ImprimisRx, LLC v. OSRX, Inc.

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 IMPRIMISRX, LLC, Case No. 21-cv-01305-BAS-DDL 11 Plaintiff,

ORDER: 12 v.

(1) DENYING DEFENDANTS’ 13 MOTION TO EXCLUDE PLAINTIFF’S WITNESSSES (ECF 14 OSRX, INC.; OCULAR SCIENCE, INC., No. 189-1);

15 Defendants. (2) GRANTING DEFENDANTS’ MOTION FOR PARTIAL 16 SUMMARY JUDGMENT (ECF No. 168-1); 17

AND 18

(3) GRANTING IN PART AND 19 DENYING IN PART PLAINTIFF’S MOTION FOR PARTIAL 20 SUMMARY JUDGMENT (ECF No. 171-1) 21

22 23 Before the Court are two motions for partial summary judgment by the parties and a 24 motion by Defendants to exclude belatedly identified witnesses. (ECF Nos. 168-1, 171-1, 25 189-1.) Defendants OSRX, Inc. and Ocular Science, Inc. filed a motion for partial 26 summary judgment with respect to Plaintiff ImprimisRx, LLC’s false advertising claims 27 and their affirmative defense of unclean hands. (ECF No. 168-1.) Plaintiff ImprimisRx 28 filed a motion for cross summary judgment with respect to its false advertising claims 1 against Defendants and with respect to Defendants’ false advertising counterclaims. (ECF 2 No 171-1.) Defendants also filed a motion to exclude twelve witnesses identified in 3 Plaintiff’s amended witness disclosures following the close of fact discovery. (ECF No. 4 189-1). 5 For the following reasons, the Court DENIES Defendants’ motion to exclude 6 Plaintiff’s belatedly identified witnesses and reopens fact discovery solely to allow for the 7 deposition of these witnesses, GRANTS Defendants’ motion for partial summary 8 judgment, and GRANTS IN PART AND DENIES IN PART Plaintiff’s motion for partial 9 summary judgment. 10 11 BACKGROUND 12 I. Factual and Regulatory Background 13 Both Plaintiff and Defendants are compounding pharmacies that focus on 14 medications used in optometry and ophthalmology. Compounding is the practice of 15 combining, mixing, or altering ingredients of an existing drug to create a product tailored 16 to the needs of a specific patient. (ECF No. 171-1 at 8.) Ordinarily, the Federal Food, 17 Drug, and Cosmetic Act (“FDCA”) requires drug-makers to obtain approval to sell 18 pharmaceutical products under extended, rigorous approval guidelines. However, Sections 19 503A and 503B of the FDCA provide exceptions from those approval guidelines for 20 compounded drugs under certain conditions. There are two versions of compounding 21 pharmacies under these exceptions: Section 503A pharmacies fill prescriptions for 22 individual patients and Section 503B pharmacies produce compounded products in large 23 quantities that are not necessarily tied to a specific patient. Plaintiff ImprimisRx operates 24 both a Section 503A pharmacy and a Section 503B pharmacy. (ECF No. 171 at 9.) 25 Defendants OSRX and Ocular Science operate only a Section 503A pharmacy. (Id. at 10.) 26 Section 503A allows for drugs compounded “for an identified individual patient . . . 27 [that are] necessary for the identified patient” to be exempted from the typical FDCA drug- 28 approval requirements if certain conditions are met. 21 U.S.C. § 353a. This exemption 1 applies where: (1) the drug compounding occurs after the receipt of a valid, individual 2 prescription; or (2) the drug compounding occurs before the receipt of a valid, individual 3 prescription “based on a history of . . . receiving valid prescription orders for the 4 compounding of the drug product” within an “established relationship” between the 5 compounding pharmacy and the prescriber. Id. 6 Among other conditions, Section 503A also requires compliance with the 7 “applicable United States Pharmacopeia (“USP”) . . . monograph if one exists, and the 8 [USP] chapter on pharmacy compounding.” USP General Chapter 797 “describes the 9 minimum standards to be followed when preparing compounded sterile human and animal 10 drugs” including “ophthalmic dosage forms.” USP Chapter 797 § 1. USP Chapter 797 11 provides numerous regulations and procedures that must be followed including garbing, 12 labeling, cleaning, monitoring, and testing requirements. Violations of the sterile 13 manufacturing requirements of USP Chapter 797 also imply non-compliance with Section 14 503A of the FDCA. 15 Section 503B provides an exception to the FDCA’s drug approval guidelines for 16 bulk compounded drug products sold to practitioners and hospitals as “office stock” to be 17 available for use on an as-needed basis. 21 U.S.C. § 353b. These outsourcing facilities 18 are exempted from the FDCA’s premarket approval requirements if eleven statutory 19 criteria are met. Id. 20 II. Procedural Background 21 The Court addresses Defendants’ motion to exclude Plaintiff’s belatedly identified 22 witnesses and the parties’ cross motions for summary judgment on false advertising claims 23 brought under the Lanham Act, 15 U.S.C. §1125 (a). On July 20, 2021, Plaintiff 24 commenced this action alleging claims of false advertising, trademark infringement, false 25 designation of origin, common law unfair competition, copyright infringement, and 26 violation of California’s Unfair Competition Law. (ECF No. 1.) On April 14, 2023, 27 ImprimisRx filed the operative Third Amended Complaint. (ECF No. 145.) 28 1 Relevant to the motions before the Court, Plaintiff asserts that Defendants engaged 2 in false advertising in violation of the Lanham Act by: claiming they operate in compliance 3 with Section 503A of the FDCA (“Section 503A Compliance Claims”); claiming their 4 products “are safe and effective, and appropriate for the treatment of certain maladies” 5 (“Safety and Efficacy Claims”); claiming studies show the safety and efficacy of their 6 products (“Study Claims”); claiming their products can be used to treat certain diseases, 7 such as glaucoma, or used as LASIK drops, when they cannot (“Disease Use Claims”); and 8 failing to disclose contraindications associated with their drugs (“Contraindications 9 Claims”). In its Opposition to Defendants’ motion, Plaintiff clarified it does not intend to 10 pursue its Safety and Efficacy Claims or Study Claims at trial but does intend to pursue its 11 Section 503A Compliance, Disease Use, and Contraindications Claims at trial. (ECF No. 12 203 at 10.) Accordingly, the Court does not review Plaintiff’s Safety and Efficacy Claims 13 or Study Claims here. 14 On May 13, 2022, Defendants filed their Answer and Counterclaims to Plaintiff’s 15 Amended Complaint which asserted four false advertising counterclaims. (ECF No. 30.) 16 Defendants contend Plaintiff engaged in false advertisements through: statements by Mark 17 L. Baum, the CEO of ImprimisRx’s parent company, claiming ImprimisRx is “compliant 18 with highest quality standards” and is “100% dedicated to patient safety and regulatory 19 compliance” (“Baum Claims”); statements in a video by John Saharek, ImprimisRx’s 20 president, that Plaintiff uses “strict sterile manufacturing processes” where “[e]ach 21 formulation is properly labeled” and then “approved using validated and stringent testing 22 requirements” (“Saharek Claims”); statements on ImprimisRx’s website that ImprimisRx 23 “provides sterile compounded formulations you can trust” (“Trust Claims”); and 24 statements that ImprimisRx is compliant with USP standards for its sterility testing, beyond 25 date use, pre-shipment quarantine, and endotoxin testing internal monitoring procedures 26 (“USP Claims”). (ECF No. 152 at 21–22.) 