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  • Shelly Albaum

Niagen. There is no substitute.

You get a real sense of the quality of Elysium's counsel when you read through some of the exhibits to these motions. It's almost as if they don't intend to win; they only want to fight.

The expert report on patent misuse is a great example.

To win on its patent misuse claim, Elysium needs to show not only that ChromaDex had a patent and did something bad, but also that the result had anti-competitive effect.

So that's why the legal filings include pages and pages of mind-numbing text addressing anti-trust issues like market definition and price elasticity.

Specifically, Elysium needs to show that ChromaDex has "market power," and to do that they need to define the market.

Let's take this into the automobile context -- What business is Porsche in?

If we wanted to accuse Porsche of misusing their patents, we would first want to show that Porsche dominates their market. And ideally, we would say that the market they are participating in is the market for Porsches. They are monopolists in this market, and they can raise prices at will, and consumers have no choice but to pay because, after all, there is no substitute for a Porsche.

But a more reasonable market analysis would probably conclude that Porsche participates in the Luxury Gasoline-Powered Car Market, and that it has many competitors, such as BMW, Audi, Mercedes, Jaguar, Lexis, Infinity, Genesis, and Acura.

And if we define the market a little more broadly to just be "Luxury Vehicles," maybe Tesla. Perhaps Land Rover and Maserati, too?

In the Luxury Vehicle market, Porsche has very little market power. There are lots of substitutes, and if Porsche makes itself difficult to deal with, customer can easily go across the street to a different dealership and choose a very high quality vehicle that does all the same things, although maybe not in exactly the same way, and not always as well, though perhaps sometimes better.

But if you think Porsche lacks market power in the luxury vehicle market, it's much worse if the market is just, "Automobiles," because then Honda, Toyota, and Chevrolet all become substitutes, and Porsche's market share becomes miniscule.

Or is Porsche really just in the "Transportation" market? If what a Porsche does is get you from here to there, then they are also competing with trains, planes, buses, taxis, bicycles, segways, electric scooters, helicopters, private jets, and more. Porsche has no ability whatsoever to control the transportation market.

So if we want to go after Porsche with some claim that requires anti-trust analysis, like Patent Misuse, we really want to show that they are participating in the smallest possible market, or else their actions, even if improper, can't do any harm.

So we would like to argue that Porsche participates in the Porsche market, and they are monopolists.

Common sense says otherwise, because we've never met anyone who says if I can't have a Porsche, I won't buy any car at all.

Actually, we have met one person who says that: Porsche.

Everyone is familiar with their advertisements (one is reproduced above) that say, "Porsche. There is no substitute."

That's a demonstrably false statement, but it is legally permissible lie in the United States, because you are allowed to say things like that -- like you are the best -- even if you are not.

But if an expert witness appeared before judge and jury to argue that Porsche had a monopoly over the market for Porsches, and offered as evidence of that, Porsche's own ads claiming that there were no substitutes, that expert would be laughed out of the court room, if not tarred and feathered.

Weirdly, that is exactly what has happened in our case.

Elysium is arguing that there is no substitute for Nicotinamide Riboside, and therefore ChromaDex acts as a monopolist (duopolist?) in the NR market.

Anyone with enough common sense to know that Audi, BMW, Jaguar, and Mercedes make decent Porsche-substitutes ALSO knows that there are a variety of NAD precursors in addition to NR -- Specifically, NA, NAM, NMN, and Tryptophan.

As ChromaDex shareholders, we might wish these substitutes did not exist, and we might wish that there was a boatload of scientific evidence showing that NAM and NMN in particular were completely inadequate and ineffective as NAD precursors, and so anyone who wants to replenish their NAD has no realistic choice but to use NR. However, that is not the case -- NA, NAM, and NMN all function as NAD precursors.

We know from -- for example -- David Sinclair's research that there is plenty of credible scientific evidence that NMN is an adequate NAD precursor. Indeed, we are all familiar with a study that shows that NR is mostly converted to NAM in the liver, and therefore that NR should not function differently from oral NAM, which is clearly and undeniably an NAD precursor.

We know from amazon sales ranking that a LOT of people choose to buy NAD precursors NMN and NAM. In fact, I know from my own affiliate referral traffic that people who read my articles suggesting that NR is the best NAD precursor nonetheless go on to buy NMN, NAM, or even NAD!

So the idea that NR has no substitutes is sadly inconsistent with scientific evidence and commercial reality.

But let's say that you were Elysium's expert witness and you wanted to PROVE that NR had no substitutes and was its own unique market. What evidence would you propose?

You are not going to believe it. Iain Cockburn, Expert Witness:

From my review of ChromaDex’s own documents and public statements, it appears that NR is marketed to consumers and investors as not being reasonably interchangeable in use with any other products and as having its own peculiar characteristics and uses. In fact, as discussed below, ChromaDex has repeatedly stated that there are no substitutes for NR. Thus, the supply of NR must be deemed to be within its own product market because an analysis broadening the market beyond NR – even to just other potential NAD+ precursors – quickly fails to find reasonably interchangeable products...

Dr. Charles Brenner...rejected any claim that substitutes to NR existed, concluding that: “NR is the only NAD-boosting compound that elevates metabolism, protects damaged nerves, extends lifespan in mice and other model systems, and increases insulin sensitivity.” Dr. Brenner continued, stating, “inexpensive NAD precursors […] cannot substitute for NR...You can be assured that there is no other NAD precursor that can do what NR does...”

in press releases, ChromaDex describes NR as having “unique properties"... In another presentation from 2017, ChromaDex stated that “NIAGEN® is the most efficient and effective NAD+ booster....

Internal and external ChromaDex documents recognize that a distinct market for the supply of NR exists due to the unique properties of NR perceived by ChromaDex, its investors, and its customers...

That's right. Dr. Cockburn is extensively citing ChromaDex's own marketing statements that there is no substitute for NR to establish that there is no substitute for NR.

Dr. Brenner and ChromaDex might even believe it, but no one in the world is less impartial and less convincing on this issue, and there couldn't be a worse way to prove the point than to cite these advocates. Dr. Cockburn cites Elysium for the same point, too; same problem.

Dr. Cockburn's report should get laughed out of court, just as if he had cited Porsche's advertisements stating that "There is no substitute" as proof that there is no substitute.

I said yesterday that ChromaDex's attack on Dr. Cockburn's report was devastating, and likely to prevail, and indeed ChromaDex attacked the report on many more grounds than just this one I have considered above. In fact, in a 20-page brief, the argument I made above gets just a few sentences from Chromadex:

...Dr. Cockburn points to ChromaDex marketing and investor materials that refer to an “NR market.” (Ex. 1 at 28–29). But one cannot, from that evidence, extrapolate a relevant product market. Jonathan B. Baker, Market Definition: An Analytical Overview, 74 Antitrust L.J. 129, 139 (2007) (“[T]here is no reason to expect that the concept of market employed by business executives when discussing issues of business strategy or marketing, whether in testimony or documents prepared for business purposes, would be the same as the concept of [a] . . . ‘relevant market’ defined for the purpose of antitrust analysis.”). Among other problems, there is no indication that any statements by ChromaDex “regarding [its] perceptions of competition, market, and the like,” were “based on proper research methods.”

Anyway, I mention this not because I think methodologies for market definition of anti-trust analysis are important to understand, but because I think this examples sheds light on the quality of the materials Elysium is submitting to the Court.

#CDXC #ChromaDex #ElysiumHealth #Litigation