POLYMER TECHNOLOGY CORPORATION (a New York Corporation),
Plaintiff-Appellant,
v.
Emile MIMRAN, also known as Alan Franco; U.D.S. Export &
Import, also known as User Designed Software; Optic
Express, Incorporated; American Contact Lens Association;
International Contact Lens Lab I; Marty Powers Sales,
Incorporated; Worldwide Scents, Incorporated; Julio
Moreno; Carlo Sanchez d/b/a Alpha Omega; and Various John
Does, Jane Does and XYZ Companies, Defendants-Appellees.
No. 1979, Docket 94-7207.
United States Court of Appeals,
Second Circuit.
Argued May 23, 1994.
Decided Oct. 6, 1994.
Morton M. Maneker, New York City (Proskauer Rose Goetz & Mendelsohn, New York City, of counsel), for plaintiff-appellant.
Fran M. Jacobs, New York City (Jonathan A. Kenter, Richards & O'Neill, New York City, of counsel), for defendants-appellees.
Before: VAN GRAAFEILAND, CARDAMONE, and ALTIMARI, Circuit Judges.
ALTIMARI, Circuit Judge:
This action for a preliminary injunction returns to us after a prior remand to the district court. See Polymer Technology Corp. v. Mimran,
Polymer, a manufacturer of ophthalmic products including contact lens solutions, sells its lens care solutions under the federally-registered "BOSTON" trademark. Polymer uses two methods of distributing these solutions. One line of solutions is distributed in the retail market ("retail solutions"). The retail solutions are generally packaged individually and their outer packaging contains a list of active ingredients and preservatives, а notice that the contents are sterile, warnings concerning contamination, contraindications, and shelf life, and tamper-evident seals on the top and bottom flaps. The solutions also contain an insert with directions and important safety information.
The other line of solutions is directed through authorized distributors to professional eye-care practitioners ("professional solutions"). Although the professional solutions contain an insert similar to the one used with the rеtail solutions, they do not always contain the same information on their outer packaging as the retail solutions, nor do they always contain the tamper-evident seal. Some of the solutions contain labels indicating that the solutions are "For Professional Dispensing Only."
The professional solutions are packaged in two types of kits, "Care System Kits" and "Starter Kits." The "Care System Kits" contain a full retail-size bottle of conditioning solution, and smaller containers of lens cleaner and reconditioning drops. Polymer sells these Care System Kits to the distributors for $1.75, and they in turn sell them to eye-care professionals for between $2.00 and $2.50. The price for the retail equivalent of the "Care System Kits" ranges from $10.00 to $14.50. The "Starter Kits" contain sample-sized containers of the solutions and are given to the distributors free of charge.
Although Polymer's authorized distributors are not explicitly contractually bound to restrict their distribution of the professional solutions to eye-care рractitioners, the distribution of the professional solutions to these practitioners is a key part of Polymer's marketing strategy. Presumably the eye-care practitioners give the solutions to their patients as they fit them for contact lenses, and the patients then continue to use the BOSTON solutions in the future. Polymer's marketing research indicates that 75-80% of patients will continue to buy the same brand of solution recommended to them by their doctors.
Defendant-appellant Emile Mimran owns a number of businesses that distribute ophthalmic lens care products. Mimran admittedly obtains Polymer's professional solutions from Polymer's authorized distributors and then resells them to wholesalers and retail drug stores. Polymer sought a preliminary injunction against Mimran from obtaining possession of, purchasing, or selling Polymer's professional solutions. The district court for the Southern District of New York (Knapp, J.) denied the injunction against Mimran, finding, among other things, that Polymer's failure to have restricted by contrаct "the population of entities to which defendants could sell its product" defeated Polymer's claim that the sales in question were unauthorized. On appeal, a divided panel of this Court vacated the district court's decision and remanded for reconsideration of certain evidence relevant to Polymer's claims of trademark infringement. See Polymer I,
Polymer now appeals.
