The Federal Circuit Wades into FDC Act Preemption and Intended Use in RevitaLash Decision

January 2, 2014

By Kurt R. Karst –      

Last week, in an unusual move, the U.S. Court of Appeals for the Federal Circuit waded into non-patent territory when the Court issued its decision in Allergan, Inc. v. Athena Cosmetics, Inc. (Case No. 2013-1286), a consolidated appeal of several decisions by the U.S. District Court for the Central District of California.  The defendants in the case allegedly manufacture, market, and/or sell products (formulations of Athena’s RevitaLash line) containing a prostaglandin derivative for eyelash (and hair) growth and that compete with Allergan’s LATISSE (bimatoprost ophthalmic solution), which FDA approved under NDA No. 022369 in December 2008 for “treatment of hypotrichosis of the eyelashes by increasing their growth including length, thickness and darkness.” 

Although the case has roots in a patent dispute, which the Federal Circuit  previously considered (see here and here), it evolved into a dispute over FDC Act preemption and “intended use” for the Federal Circuit to consider when the California District Court found that Athena’s products qualify as “drugs” rather than as “cosmetics.”   Based on this finding, the California District Court granted Allergan’s Motion for Summary Judgment that Athena violated California’s Unfair Competition Law (“UCL”) and entered a nationwide injunction against Athena prohibiting the company from selling “any and all eyelash growth product(s).”

After dispensing with a jurisdictional dispute raised by Allergan that the Federal Circuit does not have jurisdirction over the appeal, the Court went on to address Athena’s appeal of the California District Court decisions that the company violated the California UCL “by marketing, distributing and selling, without regulatory approval, products that qualify as drugs,” and challenge of the district court’s entry of a nationwide injunction and denial of Athena’s Motion for Judgment on the Pleadings that the FDC Act impliedly  preempts Allergan’s UCL claim.  Briefs in the Federal Circuit appeal are available here, here, and here.

Athena argued on appeal that Allergan’s UCL claim involves the violation of a California statute that is not rooted in state law tort principles, but simply incorporates FDC Act provisions.  As such, argued Athena, under the U.S. Supreme Court’s decision in Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001), and the Ninth Circuit’s application of that decision in PhotoMedex, Inc. v. Irwin, 601 F.3d 919 (9th Cir. 2010), a state law claim is impliedly preempted if it does not implicate a traditional state law tort principle and exists solely by virtue of a federal statute.  Thus, according to Athena, Allergan’s UCL claim “interferes with the FDA’s discretionary authority whether to regulate an article in interstate commerce as a drug,” and under the prudential doctrine of primary jurisdiction, the California District Court “abused its discretion by declining to stay this case pending the FDA’s determinations about the products at issue.”

Allergan, using the U.S. Superme Court’s decision in Wyeth v. Levine, 555 U.S. 555 (2009), argued that there is no implied preemption where it is possible to have simultaneous compliance with state and federal law, and that the California law is not an obstacle to the realization of federal goals under the FDC Act.  Specifically, Allergan argued that compliance with both the California Health Code and the FDC Act is possible, and that the California district court “did not abuse its discretion by retaining jurisdiction because the resolution of this case did not require the FDA’s specialized knowledge.”

Siding with Allergan, the Federal Circuit held that the FDC Act does not impliedly preempt the Company’s UCL claim:

The fact that the California Health Code parallels certain FDCA provisions does not mean that it does not implicate an historic state power that may be vindicated under state law tort principles. . . .  We do not find a clear purpose by Congress to preempt the state law claim at issue. Congress expressed its intent to preempt state-law causes of action regarding, for example, non-prescription drugs and medical devices.  Allergan’s contention, however, is that the products at issue must ultimately be regulated as prescription drugs—about which Congress “declined to enact such a provision.” . . .  Moreover, the California Health Code is not an obstacle to realizing federal objectives.  To the contrary, it contains provisions that parallel the FDCA, such that the statutes have consistent goals. [(Internal citations omitted.)]

Moving on to the California District Court’s Summary Judgment finding that Athena “objectively intended to market past and present formulations of the products at issue to affect the structure of eyelashes” – i.e., as “drugs” for eyelash growth, instead of as “cosmetics” for eyelash appearance – the Federal Curcuit affirmed that decision as well. 

Athena argued that there is genuine issue of material fact about its objective intent that made Summary Judgment inappropriate.  Specifically, Athena argued “that its intent should turn only on labeling and marketing materials related to its most recent formulation, and that the physical properties of the products at issue and marketing of past formulations are irrelevant.”  In addition,  Athena contended that the company ultimately “limited its marketing to claims about eyelash appearance,” and that “statements by resellers about eyelash growth do not reflect Athena’s objective intent.”  Allergan contended otherwise, saying that “there is no genuine factual dispute that Athena objectively intends for the products at issue to be used as drugs,” and that Athena’s marketing “consistently references eyelash length, which depends on growth,” thereby making it a “drug” rather than a “cosmetic.”

Once again siding with Allergan (and the California District Court), the Federal Circuit held that “there is no genuine dispute that Athena objectively intends for the products at issue to be used to affect the structure of eyelashes—i.e., as drugs.”  Noting that the Ninth Circuit, in United States v. Storage Spaces Designated Nos. “8” & “49”, 777 F.2d 1363 (9th Cir. 1985), found that the intended use of a product may be “derived or inferred from labeling, promotional material, advertising, or any other relevant source,” the Federal Circuit disagreed with Athena “that the only relevant evidence is labeling and marketing, or that the only relevant formulation is the most recent one.”  Among other things, the Federal Circuit pointed to the company’s website, which “collectively refers to the RevitaLash ‘line-up of products,’ and describes formulation changes as ‘improve[ments]’ to the intended use of ‘one or more of our products.’”  “Athena’s marketing of the products at issue consistently discusses physical changes to eyelashes,” wrote the Court.  “There is no dispute that Athena made drug-related claims about an early formulation—and it never expressly disavowed such claims as it reformulated its products.  Instead, the company continued to suggest that the products at issue change eyelash structure.”

The one bright spot for Athena is the Federal Circuit’s decision to vacate the California District Court’s nationwide permanent injunction.  “[T]he district court abused its discretion by entering an injunction that regulates any and all out-of-state conduct,” wrote the panel.  “The injunction impermissibly imposes the UCL on entirely extraterritorial conduct regardless of whether the conduct in other states causes harm to California. . . .  Neither the California courts nor the California legislature are permitted to regulate commerce entirely outside of the state’s borders.  To do so would violate the Commerce Clause” of the U.S. Constitution.  Instead, wrote the Court, “The FDA—and the FDA alone—has the power and the discretion to enforce the FDCA. . . .  California does not have the authority to stand in the shoes of the FDA to determine whether Athena’s sale of the products at issue amounts to the sale of an unapproved drug under the FDCA.” 

Now that the Federal Circuit has hit the ball into FDA’s court, whether the win for Athena on the nationwide permanent injunction will continue to be a bright spot for the company (or whether it will be an evanescent win) will depend on whether or not FDA decides to take enforcement action against the company for marketing an unapproved new drug.