PATRICK McNAMARA NAFFS General Counsel Partner, Scarinci & Hollenbeck
The article contains excerpts from a presentation on legal and regulatory issues given by NAFFS General Counsel Patrick McNamara.
APPOINTMENT OF STEPHEN HAHN TO BE NEW FDA COMMISSIONER
Dr. Hahn is the chief medical executive at MD Anderson Cancer Center in Houston. He is the only candidate personally interviewed by the president, according to an article from Politico, which labeled him as the “clear front runner” for the position. If confirmed (he ultimately was confirmed Dec. 17), Hahn would replace Dr. Norman Sharpless, who has been serving as acting commissioner since Dr. Scott Gottlieb left the position in April.
CONTROVERSY CONCERNING THE STRONGER PATENTS ACT OF 2019
On Sept. 11, the Senate Judiciary, Sub-Committee on Intellectual Property held a public hearing on the STRONGER Patents Act of 2019. The witnesses who provided testimony were pretty much evenly split for and against the proposed legislation, highlighting the lack of consensus on how to address patent validity claims. The bill’s acronym stands for Support Technology and Research for our Nations Growth and Economic Resilience Patents Act. Various versions of the bill have been debated for four years. The stated goal is to “strengthen the position of the United Sates as the world’s leading innovator by amending Title 35, United States Code to protect the property rights of the inventors that grow the country’s economy.”
Supporters refer to recent court rulings as part of an unintended consequence of weakening the patent system. One of the most controversial provisions would restore the presumption of injunctive relief upon a finding a patent is both valid and being infringed. The proposed legislation states and defines injunction as follows:
“upon a finding by a court of infringement of a patent not proven invalid or unenforceable, the court shall presume that:
Further infringement of the patent would cause irreparable injury; and
Remedies available at law are inadequate to compensate for that injury.”
In effect the legislation would overrule a Supreme Court decision in eBay vs. MercEXCHANGE, a 2006 decision, where the court held a presumption that an injunction should issue to a prevailing patent owner was inappropriate and that courts needed to apply the Four Factor Test they have historically used for weighing whether injunctive relief should be issued.
At the recent hearings, stakeholders argued strongly in favor and against the bill. While supporters maintain the changes are necessary to strengthen patent rights, critics argue the existing inter-parties review system provides a sufficient check on patent validity. They also maintain the Supreme Court’s decision in the eBay case has not been proven to stifle innovation.
UPDATE OF THE FOOD SAFETY MONITORIZATION ACT
On Sept. 30, FDA issued a statement on measuring progress of implementing the Food Safety Monitorization Act. The announcement touted a launch of the new Food Safety Dashboard launched by FDA on its website as a tool for the agency to monitor certain programs through key performance metrics and projects and ensure transparency to the general public. The announcement said FDA data shows that overall, the regulated industry has improved the time it takes to move from identifying a recall event to initiating voluntary recall from an average of four days five years ago approximately two days in 2019. The report also noted that food recalls have reached a five-year low since the adoption of the law. However, FDA stated with caution that it cannot “definitively say these are meaningful representative of the entire food industry.”
The report said the dashboard introduces a series of metrics for food safety outcomes, associated measures and initial data for certain aspects for FSMA. The agency said it hopes that over time the dashboard will be populated with additional data to show more outcomes and an overall reduction in foodborne illness attributable to federally regulated food and products. The agency hopes to publish this data on a quarterly basis and to ultimately publish metrics for all seven sets of its key rules on a quarterly basis.
CANNABIS INDUSTRY CELEBRATES PASSAGE OF SAFE BANKING ACT BY HOUSE OF REPRESENTATIVES
On Sept. 25, the House passed the Secure and Fair Enforcement Banking Act. The legislation represents the House’s first successful stand-alone vote on cannabis legislation. Colorado representative Ed Perlmutter said the proposed legislation will “go a long way in getting cash off our streets and providing certainties of financial institutions can work with cannabis businesses and employees."
Under the proposed legislation, a federal banking regulator would be prohibited from doing the following:
Terminating or limiting the deposit insurance or share insurance in the depository institution; solely because the institution provides financial services to a legitimate marijuana-related business.
Prohibiting or otherwise discouraging a depository institution from offering financial services to such a business.
Recommending, incentivizing or encouraging a depository institution not to offer financial services to an account holder solely because the account holder is affiliated with such a business.
Taking any adverse or corrective supervisory action on a loan made to a person solely because the person either owns such a business or owns real estate or equipment leased or sold to such a business.
Penalizing a depository institution for possessing or collecting payments for such a business.
