IVES LABORATORIES, INC., Plaintiff-Appellant,
v.
DARBY DRUG CO., INC., Inwood Laboratories Incorporated,
Lowitt Labs., Inc., MD Pharmaceutical Company, Inc., Premo
Pharmaceutical Laboratories, Inc., Rugby Laboratories, Inc.,
and Sherry Pharmaceutical Co., Inc., Defendants-Appellees.
No. 529, Docket 78-7454.
United States Court of Appeals,
Second Circuit.
Argued May 2, 1979.
Decided June 11, 1979.
Marie V. Driscoll, New York City (Rogers, Hoge & Hills, New York City, William F. Weigel, Charles J. Raubicheck, Egon E. Berg, and Steven Baron, New York City, of counsel), for plaintiff-appellant, Ives Laboratories, Inc.
Robert V. Marrow, New York City (Salon, Bloustein & Raybin, Leon Salon, and Lauren Friedman, New York City, of counsel), for defendants-appellees, Darby Drug Co., Inc., MD Pharmaceutical Co., Inc., Rugby Laboratories, Inc., and Sherry Pharmaceutical Co., Inc.
Sheldon S. Lustigman, New York City (Bass, Ullman & Lustigman, New York City), for defendant-appellee, Inwood Laboratories Inc.
Peter T. Cobrin, New York City (Kirschstein, Kirschstein, Ottinger & Cobrin, P.C., New York City, David B. Kirschstein, New York City, of counsel), for defendant-appellee, Premo Pharmaceutical Laboratories, Inc.
John H. Shenefield, Asst. Atty. Gen., U. S. Dept. of Justice, Washington, D.C., Barry Grossman, Roger B. Andewelt, Robert J. Wiggers, and Andrew L. Pringle, Attys., Dept. of Justice, Washington, D.C., of counsel), for the United States as amicus curiae.
Before FRIENDLY and MULLIGAN, Circuit Judges, and GAGLIARDI, District Judge.*
FRIENDLY, Circuit Judge:
This appeal from an order of the District Court for the Eastern District of New York denying a motion of plaintiff, Ives Laboratories, Inc., for a preliminary injunction,
I.
Plaintiff Ives Laboratories, Inc. (Ives) manufactures and sells Cyclospasmol to wholesalers, retail pharmacists, and hospitals. The drug, a powder whose generic name is cyclandelate, is sold in two kinds of labeled packages. One type of package is filled with pale blue capsules imprinted "Ives 4124", each containing a dosage of 200 mg. The other is filled with red-and-blue capsules imprinted "Ives 4148", each containing a dosage of 400 mg. The blue capsule had been used during the life of the patent; the blue-and-red capsule was introduced after its expiration.
Ives directs its advertising not to the consumer but to prescribing physicians and to pharmacists in hospitals and elsewhere. Until April 26, 1972, when the patent expired, the primary object of the advertising (which included the large-scale distribution of "starter" samples) was to convince the physician of the superiority of Cyclospasmol over other vasodilators; since then the advertising has had the additional objective of persuading the physician to specify Cyclospasmol rather than writing prescriptions which can be filled with competing cyclandelate preparations. The latter objective has assumed increased importance because of the enactment of "generic drug laws" by many states.1
Defendants Premo Pharmaceutical Laboratories, Inc. (Premo), Inwood Laboratories, Incorporated (Inwood), and MD Pharmaceutical Company, Inc. (MD), (collectively the manufacturers), purchase empty capsules which they fill with the cyclandelate powder and sell the capsules to wholesalers, hospitals, retail pharmacies and others. Premo and Inwood manufacture and sell both 200 mg. and 400 mg. capsules in colors essentially identical to Ives'; MD has done the same with 200 mg. capsules. Until shortly before the district court's decision, none imprinted any mark on their capsules; on June 26, 1978, Premo filed an affidavit stating that in the future it would imprint "Premo" on all its capsules. Three other defendants, Darby Drug Co., Inc. (Darby); Rugby Laboratories, Inc. (Rugby); and Sherry Pharmaceutical Co., Inc. (Sherry), (collectively "the wholesalers") purchase capsules of the sort described and resell them to other wholesalers, doctors, pharmacies and others. Both categories of defendants promote the generic product as "comparable" or "similar" or "equivalent" to Cyclospasmol; in some catalogs they refer to the color of the capsules.2 Defendants' advertising, like plaintiff's, is directed to physicians, pharmacists, and other intermediaries, and not to the ultimate consumer. Ives conceded for the purpose of the temporary injunction motion that the cyclandelate used by defendants had the same therapeutic properties as that used in Cyclospasmol.