27 On June 2, 2023, Plaintiff and Defendants filed the present motions for partial 28 summary judgment with respect to Plaintiff’s false advertising claims and Defendants’ 1 false advertising counterclaims. (ECF Nos. 168-1, 171-1.) In specific, Plaintiff moves for 2 partial summary judgment on its Section 503 Compliance Claims. (ECF No. 171-1 at 10– 3 11.) Defendants move for cross summary judgment on this claim and Plaintiff’s Safety 4 and Efficacy claims. (ECF No. 168-1 at 14.) Additionally, Defendants move for summary 5 judgment on their unclean hands defense. (ECF No. 168-1 at 25–26.) Plaintiff also brings 6 a motion for partial summary judgment on Defendants’ false advertising counterclaims. 7 In addition to the parties’ cross motions for summary judgment, the Court considers 8 Defendants’ motion to exclude Plaintiff’s belatedly identified witnesses. (ECF No. 189-1.) 9 On February 24, 2022, Plaintiff served Rule 26(a) initial disclosures on Defendants. (ECF 10 No. 200 at 6.) On March 2, 2023, the fact discovery window closed. (ECF No. 91.) On 11 April 28, 2023, Kelsey Deschamps, a former OSRX employee, left a voicemail for 12 Plaintiff’s counsel claiming she had information that would be pertinent to the litigation. 13 (ECF No. 200 at 7.) Plaintiff was unaware of Deschamps prior to this voicemail. (Id.) 14 Twenty days after Deschamps left her voicemail, on May 18, 2023, Plaintiff served 15 amended disclosures adding twelve new witnesses, ten of which are former OSRX 16 employees, including Deschamps. (Id. at 8.) Defendants now move to exclude the 17 evidence to be offered by these twelve witnesses. (ECF No. 189-1.) 18 ANALYSIS 19 I. Defendants’ Motion to Exclude Plaintiff’s Witnesses 20 Defendants move to exclude the twelve witnesses newly identified in Plaintiff’s 21 Second Amended Initial Disclosures under Rules 26 and 37 of the Federal Rules of Civil 22 Procedure. (ECF No. 189-1.) Fact discovery for this case was closed March 2, 2023. (ECF 23 No. 91.) On May 18, 2023, Plaintiff served its Second Amended Initial Disclosures 24 identifying the twelve new witnesses, who are all current or former OSRX employees. 25 (ECF No. 189-1 at 6.) Plaintiff contends it was not previously aware of these witnesses or 26 their testimony before Deschamps left a voicemail on April 28, 2023. (ECF No. 200 at 6.) 27 Federal Rule of Civil Procedure 26(a) requires “a party must, without awaiting a 28 discovery request, provide to the other parties . . . the name and, if known, the address and 1 telephone number of each individual likely to have discoverable information—along with 2 the subjects of that information—that the disclosing party may use to support its claims or 3 defenses, unless the use would be solely for impeachment[.]” Fed. R. Civ. P. 4 26(a)(1)(A)(i). Additionally, Rule 26(e) requires: 5 “[a] party who has made a disclosure under Rule 26(a)—or who has responded to an interrogatory, request for production, or request for admission—[to] 6 supplement or correct its disclosure or response . . . in a timely manner if the 7 party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not 8 otherwise been made known to the other parties during the discovery process 9 or in writing[.]” 10 Fed. R. Civ. P. 26(e)(1)(A). 11 Where “a party fails to provide information or identify a witness as required by Rule 12 26(a) or (e), the party is not allowed to use that information or witness to supply evidence 13 on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is 14 harmless.” Fed. R. Civ. P. 37(c)(1). “In addition to or instead of this sanction, the court on 15 motion and after being given an opportunity to be heard” may instead “order payment of 16 the reasonable expenses, including attorney’s fees, caused by the failure[,] may inform the 17 jury of the party’s failure[,] and may impose other appropriate sanctions[.]” Id. 18 Plaintiff argues it did not violate its Rule 26(a) or (e) discovery obligations because 19 it was previously unaware of Deschamps and amended its disclosures “in a timely manner” 20 once it verified Deschamps’s information. (ECF No. 200 at 11–12.) Defendants insist 21 Plaintiff was dilatory by taking three weeks to investigate Deschamps’s claims and should 22 have been aware of Deschamps if ImprimisRx had exercised proper diligence in 23 investigating the case. (ECF No. 189-1.) 24 Amended disclosures served after the close of discovery are presumptively untimely. 25 See, e.g., Ashman v. Solectron, Inc., No. CV 08-1430 JF, 2010 WL 3069314, at *4 (N.D. 26 Cal. Aug. 4, 2010). Here, however, Plaintiff was not aware of Deschamps or any of the 27 belatedly disclosed witnesses and was not aware of the content of their testimony prior to 28 Deschamps recording her voicemail. Rule 26(e) creates a “duty to supplement” but that 1 duty cannot attach before Plaintiff was aware of the information to be supplemented. Cf. 2 Luke v. Family Care and Urgent Med. Clinics, 323 F. App’x 496, 500 (9th Cir. 2009) 3 (noting “[s]upplementation under the Rules means correcting inaccuracies, or filling the 4 interstices of an incomplete report based on information that was not available at the time 5 of the initial disclosure”) (quoting Keener v. United States, 181 F.R.D. 639, 640 (D. Mont. 6 1998)). As follows, Plaintiff was not “untimely” in disclosing Deschamps and the other 7 identified witnesses after receipt of her voicemail. See Dayton Valley Investors, LLC v. 8 Union Pac. R. Co., No. 2:08-CV-00127-ECR, 2010 WL 3829219, at *3 (D. Nev. Sept. 24, 9 2010) (holding “[t]iming is better gauged in relation to the availability of the supplemental 10 information” rather than the timing of the discovery cutoff date). 11 Even if Plaintiff’s disclosure was untimely under Rule 26(e), the Court may decline 12 to impose Rule 37(c)(1) exclusion where the discovery violation was either substantially 13 justified or harmless. See, e.g., Erhart v. BofI Holding, Inc., No. 15-cv-02287-BAS, 2022 14 WL 84389, at *2 (S.D. Cal. Jan. 7, 2022). The Ninth Circuit “give[s] particularly wide 15 latitude to the district court’s discretion to issue sanctions under Rule 37(c)(1).” Yeti by 16 Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). Courts 17 consider several factors to determine whether substantial justification or harmlessness 18 exists: (1) prejudice or surprise to the party against whom the evidence is offered; (2) the 19 ability of that party to cure the prejudice; (3) the likelihood of disruption of trial; and (4) 20 bad faith or willfulness in not timely disclosing the evidence. See Lanard Toys Ltd. v. 21 Novelty, Inc., 375 F. App’x 705, 713 (9th Cir. 2010). 22 In reviewing these factors, the Court does not find bad faith or willfulness in waiting 23 three weeks to disclose these new witnesses. Plaintiff needed sufficient time to verify the 24 new witnesses’ proposed testimony and determine it intended to use this information at 25 trial. A three week window to accomplish these tasks is not dilatory and does not amount 26 to bad faith. Further, trial is unlikely to be disrupted as the trial schedule has been vacated 27 in this matter. Compare Soverns v. Delta Air Lines, Inc., No. 20-CV-06258-BLF, 2023 28 WL 2768431, at *2 (N.D. Cal. Apr. 3, 2023) (holding a belated disclosure harmless where 1 the disclosures were made months before trial), with Montalvo v. Am. Family Mut. Ins. Co., 2 No. CV-12-02297-PHX-JAT, 2014 WL 2986678, at *7 (D. Ariz. July 2, 2014) (holding 3 disruption to the trial schedule was prejudicial to the moving party). Defendants will not 4 be forced to make “last-minute preparations and decisions on the run” here. See Ollier v. 5 Sweetwater Union High Sch. Dist., 768 F.3d 843, 863 (9th Cir. 2014). 