Vascular Solutions v. Marine Polymer Tech.

• Decision Date: 23 December 2009
• Docket Number: No. 08-1911.,08-1911.
• Parties: VASCULAR SOLUTIONS, INC., Plaintiff, Appellee, v. MARINE POLYMER TECHNOLOGIES, INC., Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

590 F.3d 56

VASCULAR SOLUTIONS, INC., Plaintiff, Appellee, v. MARINE POLYMER TECHNOLOGIES, INC., Defendant, Appellant.

No. 08-1911.

United States Court of Appeals, First Circuit.

Heard February 4, 2009.

Decided December 23, 2009.

Peter D. Vogl with whom Todd R. Geremia and Jones Day were on brief for appellant.

J. Thomas Vitt with whom David Y. Trevor, Clifford S. Anderson and Dorsey & Whitney LLP were on brief for appellee.

Before BOUDIN, STAHL and LIPEZ, Circuit Judges.

PER CURIAM.

Vascular Solutions, Inc. ("VSI") and Marine Polymer Technologies, Inc. ("MPT") sell differently designed medical patches that are designed to stop bleeding after specific medical procedures, including catheterizations. Each accused the other of spreading false statements about its particular product. Awarding nothing to MPT, the jury found VSI was entitled to damages of $4.5 million in lost profits on its product disparagement claim, and it is from that judgment that MPT now appeals.

The background facts can be briefly summarized, recounted in light of the jury's verdict. Mendez-Matos v. Municipality of Guaynabo, 557 F.3d 36, 40 (1st Cir.2009). Both MPT's "SyvekPatch" and VSI's "D-Stat Dry" are commonly used after cardiac catheterization procedures, which are performed to examine blood vessels in the heart. Applied to the skin surface like a bandage, the patches stem blood flow at the site of a physician's puncture of a patient's major artery in the upper thigh, which is made to start the catheterization. The patches are intended to operate more quickly and less invasively than older methods for halting post-catheterization bleeding.

VSI's D-Stat Dry patch uses bovine thrombin—a compound derived from cow's blood—as its active ingredient. The ingredient creates the risk, which increases with multiple exposures of the patient to the ingredient, of triggering antibodies and therefore possible complications (which may include excessive bleeding or blood clots). An FDA-approved warning appears in D-Stat Dry's written instructions for use. However, the ingredient seals wounds rapidly and, by the time of trial, VSI had sold more than one million D-Stat Dry patches, without reports of severe bleeding or blood clots resulting from proper use of the device.

VSI began selling D-Stat Dry in September 2003: it sold 19,000 devices during the remainder of 2003 and 164,000 in 2004. In early 2005, Howard Root, VSI's chief executive officer ("CEO"), and VSI's chief financial officer developed a three-year sales forecast, projecting that sales of VSI's patch would grow from an estimated 282,000 in 2005 (one-third of the market) to 467,000 in 2007 (one-half of the market). VSI's sales leveled off, however, and the company achieved about a 37 percent market share by 2007.

Several years earlier, MPT had won FDA approval for its own clotting bandage, now named the SyvekPatch, which uses a thin fiber produced by the diatom, a single-celled marine organism. MPT's sales of the patch grew rapidly through 2002, but growth declined in subsequent years. MPT concluded that its sales had been affected by false information about its patch disseminated by VSI starting in 2003, and it counter-attacked by providing to its own sales agents negative information about VSI's product.

After gentler critiques of D-Stat Dry failed to stop the decline in MPT's sales, MPT's marketing director, Peter Stevens, prepared an informational bulletin dated March 2, 2004 (the "marketing bulletin"), drawing on material in a scientific paper published in 2001 (the "Ortel article"). The bulletin, in an introductory large-type message, asserted, "YOU CAN'T USE D-STAT AND `DO NO HARM' "—a reference to the Hippocratic Oath—and contained five statements later successfully challenged by VSI as product disparagement (the first two being the two sentences contained in the substantive paragraph that follows):

The message to communicate to all health care providers is:

After one application of bovine thrombin there is a 95% patient risk of developing antibodies to it, and a 51% risk of developing antibodies to human factor V. After just two exposures to topical thrombin there is a 36% risk of developing abnormal coagulation results leading to events such as excessive post-op bleeding, gastrointestinal bleeding, and hemorrhagic stroke.

The other statements challenged by VSI were the first three of five numbered points that appeared farther down on the first page of the bulletin:

1. Bovine thrombin [e.g. D-Stat] is extremely immunogenic; after just one exposure to Bovine thrombin 95% of patients raise antibodies to it.

2. Bovine thrombin carries a very high risk of causing serious permanent bleeding disorders in 51% of patients. Excessive post-op bleeding, gastrointestinal bleeding, and hemorrhagic stroke occur—after only 2 exposures to bovine thrombin.