The complaint claimed that defendants' use of capsules having the same color or colors as those previously adopted by Ives violated its rights in three ways:
(1) as contributory infringements in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114, in that the similarity encouraged retail druggists to use Ives' mark "Cyclospasmol" in selling capsules not manufactured by it;
(2) as "a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent" the goods sold by defendants in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a);3
(3) as unfair competition under New York common and statutory law, N.Y. General Business Law § 368-d.
In a considered opinion,
Ives' complaint related to a wide spectrum of acts. In a state with a generic drug law like New York's these range from the most serious case, where the physician has specified Cyclospasmol and the druggist has filled the prescription with the generic product but has labeled it "Cyclospasmol" admittedly actionable against the druggist to the most innocent one, where the physician has permitted substitution and the druggist has filled the prescription with capsules of the competing manufacturer and so labeled the package. Intermediate cases are where the prescription requires Cyclospasmol and the druggist substitutes a product of the defendants naming it or not, and where the prescription permits substitution and the druggist fills it with defendant's product but names it Cyclospasmol (again clearly actionable against the druggist) or gives no name at all.5 Similar variations can occur in other states with or without generic drug laws.
II.
It will be useful to discuss at the outset plaintiff's claim of contributory infringement in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114. The judge was right in concluding that the protection conferred by that section is narrower than that afforded by § 43(a), 15 U.S.C. § 1125(a), in that the former relates only to infringement of the trademark itself and thus would apply only to cases where Ives' mark or a confusingly similar one had been used. We fear, however, that his approach to the issue may have been unduly narrow. He referred to "the knowing and deliberate instigation of such a practice",
Before considering Ives' other claims, it will be useful to review what we regard as the most pertinent authorities.
We begin with two opinions of the Supreme Court. William R. Warner & Co. v. Eli Lilly & Co.,
The second case, Kellogg Company v. National Biscuit Co.,
"(1) from the use of the name 'SHREDDED WHEAT' as its trade name, (2) from advertising or offering for sale its product in the form and shape of plaintiff's biscuit, and (3) from doing either."
In reversing, the Supreme Court began by holding that National had no exclusive right to Shredded Wheat as a trade name both because the term was generic and because the name "as well as the product, the process and the machinery employed in making it, has been dedicated to the public" upon the expiration of Perky's patent in 1912 or shortly thereafter. Because National had allowed Shredded Wheat to become "the generic designation of the thing which has arisen during the (patent) monopoly," Singer Mfg. Co. v. June Mfg. Co.,
The Court next held that National "has not the exclusive right to sell shredded wheat in the form of a pillow-shaped biscuit . . . ." This was primarily because the pillow shape was that in which shredded wheat was made under the patent. Here again Kellogg "was free to use the pillow-shaped form, subject only to the obligation to identify its product lest it be mistaken for that of the plaintiff."
Finally the Court addressed itself to the question whether Kellogg was exercising its rights "fairly", i. e., "in a manner which reasonably distinguishes its product from that of plaintiff." It found that Kellogg had taken every reasonable means for doing this using cartons distinctive in size, form and color, featuring the name Kellogg, and containing biscuits only two-thirds the size of National's. Conceding that Kellogg was sharing in the good-will of an article created by National and its predecessors, Mr. Justice Brandeis said that "(s)haring in the goodwill of an article unprotected by patent or trade-mark is the exercise of a right possessed by all and in the free exercise of which the consuming public is deeply interested."