6 Defendants, however, will be prejudiced if they are unable to depose the newly 7 identified witnesses to understand the extent of their knowledge and their testimony. See 8 Soverns, 2023 WL 2768431, at *2. Accordingly, the Court finds that reopening discovery 9 for the sole purpose of allowing Defendants to depose the twelve newly identified 10 witnesses is appropriate. Defendants’ motion to exclude these witnesses’ testimony is 11 therefore denied and discovery reopened to depose the new witnesses. 12 II. Summary Judgment 13 A. Legal Standard 14 Summary judgment is proper on “each claim or defense” “or the part of each claim 15 or defense” when “there is no genuine dispute as to any material fact and the movant is 16 entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A fact is “material” if it 17 might affect the outcome of the suit under the governing law, and a dispute is “genuine” if 18 there is sufficient evidence for a reasonable trier of fact to decide in favor of the nonmoving 19 party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 20 Summary judgment is appropriate if “particular parts of materials in the record, 21 including depositions, documents, electronically stored information, affidavits or 22 declarations, stipulations . . . admissions, interrogatory answers, or other materials” show 23 that a “a fact cannot be.” Fed. R. Civ. P. 56(c). “[T]he district court may limit its review 24 to the documents submitted for the purposes of summary judgment and those parts of the 25 record specifically referenced therein.” Carmen v. San Francisco Unified Sch. Dist., 237 26 F.3d 1026, 1030 (9th Cir. 2001). The court is not obligated “to scour the record in search 27 of a genuine issue of triable fact.” Keenan v. Allen, 91 F.3d 1275, 1279 (9th Cir. 1996) 28 (quoting Richards v. Combined Ins. Co. of Am., 55 F.3d 247, 251 (7th Cir. 1995)). When 1 resolving a motion for summary judgment, the court must view all inferences drawn from 2 the underlying facts in the light most favorable to the nonmoving party. See Matsushita 3 Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The court does not 4 make credibility determinations or weigh conflicting evidence. See Anderson, 477 U.S. at 5 255. The court’s role at summary judgment “is to isolate and dispose of factually 6 unsupported claims” so that they are “prevented from going to trial with the attendant 7 unwarranted consumption of public and private resources.” Celotex Corp. v. Catrett, 477 8 U.S. 317, 323–24, 327 (1986). “Disputes over irrelevant or unnecessary facts will not 9 preclude a grant of summary judgment.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors 10 Ass’n, 809 F.2d 626, 630 (9th Cir. 1987). 11 The party seeking summary judgment bears the initial burden of establishing the 12 absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 323. The moving 13 party can satisfy its burden in two ways: (1) by presenting evidence that negates an essential 14 element of the nonmoving party’s case or (2) by demonstrating that the nonmoving party 15 failed to make a showing sufficient to establish an element essential to that party’s case on 16 which that party will bear the burden of proof at trial. Id. at 322–23. If the moving party 17 fails to discharge this initial burden, summary judgment must be denied and the court need 18 not consider the nonmoving party’s evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 19 159–60 (1970). 20 If the moving party meets its burden, the nonmoving party must go beyond the 21 pleadings and, by its own evidence or by citing appropriate materials in the record, show 22 by sufficient evidence that there is a genuine dispute for trial. Celotex Corp., 477 U.S. at 23 324. The party “must do more than simply show that there is some metaphysical doubt as 24 to the material facts . . . [w]here the record as a whole could not lead a rational trier of fact 25 to find for the non-moving party, there is no ‘genuine issue for trial.’” Matsushita, 475 26 U.S. at 587 (quoting First Nat. Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968)). 27 A “scintilla of evidence” in support of the nonmoving party’s position is insufficient; “there 28 must be evidence on which the jury could reasonably find for the [nonmoving party].” 1 Anderson, 477 U.S. at 252. See also Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 2 1221 (9th Cir. 1995). Nor can “a party . . . manufacture a genuine issue of material fact 3 merely by making assertions in its legal memoranda.” S.A. Empresa de Viacao Aerea Rio 4 Grandense (Varig Airlines) v. Walter Kidde & Co., Inc., 690 F.2d 1235, 1238 (9th Cir. 5 1982) (citations omitted). 6 B. Plaintiff’s Lanham Act False Advertising Claims 7 Plaintiff moves for partial summary judgment on its claim that Defendants violate 8 the false advertising provision of the Lanham Act by claiming that “OSRX operates in full 9 compliance with Section 503A regarding compounded drugs as defined in the [FDCA].” 10 (ECF No. 171-1 at 10–11.) Defendants also move for partial summary judgment on this 11 claim and Plaintiff’s other false advertising claims. (ECF No. 168-1 at 9.) 12 The elements of a Section 43(a) false advertising claim under the Lanham Act are: 13 (1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product; 14 (2) the statement actually deceived or has the tendency to deceive a substantial 15 segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing 16 decision; (4) the defendant caused its false statement to enter interstate 17 commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false 18 statement, either by direct diversion of sales from itself to defendant or by a 19 lessening of the goodwill associated with its products. 20 Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) (citing Cook, 21 Perkiss and Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 244 (9th Cir. 22 1990)). The Court will analyze each element of ImprimisRx’s false advertising claims in 23 turn. 24 1. Falsity 25 Plaintiff contends the material facts establish that OSRX’s claim it “operates in full 26 compliance with Section 503A regarding compounded drugs as defined in the [FDCA]” is 27 literally false. (ECF No. 171-1 at 24.) Plaintiff argues Defendants are not in compliance 28 with Section 503A based on two theories: (1) Defendants instruct prescribers to place bulk 1 product orders, rather than for particular patients, and provide “office stock” for use by 2 unspecified future patients; and (2) Defendants fail to compound drugs in a sterile manner 3 in violation of USP Chapter 797. (Id.) 4 To demonstrate falsity under the Lanham Act, “a plaintiff may show that the 5 statement was literally false, either on its face or by necessary implication, or that the 6 statement was literally true but likely to mislead or confuse consumers.” Southland Sod 7 Farms, 108 F.3d at 1139. When evaluating whether a claim is literally false, the claim 8 must always be analyzed in its full context. Id. “Literal falsity is a question of fact, and 9 summary judgment should not be granted where a reasonable jury could conclude a 10 statement is not false.” K&N Eng’g, Inc. v. Spectre Performance, No. EDCV 09-01900- 11 VAP, 2011 WL 4387094, at *9 (C.D. Cal. Sept. 20, 2011) (citing Southland Sod Farms, 12 108 F.3d at 1144–45). 