DISCUSSION
On appeal, Polymer maintains that Mimran's retail sale of products Polymer intended only for professional distribution constitutes trademark infringement and common law misappropriation. We will discuss each of Polymer's theories of liability in turn.
I. Standard of Review
As a general matter, in order for Polymer to obtain a рreliminary injunction, it must demonstrate irreparable harm, and "either (1) a likelihood of success on the merits of its case or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in its favor." Coca-Cola Co. v. Tropicana Prods., Inc.,
II. Trademark Infringement Claims
As it did below, Polymer sets forth the following three theoriеs of trademark infringement by Mimran: quality control violations, unauthorized distribution, and contributory infringement.
(1) Quality Control
An action for trademark infringement arises where "[a]ny person ... without the consent of the registrant ... use[s] in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods ... [and] such use is likely to cause confusion...." Section 32(1) of the Lanham Act, 15 U.S.C. Sec. 1114(1). An action will not arise where the goods being sold are genuine goods bearing a true mark. See Polymer I,
Relying on the above case law, Polymer claims that Mimran has violated its trademark rights by selling its рrofessional solutions to the retail market even though the solutions do not meet Polymer's quality control standards for retail product. Specifically, Polymer claims that the kits being sold by Mimran do not meet its quality control standards for retail product because the kits lack ingredients statements, warnings, and anti-tampering seals required by the FDA. Additionally, Polymer claims that Mimran breaks down the kits and sells the solutions individually, without the appropriate individual packaging.
(a) improper labeling
In its initial decision, the district court did nоt address Polymer's claims that Mimran's distribution of allegedly mislabeled product amounted to trademark infringement. In Polymer I, we directed the court to consider whether these FDA labeling violations occurred and whether such violations can constitute trademark infringement. On remand, the district court found that Polymer's claims were belied by the fact that Polymer itself placed a product (the "Combination Pack") into the retail market that did not contain the information that Polymer now claims must be on all retail products.
After carefully reviewing Polymer's arguments and the relevant sections of the FDA regulations, we are unpersuaded that the retail sale of the solutions by Mimran violates FDA labeling requirements. Alternatively, even assuming that the retail sale of the solutions by Mimran violates FDA regulations, we do not find such sale a violation of Polymer's own quality control standards.
Regarding the FDA requirements, although Polymer argues that a medical device will be deemed "misbranded" unless it contains сertain information that the labels of the professional solutions lack, the statute actually requires that such information appear on the "labeling." See 21 U.S.C. Sec. 352(f). Labeling is defined as the information on the outer packaging and any information included separately. See 21 U.S.C. Sec. 321(m). Accordingly, because the required information appears on the insert included with the kits, we are not convinced that the retail packaging violates the FDA regulations.
In any event, as noted by the district court, Polymer itself introduced a product in the retail market containing an outside label with less information than that included on the outside labels on the professional kits. On appeal, Polymer claims that the product's labeling was a mistake. This claim is equally damaging to Polymer's quality control argument. Whether or not the FDA regulations have been violated, in order to succeed with its claim of quality control trademark infringement, Polymer must ultimately prove that any actions taken by Mimran violated the quality control procedures followed by Polymer. See, e.g., El Greco,
(b) tamper-evident seals
Polymer next claims that the retail distribution of its product without FDA-required tamper-evident seals interfered with its quality control. The district court did not discuss this argument. The FDA requirements clearly provide that seals are required when the "product is accessible to the public while held for sale." 21 C.F.R. 800.12(b) (1994). Assuming that Mimran did distribute some Polymer product without tamper-evident seals, there is no evidence that Polymer had any quality control mechanism in place to prevent its authorized distributors from placing professional samples lacking tamper-evident seals in places that were not "accessible to the public while held for sale." For example, some of the eye-care professionals tо whom BOSTON Kits are distributed are optical retail stores, and Polymer does nothing to ensure that those stores keep the kits inaccessible from the public. Accordingly, because Polymer itself has no procedures in place to prevent its non-sealed kits from reaching the retail public, it cannot now claim that its trademark was violated because Mimran allowed such product to reach that market.
