Alfasigma USA, Inc. v. Exegi Pharma, LLC, 0733

ALFASIGMA USA, INC., v. EXEGI PHARMA, LLC AND CLAUDIO DE SIMONE

No. 0733

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2020

June 11, 2021

Circuit Court for Montgomery County

Case No. 465781V

UNREPORTED

Fader, C.J. Shaw Geter, Harrell, Jr., Glenn T. (Senior Judge, Specially Assigned), JJ.

Opinion by Shaw Geter, J.

*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

This is an appeal from the grant of summary judgment by the Circuit Court for Montgomery County. Appellant, Alfasigma USA, Inc., filed a lawsuit against appellees, ExeGi Pharma, LLC and Claudio De Simone, claiming: tortious interference with business relations, tortious interference with contract, injurious falsehood, libel per se, and, against ExeGi only, common law unfair competition. Appellees filed a Motion for Summary Judgment, and, following a hearing, the court entered a memorandum and order, granting the motion. Appellant timely appealed and presents the following questions for our review:

1. Did the circuit court err in denying Alfasigma an opportunity to take any discovery?

2. Did the circuit court err in granting summary judgment to the Appellees?

3. Did the circuit court err in finding that the common law litigation privilege barred Alfasigma's claims even though there were questions of fact as to whether Appellees' communications were related to a legal proceeding actually contemplated in good faith and under serious consideration?

For the reasons set forth below, we affirm the judgment of the circuit court.

BACKGROUND

Appellant, Alfasigma USA, Inc. ("Alfasigma") and appellees, ExeGi Pharma, LLC ("ExeGi") and Claudio De Simone ("De Simone"), both sell probiotic products: Italian VSL#3 and Visbiome, respectively. In the 1990's, De Simone, along with two other scientists, invented a bacterial eight-strain probiotic, commonly known as "the De Simone Formulation." In 1999, De Simone and the Sigma-Tau Group, an Italian pharmaceutical conglomerate, entered an agreement acknowledging De Simone's ownership in the eight-strain probiotic patent and the "Know-How" for the probiotic.¹ The agreement also gave the Sigma-Tau Group "an exclusive option for an exclusive license related to" De Simone's rights, with the objective of commercializing the probiotic patent in the U.S. In 2000, De Simone, along with Claudio and Paolo Cavazza, who owned the Sigma-Tau Group, incorporated VSL, Pharmaceuticals, Inc. ("VSL") and agreed to bring products patented by De Simone to the U.S. market as nutritional supplements. In September 2000, De Simone transferred the trademark, VSL#3, to VSL. De Simone and VSL then entered into a patent license agreement, which granted VSL an exclusive license to De Simone's rights in the probiotic patent "for the production and for the commercialization" in the U.S. of any product "marketed as dietary supplement or functional food" containing the bacteria specified in the patent.

From 2002 until January 2016, the De Simone Formulation was sold under the brand name VSL#3. In January 2016, De Simone terminated VSL's license to sell the De Simone Formulation.² That year, De Simone partnered with ExeGi to create the new brand, Visbiome, using the original De Simone Formulation. In May 2015, ExeGi began to market Visbiome. Since June 2016, VSL#3 has contained a new seven-strain formula, which is produced in Italy ("Italian VSL#3"). Since then, Alfasigma has been the exclusive distributor of Italian VSL#3.

The parties have an extensive history of litigation, which commenced in federal court. The outcome of the parties' initial judicial proceedings were in appellant's favor. However, on November 20, 2018, after a fourteen-day trial, a jury returned a verdict in favor of appellees in a case against Alfasigma, VSL, and Leadiant Biosciences, Inc.³ The jury found Alfasigma liable for false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a) (2012), and awarded damages totaling $15 million against Alfasigma.⁴ The outcome of the federal litigation is contained in several opinions: De Simone v. VSL Pharmaceuticals, Inc., 352 F. Supp. 3d 471, 477, 483 (D. Md. 2018) (concluding that "De Simone owns the Know-How" associated with the De Simone Formulation, which "consist[s] of a unique biochemical profile, formulae, processes, data, and other technical and non-technical information"); De Simone v. VSL Pharmaceuticals, Inc., 395 F. Supp. 3d 617 (D. Md. 2019) aff'd sub nom. De Simone v. Alfasigma USA, Inc., 2021 WL 613697 (4th Cir. Feb. 17, 2021) (denying defendant's post-trial motions); De Simone v. VSL Pharmaceuticals, Inc., 2019 WL 2569574 (D. Md. June 20, 2019), aff'd in part, vacated in part sub nom. De Simone v. Alfasigma USA, Inc., 2021 WL 613697 (4th Cir. Feb. 17, 2021) (granting a permanent injunction against Alfasigma, among other defendants, as an additional remedy for false advertising); and De Simone v. Alfasigma USA, Inc., 2021 WL613697 (4th Cir. Feb. 17, 2021) (affirming the verdict on the false advertising claim and unjust enrichment claim, but vacating the permanent injunction as "overbroad as written").