13 i) Bulk Ordering 14 Plaintiff claims Defendants’ statement is literally false because OSRX provides bulk 15 order prescriptions and “office stock” in contravention of the requirements of Section 503A 16 of the FDCA. Section 503A, as an exception to the FDCA’s general drug approval 17 requirements, is limited to products “compounded for an identified individual patient based 18 on the receipt of a valid prescription order” or where a history of receiving valid 19 prescriptions exists between the compounding pharmacy and the prescriber. 21 U.S.C. § 20 353a. 21 Office stock are prescriptions held by prescribers for use by future, unspecified 22 patients. Section 503B outsourcing facilities are permitted to distribute compounded drugs 23 without a valid prescription and provide office stock, but Section 503A compounding 24 pharmacies are limited to only providing products for specific patients. See Prescription 25 Requirement Under Section 503A of the Federal Food, Drug, and Cosmetic Act: Guidance 26 for Industry, U.S. Department of Health and Human Services Food and Drug 27 Administration (Dec. 2016), https://www.fda.gov/media/97347/download. Accordingly, 28 1 providing bulk supplies of compounded medications as office stock is prohibited under 2 Section 503A. 3 In support of its office stock theory, Plaintiff offers email correspondence between 4 Defendants’ sales agents and various prescribers where Defendants advise customers to 5 order four bottles of ophthalmological solution per patient. (ECF No. 171-1 at 13–16.) 6 Plaintiff contends four bottles exceeds what is needed per patient and, because the bottles 7 are not labeled with patient names, this strategy works to generate office stock in 8 contravention of Section 503A. (Id.) Plaintiff’s pharmacy operations expert, Dr. Kenneth 9 Schell, opines this four bottle order strategy helps skirt Section 503A’s bulk order 10 prohibition. (Id.) In response, Defendants argue four bottles is an appropriate quantity of 11 product per patient. (ECF No. 206 at 14.) Defendants offer deposition testimony by Dr. 12 Damien Goldberg and Amy Frost that dosing regimens are patient and physician specific 13 and that there is a range of plausible bottles per patient. (Id. at 14–15.) 14 In reviewing the evidence, the Court finds the question of whether four bottles per 15 patient is excessive is contested. Plaintiff has offered the testimony of its medical experts 16 and Defendant has countered with its own expert testimony and declarations. (ECF Nos. 17 171-1 at 12, 206 at 14–15.) Ultimately, the question of whether four bottles per patient is 18 appropriate, and subsequently interpreting whether that sales tactic is a workaround for 19 Section 503A’s individual prescription requirements, is not undisputed given the evidence 20 before the Court. 21 Further, even if there was no controversy over the appropriate amount of product 22 dispensed per patient, there is a factual dispute over whether Defendants actually 23 distributed the product discussed in their sales emails. Defendants assert the sales emails 24 describe their sales and marketing communications rather than their dispensing practices. 25 (Id. at 16.) Defendants assert the prescription data reviewed by Dr. Alyson Wooten shows 26 bulk orders and office stock were not actually provided. (ECF No. 206 at 17.) To support 27 its theory that these products were dispensed, Plaintiff provides the declarations of three 28 former OSRX employees who all claim OSRX shipped large quantities of product without 1 individual patient prescriptions. (ECF No. 171-1 at 15.) In turn, Defendants present 2 rebuttal declarations by current OSRX employees and claim the former employees are not 3 credible. (Id.) 4 In assessing the evidence, the Court finds there is a dispute of material fact as to 5 whether there were valid patient prescriptions for each bottle and whether office stock was 6 actually dispensed. Summary judgment under this theory of falsity is not merited. 7 ii) Compliance with USP Chapter 797 8 Plaintiff argues OSRX’s claim that it “operates in full compliance with Section 9 503A” is literally false because Plaintiff violates USP Chapter 797 and therefore Section 10 503A. (ECF No. 171-1 at 20–22.) 11 Section 503A of the FDCA requires compounding pharmacies comply with the 12 “applicable United States Pharmacopeia (“USP”) . . . monograph if one exists, and the 13 [USP] chapter on pharmacy compounding.” 21 U.S.C. § 353a(b)(1). USP Chapter 797 14 “describes the minimum standards to be followed when preparing compounded sterile 15 human and animal drugs.” USP Chapter 797, § 1. USP Chapter 797 provides a litany of 16 standards applicable to Defendants’ compliance with Section 503A. 17 Plaintiff contends OSRX violates USP Chater 797 because: OSRX personnel do not 18 comply with garbing and cleaning requirements; OSRX equipment is not maintained or 19 recertified; OSRX compounding procedures are not updated or recorded properly; OSRX 20 failed sterility and visual tests are not corrected; OSRX reports of patients experiencing 21 adverse side effects are not investigated; and OSRX standard operating procedures 22 (“SOPs”) are not maintained. (ECF No. 171-1 at 25–26.) 23 In support of these allegations, Plaintiff offers the declarations of two former OSRX 24 employees, Deschamps and Zirko, who declare they personally observed the alleged 25 manufacturing defects. (ECF No. 171-1 at 20–22.) Plaintiff does not adduce any additional 26 evidence in support of its claim that Defendants violate the provisions of USP Chapter 797. 27 In response, Defendants offer the declarations of Frost and Brian Holdorf that deny the 28 facts observed by Deschamps and Zirko (ECF No. 206 at 18–19). For each alleged 1 violation observed by Deschamps and Zirko, Frost or Holdorf dispute and rebut the claims 2 made. Defendants also present the job performance records of Deschamps and Zirko in an 3 effort to undermine their credibility. 4 Neither party is entitled to partial summary judgment with respect to this claim. 5 Defendants provide rebuttal declarations for each observed production violation offered in 6 the declarations of Deschamps and Zirko. “Credibility determinations, the weighing of the 7 evidence, and the drawing of legitimate inferences from the facts are jury functions, not 8 those of a judge, whether he [or she] is ruling on a motion for summary judgment or for a 9 directed verdict.” Anderson, 477 U.S. at 255 (1986). See also Neely v. St. Paul Fire and 10 Marine Ins. Co., 584 F.2d 341, 344 (9th Cir. 1978). 11 Given the competing declarations offered by former and current OSRX employees, 12 there is a material factual dispute as to whether Defendants operate in full compliance with 13 USP Chapter 797. It is the responsibility of the trier of fact to make the requisite credibility 14 assessments to assess whether USP Chapter 797 has been violated. 15 Overall, because the evidence is disputed for both of Plaintiff’s theories, summary 16 judgment as to the issue of falsity is not warranted. 17 2. Deception 18 Plaintiff moves for summary judgment on the element of deception arguing 19 Defendants’ literally false statements are necessarily deceptive. Where a challenged 20 statement is literally false, consumer confusion is presumed. U-Haul Int’l, Inc. v. Jartran, 21 Inc., 793 F.2d 1034, 1041 (9th Cir. 1986). Because falsity has not been established for 22 Plaintiff’s Section 503A compliance claim, a presumption of deception does not apply. 