SK&F, Co. v. Premo Pharmaceutical Laboratories, Inc.

Citation625 F.2d 1055,206 USPQ 964
Decision Date12 June 1980
Docket NumberNo. 79-2823,79-2823
Parties, 1980-2 Trade Cases 63,361 SK&F, Co., v. PREMO PHARMACEUTICAL LABORATORIES, INC., Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

David M. McCann, Carpenter, Bennett & Morrissey, Newark, N. J., Donald R. Dunner (argued), Michael C. Elmer, Charles E. Lipsey, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D. C. of counsel; Alan D. Lourie, Janice E. Williams, SmithKline Corp., Philadelphia, Pa., for appellee SK&F, Co.

David B. Kirschstein (argued), Kirschstein, Kirschstein, Ottinger & Corbrin, P. C., New York City, for appellant Premo Pharmaceutical Laboratories, Inc.; Robert C. Podwil, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., of counsel.

Nancy L. Buc, Chief Counsel, Kathleen A. Blackburn, Asst. Chief Counsel for Enforcement Food and Drug Administration, Rockville, Md. for Food and Drug Administration as amicus curiae.

Sanford M. Litvack, Sp. Asst. to the Atty. Gen., Barry Grossman, Roger B. Andewelt, Robert J. Wiggers, Lois Friedman, Attys., Dept. of Justice, Washington, D. C., for United States as amicus curiae.

Milton A. Bass, Sheldon S. Lustigman, Bass, Ullman & Lustigman, New York City, for Nat. Ass'n of Pharmaceutical Manufacturers as amicus curiae.

Before ALDISERT and GIBBONS, Circuit Judges, and POLLAK *, District Judge.

OPINION OF THE COURT

GIBBONS, Circuit Judge.

Premo Pharmaceutical Laboratories, Inc. (Premo) appeals from an order prohibiting it, pending final hearing, from marketing a combination drug, Triam-Thiazide, an oral diuretic, in hard gelatin capsules having the same maroon and white color combination as the capsule used by SK&F, Co. (SKF) in marketing its product DYAZIDE, which contains the same combination drug. The order was entered in an action brought by SKF against Premo charging patent infringement, unfair competition, and the introduction into commerce of a false designation of origin or a false description or representation in violation of section 43(a) of the Lanham Act. 15 U.S.C. § 1125 (1976). Upon the filing of the complaint the district court issued an order directing Premo to show cause on December 17, 1979 why a preliminary injunction should not issue restraining it from infringing certain SKF patents, and from selling, offering for sale or advertising capsules containing the combination diuretic in the shape, color or other trade dress confusingly similar to DYAZIDE. A hearing was held on the return day. There was no request for a consolidation, pursuant to Fed.R.Civ.P. 65(a)(2), of the hearing on the preliminary injunction with the trial on the merits. At the conclusion of the preliminary injunction hearing the court, reserving decision on SKF's motion for pendente lite injunctive relief from patent infringement, granted the preliminary injunction appealed from herein. We affirm.

I.

In 1965, after a long period of research and development, SKF began manufacturing and marketing a patented oral diuretic and hypotensive drug consisting of a compound of triamterene and hydrochlorothiazide under the trademark DYAZIDE. In the United States DYAZIDE is marketed as a powder contained in a maroon and white No. 3 hard gelatin capsule approximately 1/2 inch in length. On each half of the capsule the logos "DYAZIDE" and "SKF" are stamped. In Europe the same drug combination is sold in the form of an orange tablet, and on the record before us it appears that each form is equally effective. DYAZIDE is promoted through an extensive network of detailers who call on doctors, hospitals, and pharmacies, and is advertised in journals likely to reach the medical profession. Ultimate consumers may obtain the drug only by prescription. Because DYAZIDE is used to control hypertension, the course of therapy is generally an extended one. There are other oral diuretics on the market, but prior to November, 1979, DYAZIDE was the only one sold in capsule form, the only bi-colored diuretic, and the only diuretic using the color maroon. SKF's patent for the compound itself issued on March 12, 1963 and thus expired on March 12, 1980.

Premo is a manufacturer of generic pharmaceuticals. As it has done in other instances, 1 in late November 1979, near the expiration date of the SKF patent, Premo began to market a generic substitute for DYAZIDE, composed of the same active ingredients in powder form, and also contained in a No. 3 hard gelatin capsule approximately one-half inch in length. The Premo capsules are stamped with the logo "PREMO", but adopt the maroon and white color scheme that SKF had used for DYAZIDE for many years.