(c) tampering or repackaging
Polymer's final claim regarding quality control is based on its allegatiоn that Mimran breaks up the kits and sells the solutions individually. Polymer claims that the selling of the individual solutions without the customary individual outer packaging disappoints the expectations of customers and disturbs their confidence in Polymer's products. The district court originally found that there was no evidence that Mimran broke the tamper-resistant seal, or in any way altered the packaging. We directed reconsideration of certain evidence regarding this claim. Specifically, we ordered the district court to consider: (1) the declarations and deposition testimony of two private investigators who claimed to have observed one of Mimran's employees breaking down and separating professional kits; (2) invoices showing sales of individual solutions by Mimran to a retail outlet called Vision Express; and (3) photographs of a garbage can outside Mimran's warehouse which held discarded packaging from Polymer's competitors' solutions.
On remand, the district court considered all of the above evidence and still concluded that there was insufficient evidence to support Polymer's claim that Mimran had broken down the kits and sold the solutions individually. Regarding the statements made by the two private investigators, the court found their testimony incredible due to certain inconsistencies. For example, although one of Polymer's investigators testified that he had witnessed one of Mimran's employees breaking down the kits, his previous declaration in support of Polymer's motion contained no mention of this incident. The court also found telling the investigator's failure to obtain any physical evidence of repackaging, such as an individual bottle sold separately from its kit, or any pictures of Polymer's packaging in the garbage cans that Polymer had searched. We find these factors clearly support the district court's denial of this claim.
In sum, Polymer has failed to prove that the district court abused its discretion in failing to accept Polymer's theory of trademark infringement based on Mimran's alleged circumvention of Polymer's quality control efforts.
(2) Unauthorized Distribution
Polymer next claims that the retail distribution of its professional product constituted trademark infringement under a theory of unauthorized distribution. The district court originally disregarded this theory of liability because it found no contractual provision preventing retail sale of the professional solutions, nor did it find any indication that Mimran had notice of Polymer's intent tо restrict resale to eye-care professionals. This Court directed the district court to reconsider whether, despite Polymer's failure to have contractually restricted retail sale of its professional solutions, it was entitled to a preliminary injunction due to its expression of intent so to restrict sales by labeling its product "For Professional Dispensing Only." On remand, the district court considered the issue and concluded that intent alone, in the absence of a contractual provision, does not suffice to make Mimran liable for trademark infringement due to unauthorized distribution.
Regardless of the presence or absence of a contractual restriction, a distributor's failure to observe a restrictive condition on the sale of a product can only constitute trademark infringement if the trademark owner can prove consumer confusion, the hallmark of any trademark infringement claim. See Polymer I,
First, Polymer claims that the sale of a product in the retail market which is specifically marked "For Professional Distribution Only" will cause consumer confusion about the "legality and safety of the product." This is not the type of consumer confusion that courts have previously found gives rise to a claim for trademark infringement in these types of cases. Generally, courts find cоnsumer confusion only where consumers, relying on the reputation of a trademark, buy a product that they think is safe or of a certain quality, and then subsequently find out that they have actually purchased an inferior item. See Matrix Essentials,
Perhaps realizing the flaws in its first theory of consumer confusion, Pоlymer also directs us to its discussion of consumer confusion under its theory of quality control violations. There, Polymer argues that Mimran was placing a product on the shelves that did not meet Polymer's standards, and consumers would mistakenly believe that Polymer was the source of the inferior product. Although this is clearly a correct theory of consumer confusion, as discussed above, given Polymer's failure to monitor its alleged quality control standards, we are not convinced that thе product sold to wholesalers and retailers by Mimran was inferior to the product distributed by Polymer.
