Biotechnology Company Files Product Defamation Lawsuit Against Financial Journalist


As Chicago Internet product disparagement litigation attorneys, we were interested to see reports about a product disparagement lawsuit filed in early April against financial publication and one of its reporters. Fierce Biotech reported April 7 that Canadian drug maker Generex has sued TheStreet and columnist Adam Feuerstein for libel, product disparagement and injurious falsehood. The lawsuit, filed in New York state court, seeks $250 million in damages for what Generex called “numerous defamatory statements” about the company, its leaders and its flagship product, an insulin delivery system allowing the hormone to be absorbed through the lining of the mouth, obviating the need for injections. In its filing (PDF), Generex said the statements caused its stock to drop nearly 8%, losing the company $12 million in market capitalization and the goodwill of third parties like investors.

Product disparagement laws prohibit outright false claims about another company or person’s products or services. In its April 6 press release announcing the lawsuit, Generex claims TheStreet and Feuerstein made such false claims, with the company’s general counsel saying they “[spread] categorical falsehoods” in articles “that go well beyond the expression of disparaging opinion or fair comment.” The company is referring to two articles authored by Feuerstein in March of 2010. In the first, he wrote that the company’s stock “is a total bust” because its product “is more fiction than science,” has not been tested sufficiently and would not be in demand. He also claimed the product had not been discussed in medical journals or presented at medical conferences, but TheStreet later retracted that statement when the company contacted it.

In the second article, Feuerstein went further and said the company’s work is “a ruse to perpetuate a 15 year-long stock promotion scheme.” He said the studies on its product, Oral-lyn, were extremely small and poorly designed. A Phase III trial in the United States, the first step toward FDA approval, was underenrolled and insufficient for FDA approval, he added, saying this showed that “Generex isn’t interested in seriously developing an oral insulin spray.” On the day Generex announced its lawsuit, TheStreet published a third Feuerstein article noting that approval of Oral-lyn was revoked by regulators in India — the largest country where it had been approved — about a year earlier, but that Generex had failed to notify investors. A fourth article dated April 29 faulted the company for mischaracterizing the FDA’s permission to use Oral-lyn experimentally as a “mini-approval.”
As Illinois online business libel lawyers, we believe winning this claim will be an uphill battle for Generex. To win, the company must convince a jury that Feuerstein’s articles were intended as statements of fact, not opinion. This could be difficult with the first article, because Feuerstein was responding in that piece to a direct question from a reader asking “What are your thoughts?” about Generex stock. The next sentence started with the phrase “I think…”, which seems to indicate that the following information was an opinion. The second article may offer more hope for Generex, because it doesn’t seem to contain any such clear statements indicating opinion. However, Generex would still have to show that the articles, which are intended as stock-picking advice, are not inherently opinion. It may also have to show “actual malice” by Feuerstein and TheStreet, which means reckless disregard of the truth or knowledge of falsity.

Based in Oakbrook Terrace, Ill., Lubin Austermuehle represents both plaintiffs and defendants involved in product defamation, business libel and trade libel cases. Our Chicago business law attorneys handle cases involving disparagement of products and services through conventional advertising, but more and more, these cases are coming to us because of the Internet. The Internet makes it easier than ever to make claims about a product or service to a wide audience, but it doesn’t provide an editor or arbitrator to ensure that the claims are proven. Our Joilet and Waukegan, Ill. trade libel attorneys handle claims stemming from online reviews, websites set up specifically about a product or service, disparaging use of a logo or trademark, misuse of keyword advertising and other Internet-related claims. We also help defendants balance their right to free speech against businesses’ concern for their reputations.

If you’re involved in a legal claim concerning false statements about a business or its products or services, or are considering one, Lubin Austermuehle can help. To set up a free consultation, please contact us online or call 630-333-0333 today.

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