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Cytosport, Inc., A California Corporation v. Vital Pharmaceuticals

September 6, 2012

CYTOSPORT, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
VITAL PHARMACEUTICALS, INC. A FLORIDA CORPORATION,
DEFENDANT.



ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON ITS CLAIMS, GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON DEFENDANT'S COUNTER-CLAIMS, AND DENYING DEFENDANT'S MOTION FOR EMERGENCY STAY

This matter is before the Court on two motions for summary judgment filed by Plaintiff CytoSport, Inc. ("CytoSport") against Defendant Vital Pharmaceuticals, Inc. ("VPX"). The first motion is for judgment on counter-claims raised by VPX in its Amended Answer, Affirmative Defenses, and Counterclaim (Doc. # 115-1). VPX opposes the motion (Doc. # 199). The second motion is for judgment on CytoSport's fifth through eighth causes of action in its Third Amended Complaint ("TAC") (Doc. # 195). VPX also opposes this motion (Doc. # 201). VPX also filed a motion seeking an emergency stay of these proceedings pending final agency action by the Food and Drug Administration ("FDA") (Doc. # 203), which CytoSport opposes (Doc. # 207).

I. BACKGROUND

This case originated in 2008 when VPX released a product 4 called Muscle Power, a ready-to-drink protein shake. CytoSport 5 already marketed a competing product, Muscle Milk. Muscle Power 6 used the same base packaging and similar graphics including layout 7 and font in the label design for its product. CytoSport sued VPX 8 claiming that the Muscle Power product infringed on its trademark 9 and trade dress for Muscle Milk. CytoSport also claims that VPX created comparative advertisements that constitute false advertising.*fn1

Muscle Power and Muscle Milk are both marketed in octagonal tetra-packs, one of the few available FDA approved packages available for ready to drink protein drinks. The drinks retail from $3-$5 in the same retail establishments, and are targeted toward people with active lifestyles like athletes and bodybuilders.

During the short time that Muscle Milk and Muscle Power were both on the market and in direct competition, VPX ran ads that are relevant to the parties' claims. First, Muscle Power ran an ad that depicted a woman nursing a child with the caption, "MILK IS FOR BABIES, MUSCLE POWER IS FOR MEN!" prominently displayed across the ad. VPX also ran ads that claimed Muscle Power contained 600% less sugar and 183% less fat than Muscle Milk.

This case was previously assigned to Judge Damrell who issued 2 a preliminary injunction in CytoSport's favor on May 6, 2009 (Doc. 3 # 72), finding that CytoSport was likely to prevail on the merits 4 of its infringement claims. VPX subsequently withdrew Muscle Power 5 from the market and introduced a new product that did not resemble 6 Muscle Milk. 7

The parties submitted expert reports and testimony to support 8 their respective positions. VPX submitted a survey conducted by 9 Robert Klein that shows, under the circumstances of his survey, that 4.1% of consumer respondents mistake Muscle Power for Muscle Milk or as a product produced by CytoSport. CytoSport submitted a survey conducted by Hal Poret that shows, under the circumstances of his survey, that 25.4% of consumer respondents conflate Muscle Power and CytoSport products. There is also evidence in the record consisting of CytoSport employee declarations that CytoSport customers were confused as to the source of the Muscle Milk product.

On December 7, 2009, VPX filed counter-claims against CytoSport (Doc. 115). VPX claims that the use of the word "milk" on Muscle Milk, a product that contains no liquid dairy milk, is deceptive. VPX submitted a survey conducted by Gabriel Gelb that shows a mistaken belief amongst consumers, under the conditions of that survey, as to whether or not Muscle Milk contains milk. VPX also relies heavily on an FDA warning letter dated June 29, 2011 wherein the FDA preliminarily determined that the mark "Muscle Milk" as used by CytoSport is deceptive because CytoSport's product contains no milk. This warning letter, along with other documents, was submitted by VPX in a Request for Judicial Notice (Doc. # 199- 2). The theory underlying VPX's counter-claim is also central to 2 its defense on CytoSport's claims because VPX seeks to invalidate 3 CytoSport's mark, thereby making it unenforceable. As of the date 4 of this order, the FDA has not followed up on its 2011 warning 5 letter with a final determination about CytoSport's compliance with 6 applicable FDA regulations. 7

CystoSport seeks entry of judgment on five claims in its 8 complaint: Claim Five, Trademark Infringement, Violation of 15 9 U.S.C. § 1114(a); Claim Six, Trademark Infringement, Violation of Cal. Bus. & Prof. Code § 14245; Claim Seven, False Advertising, Violation of 15 U.S.C. § 1125(a) and Cal. Bus. & Prof. Code §§ 17200, 17500; and Claim Eight, Cancellation of U.S. Trademark Reg. Nos. 3,551,076 and 3,547,541 Pursuant to 15 U.S.C. § 1119. CytoSport does not move for judgment on its first through fourth claims.