There is something for everyone in these two decisions. Defendants take comfort from so much of Warner as upheld that company's right to copy not only the basic ingredients of Lilly's product but their color, taste and smell; plaintiff emphasizes the severe restrictions placed on Warner in order to avoid dishonest substitution by druggists. Defendants find cheer in the holdings in Kellogg that National, in part because of expiration of the patent, had no rights in the name Shredded Wheat or in the pillow-shaped form. Plaintiff says that the holding as to the name was based on its generic nature; that the Court differentiated the case of a valid trademark; that the holding as to the pillow-shaped form likewise was predicated on the bases that this was what the patented machine was designed to produce and that the form was also covered by a design patent that had been held invalid and in any event had long since expired; and that, even on the premise that neither the name nor the form deserved protection, the Court still insisted on Kellogg's doing everything reasonably possible to disclose the difference in source. It argues that here in contrast, so far as the ultimate consumer is concerned, the defendants did nothing (except for Premo's recent imprinting) to disclose the difference to the consumer, although the use of other colors was entirely feasible.
We turn next to a few particularly pertinent decisions of courts of appeals in the interval between Kellogg and Sears-Compco one before and the others after the effective date of the Lanham Act. Smith, Kline & French Laboratories v. Clark & Clark,
Upjohn Company v. Schwartz,
should be enjoined from either directly or indirectly, representing or suggesting to any one selling any pharmaceutical products similar in contents and appearance to plaintiff's products that such similar products may be substituted for the products of the plaintiff when the latter are prescribed or requested by a physician; and that on the sale of any such products he be required to attach to bottles or containers of a size not made for direct over-the-counter sale, a notice that the contents are not to be sold or dispensed as the product of the plaintiff.
Norwich Pharmacal Co. v. Sterling Drug, Inc.,
This brings us to Sears and Compco, supra,
It has been said that if the lower courts in Sears and Compco had rested their decisions on "general" principles of unfair competition law rather than on the law of Illinois, the Supreme Court would not have needed more than a citation of Kellogg to justify reversal. Brown, Product Simulation, Supra, at 1216. It was this probably unwarranted reliance, see
Sears has been held liable here for unfair competition because of a finding of likelihood of confusion based only on the fact that Sears' lamp was copied from Stiffel's unpatented lamp and that consequently the two looked exactly alike. Of course there could be "confusion" as to who had manufactured these nearly identical articles. But mere inability of the public to tell two identical articles apart is not enough to support an injunction against copying or an award of damages for copying that which the federal patent laws permit to be copied. Doubtless a State may, in appropriate circumstances, require that goods, whether patented or unpatented, be labeled or that other precautionary steps be taken to prevent customers from being misled as to the source, just as it may protect businesses in the use of their trademarks, labels, or distinctive dress in the packaging of goods so as to prevent others, by imitiating such markings, from misleading purchasers as to the source of the goods. 9 But because of the federal patent laws a State may not, when the article is unpatented and uncopyrighted, prohibit the copying of the article itself or award damages for such copying.
Sears,
As we have said in Sears, while the federal patent laws prevent a State from prohibiting the copying and selling of unpatented articles, they do not stand in the way of state law, statutory or decisional, which requires those who make and sell copies to take precautions to identify their products as their own. A State of course has power to impose liability upon those who, knowing that the public is relying upon an original manufacturer's reputation for quality and integrity, deceive the public by palming off their copies as the original. That an article copied from an unpatented article could be made in some other way, that the design is "nonfunctional" and not essential to the use of either article, that the configuration of the article copied may have a "secondary meaning" which identifies the maker to the trade, or that there may be "confusion" among purchasers as to which article is which or as to who is the maker, may be relevant evidence in applying a State's law requiring such precautions as labeling; however, and regardless of the copier's motives, neither these facts nor any others can furnish a basis for imposing liability for or prohibiting the actual acts of copying and selling.
Compco,
Some, including dissenting Justices, have thought the basic principles of Sears and Compco were undermined by Goldstein v. California,
Only a few cases have dealt with the effect of Sears and Compco on simulation of the color of a trademarked drug. Marion Laboratories, Inc. v. Michigan Pharmacal Corp.,
IV.