3. After a second exposure to thrombin, 51% of patients develop antibodies to HUMAN Factor V and 36% have abnormal coagulation results—the effect is irreversible for life.

The bulletin was sent electronically and presented in training sessions to MPT's sales force for its message to be communicated to customers without giving them the bulletin itself. A VSI sales agent discovered the document while visiting a customer, and Root then wrote to MPT's president asking for correction of false and misleading statements. Root asserted, for example, that the Ortel article rested on a study using an "extremely impure and since-discontinued" form of bovine thrombin rather than the purer D-Stat Dry version, and said that certain of the data concerned patients who had undergone "massively-invasive" surgeries rather than minimally invasive catheterization procedures.

MPT did not respond and VSI filed the present action in federal district court in Minnesota in May 2005; the case was later transferred to the District of Massachusetts. The only one of VSI's claims to survive the trial was its product disparagement claim (we need not discuss the others or MPT's counterclaims which also failed). Following a 10-day trial, the jury awarded VSI $4.5 million, a little more than half of the $8.4 million in damages VSI had sought. The jury made specific findings that these five statements were false and, in light of the jury instructions, had to find that MPT made them with actual malice. The district court enjoined MPT's further use of the false statements.

On appeal, MPT challenges the jury's verdict for VSI. MPT contends that VSI failed to prove malice by clear and convincing evidence and, alternatively, that VSI was not entitled to the judgment because the evidence did not show specific lost sales attributable to MPT's conduct and so was insufficient evidence of special damages as a matter of law. The parties assume in their briefs that Massachusetts law governs VSI's product disparagement claim; we therefore do likewise. See Nagle v. Acton-Boxborough Reg'l Sch. Dist., 576 F.3d 1, 3 (1st Cir.2009).

Starting with malice, we note that neither the Supreme Court nor this one has decided whether the First Amendment requires in product disparagement actions the actual malice standard of New York Times Co. v. Sullivan, 376 U.S. 254, 279-80, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964); at least one circuit has rejected that proposition for a similar cause of action, see Procter & Gamble Co. v. Amway Corp., 242 F.3d 539, 552 & n. 26 (5th Cir.2001) (Lanham Act commercial disparagement), cert. denied, 534 U.S. 945, 122 S.Ct. 329, 151 L.Ed.2d 243 (2001). Whether Massachusetts courts might independently read such a requirement into its common law cause of action is also unclear.¹

The parties tried the case before us on the premise that actual malice is required, and we accept that view solely for the purposes of this case. Bose Corp. v. Consumers Union of the U.S., Inc., 692 F.2d 189, 194 (1st Cir.1982) (accepting that the actual malice standard applied in a product disparagement case where the parties did not dispute it), aff'd, 466 U.S. 485, 104 S.Ct. 1949, 80 L.Ed.2d 502 (1984); Suzuki Motor Corp. v. Consumers Union of U.S., Inc., 330 F.3d 1110, 1133-34 & n. 11 (9th Cir.) (same), cert. denied, 540 U.S. 983, 124 S.Ct. 468, 157 L.Ed.2d 373 (2003). Such a requirement might seem far afield from the concerns animating the New York Times case—itself an innovation not known to the common law—but this is an issue for another case.

To prove actual malice, VSI had to provide clear and convincing evidence that MPT's marketing director made the challenged statements "with knowledge that [they were] false or with reckless disregard of whether [they were] false or not." New York Times, 376 U.S. at 279-80, 287, 84 S.Ct. 710; Bose, 692 F.2d at 195. Thus Stevens must have had a "high degree of awareness of their probable falsity" to meet the actual malice standard, Garrison v. Louisiana, 379 U.S. 64, 74, 85 S.Ct. 209, 13 L.Ed.2d 125 (1964); for recklessness the evidence must permit the conclusion that he "in fact entertained serious doubts as to the truth of his publication," St. Amant v. Thompson, 390 U.S. 727, 731, 88 S.Ct. 1323, 20 L.Ed.2d 262 (1968).

Subjecting the jury's malice determination to our own independent review, as we must, see Bose, 466 U.S. at 510-11, 104 S.Ct. 1949, we find that the evidence supports the jury's finding that the statements were false and provides ample proof of malice for at least the principal challenged statements; and, for reasons that will appear, this is an ample basis for satisfying the malice requirement, assuming it exists.

The most inflammatory of the five statements, and the most glaringly unsupported, are the two that associated D-Stat Dry with specific and serious outcomes in percentages that would be remarkable for a relatively straightforward medical task—to stop bleeding at a modest-size doctor-created incision. If believed, they would certainly deter use of a product for a result that could be achieved by other, long-used...