When SKF became aware of Premo's marketing of the generic substitute for DYAZIDE it filed a three count complaint. The first count charges patent infringement. Count II asserts diversity jurisdiction and charges unfair competition in violation of state law. Count III alleges a violation of section 43(a) of the Lanham Act. Both the state law and unfair competition count and the Lanham Act count are predicated upon Premo's deliberate adoption of the arbitrary and distinctive appearance of SKF's DYAZIDE capsules. The complaint alleges that Premo did so in order to place in the hands of the pharmaceutical trade capsules containing a mixture of triamterene and hydrochlorothiazide which can be and will be passed off and illegally substituted for DYAZIDE. The complaint alleges, further, that unscrupulous pharmacists can easily pass off the Premo capsules as SKF's, and that it was the intent, purpose, and natural effect of Premo's conduct in copying the DYAZIDE color scheme that such passing off could and would occur.

As we noted above, SKF sought preliminary injunctive relief both on patent infringement and on unfair competition grounds. The parties filed affidavits in support of or in opposition to the grant of such relief, addressing both the patent and the unfair competition issues. Counsel for Premo cross-examined the SKF affiants Fletcher and Dibble on the unfair competition aspects of the case, but did not offer any other oral testimony. During the testimony of Fletcher fifteen exhibits were introduced in evidence. There is no contention that this record was inadequate for the resolution of the preliminary injunction application or that Premo was prevented from developing an adequate record.

On the patent infringement count Premo conceded infringement. Premo contended that the patent was invalid because the diuretic value of triamterene was a known prior discovery, and its combination with hydrochlorothiazide to prevent the undesirable side effect of potassium loss associated with all diuretics was an obvious improvement. Both of these validity issues were contested. The trial court, recognizing that the patent validity issues were difficult, that the patent would expire before the case would be reached for final hearing, and that at that point the question of preliminary injunctive relief on the unfair competition count would have to be faced, chose to reserve decision on the request for preliminary relief on Count I. Since the patent has now expired, the injunctive aspects of Count I are moot, and the charge of patent infringement is relevant to this appeal, which involves only the issues of unfair competition, only to the extent that the admitted infringement may be evidentiary on those issues.

SKF's affidavits tended to show that it had expended vast sums of money in the successful promotion of DYAZIDE in its present trade dress; that over the past 15 years doctors have prescribed DYAZIDE therapy for over twenty million patients, with the average course of therapy extending over many months or years; that during this extended course of therapy each patient may be expected to have consumed hundreds of DYAZIDE capsules, and to have noted the arbitrary and distinctive appearance of those capsules; that recognition of the DYAZIDE capsule's appearance is widespread; that of the 25 leading diuretics sold in the United States, and which account for 90 per cent of the diuretic market, the appearance of DYAZIDE is both arbitrary and distinctive because it is the only one marketed in capsule form, the only one marketed in a bi-color form, and the only one employing the color maroon; and that the drugs in the DYAZIDE compound could be marketed either in capsule or other dosage form, including tablet or lozenge form, as evidenced by the fact that SKF markets DYAZIDE abroad in the form of round orange tablets. SKF also filed affidavits tending to show the likelihood of undisclosed substitution and mislabeling by pharmacists when generic equivalents of popular drugs are marketed in a similar trade dress. Included in this showing was the testimony of Frederick N. Dibble describing the results of surveys on illegal substitution and mislabeling of the generic equivalents of Librium and Darvon Compound 65, which are drug products of other manufacturers, each with a market status similar to that of DYAZIDE. This showing also included the results of a three day survey, involving 70 to 80 purchases of diuretics, conducted in the week prior to the hearing on the preliminary injunction application. The SKF affiants Fletcher and Dibble were cross-examined extensively on the likelihood of undisclosed, illegal substitution and mislabeling. Dibble explained that the survey on illegal substitution and mislabeling of Librium was conducted because, like DYAZIDE it is a high volume prescription product. Unlike DYAZIDE, however, Librium is presently a compound available from several sources. From his experience in the drug industry Dibble concluded that when the patent expired and the DYAZIDE compound became available from multiple sources the substitution pattern would be similar to that currently experienced with Librium. He expressed the opinion that based on the Librium and Darvon evidence a 4% rate of unlawful substitution and...

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