam flour or any other Glucomannan product." (Id. § II(d).)

Shimizu and FRI subsequently amended the February 2015 Agreement, making changes to the scope and duration of the legal claims assignment provision. On August 18, 2017, Shimizu and FRI amended Section I(a) to state "Shimizu hereby assigns to Fiber Research all rights title and interest it has to any legal claim related to violation of the Lahnam [sic] Act or similar law claim, false advertising, fraud, trademark, copyright, intentional interference, or any other similar claim, including, without limitation, relying on Shimizu's studies and any trademark claim, against Obesity Research Group (Lipozene)." (Ex. 93 at 1.) To be effective February 1, 2017, the parties replaced Section I(d) with the following: "Permanent Assignment of Legal Claims. The assignment of Legal Claims in Section I a. of the [February 2015] Agreement, as amended, shall be permanent and without limitation, unless agreed by the Parties in writing." (Ex. 95 at 1.)

On March 10, 2015, FRI sent a letter to ORI's general counsel regarding Lipozene and its advertising. (Ex. 107.) The letter stated, among other things, that ORI's Lipozene contains "adulterations," "is not an equivalent glucomannan product," and "has less viscosity [than Shimizu's products]." (Id. ) In the letter, FRI also accused ORI of "falsely and fraudulently market[ing] and promot[ing] Lipozene® using three clinical studies on pure, unadulterated glucomannan," taking the position that ORI's reliance on "the glucomannan studies is not scientifically valid." (Id. ) The letter also contains accusations that ORI caused "significant damages" to FRI and that ORI "[stole] ... research on the more expensive, pure product." (Id. ) And finally, FRI concluded its letter by stating that this "commercial injury gives rise to a suit for a claim under the Lanham Act." (Id. )

2. Procedural Background

On March 16, 2015, ORI filed a Complaint for Declaratory Judgment against FRI asking the Court to declare that ORI has no liability under either the Lanham Act, 15 U.S.C. §§ 1125 et seq. , or the Federal Food, Drug, and Cosmetic Act ("FFDCA"), 21 U.S.C. §§ 301 et seq. (ECF No. 1.) On April 13, 2015, FRI filed an Answer, in which it asserts the affirmative defense of unclean hands, and related counterclaims. (ECF No. 16.) FRI amended its counterclaims, and filed the FACC on May 28, 2015. (ECF No. 41.) The FACC alleges a violation of the Lanham Act (false advertising, unfair competition, and false designation in violation of section 1125(a)(1) ), a violation of California's unfair competition law ("UCL"), Cal. Bus. & Prof. Code §§ 17200 et seq. , and a violation of California's false advertising law ("FAL"), Cal. Bus. & Prof. Code §§ 17500 et seq. (Id. ) ORI filed...