The parties filed multiple post-trial motions and the district court rejected many of Alfasigma's challenges to the false advertisement claim. The court concluded:

the evidence was sufficient to establish that at a minimum, the VSL#3 Webpage . . . satisfies all of the elements of false advertising as to Alfasigma. The VSL#3 Webpage included a statement by Ocnean that "[m]oving VSL#3 back to the original manufacturing facility in Italy allowed the brand to revert back to an established process that removes all dairy while maintaining the original proprietary mix of eight strains of live bacteria."

De Simone v. VSL Pharmaceuticals, Inc., 395 F. Supp. 3d 617, 624 (D. Md. 2019), aff'd sub nom. De Simone v. Alfasigma USA, Inc., 2021 WL 613697 (4th Cir. Feb. 17, 2021). The court also found "that the evidence was sufficient to support the conclusion that . . . the VSL#3 Webpage . . . contained literally false statements." Id. at 625. Specifically, the court determined that the statement in the VSL#3 Webpage that VSL#3 "maintain[s] the original proprietary mix of eight strains of live bacteria" was false. Id. The court explained:

the heart of ExeGi's claim is that the falsity of Alfasigma's advertising is the representation that, in essence, its product is the exact same product, with the exact same formulation, as ExeGi's product, where it is undisputed that the De Simone Formulation is otherwise available only through ExeGi in the form of Visbiome.

Id. at 631.

On June 20, 2019, the district court granted a permanent injunction to appellees under the Lanham Act upon finding that "the De Simone Parties have suffered an irreparable injury." De Simone v. VSL Pharmaceuticals, Inc., 2019 WL 2569574, at *2 (D. Md. June 20, 2019), aff'd in part, vacated in part sub nom. The court continued: "[i]npassing off Italian VSL#3 as the De Simone Formulation, Alfasigma and Leadiant deprived the De Simone Parties 'of a legitimate competitive advantage and reduced consumers' incentive' to purchase Visbiome, which actually contains the De Simone Formulation, rather than Italian VSL#3." Id. (citation omitted). The permanent injunction enjoined Alfasigma from:

making any claims in VSL#3 promotional materials that state or suggest a false continuity between Italian VSL#3 and the De Simone Formulation, including but not limited to statements claiming that VSL#3 continues to contain the "original proprietary blend" or the "same mix in the same proportions" [and] citing any clinical study performed on the De Simone Formulation or implying that any such study was conducted on Italian VSL#3.

Id. at *4.

On July 30, 2020, the district court found Alfasigma in civil contempt for violating the permanent injunction because of three online promotional statements for VSL#3 that were false. To purge themselves of contempt, the district court ordered Alfasigma to remove all noncompliant statements from applicable media and required them to pay appellees' legal fees for the contempt motion.

In February 2021, the Fourth Circuit vacated a portion of the permanent injunction holding "that the district court acted within its discretion in issuing a permanent injunction to prevent the VSL Parties from continuing their false advertising, [but] that the injunction is overbroad as written." De Simone v. Alfasigma USA, Inc., 2021 WL 613697, at *6 (4th Cir. Feb. 17, 2021). The court stated:

the language prohibiting the VSL Parties from "citing to or referring to any clinical studies performed on the De Simone Formulation or earlier versions of VSL#3 as relevant or applicable to Italian VSL#3" is too broad. To theextent that this language is intended to prohibit the VSL Parties from citing or referring to the clinical studies as though they were performed on Italian VSL#3 (rather than on the Danisco-made version), it's superfluous to prohibiting claims of continuity between the products. But prohibiting the VSL Parties from citing or referring to the clinical studies as even relevant to Italian VSL#3 goes too far, as they could feasibly do so without claiming continuity between their old product and their new one.

Id.

Approximately a month after the November 2018 jury verdict, at appellees' directive, "cease and desist" letters were sent to various companies that distributed or sold Italian VSL#3 in the United States. Alfasigma contended, inter alia, that the letters contained multiple false or misleading statements. They alleged the letters falsely stated that Alfasigma was selling "counterfeit VSL#3" and that they were "in breach of its agreements with its distributor or business partner." They claimed that appellees "threatened to commence litigation against Alfasigma's distributors and...