23 Plaintiff has otherwise not provided any evidence as to deception. Accordingly, summary 24 adjudication on the issue of deception is not merited. 25 3. Materiality 26 Plaintiff moves for partial summary judgment arguing the evidence is 27 uncontroverted that Defendants’ challenged Section 503A compliance claims are material. 28 (ECF No. 171-1 at 27.) Defendants move for partial summary judgment arguing the 1 evidence is uncontroverted that the alleged misstatements were not material. (ECF No. 2 168-1 at 17–19.) Under the Lanham Act, false or deceptive advertising is material where 3 “it is likely to influence the purchasing decision.” Rice v. Fox Broad. Co., 330 F.3d 1170, 4 1181 (9th Cir. 2003) (quoting Cook, Perkiss, and Liehe, 911 F.2d at 244). 5 As an initial matter, Plaintiff argues when statements are found to be literally false, 6 materiality is presumed according to circuit precedent. (ECF No. 203 at 12.) The Court 7 disagrees. In prior cases, the Ninth Circuit reviews for materiality even when the 8 challenged statements were found to be literally false. See Rice, 330 F.3d at 1181; Skydive 9 Ariz., Inc. v. Quattrocchi, 673 F.3d 1105, 1111–12 (9th Cir. 2012); Obesity Research Inst., 10 LLC v. Fiber Research Int’l, LLC, 310 F. Supp. 3d 1089, 1125 (S.D. Cal. 2018) (discussing 11 Ninth Circuit precedent). As follows, even if the evidence was uncontroverted that the 12 challenged statements were literally false, Plaintiff must still provide some evidence in 13 support of its materiality argument. 14 Second, Defendants contend the challenged statement could not be observed by 15 consumers and therefore cannot be material. (Id.) In cases where the Ninth Circuit has 16 found alleged false statements were immaterial because the statements were unobservable, 17 there was no possible means by which purchasers could see the statements. See Rice, 330 18 F.3d at 1181 (holding statements were immaterial because the allegedly false video jackets 19 were not sold in retail stores, were not part of broadcasted advertisements, and were not 20 depicted in internet advertisements). That is not the case here. While the statements may 21 be presented in a small font, possible purchasers could still see them on Defendants’ 22 website and order forms. 23 Turning to the evidence, Plaintiff cites declarations by four ImprimisRx customers 24 that claim Section 503A compliance was an important factor in their purchasing decisions. 25 Plaintiff also presents survey evidence by its expert Amanda Butler that 54.1% of surveyed 26 prescribers indicate that whether a compounding pharmacy “operates in full compliance 27 with Section 503A” is an important factor in selecting a compounding pharmacy. (ECF 28 No. 171-1 at 27.) In response, Defendants offer their own survey expert testimony and 1 critique Butler’s opinion arguing her survey does not test the importance of the challenged 2 statements in this case and the results appear illogical. (ECF No. 206 at 29.) 3 Defendants’ objections to Butler’s proposed testimony do not make the evidence 4 uncontroverted. As the Court discussed in evaluating the parties’ motions to exclude expert 5 testimony, while Butler’s survey may have seemingly contradictory survey results, those 6 results are not so illogical as to fully undermine the credibility of the survey. (ECF No. 7 257.) However, Plaintiff’s evidence is not uncontroverted. Defendants present their own 8 expert and survey evidence in direct conflict with Plaintiff’s evidence. Given the 9 conflicting expert testimony and evidence, the issue of materiality ultimately requires 10 parsing the credibility and weight of evidence presented by both parties. 11 Accordingly, summary adjudication on the issue of materiality is not due. 12 4. Dissemination in Interstate Commerce 13 Plaintiff moves for summary judgment on the element of dissemination in interstate 14 commerce. (ECF No. 168-1 at 27.) The Lanham Act proscribes misrepresentation of one’s 15 own goods or services in “commercial advertising or promotion.” 15 U.S.C. § 16 1125(a)(1)(B). The Ninth Circuit has acknowledged that it is “virtually automatic” that 17 statements on websites enter interstate commerce. See TrafficSchool.com, Inc. v. Edriver 18 Inc., 653 F.3d 820, 829 n.3 (9th Cir. 2011). Defendants placed the challenged statement 19 on their website ordering pages and included the statement on many additional webpages 20 and emails. (ECF No. 168-1 at 27–28.) 21 Accordingly, summary adjudication on the issue of dissemination in interstate 22 commerce is appropriate. 23 5. Injury to Plaintiff 24 Plaintiff and Defendants move for summary judgment on the issue of injury. The 25 required showing under the Lanham Act depends on the remedy sought. See Obesity 26 Research, 310 F. Supp. 3d at 1126–28. Plaintiff seeks a preliminary and permanent 27 injunction against Defendants from “engaging in any of the types of false and unlawful 28 1 advertising described herein,” an award of unjustly obtained profits, compensatory 2 damages, and statutory damages. (ECF No. 145 at 16–17.) 3 i) Monetary Damages & Unjust Enrichment 4 Under Section 43(a) of the Lanham Act, to obtain monetary damages and unjustly 5 obtained profits, a plaintiff must have been “or is likely to be injured as a result of the false 6 statement, either by direct diversion of sales from itself to defendant or by a lessening of 7 the goodwill associated with its products.” Southland Sod Farms, 108 F.3d at 1139. When 8 suing for damages, “actual evidence of some injury resulting from the deception is an 9 essential element of the plaintiff’s case.” Harper House, Inc. v. Thomas Nelson, Inc., 889 10 F.2d 197, 210 (9th Cir. 1989). 11 Plaintiff contends under the Lanham Act injury can be presumed because 12 Defendants are its direct competitors. (ECF No. 171-1 at 28.) The Court is not convinced 13 that presumption applies here. In cases involving false comparative advertising, the Ninth 14 Circuit has held that damages may be awarded without proof of injury because a competitor 15 can be presumed harmed. See TrafficSchool.com, 653 F.3d at 831 (noting an award of 16 profits is “appropriate in false comparative advertising cases, where it’s reasonable to 17 presume that every dollar defendant makes has come directly out of plaintiff’s pocket”); 18 Nat’l Prod., Inc. v. Gamber-Johnson LLC, 699 F. Supp. 2d 1232, 1241 (W.D. Wash. 2010). 