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Schulman Bhattacharya Wins Federal Appeal — U.S. Court of Appeals for the Fourth Circuit Upholds Jury Verdict In Excess of $17 Million on False Advertising and Unjust Enrichment Claims and Affirms Core of Permanent Injunction Against Sellers of VSL#3 Probiotic Product

Feb 17

The United States Court of Appeals for the Fourth Circuit today issued a decision affirming Schulman Bhattacharya’s trial win for clients Claudio De Simone and ExeGi Pharma, LLC, in which we secured more than $17 million from a Greenbelt, Maryland jury on Lanham Act (false advertising) and unjust enrichment claims and a permanent injunction prohibiting further false advertising of the VSL#3 probiotic product. At trial, we recovered an additional amount just under $1 million in unpaid royalties, which the defendants elected not to appeal.

Today’s judgment affirms the findings from a 2018 trial in the U.S. District Court for the District of Maryland, which was brought by ExeGi and Professor De Simone, a renowned inventor of probiotic products.  The original case sought to declare that Professor De Simone owned the rights to a proprietary probiotic formulation (known as the De Simone Formulation and sold under the trademark “VisbiomeÒ”) and to find the sellers of the competing product, named “VSL#3,” liable for false advertising under the Lanham Act. The De Simone Formulation is one of the most well studied probiotics on the market with over 70 human clinical trials going back over 20 years. The product is used as a medical food to help in the dietary management of dysbiosis in patients with certain gastrointestinal and liver related conditions.

Prior to 2016, the formulation was sold by various commercial parties under license agreements with Professor De Simone and using the brand name “VSL#3”. When Professor De Simone decided to terminate these commercial agreements, ownership of the product formulation stayed with him, and the trade name, VSL#3, stayed with the old license partner VSL Pharmaceuticals. Without access to the formulation, VSL Pharmaceuticals attempted to create a copy of the product and pass it off as the original, with its U.S. licensees selling it under the VSL#3 name and proclaiming it to be the same without any supporting clinical data. At trial, ExeGi and De Simone were able to show that the copy was not the same formulation, making claims of equivalence false and misleading. In the unanimous opinion issued today, the three-judge panel of the Fourth Circuit Court of Appeals upheld the jury verdict from the previous trial and several key post trial decisions by the U.S. District Judge.

“I’m very pleased by the decisions of the appeals court in this case, after fighting for the health of patients for so many years,” said Professor Claudio De Simone. “When my prior partners attempted to copy my product, I was very fearful that patient health outcomes could be at risk because their new formulation was untested. I took this extraordinary step of engaging in a multi-year litigation so that patients would no longer be misled.”

The appellate judgment also affirmed the core of a permanent injunction which is intended to prevent the sellers of VSL#3 from creating a false continuity between their new copy product and the original De Simone Formulation.

Helpful Links:

Decision: A copy of the Fourth Circuit’s decision

Reuters: Press Release of the happening

Westlaw members: Here’s an overview of the case

Yahoo Finance: Appeals Court Upholds False Advertising Verdict Against Sellers of VSL#3® Probiotic