901 F.Supp.2d 436 (S.D.N.Y. 2012), 07 Civ. 5898(RJS), Merck Eprova AG v. Gnosis S.p.A.

Docket Nº:07 Civ. 5898(RJS).
Citation:901 F.Supp.2d 436
Opinion Judge:RICHARD J. SULLIVAN, District Judge.
Party Name:MERCK EPROVA AG, Plaintiff, v. GNOSIS S.P.A. and Gnosis Bioresearch S.A., Defendants.
Attorney:Robert Elliot Hanlon, Esq., Thomas Jude Parker, Esq., Lance Anders Soderstrom, Esq., Natalie Christine Clayton, Esq., and Victoria Elizabeth Spataro, Esq., of Alston & Bird, LLP, New York, NY, for Plaintiff Merck Eprova AG. William Don. Chapman, Esq., and Catherine A. Close, Esq., of Julander, Br...
Case Date:September 30, 2012
Court:United States District Courts, 2nd Circuit, Southern District of New York
 
FREE EXCERPT

Page 436

901 F.Supp.2d 436 (S.D.N.Y. 2012)

MERCK EPROVA AG, Plaintiff,

v.

GNOSIS S.P.A. and Gnosis Bioresearch S.A., Defendants.

No. 07 Civ. 5898(RJS).

United States District Court, S.D. New York.

September 30, 2012

Page 437

[Copyrighted Material Omitted]

Page 438

[Copyrighted Material Omitted]

Page 439

[Copyrighted Material Omitted]

Page 440

[Copyrighted Material Omitted]

Page 441

Robert Elliot Hanlon, Esq., Thomas Jude Parker, Esq., Lance Anders Soderstrom, Esq., Natalie Christine Clayton, Esq., and Victoria Elizabeth Spataro, Esq., of Alston & Bird, LLP, New York, NY, for Plaintiff Merck Eprova AG.

William Don. Chapman, Esq., and Catherine A. Close, Esq., of Julander, Brown, Bollard & Chapman, Irvine, CA, and

Page 442

Bryon L. Friedman, Esq. of Littleton, Joyce, Ughetta, Park & Kelly, LLP, New York, NY, for Defendants Gnosis S.p.A. and Gnosis Bioresearch S.A.

OPINION AFTER BENCH TRIAL

RICHARD J. SULLIVAN, District Judge.

Plaintiff Merck & Cie (" Merck" ), formerly known as Merck Eprova AG, a producer of pharmaceutical and dietary ingredients, brings this action against Defendants Gnosis S.p.A. and Gnosis Bioresearch S.A. (collectively, " Gnosis" ), manufacturers and sellers of raw ingredients to nutritional companies, for misleading advertising in connection with Gnosis's manufacture and sale of a folate nutritional ingredient. Specifically, Merck alleges that Gnosis falsely marketed its folate product using the chemical name, abbreviation, chemical formula, and Chemical Abstracts Services registry number (" CAS number" ) reserved for Merck's purer folate ingredients. Merck also contends that Gnosis described its ingredient in brochures, websites, and e-mails to clients using statements that only apply to the pure product manufactured by Merck. Merck seeks to hold Gnosis liable for false advertising, contributory false advertising, and deceptive trade practices under federal and New York law.

Having presided over a bench trial in this action, the Court issues the following findings of fact and conclusions of law, pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. For the reasons set forth below, the Court finds that: (1) Gnosis engaged in false advertising and contributory false advertising in violation of the Lanham Act; and (2) Merck failed to meet its burden to prove that Gnosis engaged in a deceptive practice or false advertising in violation of New York state law. Accordingly, the Court hereby enters judgment for Merck and awards Merck damages in the amount of $526,994.13 plus interest, as well injunctive relief and attorneys' fees.1

I. PROCEDURAL HISTORY

Merck filed this action on June 21, 2007. The case was originally assigned to the Honorable Kenneth M. Karas, but was reassigned to my docket on September 4, 2007. On October 22, 2007, Merck filed an Amended Complaint, asserting six causes of action: (1) false advertising under Section 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B); (2) contributory false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B); (3) " use of false descriptions and false representations" in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A); (4) unfair competition under New York common law; (5) deceptive trade practices pursuant to Section 349(h) of the New York General Business Law; and (6) false advertising under Section 350a(3) of the New York General Business Law.

After denying Gnosis's motion to dismiss the Amended Complaint for lack of personal jurisdiction,

Page 443

Merck Eprova AG v. Gnosis S.p.A., No. 07 Civ. 5898(RJS), 2008 WL 5336587, at *1 (S.D.N.Y. Dec. 12, 2008), the Court directed the parties to proceed with discovery. What ensued has already been the subject of a lengthy opinion concerning Gnosis's outrageous conduct in the course of discovery. See Merck Eprova AG v. Gnosis S.P.A, No. 07 Civ. 5898(RJS), 2010 WL 1631519, at *1 (S.D.N.Y. Apr. 20, 2010). The Court will not repeat its findings here, other than to note that Gnosis was fined $25,000 and ordered to pay $89,921 in attorneys' fees. Id.