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)11 goes beyond § 32 in making certain types of unfair competition federal statutory torts, whether or not they involve infringement of a registered trademark. L'Aiglon Apparel, Inc. v. Lana Labell, Inc.,
It is surely true that in the Sears and Compco opinions the Supreme Court said nothing about the federal tort created by § 43(a).12 Stiffel's and Day-Brite's claims were treated as resting solely on state unfair competition law which was held invalid as in conflict with federal patent law. The opinions can be read as limited to rights claimed under state unfair competition law granting protection equivalent to that of the federal patent or copyright laws for products not enjoying valid patent or copyright protection. The Court, it can be strongly argued, had no need to be concerned with marking out the boundaries of a federal tort over which it had complete control and which Congress could contract if the courts were pressing it further than that body desired.13 The Eighth Circuit took essentially this position in Truck Equipment Service Co. v. Fruehauf Corp.,
Assuming that the law developed by federal courts under § 43(a) prior to Sears and Compco continues to govern and that the precise strictures there addressed to the states may not be applicable to a claim under that section, this still leaves the question whether Ives showed a probability of success or a fair ground for litigation and a balance of hardships tipping decidedly in its favor. A good statement of the law under § 43(a) is in Pagliero v. Wallace China Co.,
Imitation of the physical details and designs of a competitor's product may be actionable, if the particular features imitated are 'non-functional' and have acquired a secondary meaning. Crescent Tool Co. v. Kilborn & Bishop Co., 2 Cir., 1917,
One would not initially suppose the color of a capsule to be functional. Unlike the chocolate in the Warner case, Supra, the blue and blue-and-red coatings of Ives' capsules do not contribute to their efficacy; any other colors would do as well.15 The argument that, like functional elements, color ought to be automatically denied protection because of the risk of creating monopolies through tying up all available colors, cf. Morrissey v. Proctor & Gamble Co.,
With respect to secondary meaning we cannot say that Ives would necessarily be unable to establish that consumers had come to associate the blue and blue-and-red colors with the trademark Cyclospasmol. Mr. Justice Holmes said long ago, American Waltham Watch Co. v. United States Watch Co.,
It is true that a man cannot appropriate a geographical name; but neither can he a color, or any part of the English language, or even a proper name to the exclusion of others whose names are like his. Yet a color in connection with a sufficiently complex combination of other things may be recognized as saying so circumstantially that the defendant's goods are the plaintiff's as to pass the injunction line.
It is significant that, given the method of sale, Ives had no way of identifying Cyclospasmol to the ultimate consumer other than by the color of the capsule and by the imprint on it, which is contended to be of dubious value. See Note, Unfair Competition and the Doctrine of Functionality, 64 Colum.L.Rev. 544, 557-58 and nn. 93 & 94 (1964). This distinguishes the case from Norwich Pharmacal Co. v. Sterling Drug, Inc., supra,
We find rather less merit in plaintiff's claims under New York law than in those under § 43(a) of the Lanham Act. It is true that we have recognized the breadth of the relief which New York affords against unfair competition, Flexitized Inc. v. National Flexitized Corp.,
The upshot of our consideration is that while we are not so convinced that Sears and Compco are an insurmountable barrier to plaintiff as was the district judge and, indeed, believe them to have only tangential bearing on the Lanham Act claims, this is an appropriate case for applying the "rule" that denial of a temporary injunction should not be reversed save for "abuse" of discretion. State of New York v. Nuclear Regulatory Commission,
The order is therefore affirmed. After trial the district court will, of course, consider whether even if under our analysis Ives is not entitled to the full relief demanded, it should not be awarded more limited relief of the sort granted in Warner, Kellogg and other cases.
Notes
Judge of the United States District Court for the Southern District of New York, sitting by designation
The New York law, Education Law § 6810(6)(a), requires the prescription form to state:
This prescription will be filled generically unless physician signs on line stating "dispense as written."