19 Similarly, in false advertising cases involving improper use of a competitor’s mark, the 20 Ninth Circuit holds injury can be presumed because the use of the mark violated the rights 21 of the mark registrant. See Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1403 (9th 22 Cir. 1993). See also Certified Nutraceuticals Inc. v. Clorox Co., No. 18-CV-0744 W 23 (KSC), 2021 WL 4460806, at *7 (S.D. Cal. Sept. 29, 2021). Neither circumstance is 24 applicable here. 25 Instead, Plaintiff must provide some proof of past injury or risk of future injury 26 caused by Defendants’ false statements. See, e.g., Quidel Corp. v. Siemens Med. Solutions 27 USA, Inc., No. 16-CV-3059-BAS-AGS, 2020 WL 4747724, at *10 (S.D. Cal. Aug. 17, 28 2020), aff’d, No. 20-55933, 2021 WL 4622504 (9th Cir. Oct. 7, 2021); Cascade Yarns, Inc. 1 v. Knitting Fever, Inc., No. C10-861 RSM, 2015 WL 1735517, at *6 (W.D. Wash. Apr. 15, 2 2015). The Lanham Act requires this proof to avoid awarding damages or profits for 3 speculative injuries. See TrafficSchool.com, 653 F.3d at 831 (noting without proof of past 4 injury “the district court had no way to determine with any degree of certainty what award 5 would be compensatory” and therefore not speculative) (citing ALPO Petfoods, Inc. v. 6 Ralston Purina Co., 913 F.2d 958, 969 (D.C. Cir. 1990)); Porous Media Corp. v. Pall 7 Corp., 110 F.3d 1329, 1334 (8th Cir. 1997) (“[W]here a defendant is guilty of 8 misrepresenting its own product without targeting any other specific product, it is 9 erroneous to apply a rebuttable presumption of harm in favor of a competitor. Otherwise, 10 a plaintiff might enjoy a windfall from a speculative award of damages by simply being a 11 competitor in the same market.”). 12 Plaintiff offers a litany of evidence showing it was in competition with Defendants 13 including: an email where Defendants describe ImprimisRx as their “direct competition” 14 (Ex. 11, ECF No. 170 at 265); deposition testimony that Defendants “generally don’t lose 15 customers to Imprimis” and that customers “generally flow the other direction” (Ex. 4, 16 ECF No. 170-1 at 68); and email correspondence where Defendants attempt to poach 17 Plaintiff’s customers (Exs. 21, 23, 31, 32, 33, ECF No. 170-2 at 28–31, 37, 127–36). This 18 evidence of competition alone, however, is insufficient given the type of market and the 19 false advertising at issue here. 20 In prior instances, courts have found false advertisements that injured the entire 21 market’s reputation were sufficient to presume injury. See, e.g., Sandoz Inc. v. Amgen Inc., 22 No. 2:22-CV-05326-RGK-MARX, 2023 WL 4681569, at *4 (C.D. Cal. June 29, 2023). 23 And in prior instances, courts have found injury can be presumed in a market consisting of 24 only two major players. Cf. TrafficSchool.com, 653 F.3d at 831 (holding a showing of 25 injury was not necessary where “it’s reasonable to presume that every dollar defendant 26 makes has come directly out of plaintiff’s pocket). Here, unlike those cases, there is 27 appreciable competition in the market, and Defendants’ false statements did not harm the 28 entire market. While ImprimisRx and Defendants are two of the largest compounding 1 pharmacies within the post-operative ophthalmological market, other U.S. Food and Drug 2 Administration (“FDA”) approved pharmaceutical companies compete with them. For 3 example, Allergan, Novartis, and Bio Tissue manufacture competing products. 4 Defendants’ investment overview reflects this understanding of the market: 5 “There are large and small companies offering post-operative surgical medications for the care of vision correction patients and the management of 6 glaucoma and dry eye disease. The list of Big Pharma name brands and 7 generic providers includes household names like Novartis/Alcon, Allergan, Shire, Bausch & Lomb, Bio Tissue and BioD. However, Ocular Science only 8 has two significant competitors in the compounded medication and biologics 9 space, Imprimis and Bio-Tissue.” 10 (Ex. 25, ECF No. 170-2 at 96–97.) Because prescribers have many options in selecting 11 post-operation ophthalmological drugs, the Court cannot assume Plaintiff’s sales were 12 necessarily reduced by any increases to Defendants’ sales due to the false statements. 13 Instead, Plaintiff must provide some evidence it was harmed to meet its burden.1 It has not 14 done so. 15 Plaintiff provides evidence that prescribers could care about Defendants’ Section 16 503A compliance, but this evidence goes to the materiality of the alleged statements rather 17 than injury. Plaintiff submits the declaration of Dr. Kevin Barber who asserts if “[he] 18 discovered that the supplier claimed to be compliant but was in fact intentionally 19 circumventing the applicable laws and regulations, [he] would stop prescribing from that 20 prescriber.” (ECF No. 170-4 at 17). However, Dr. Barber has only ever been an 21 ImprimisRx customer. In other instances cited by Plaintiff, an ophthalmologist was 22 concerned about Defendants’ representations as a Section 503A pharmacy (ECF No. 170- 23 4 at 144), a prescriber “currently using the Imprimis combination drops” requested 24 information from Defendants including whether they were a 503a facility (Ex. 21, ECF No. 25

26 1 The Court is not persuaded by Plaintiff’s citation to Allergan USA, Inc. v. Imprimis Pharm., Inc., 2019 WL 4545960 (C.D. Cal. Mar. 27, 2019), or other cases where, absent any evidence of injury, courts 27 have denied summary judgment because the parties were competitors. The Ninth Circuit has described awarding profits or damages in circumstances without evidence of harm as “an uncommon remedy in a 28 1 170-2 at 31), and another prescriber “was not happy [Defendants] weren’t a 503B 2 [compounding pharmacy].” (Ex. 22, ECF No. 170-2 at 33). This evidence, again, goes to 3 materiality rather than injury. Plaintiff submits evidence showing Defendants poached 4 Plaintiff’s customers but does not show that these customers were poached as a result of 5 Defendants’ alleged false statements. (ECF No. 203 at 16.) To wit, Plaintiff has not 6 provided the name of or a declaration from any customers that purchased from Defendants 7 and would have purchased from Plaintiff but for Defendants’ misstatements. As such, 8 Plaintiff ultimately offers no evidence it was actually injured by Defendants’ alleged 9 misstatements. 10 Plaintiff is correct that a precise calculation of damages is not required under the 11 Lanham Act. See DSPT Int’l, Inc. v. Nahum, 624 F.3d 1213, 1223 (9th Cir. 2010) (holding 12 a “crude” measure of damages was acceptable to survive a directed verdict for a suit 13 involving intentional trademark infringement). But a showing of some injury is required. 14 See Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931) 15 (noting “there is a clear distinction between the measure of proof necessary to establish the 16 fact that petitioner had sustained some damage and the measure of proof necessary to 17 enable the jury to fix the amount”). See also Harper House, 889 F.2d at 210. To hold 18 contrary “would enable every Lanham Act plaintiff to survive summary judgment, which 19 is not correct.” VBS Distrib., Inc. v. Nutrivita Laby’s, 811 F. App’x 1005, 1008 (9th Cir. 20 2020). Plaintiff has not met its burden because it has not provided any evidence of actual 21 injury. 22 Accordingly, Defendants’ motion for summary judgment is granted with respect to 23 injury for Plaintiff’s monetary damages and unjust enrichment claims. 24 ii) Injunctive Relief 25 Because a competitor may suffer future injury, competitors “need not prove injury 26 when suing to enjoin conduct that violates section 43(a).” Harper House, 889 F.2d at 210. 27 It is uncontested that Plaintiff and Defendants are competitors in the post-care 28 ophthalmological drug compounding market. While it does not need to provide proof of 1 injury to seek injunctive relief under the Lanham Act, Plaintiff must still meet all the prongs 2 for a permanent injunction. See Obesity Research, 310 F. Supp. 3d at 1128. A plaintiff 3 seeking a permanent injunction must establish: 4 (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) 5 that, considering the balance of hardships between the plaintiff and defendant, 6 a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. 