CytoSport also seeks entry of judgment in its favor on the five counter-claims raised by VPX in its Answer to the TAC: 1) False Advertising, Violation of 15 U.S.C. § 1125(a); 2) False Advertising, Violation of Cal. Bus. & Prof. Code § 17500; 3) Unlawful Trade Practice, Violation of Cal. Bus. & Prof. Code § 17200; 4) Cancellation of Trademark Registrations Pursuant to 15 U.S.C. § 1119 for Violation of 15 U.S.C. § 1052(a); and 5) Declaratory Judgment Pursuant to 28 U.S.C. § 2201.

A hearing on these matters was held on August 8, 2012. At that hearing, the Court ordered additional briefing on two issues:

1) the effect of a recent Ninth Circuit decision, Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1176 (9th Cir. 2012), on VPX's FDA warning letter based counter claims, and 2) the potential impact of a final FDA decision determining that CytoSport's use of the Muscle 2 Milk mark on a product that contains no milk is deceptive. The 3 Court also granted CytoSport's motion to exclude the Gelb survey 4 and denied the motion to exclude the Klein survey for the reasons 5 discussed below in this order. 6

In sum, the following motions have been presented to the Court 7 for decision and are discussed below: 1) CytoSport's Motion for 8 Summary Judgment on Claims Five, Six, Seven and Eight; 2) 9 CytoSport's Motion for Summary Judgment on VPX's Counter-Claims; 3) CytoSport's Motions to Exclude the Expert Testimony of Gelb and Klein; 4) VPX's Request for Judicial Notice; and 5) VPX's Emergency Motion to Stay.

II. OPINION

A. Evidentiary Motions

CytoSport filed two motions to exclude VPX's expert witnesses.

The first motion is to exclude the testimony of Robert L. Klein (Doc. # 196) who conducted a survey about customer confusion between the Muscle Power and Muscle Milk marks. The second is to exclude the testimony of Gabriel M. Gelb (Doc. # 194) who conducted a survey about consumer confusion created by the use of the Muscle Milk mark on a product that contains no milk.

Under Federal Rule of Evidence 702, the district court is the "gatekeeper" in order to "ensur[e] that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 597 (1993). A district court must exclude evidence that is either not "relevant," or not conducted according to accepted principles.

Wendt v. Host Int'l, Inc., 125 F.3d 806, 814 (9th Cir. 1997) 2 (citing E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 3 1292 (9th Cir. 1992)). In the Ninth Circuit, surveys are to be 4 admitted in trademark cases so long as they are conducted according 5 to accepted principles. Gallo, 967 F.2d at 1292. "Technical 6 unreliability goes to the weight accorded a survey, not its 7 admissibility." Prudential Ins. Co. of Am. v. Gibraltar Fin. Corp. 8 of Cal., 694 F.2d 1150, 1156 (9th Cir. 1982). 9

Under Federal Rule of Evidence 403, relevant and otherwise admissible evidence may be excluded when the danger of unfair prejudice substantially outweighs its probative value.

1. Gelb Survey

At the August 8, 2012 hearing, the Court granted CytoSport's motion to exclude evidence of a survey conducted by Gabriel Gelb which was done to test confusion created by the Muscle Milk mark, i.e., the use of Muscle Milk on a product that contains no milk causes consumers to mistakenly believe that the product contains milk. The basis for the Court's decision is as follows.

The Gelb survey was a series of three questions where respondents were presented three brand names without accompanying trade dress or images of the products: Muscle Milk, ProMan-X, and Lean Body. They were then asked if each product contained a lot, some, or no protein, creatine, and milk. Consumers did not have an "I don't know" option or another means to indicate lack of knowledge. Lean Body and Muscle Milk are protein drinks, ProMan-X is a herbal male enhancement supplement. The respondent's answers indicate that a high level of guessing occurred. For instance, for ProMan-X, 98% said it contains protein, 92% creatine, and 68% milk.

ProMan-X does not contain any of these ingredients. For Muscle 2 Milk, 80% responded that it contained milk. Gelb admitted in his 3 deposition that respondents were guessing. Gelb Dep. 221:14-18. 4 CytoSport cites two cases to support its contention that the 5 Gelb survey was not conducted according to accepted principles. 6 Pharmacia Corp. v. GlaxoSmithKline Consumer Healthcare, L.P., 292 7 F. Supp. 2d 594, 603 (D.N.J. 2003) (discrediting a survey that does 8 not control for respondents' pre-existing beliefs); Procter & Gamble 9 Co. v. Ultreo, Inc., 574 F. Supp. 2d 339, 351 (S.D.N.Y. 2008) (same). VPX responds with general arguments about the adequacy of the survey, but cites no authority that shows that the methods used by Gelb are generally acceptable. VPX bears the burden of showing the admissibility of its survey, Keith v. Volpe, 858 F.2d 467, 480 (9th Cir. 1988), and it has not met its burden. Accordingly, the Gelb survey is excluded.