The form must contain two lines, one over the words "substitution permissible" and the other over the words "dispense as written"; the physician must sign one or the other. If the physician signs the "substitution permissible" line, substitution is mandatory if the drug is on a list established under the New York Health Law, see N.Y. Education Law § 6816-a, N.Y. Public Health Laws § 206(1)(i); in other cases substitution of the generic drug is permissible. Unless the physician otherwise directs, the pharmacist making a substitution must indicate on the label the name and strength of the drug and its manufacturer; when a brand name is dispensed, the pharmacist, unless otherwise directed by the prescription, must similarly affix on the label the brand name and strength. N.Y. Education Law § 6816-a.
Sherry had offered the drug under the name "Spasmol" but had abandoned such use. The district court enjoined resumption of the practice, and Sherry has not appealed. Plaintiff had also named an additional defendant, Lowitt Labs., Inc. (Lowitt), a retail pharmacy; the complaint charged that, on receiving a prescription for Cyclospasmol, Lowitt substituted generic cyclandelate and labeled the bottle "Cyclospasmol." The court entered a consent order prohibiting this
In the trial court this claim included a contention that the product sold by defendants was not "comparable" or "equivalent" to Cyclospasmol. The judge held this claim not to have been proved,
The judge referred to our formulation of the criterion for this in Selchow & Righter Co. v. McGraw-Hill Book Company,
While many of these variations are actionable as misbranding under the New York law, see N.Y. Education Law §§ 6811(9), 6815(2)(h), 6816, these laws, aimed at protecting the consumer, do not necessarily displace the protection for competitors embodied in trademark and unfair competition law
Although the opinion does not say so, the Court apparently applied its own views of trademark and unfair competition law under the principle of Swift v. Tyson,
Mr. Justice Brandeis noted,
Previous discussion in the opinion indicated that the injunction should also include a prohibition against defendant's salesmen pointing out the feasibility of substituting defendant's product for SKF's without danger of detection,
Smith, Kline & French Laboratories v. Heart Pharmaceutical Corp.,
In Compco,
It seems apparent that Illinois has not seen fit to impose liability on sellers who do not label their goods. Neither the discussions in the opinions below nor the briefs before us cite any Illinois statute or decision requiring labeling
Judge Garth, concurring, said that if all the factual material were properly before the court of appeals, he "would have strenuously urged a different disposition on the merits as to the 'palming off' issue" on the basis of Sears and Compco,
This reads:
(a) Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to be transported or used in commerce or deliver the same to any carrier to be transported or used, shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.
This was natural since neither Stiffel nor Day-Brite made any claim under § 43(a). The Lanham Act was cited to the Supreme Court only by the Government's Amicus brief in a Cf. type of reference to the refusal to grant trademark registration to functional configurations in Application of Deister Concentrator Co.,
A contrary argument could be constructed on the basis that Art. I, § 8, authorizes Congress to secure "to Authors and Inventors the exclusive Right to their respective Writings and Discoveries" only "for limited times." See Bender, Product Simulation, 64 Colum.L.Rev. 1228, 1230 (1964). However, nothing in the Sears and Compco opinions suggests that the Court was aiming shafts at Congress, and it would be hard to argue that the time limitation on the power of Congress to protect "writings and discoveries" limits its power under the commerce clause to protect trademarks or other symbols of origin. A commentator has categorically declared that "Sears-Compco do not affect rights under other federal statutes." Dannay, The Sears-Compco Doctrine Today: Trademarks and Unfair Competition, 67 Trademark Reporter 132, 143 (1977)
After quoting the passage from Compco which we have quoted above, the court characterized the Supreme Court's language as dictum,
It is of interest that, as noted in Comment, Product Simulation in the Eighth Circuit, 57 Neb.L.Rev. 91 (1978), the trial court eventually decided that, because of the extensive sales by Fruehauf, the shape was not identified with plaintiff as source, and modified the injunction merely to prohibit the deceptive advertising and to require labeling.
While color was held to be functional in Smith, Kline & French Labs v. Clark & Clark, supra,
Mr. Swenson is trademark counsel to Eli Lilly & Co
In 12 instances the product was labeled as Cyclospasmol