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De Simone v. VSL Pharmaceuticals, Inc.

United States District Court, D. Maryland

June 20, 2019

CLAUDIO DE SIMONE, Plaintiff/Counterclaim Defendant,
DANISCO USA, INC., Counterclaim Defendant.



         Having received a favorable jury verdict, Claudio De Simone and ExeGi Pharma, LLC ("ExeGi") (collectively, "the De Simone Parties") have filed a post-trial Motion in which (1) ExeGi asks this Court to increase the jury's award of $15, 000, 000 against Alfasigma USA, Inc. ("Alfasigma)) on its claim of false advertising in violation of the Lanham Act, 15 U.S.C. S 1125(a) (2012); (2) ExeGi seeks a permanent injunction against Leadiant Biosciences, Inc. ("Leadiant") and Alfasigma as an additional remedy on the false advertising claim; and (3) the De Simone Parties ask the Court to award them attorney's fees, costs, and pre-and post-judgment interest. Leadiant, Alfasigma, and VSL Pharmaceuticals, Inc. ("VSL") (collectively, "the VSL Parties") oppose the Motion on all issues with the exception of costs and post-judgment interest. Having reviewed the submitted materials, the Court finds no hearing necessary. See D. Md. Local R. 105.6. For the reasons set forth below, the Motion is GRANTED IN PART and DENIED IN PART.


         I. Enhanced Damages

         At trial, ExeGi asked the jury to award it $27, 843, 149 on its false advertising claim against Alfasigma, representing Alfasigma's profits from sales of VSL#3 from July 1, 2016 through the end of trial. Although the jury found Alfasigma liable for that claim, it awarded ExeGi only $15, 000, 000. ExeGi now asks this Court to increase that award to its originally requested $27, 843, 149, supplemented by an additional amount calculated by applying a daily rate of $29, 819.08 through January 31, 2019, the day this Motion became ripe.

         When a plaintiff seeks the defendant's profits, "[i]f the court shall find that the amount of the recovery ... is either inadequate or excessive[, ] the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case." 15 U.S.C.-1117(a). Such adjusted damages must "constitute compensation and not a penalty." Id. Beyond this provision, the Lanham Act "gives little guidance on the equitable principles to be applied by a court" in determining whether to adjust a compensation award. Synergistic Intern., LLC v. Korman, 470 F.3d 162, 174 (4th Cir. 2006). In the absence of statutory instruction, courts have developed a list of factors to consider when determining appropriate compensation under the Lanham Act:

(1) whether the defendant had the intent to confuse or deceive,
(2) whether sales have been diverted,
(3) the adequacy of other remedies,
(4) any unreasonable delay by the plaintiff in asserting his rights,
(5) the public interest in making the misconduct unprofitable, and
(6) whether it is a case of palming off.

Id. at 175; Quick Techs., Inc. v. Sage Group PLC, 313 F.3d 338, 349 (5th Cir. 2002) (applying this test to an award of profits).

         Here, upon consideration of the evidence and the factors identified in Synergistic, the Court concludes that the jury award of profits in the amount of $15, 000, 000 was justified. The De Simone Parties' expert witness on damages, Bryan Callahan, calculated Alfasigma's profits at $27, 843, 149, significantly above the jury's award. Most of the factors support the jury's award. As discussed in this Court's Memorandum Opinion denying the VSL Parties' Motions for Judgment as a Matter of Law and for a New Trial ("the VSL Parties' Post-Trial Motions"), De Simone v. VSL, Rule 50 and 59 Mem Op. S 1.B.2, the evidence established that the VSL Parties' senior management,, specifically, Luca Guarna, the President and Chief Executive Officer ("CEO") of VSL, knew that in producing a new version of VSL#3 in Italy ("Italian VSL#3"), they had not been able to precisely replicate the original proprietary mix, so the false advertising was deployed with the intent to confuse or deceive. The testimony of Dr. Anthony Fasano, an expert witness on the use of probiotics for the management of gastroenterological and immunological disorders, supports the further inference that, although not easily quantified, sales were diverted away from ExeGi to Alfasigma, particularly where the false advertising had the effect of "palming off Italian VSL#3 as the same as the original VSL#3 product now sold by ExeGi as Visbiome ("the De Simone Formulation"). Where ExeGi was a new company such that a calculation of its own lost profits would not adequately compensate it, there was no adequate remedy other than Alfasigma's profits. ExeGi did not delay in asserting its claims. As for the public interest, where various expert witnesses testified that Italian VSL#3 was not functionally equivalent to the De Simone Formulation, there is a public interest in ensuring that the public not be misled into believing that a particular product offered to address health needs will have the same efficacy as a trusted product when that has not been established. Notably, however, there was no evidence definitively establishing that any functional difference between Italian VSL#3 and the De Simone Formulation would render Italian VSL#3 unsafe or clinically ineffective for all of its users.

         While the award was not excessive as a matter of equity, it was also sufficiently substantial.. Where ExeGi was a start-up company with limited marketing resources, the amount of sales actually diverted, and the amount needed to compensate ExeGi for the harm of the false advertising, would be difficult to quantify, such that an award of less than all of Alfasigma's profits would be reasonable. Under these circumstance,, the Court declines to increase the award. See Synergistic, 470 F.3d at 175.

         II. Permanent Injunction

         A. Issuance of an Injunction

         The Lanham Act provides that courts "shall have power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation" of any of the Lanham Act's provisions. 15 U.S.C. S ...

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