In August 2010, both Merck and Gnosis filed motions for summary judgment. (Doc. Nos. 88, 96.) The Court heard oral argument on both parties' motions, and, in a Memorandum and Order dated March 17, 2011, the Court denied Merck's motion for summary judgment in its entirety. (Doc. No. 146.) The Court granted Gnosis's motion in part, dismissing Merck's third and fourth claims, but otherwise denied the motion. See Merck Eprova AG v. Gnosis S.P.A., No. 07 Civ. 5898(RJS), 2011 WL 1142929, at *1 (S.D.N.Y. Mar. 17, 2011).

The case proceeded to trial on June 20, 2011. The trial was conducted without objection in accordance with the Court's Individual Rules for the conduct of nonjury proceedings. The parties submitted affidavits containing the direct testimony of their respective witnesses, as well as copies of all exhibits and deposition testimony that they intended to offer as evidence at trial. The parties were then invited to call those witnesses whom they wished to cross-examine at trial. In all, nine witnesses submitted affidavits, and ten witnesses testified before the Court at trial. The Court ruled on objections made with regard to statements in various witness affidavits and various exhibits. Closing arguments took place on June 30, 2011.

Each party submitted a post-trial memorandum (" Post-Trial Mem." ) on August 1, 2011. On the same date, Merck filed a motion to redact portions of the trial transcript (Doc. No. 214) and renewed its motion for an adverse inference (Doc. No. 216), requesting that the Court infer that documents missing as a result of Gnosis's discovery violations support a finding of liability and willfulness on the part of Gnosis. On August 2, 2011, Gnosis filed a motion to redact portions of the trial transcript and certain pre-trial submissions. (Doc. No. 223.) On March 30, 2012, the Court denied Merck's renewed motion for an adverse inference as moot (Doc. No. 231), and granted both motions to redact the transcript (Doc. No. 232).

II. FINDINGS OF FACT 2

At the heart of this case is Gnosis's folate product, which is a mixture of the " active" Sisomer and the " inactive" R-isomer.3 Although Gnosis's product is admittedly a mixture of these two isomers (PTO Facts ¶ 8), Gnosis used terms and the chemical formula for the pure S-isomer product in describing its product ( see infra Parts II.C-D). Merck claims that this violates the Lanham Act and state law. Gnosis acknowledges that its product is a mixture. Nevertheless, Gnosis argues that its use of the terms describing its product is accurate based on scientific naming conventions. In addition, while acknowledging

Page 444

that it used the incorrect chemical formula and CAS registry number on some documents, Gnosis contends that this use was not part of an advertising campaign. Similarly, it contends that the allegedly false descriptions of its product in advertising brochures, websites, and emails to clients were also not part of an organized advertising campaign. Gnosis seeks attorneys' fees against Merck, contending that Merck filed this suit with anti-competitive motives.

A. The Parties

Plaintiff Merck is a Swiss corporation with its principal place of business in Schaffhausen, Switzerland. (PTO Facts ¶ 1.) Defendant Gnosis S.p.A. is an Italian corporation with its principal place of business in Desio, Italy, and Defendant Gnosis Bioresearch S.A. is a Swiss association with its principal place of business in San Antonino, Switzerland. ( Id. ¶ 2.) Gnosis sells its products in the United States, advertising them through product literature circulated at trade shows, information presented on the internet, and promotional materials distributed in person and via email to current and potential customers. ( Id. ¶ 5.) The companies are competitors, as both Merck and Gnosis produce raw dietary ingredients used in the production of nutritional supplements. ( Id. ¶¶ 3-4; Tr. 884:17-19.)

B. Stereochemistry 4

Stereochemistry is a branch of chemistry concerned with the structure and properties of molecules. (PTO Facts ¶ 14.) Stereoisomers are molecules with the same composition of atoms and bond connectivity of atoms, but with different arrangements of those atoms in space. (Affidavit of Daniel W. Armstrong, Ph.D. dated May 17, 2011 (" Armstrong Aff." ), ¶ 21.) These differences in spatial orientation result in different stereoisomers having different physical, chemical, and biological properties. ( Id. ¶ 22.)

Stereoisomers that are not mirror images of each other are called diastereoisomers. ( Id. ¶ 35; see Affidavit of Dr. Jesse F. Gregory dated May 18, 2011 (" Gregory Aff." ), ¶ 30.) Although they have the same molecular formula, virtually all of the physical, chemical, and biological properties of diastereoisomers are different. (Armstrong Aff. ¶ 37.) Accordingly, diastereoisomers of the same molecule can have vastly different effects in the human body. ( Id.; Gregory Aff. ¶¶ 3-5.)

As explained in great detail at trial, at least three different conventions exist for the naming of stereoisomers. Under the Cahn-Ingold-Prelog priority rules, an isomer is identified as either " R" or " S" depending on the isomer's relation to the carbon atom. (PTO Facts ¶ 20.) The Fischer-Rosanoff convention labels the isomers either " D" or " L" based on the isomer's relation to the glyceraldehyde molecule. ( Id. ¶ 21.) Another naming convention, based on optical activity, calls the isomers either " (+)" or " (-)," depending on the direction in which the isomer rotates the plane of polarized light. ( Id. ¶ 22.) These three conventions have no direct relation to each other. ( Id. ¶ 17; Armstrong Aff. ¶ 24.) The R/S designations are most commonly employed, with the International Union of Pure and Applied Chemistry recommending their use (" IUPAC" ). ( Id. ¶ 26.) Nevertheless,...

To continue reading

FREE SIGN UP