The Senate version of this legislation has 33 co-sponsors, as well as the endorsement of numerous trade groups such as the American Bankers Association, the Independent Community Bankers of America and the Credit Union National Association. No formal hearings have been scheduled by any of the Senate committees that would have jurisdiction over this bill.
VAPING CONTROVERSY
FDA issued a statement on Oct. 4 warning consumers to stop using THC vaping products amid ongoing investigations into various lung issues. FDA and the Center for Disease Control are working closely with state and local health officials to investigate these claims. The agency said it is “committed to taking appropriate actions as a clearer picture of the facts emerge”. The agencies have noted that even though the cases appear similar, it’s not clear if they have a common cause or if they involve different diseases with similar presentation, which is a focus of the ongoing investigation. Both agencies stated they are providing consultation services to State health departments and are trying to work closely with them to gather as much information as possible. Information can be downloaded from both agencies’ website at www.fda.gov and www.cdc.gov.
As of Nov. 1, more than 1,800 lung injury cases involving the use of e-cigarettes or vaping products have been reported to the CDC across the country. There are at least 35 deaths in more than 20 states potentially linked to use of this product. The median age of deceased patients was 49.5 years, with a range of 27-71 years. All patients are noted to have a reported history of e-cigarette product use and no consistent evidence of an infectious case has been discovered, according to the CDC. According to the agencies, the suspected cause is chemical exposure. However, the specific chemical exposure causing the type of lung injury in this instance remains unknown. Among nearly 600 patients with information on substances used in e-cigarettes or vaping in the three months prior to symptom onset, approximately 78% reported using THC-containing products, with 37% reporting exclusive use of such products.
On Sept. 9, FDA issued a warning letter to JUUL Labs alleging it was marketing unauthorized modified risk tobacco products to persons under the age of 21. The warning letter stated that based upon the agency’s review of the information available to it, including testimony heard at a July hearing on examining JUUL’s role in the youth nicotine epidemic, FDA determined JUUL adulterated its products under the Food, Drug and Cosmetic Act by selling or distributing them as modified tobacco products without an FDA order in effect that permits such sale or distribution.
TRUMP ADMINISTRATION ANNOUNCES PLAN TO CLEAR MARKET OF UNAUTHORIZED NON-TOBACCO FLAVORED E-CIGARETTE PRODUCTS
On Sept. 11, FDA announced that as part of its ongoing work to tackle the epidemic of youth e-cigarettes use, it would be finalizing a compliance policy in the coming weeks to prioritize the agency’s enforcement of the pre-market authorization requirements for non-tobacco flavored e-cigarettes, including mint and menthol, in an attempt to clear the market of unauthorized, non-tobacco flavored e-cigarette products. In the agency’s statement, it referred to data showing that more than a quarter of high school students were current e-cigarette users and the overwhelming majority of e-cigarette users cited the use of popular fruit and menthol or mint flavors.
As of the date of this announcement, the agency said it had issued more than 8,600 warning letters and more than 1,000 civil money penalties to retailers (both online and brick and mortar retail stores) for sale of these products and their components to minors.
NESTLE SUED FOR ALLEGED MISREPRESENTATION OF ITS “PREMIER WHITE” MORSELS DESPITE PRODUCING OTHER TOLLHOUSE CHIPS THAT CONTAIN REAL CHOCOLATE
A lawsuit was recently filed in California by Steven Prescott and Linda Cheslow saying they purchased the chips believing them to contain cocoa butter, the primary ingredient in white chocolate. Hershey’s was also sued last July for a similar complaint against its white Reese’s and the dispute there was over the use of the formal title of “white cream.” The lawsuits are claiming these white morsels are merchandised directly next to Nestle’s Tollhouse Chips, which include a milk, dark and semi-sweet chocolate. The packages prominently feature the words “100% Real Chocolate” on the front of the package. The “Premier” white bag omits that description. The lawsuit calls out the Tollhouse Premiere White Morsels as fake and packaged in “deceptive labeling and advertising.” The plaintiffs are seeking injunctive relief and restitution for false and misleading advertising. The plaintiffs claim they would not have purchased the product had they known that it did not contain cocoa butter.
WEGMANS SUED OVER VANILLA ICE CREAM
Two consumers brought a lawsuit against Wegman’s in a purported class action claim of “food fraud” for selling vanilla ice cream without selling the actual ingredient. Quincy Steel of Pennsylvania and Jimmy Arriola of New York claim the supermarket chain is misleading customers into believing its ice cream contains real vanilla. The lawsuit alleges that Wegmans uses “natural vanilla flavor” instead of vanilla- based flavoring or vanilla extract in some of its ice cream products and overprices it at a premium rate. The lawsuit also contends “natural flavor” means products that contain flavor not derived from vanilla beans, which is inconsistent with an ice cream flavor labeled with unqualified “vanilla”.