7 8 eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006). 9 The Court finds Plaintiff has not offered any evidence that it has suffered an 10 irreparable injury and is therefore entitled to injunctive relief. See Obesity Research, 310 11 F. Supp. 3d at 1128; Williams & Cochrane, LLP v. Rosette, 631 F. Supp. 3d 884, 918 (S.D. 12 Cal. 2022); Kurin, Inc. v. Magnolia Med. Techs., Inc., 473 F. Supp. 3d 1117, 1146 (S.D. 13 Cal. 2020). As discussed above, Plaintiff has failed to provide any evidence it was actually 14 injured by Defendants’ alleged false advertisements and therefore has not met its burden 15 of showing it has suffered an irreparable injury or that non-monetary damages are 16 inadequate to compensate it for its injury. 17 Because Plaintiff has not met its evidentiary burden with respect to its claim for 18 injunctive relief, Defendants’ motion for summary judgment on injunctive relief is granted. 19 C. Preemption/Preclusion Under the FDCA 20 Defendants move for summary judgment on Plaintiff’s false advertising claims 21 arguing that ImprimisRx is engaging in “impermissible private enforcement of the FDCA.” 22 (ECF No. 168-1 at 20–21.) The Court has previously addressed this question and denied 23 Defendants’ motion for partial judgment on the pleadings. (ECF No. 144.) The Court need 24 not renew discussion of this argument because it is moot given the Court’s ruling with 25 respect to injury. 26 D. Unclean Hands Defense 27 Defendants move for partial summary judgment on their equitable defense of 28 unclean hands. (ECF No. 168-1 at 25.) Because the Court granted Defendants’ motion for 1 summary judgment on the issue of injury, this affirmative defense as it relates to Plaintiff’s 2 false advertising claims is moot. Accordingly, the Court does not reach this issue. 3 E. Defendants’ Counterclaims 4 In their answer to Plaintiff’s Third Amended Complaint, Defendants assert four false 5 advertising counterclaims against ImprimisRx. (ECF No. 152 at 21–22.) Plaintiff moves 6 for summary judgment on Defendants’ false advertising counterclaims under a variety of 7 arguments. 8 1. Claims Outside of the Pleadings 9 In their opposition to Plaintiff’s motion for partial summary judgment, Defendants 10 claim Plaintiff falsely advertises that it “compl[ies] with all cGMP requirements which are 11 the most stringent standards in the nation.” (ECF No. 206 at 21). Plaintiff asserts this 12 claim is suitable for summary judgment because it was not pled in Defendants’ 13 counterclaims. (ECF No. 218 at 9.) 14 Where a complaint “does not include the necessary factual allegations to state a 15 claim, raising such claim in a summary judgment motion is insufficient to present the claim 16 to the district court.” Navajo Nation v. U.S. Forest Serv., 535 F.3d 1058, 1080 (9th Cir. 17 2008). Defendants do not identify ImprimisRx’s cGMP compliance claim as a challenged 18 claim in its their answer and counterclaims to Plaintiff’s Third Amended Complaint. 19 However, ImprimisRx’s cGMP compliance is factually related to its Baum Claim that 20 ImprimisRx is “compliant with highest quality standards.” (ECF No. 152.) Defendants 21 are not asserting an entirely new claim in their motion for partial summary judgment but 22 rather are identifying a particular standard by which to evaluate their previously pled Baum 23 Claim. Accordingly, the Court considers Plaintiff’s cGMP compliance in that context. 24 2. Statute of Limitations 25 Plaintiff argues that Defendants’ false advertising counterclaims are barred by the 26 statute of limitations on the claims. (ECF No. 171-1 at 30.) Plaintiff insists the claims 27 made by CEO Baum occurred in February and August 2017 while the remaining claims 28 were all first made before 2019. (Id.) Because Defendants brought their counterclaims in 1 May 2022, Plaintiff contends these claims are barred by the Lanham Act’s three-year 2 limitations period. (Id.) 3 “The Lanham Act contains no explicit statute of limitations.” Jarrow Formulas, 4 Inc. v. Nutrition Now, Inc., 304 F.3d 829, 836 (9th Cir. 2002). It is unclear whether the 5 Lanham Act is governed by a limitations period, as opposed to laches. See Yeager v. 6 Bowlin, 495 F. App’x 780, 781–82 (9th Cir. 2012) (“We have not resolved whether a statute 7 of limitations defense applies to claims under the Lanham Act, which are of equitable 8 character.”) (quotation omitted). Regardless, laches is a well-established equitable defense 9 to Lanham Act claims. See Jarrow, 304 F.3d at 835. 10 To assess a laches defense, the Court first examines whether a delay occurred and 11 then decides whether that delay was reasonable. See Jarrow, 304 F.3d at 838. To assess 12 delay, courts reference the analogous state law limitations period. Id. If the plaintiff filed 13 suit outside the relevant limitations period, courts apply a strong presumption that laches 14 bars the claims. See Shouse v. Pierce Cnty., 559 F.2d 1142, 1147 (9th Cir. 1977). The 15 presumption of laches is triggered if any part of the alleged wrongful conduct occurred 16 beyond the limitations period. See Jarrow, 304 F.3d at 837. The limitations period is not 17 reset even if the offensive conduct continues. See id. 18 The limitations period for Lanham Act claims begins to run when a party knew or 19 should have known about a cause of action. See Jarrow, 304 F.3d at 838. The start date, 20 however, is tolled by the discovery rule which pauses accrual “until the plaintiff discovers, 21 or has reason to discover, the cause of action.” Grisham v. Phillip Morris U.S.A., Inc., 40 22 Cal. 4th 623, 634 (Cal. 2007). To invoke this rule, plaintiffs must plead and prove facts 23 showing: (1) lack of knowledge; (2) lack of means of obtaining knowledge; and (3) how 24 and when plaintiff actually discovered the fraud. Gen. Bedding Corp. v. Echevarria, 947 25 F.2d 1395, 1397 (9th Cir. 1991). 26 The parties agree that California’s limitations period for fraud is most analogous 27 such that a three-year limitations period applies here. See Cal. Civ. Proc. Code § 338(d). 28 Plaintiff insists the challenged claims were made three years before Defendants filed their 1 counterclaims. With respect to the Baum Claims, the parties appear to agree those claims 2 were made in February 2017. For the Saharek, USP, and Trust Claims, Defendants appear 3 to dispute the date of publication but do not provide any evidence or counter Plaintiff’s 4 declaration by Andrew Boll that the statements were made and published prior to 2019. 5 (ECF No. 171-3 at 289.) In sum, all four challenged claims were publicly available three 6 years before Defendants lodged their counterclaims. 7 Defendants insist, however, that their claims are not time-barred because Plaintiff 8 “fails to present any evidence that establishes when Defendants became aware, or should 9 have become aware, that the challenged statements were made, nor why Defendants should 10 have been aware that those statements were false by 2019.” (ECF No. 206 at 31.) This, 11 however, is not Plaintiff’s burden. It is Defendants’ responsibility to make a showing for 12 why they lacked the means to discover Plaintiff’s statements to invoke the tolling of the 13 discovery rule. They have not done so. Indeed, because Plaintiff is a main competitor for 14 Defendants, one assumes Defendants would be aware of the content hosted on Plaintiff’s 15 website or the claims Plaintiff makes regarding its products. Cf. Baby Trend, Inc. v. Playtex 16 Prod., LLC, No. 5:13-CV-647-ODW RZX, 2013 WL 4039451, at *4 (C.D. Cal. Aug. 7, 17 2013) (finding the plaintiff should have been aware of claims made on its main 18 competitor’s packaging). Therefore, a presumption of laches applies. 