2. Klein Survey

CytoSport's motion to exclude a survey conducted by VPX's expert, Robert Klein was denied by the Court at the August 8, 2012 hearing for the following reasons.

The Klein survey was conducted under the guidelines established by Union Carbide Corp. v. Ever-Ready Inc., 531 F.2d 366 (7th Cir. 1976) (superseded on other grounds). Klein asked respondents to examine a container of Muscle Power and determine who made the product. 4.1% of respondents, a number that tends not to show consumer confusion, indicated that CytoSport or Muscle Milk made the product. CytoSport argues that Klein's survey failed to replicate market conditions, failed to determine whether or not respondents were aware of CytoSport or Muscle Milk before asking them questions, and failed to distinguish respondents who believed 2 that the Muscle Power product was actually Muscle Milk. 3

All of CytoSport's arguments go to the technical reliability 4 of Klein's survey. CytoSport does cite case law that finds that 5 Ever-Ready surveys are to be accorded diminished weight under 6 similar circumstances, but that is not an issue related to the 7 initial admissibility of the survey. Further, the Court is bound 8 by the Gallo decision, and CytoSport only cites district court 9 cases from other circuits to support excluding the survey. CytoSport does not dispute that the Ever-Ready format is a proper format under some circumstances, and the survey should be admitted because it is relevant to the task at hand and was conducted according to accepted principles. Gallo, 967 F.2d at 1292. CytoSport's technical reliability arguments are meritorious, but they go to the issue of weight rather than admissibility.

CytoSport's argument under Rule 403 also fails because the danger of unfair prejudice does not substantially outweigh the probative value of the survey. While CytoSport's arguments about the technical reliability of the survey are persuasive, there is little danger of unfair prejudice because CytoSport can attack the survey at trial and convince the jury that the survey is to be accorded little weight.

3. VPX's Request for Judicial Notice

The Court also considered and granted, in part, VPX's Request for Judicial Notice at the August 8, 2012 hearing. The documents consist of preliminary findings of governmental entities, previous filings of the parties, and a document from the National Advertising Division.

Generally, the Court may not consider material beyond the 2 pleadings in ruling on a motion to dismiss for failure to state a 3 claim. The exceptions are material attached to, or relied on by, 4 the complaint so long as authenticity is not disputed, or matters 5 of public record, provided that they are not subject to reasonable 6 dispute. E.g., Sherman v. Stryker Corp., 2009 WL 2241664 at *2 7 (C.D. Cal. Mar. 30, 2009) (citing Lee v. City of Los Angeles, 250 8 F.3d 668, 688 (9th Cir. 2001) and Fed. R. Evid. 201). 9

The documents submitted from governmental entities are subject to judicial notice for the fact that they exist. No party disputes that the governmental entities issued the documents, nor could they. The legal conclusions and other findings in the documents, however, are subject to dispute and the Court does not take judicial notice of the contents of the materials. The same goes for the other documents submitted. The Court may take notice that the documents exist, but not attribute any weight to their contents so long as they are disputed by either party. VPX's motion is therefore granted in part and denied in part.

B. Legal Standard for Summary Judgment

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex v. Catrett, 477 U.S. 317, 323-324 (1986).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). If the moving 2 party meets its burden, the burden of production then shifts so 3 that "the non-moving party must set forth, by affidavit or as 4 otherwise provided in Rule 56, 'specific facts showing that there 5 is a genuine issue for trial.'" T.W. Electrical Services, Inc. v. 6 Pacific Electric Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 7 1987) (quoting Fed. R. Civ. P. 56(e)). The Court must view the 8 facts and draw inferences in the manner most favorable to the non-9 moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). "[M]ere disagreement or bald assertion that a genuine issue of material fact exists will not preclude the grant of summary judgment". Harper v. Wallingford, 877 F. 2d 728, 731 (9th Cir. 1987).

The mere existence of a scintilla of evidence in support of the non-moving party's position is insufficient: "There must be evidence on which the jury could reasonably find for [the non-moving party]." Anderson, 477 U.S. at 252. This Court thus applies to either a defendant's or plaintiff's motion for summary judgment the same standard as for a motion for directed verdict, which is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id.

Federal Rule of Civil Procedure 56(d) permits a court, upon a sufficient showing of specific reasons why a non-movant cannot present facts essential to its opposition, to defer consideration of or deny a pending motion for summary judgment.

C. VPX's Counter-claims

1. Claims Barred By Deference to ...


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