These types of lawsuits are being filed by Spenser Sheehan of Great Neck, N.Y. In 2018, he was the lawyer for a class-action lawsuit brought against Unilever, which makes ice cream under the Breyer’s brand, and for Danone North America, pertaining to vanilla yogurt, including the Oikos Triple Zero lines, and Nestle’s Dreyer’s Ice Cream division, which makes Dreyer’s and Edy’s ice cream brands. Other Sheehan targets include Friendly’s, Keurigm, Dr. Pepper, Cumberland Farms and Blue Diamond Growers.
PLAINTIFF’S LITIGATION STARTS AGAINST CBD WITH LAWSUITS ALLEGING THAT PRODUCTS CONTAIN SIGNIFICANTLY LOWER LEVELS THAN ADVERTISED
It should come as no surprise the plaintiffs tort bar has already started filing various types of lawsuits against the CBD industry, alleging products are mislabeled and contain significantly lower levels of CBD than advertised.
Lawsuits have been filed in Federal Court in several states. It’s likely that states with strong consumer labeling consumer fraud laws will continue to be the venue for these types of lawsuits.
FTC FINES COMPANY FOR PRODUCTS THAT ARE “NOT TRULY ORGANIC”
The Federal Trade Commission recently resolved a case against Truly Organic and its founder and CEO, Max Harley Appleman, The company will pay $1.76 million to settle a complaint alleging its bath and beauty products are neither “100% Organic” nor “Certified Organic” by the U.S. Department of Agriculture. The complaint alleges violations of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts of practices in or affecting commerce. In May 2016, USDA contacted the company to notify officials the government received complaints alleging the products were not organic. The company responded that “previous management” had committed the erroneous act of using the USDA Organic Seal and that the company had proceeded to remove it from its packaging and promotional material. However, the company continued to make the claims that the products were “certified organic” or “USDA organic”. The settlement, in addition to the payment made of $1.76 million, also prohibits Truly Organic and Appleman from making deceptive claims, including false/substantiated claims on any good or service is:
wholly or partially organic,
contains or uses organic ingredients,
is certified organic,
is vegan, or
has been evaluated by any third party, including one that has been affiliated by the USDA, based on its environmental or health benefits or attributes.
This latest action by the FDA serves as a reminder that all environmental-based marketing claims must be accurate, true at the time they are made and supported by competent, reliable and scientific evidence.
RESEARCH SCIENTIST AND TECHNICIAN AT COLGATE-PALMOLIVE STOLE COMPANY FORMULAS
A long-time research scientist and technician at the Colgate-Palmolive facility in New Jersey recently pled guilty to conspiracy to commit wire fraud. Muamer Reci, who worked for the firm for nearly 20 years, is facing up to 20 years in prison at sentencing which is scheduled for February. Although the company’s code of conduct required him not to disclose trade secrets or other formulas, Reci and some other unnamed co-conspirators set up a consumer hygiene and cleaning products company called Reci and Sons, according to prosecutors. They then established a subsidiary, Reci Enterprises, in Macedonia, with plans to develop, manufacture and sell a toothpaste called Eurodent. Among the formulas stolen were those for a dry mouth toothpaste that had not launched yet, as well as children’s toothpaste already on the market.
FDA ISSUES WARNING REGARDING WOMEN WHO ARE PREGNANT OR ARE BREASTFEEDING TO AVOID CBD AND CANNABIS PRODUCTS FOR FEAR OF “SERIOUS RISKS”
On Oct. 16, FDA issued a consumer update acknowledging that while CBD containing products are everywhere and these products often make questionable health promises about CBD, the agency has not approved these products - other than a prescription product to treat epilepsy that contains either CBD or synthetic THC. The document states “there may be serious risks to using cannabis products, including those containing CBD, if you are pregnant or breastfeeding”. It says high doses of CBD in pregnant test animals have been shown to cause problems with the reproductive system of developing male fetuses and that some amount of CBD will be transferred to babies through breastmilk.
Patrick J. McNamara, Esq. has served since 1994 as general counsel to NAFFS. Copies of the various reports and documents referenced in his speech can be obtained from NAFFS or directly from him. Please contact him atpmcnamara@scarincihollenbeck.comor call his office at 201-896-4100. The complete version of Mr. McNamara’s presentation is available atwww.naffs.org.
This presentation provides general information only and does not constitute legal advice. No attorney-client relationship has been created. If legal advice or other expert assistance is required, the services of a competent professional should be sought. We recommend that you consult with an attorney familiar with your specific situation before taking any action.
The article contains excerpts from a presentation on legal and regulatory issues given by NAFFS General Counsel Patrick McNamara.