The Third Degree: Options When Presented With a Fiduciary Breach That Harms Your Business

Last month, Baker Jenner LLLP published a blog detailing the limited rights of pharmaceutical companies to market products for non-FDA-approved uses, which is still an open question in many courts. The FDA’s authority notwithstanding, companies operating in the FDA space occasionally see it in their best interests to challenge a claim (implied or express) made by a competitor in interstate commerce.

The tried-and-true cease and desist letter is the tool many firms initially turn to, having made the assumption that no other method would be effective. While that might be true in many cases, sending a cease and desist letter to competitors could trigger a legal process for which your company might not be fully prepared.

Before Lobbing the First Bomb…

Carefully evaluate the claims your competitor is making in marketing and advertising materials. The competitor might have substantiation for its claims you are not privy to. While evaluating your competitor’s claims, look inward to your own firm. The timeless adage about not throwing stones while living in glass houses rings true in this situation—acting on a competitor’s improper claim could display your firms’ vulnerabilities for the world to see.

In the due diligence phase prior to making a decision, include the following criteria in your considerations:

  • The specific contexts of the claim in question (consumer-facing vs. physician-facing); 
  • Similar claims made by other competitors;
  • Timeliness factors of taking action vs. doing nothing;
  • Potential damage to your company’s credibility and well-being; and 
  • Potential harm to consumers.

Considering a Demand Letter?

After meeting with in-house subject matter experts and outside consultants, your company’s management might have reached a decision to make contact with your competitor. Before crafting a cease and desist letter, your team should consider the merits of an informal demand letter. An adequate demand letter will allow your company to avoid risking a declaratory judgment—the so-called “nuclear option.”

The particular contours of your demand letter will vary depending on the circumstances and your company’s goals. Most demand letters begin with an explanation of the writing company’s understanding of the competitor’s claims: “Company X understands, through Company Y’s express and implied claims made through consumer-facing marketing and advertising, that Drug X treats conditions X, Y, and Z, which are uses not approved by the FDA.”

The demand letter should then include an opportunity for the receiving company (Company Y in the above example) to either confirm or deny Company X’s understanding, which belies the ultimate purpose of the demand letter—to invite negotiations over legal action.

Time For Escalation

The principal drawback of a demand letter is that no company is guaranteed a response. After a demand and/or cease and desist letter is sent to a competitor with no action on the competitor’s part, it could be time to ask for a judge’s ruling. The same considerations your company addressed when deciding on its initial course of action are salient at this stage. Is it worth the time and expense needed to litigate the matter? Will it shed unwanted light on your company’s internal practices?

If you decide to move forward with litigation, you and counsel need to determine the appropriate laws and regulations to bolster your side. The Lanham Act might prove useful, as might the False Claims Act or various state laws.


With the recent posture by federal courts and the FDA regarding off-label marketing tilting toward free speech, or at least freer speech, policing advertising and marketing has increasingly fallen to the competitors of alleged transgressors. No matter how clearly you believe your competitor is in the wrong, responding to or contacting a competitor requires a calculated approach.

Baker Jenner LLLP has a large body of work dealing with complex advertising disputes among competitors in the FDA space. Knowledge of the FDA’s authority to regulate advertising and recent court decisions is key when prosecuting and defending your position in court. Let’s talk soon.

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Baker Jenner LLLP is a business solutions law firm. We partner with clients to achieve their goals while managing transactional, regulatory, and legal risks.

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