19 Finding a delay, the Court then assesses whether Defendants’ delay was 20 unreasonable and whether Plaintiff would suffer prejudice caused by the delay. To assess 21 whether the delay was unreasonable, courts look to the length of the delay and the 22 reasonableness of that delay in light of the analogous limitations period. Plaintiff first 23 made some of the challenged claims in 2017 and the other claims before 2019. Defendants 24 did not bring their counterclaims until 2022. Defendants’ delay is almost twice the time 25 available to file suit under the analogous state limitations period. See Jarrow, 304 F.3d at 26 839. Defendants have not offered any reasons excusing the delay aside from waiting until 27 Plaintiff filed suit, which is an insufficient justification. Defendants’ delay was then 28 unreasonable. 1 However, Plaintiff does not appear prejudiced by the delay. Courts generally 2 recognize two forms of prejudice in the laches context: evidentiary and expectations-based. 3 See Danjaq LLC v. Sony Corp., 263 F.3d 942, 955 (9th Cir. 2001). Expectations-based 4 prejudice occurs where defendants take actions or suffer consequences they would not have 5 if plaintiff had brought suit promptly. Id. ImprimisRx has not offered any evidence to 6 support a finding of prejudice due to Defendants’ delay. In other cases, courts have found 7 prejudice where a party invests labor and capital to build on its advertising goodwill or 8 expanded its business in line with its presumed rights. See, e.g., NAACP v. NAACP Legal 9 Def. & Educ. Fund, Inc., 753 F.2d 131, 138 (D.C. Cir. 1985). Neither appear to have 10 happened here. In weighing the equities, without any support for a finding of prejudice at 11 the posture before the Court, application of laches is inappropriate. 12 Accordingly, the Court denies Plaintiff’s motion to summarily adjudicate 13 Defendants’ counterclaims on the basis of laches. 14 3. Elements of Lanham Act Counterclaims 15 Plaintiff moves for summary judgment on Defendants’ false advertising 16 counterclaims contending there is no evidence to support their claims. (ECF No. 171-1 at 17 29–30.) The Court examines whether summary judgment is appropriate by addressing 18 each Lanham Act element in turn. 19 i) Falsity 20 Plaintiff asserts that there is no evidence from which a reasonable juror could 21 conclude that the challenged statements were literally false at the time they were made. 22 (ECF No. 171-1 at 29.) With respect to the Saharek claims, Defendants present a letter 23 from the FDA that ImprimisRx does not test every batch of product. (ECF No. 206 at 24.) 24 With respect to the USP Claims, Defendants provide an FDA inspection report that the 25 ImprimisRx’s sterility, endotoxin, and potency testing lacks sufficient sampling protocols, 26 which would violate USP standards. (Id. at 25.) With respect to the Trust Claims, 27 Defendants provide a number of issues related to sterility through employee declarations, 28 1 third party audits, and FDA letters. (Id. at 22–26.) As such, Defendants present sufficient 2 facts to meet its burden as to the falsity of Plaintiff’s advertising claims. 3 Accordingly, summary adjudication on the issue of falsity is not merited. 4 ii) Materiality 5 Plaintiff argues there is no evidence that a reasonable juror could find the challenged 6 statements were material. (ECF No. 171-1 at 29.) It contends OSRX did not survey any 7 customers to determine whether its statements are material and has not provided any 8 customers who saw or relied on its advertising claims. (Id.) In support of their claim that 9 Plaintiff’s statements are material, Defendants note Plaintiff’s marketing strategy centers 10 around its sterility and reliability concerns, Plaintiff trains its sales representatives to use 11 its sterility and reliability in their sales pitches, and Plaintiff compares its products to 12 Defendants’ products based on these claims. (ECF No. 206 at 21–22.) 13 The evidence here is disputed. While Defendants have not presented survey 14 evidence in support of their claim, a reasonable jury could find Plaintiff’s claims were 15 material to prescribers. Accordingly, summary judgment as to materiality is not warranted. 16 iii) Injury to Defendants 17 Plaintiff contends that no reasonable jury could find the challenged statements 18 harmed Defendants. (ECF No. 171-1 at 29.) As before, injury is examined according to 19 the relief sought. Defendants seek injunctive and monetary relief in pursuing their 20 counterclaims. (ECF No. 152 at 29.) Like Plaintiff’s false advertising claims, the 21 undisputed facts only show ImprimisRx and Defendants are competitors. Defendants do 22 not submit any documentary evidence or deposition evidence demonstrating they lost 23 customers due to Plaintiff’s alleged false advertisements. Without evidence of actual 24 injury, this is insufficient to survive a motion for summary judgment. See 25 TrafficSchool.com, 653 F.3d at 831. Accordingly, the Court grants Plaintiff’s motion for 26 summary judgment with respect to injury for monetary damages. 27 With respect to injunctive relief, Defendants also have not provided evidence to 28 survive a motion for summary judgment with respect to the eBay elements for injunctive 1 ||relief. See eBay, 547 U.S. at 391. Defendants have not submitted any evidence showing 2 ||they were actually harmed by ImprimisRx’s alleged false statements and therefore have 3 made a sufficient showing of irreparable harm. Accordingly, the Court grants 4 || Plaintiffs motion for summary judgment with respect to injunctive relief. 5 CONCLUSION 6 Based on the foregoing, the Court DENIES Defendants’ motion to exclude 7 || Plaintiff's belatedly identified witnesses (ECF No. 189-1). The Court reopens discovery 8 solely for the purpose of obtaining the depositions of the twelve newly identified witnesses 9 Plaintiff's amended disclosures. 10 The Court GRANTS Defendants’ motion for partial summary judgment (ECF No. 11 |} 168-1) with respect to Plaintiff's false advertising claims under the Lanham Act (Cause of 12 || Action 1). This does not, however, dispose of this case. Plaintiff maintains its remaining 13 |/causes of action, namely trademark infringement in violation of the Lanham Act, false 14 || designation of origin in violation of the Lanham Act, common law unfair competition, 15 ||}copyright infringement, and violation of California’s unfair competition law. 16 The Court DENIES Plaintiffs motion for partial summary judgment with respect to 17 false advertising claims under the Lanham Act and GRANTS Plaintiff's motion for 18 |}summary judgment with respect to Defendants’ false advertising counterclaims. (ECF No. 19 171-1). 20 The Court orders the parties to contact the Magistrate Judge’s chambers within 21 || fourteen days of today’s date to coordinate the deposition of Plaintiff's newly identified 22 || witnesses and to set new dates for a pretrial conference and trial. 23 IT IS SO ORDERED. 24 / yy 25 || DATED: December 12, 2023 asf dg □ ashaa 6 United States District Judge 27 28 47