Ultimately, Polymer has failed to offer any support for the proposition that the unauthorized sale of genuine products will constitute trademark infringement merely because the goods contain a label indicating that the goods were meant to be sold in a market other than the one they appear in.
(3) Contributory Infringement
Polymer's final trademark infringement claim relates to the conduct of Wоrldwide Scents, Inc., one of the defendants named in the original suit and Mimran's largest purchaser, which admitted breaking down the professional kits and selling them at retail with counterfeit packaging. Polymer claims that Mimran contributed to Worldwide's infringement by knowingly selling to an admitted counterfeiter. The district court had initially rejected this claim after Mimran denied knowing of Worldwide's counterfeiting. In Polymer I, we were skeptical of Mimran's denial of knowledge that Worldwide was repackaging the professional solutions. We directed the district court to reconsider the possibility that the restrictive labeling provided Mimran with notice that the professional solutions would have been repackaged in order to be sold at retail.
Upon reconsideration, the district court concluded that because Mimran himself was able to sell product with restrictive labeling to retailers, there was no reason for him to conclude that Worldwide must have been breaking down the packages in order to sell them. Because of this valid interpretation of the record, and evidence that the president of Worldwide denied that Mimran had knowledge of his counterfeiting activities, we now find that the court's rejection of this claim was not an abuse of discretion.
II. Common Law Misappropriation Claims
Upon Polymer's renewal of its motion for a preliminary injunction, Polymer amended its complaint to assert the following new theories of liability: (1) unfair competition by misappropriation; (2) unjust enrichment; and (3) tortiоus interference with contract. All these claims are based on the contractual or implied restriction Polymer claims it placed on its distributors not to sell its professional solution to retailers. Polymer essentially alleges that Mimran, with knowledge of this restriction, fraudulently induced Polymer's lab distributors to supply him with quantities of professional samples which he then sold in the retail market.
Polymer seems to admit that there is no clear contractual provision limiting distribution of the professiоnal solutions, but urges that the contract should nonetheless be interpreted as implying a restriction on sales of the professional solution to the retail market. In support of this interpretation, Polymer relies on the contractual obligation of the lab distributors "to promote The BOSTON Solution products."
Interestingly, the paragraph describing the distributors' responsibility to promote the BOSTON Solutions makes no mention of promotional kits. Furthermore, the contract does contain аn explicit limit on the resale and transfer of other BOSTON products. Accordingly, we are skeptical of Polymer's interpretation of the contract. In any event, however, we find the cases cited by Polymer in support of its misappropriation theories wholly distinguishable.
In American Airlines v. Christensen,
Defendants in that case bought awards from members and sold them to third parties who were looking for discount fares. Defendants then helped the third parties evade detection by altering their airline tickets, manufacturing false identification cards for them, and instructing them to lie about how they acquired their tickets. No comparable claims can be made in this case. Aside from the absence of an explicit contractual restriction on the distributor's retail sale of the professional sоlutions, there is evidence in the record that authorized distributors willingly sold the product to Mimran without receiving assurances that the product would not be diverted to the retail market. Accordingly, Mimran's behavior cannot be compared to that of the defendant in American Airlines who knowingly, in contradiction of a clear contractual restriction between American and its frequent flyer customers, helped third parties surreptitiously buy awards and evade detection by the airline.
Thе above distinctions are equally applicable to Northwest Airlines, Inc. v. The Ticket Exchange, Inc.,
Finally, regarding Polymer's claim of tortious interference with contract, Polymer has presented no cases supporting application of the cause of action where there is no specific contractual provision barring the behavior at issue.
Aside from the above flaws in Polymer's new theories of liability, because Polymer could be adequately compensated with money damages if it were to prevail on these claims at trial, Polymer has also failed to convince us that it has suffered irreparable injury. See Loveridge v. Pendleton Woolen Mills, Inc.,
CONCLUSION
The judgment of the district court denying Polymer's motion for a preliminary injunction is affirmed.