Abbott Laboratories v. Mead Johnson & Co.

• Decision Date: 23 July 1992
• Docket Number: No. 91-3492,91-3492
• Parties: ABBOTT LABORATORIES, Plaintiff-Appellant, v. MEAD JOHNSON & COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 6

971 F.2d 6

23 U.S.P.Q.2d 1663

ABBOTT LABORATORIES, Plaintiff-Appellant, v. MEAD JOHNSON & COMPANY, Defendant-Appellee.

No. 91-3492.

United States Court of Appeals Seventh Circuit.

Argued April 9, 1992.

Decided July 23, 1992.

Thomas G. Stayton, Baker & Daniels, Indianapolis, Ind., Robert F. Ward, Pope, Ballard, Shepard & Fowle, Chicago, Ill., Thomas C. Morrison (argued), Andrew D. Schau, Robert W. Lehrburger, Patterson, Belknap, Webb & Tyler, New York City, Kenneth D. Greisman, Mark E. Barmak, Abbott Laboratories, Dept. 324, Abbott Park, Ill., for plaintiff-appellant.

Jerold S. Solovy, Robert L. Byman (argued), James L. Thompson, Daniel S. Goldman, Jenner & Block, Chicago, Ill., Evan E. Steger, Harry L. Gonso, Ice, Miller, Donadio & Ryan, Indianapolis, Ind., for defendant-appellee.

Before FLAUM, EASTERBROOK and KANNE, Circuit Judges.

FLAUM, Circuit Judge.

Abbott Laboratories (Abbott) filed this interlocutory appeal, 28 U.S.C. § 1292(a)(1), after the district court denied its motion for a preliminary injunction against Mead Johnson & Company (Mead). Abbott seeks relief under § 43(a) of the Lanham Act (the Act), 15 U.S.C. § 1125(a), to halt Mead's alleged false advertising and trade dress infringement practices in the oral electrolyte maintenance solution (OES) market. We vacate the district court's denial of preliminary relief, and remand with directions to promptly commence a full trial on the merits.

I.

Oral electrolyte maintenance solutions are over-the-counter medical products used to prevent dehydration in infants suffering from acute diarrhea or vomiting. They are clear liquids, comprised almost exclusively of water, electrolytes and dissolved carbohydrates, and are ingested orally. While OES products do not actually cure diarrhea or nausea, they maintain the fluid balance of infants inflicted with these maladies by facilitating the body's absorption of fluids and electrolytes. The OES market is a small (approximately $45 million in annual sales) but important one; dehydration is an especially dangerous medical problem for infants, and as many as ten percent of preventable postnatal infant deaths result from the collateral effects, such as dehydration, of diarrhea. John D. Snyder, Use and Misuse of Oral Therapy for Diarrhea: Comparison of U.S. Practices with American Academy of Pediatrics Recommendations, Pediatrics, Jan. 1991, at 28. Despite their medical significance, OES products may be purchased without a prescription at food and drug stores.

Abbott and Mead are, for all practical purposes, the only two competitors in the United States OES market. Abbott's product is called "Pedialyte," while Mead's is called "Ricelyte". Competition in this market is of surprisingly recent vintage, as Pedialyte enjoyed a virtual monopoly until Mead introduced Ricelyte in 1990. The two products are virtually identical; only their carbohydrate components differ. This difference is crucial to understanding the dispute in this case, so we briefly provide some background.

Pedialyte is known as a "glucose-based solution" because its carbohydrate component is glucose. Glucose is a monomer. Monomers are the simplest carbohydrate molecules, and serve as the building blocks for larger carbohydrates, known as oligimers or polymers. Commonly known larger carbohydrates include sucrose (i.e., table sugar), comprised of two glucose molecules bonded together, and starch, comprised of thousands of monomers bonded together. When a person ingests complex carbohydrates like starch, the body's digestive system breaks them down, by a process called hydrolysis, into monomers for absorption into the bloodstream via the small intestine.

Ricelyte, unlike Pedialyte, is not a glucose-based solution, for it is manufactured with carbohydrates known as "rice syrup solids." When producing Ricelyte, Mead takes whole rice kernels and separates out the two carbohydrates, amylose and amylopectin, found naturally in rice. Amylose and amylopectin, like starch, are complex carbohydrates comprised of thousands of monomers bonded together. Mead then hydrolyzes the rice carbohydrates--biochemists have long known how to replicate natural hydrolysis in the laboratory--into rice syrup solids, which are much shorter polymer chains, but still more complex than the monomer glucose. It is important for our purposes to emphasize that rice syrup solids, while hydrolytically derived from rice carbohydrates, are not actually "rice carbohydrates" as the term is used in the scientific and medical communities. The difference is analogous to that between an automobile engine and a vat of molten steel. One may produce molten steel from an engine by melting it down, but the two are completely different things, both physically and functionally.

The OES market, unlike typical consumer product markets, is "professionally driven," meaning that Abbott and Mead do not promote their product directly to consumers, but rather to physicians and nurses, who in turn recommend them to consumers. As is standard practice in the medical products field, both companies send sales representatives to visit physicians, primarily pediatricians, to tout the superiority of their respective products. Both companies also distribute brochures to physicians and place most of their print advertising in medical journals rather than in more broadly based media venues. The plan, apparently, is to convince physicians and nurses to suggest one product rather than the other when approached by parents whose infants are suffering from diarrhea or nausea. This initial recommendation is crucial because parents usually accept their physician's initial recommendation, and furthermore tend to stick with the same product should the problem recur.

Since Pedialyte is the incumbent and Ricelyte the challenger, Mead launched a promotional campaign designed to convince physicians and nurses to recommend Ricelyte over Pedialyte. The campaign does so by emphasizing that Ricelyte's carbohydrate components (i.e., rice syrup solids) come from rice, while Pedialyte's carbohydrate component is glucose. Mead focuses on rice for a fairly simple reason. Over the past decade, medical researchers worldwide, many sponsored by the World Health Organization (WHO), have studied the effectiveness of OES products made with powdered whole grains of rice, which are known as "rice-based," or whole grain, solutions. These studies have found that rice-based solutions have significant advantages over glucose-based solutions, like Pedialyte, when it comes to combatting the dehydrative effects of diarrhea. Despite their medical superiority, however, rice-based solutions face two obstacles to commercial viability. First, rice grain powder, unlike glucose and rice syrup solids, cannot be completely dissolved in water, making rice-based solutions cloudy and susceptible to separation, and less palatable to consumers as a result. ¹ Second, rice-based solutions are subject to early spoilage, and hence have too brief a shelf life for commercial distribution.

Ricelyte, according to Mead, fashions a compromise between the marketability and appearance of glucose-based solutions and the medical effectiveness of whole grain solutions. Its rice syrup solids are derived from rice, but are soluble and do not spoil, making Ricelyte more marketable than whole grain solutions. There remain, however, significant differences between Ricelyte and rice-based solutions. As noted, the carbohydrate components of rice-based solutions are actual rice carbohydrates (i.e., amylose and amylopectin), not the less complex rice syrup solids used in Ricelyte. Moreover, rice-based solutions, unlike Ricelyte, also contain the non-carbohydrate components of rice, including proteins, fats, fiber and other organic materials.

Nonetheless, Mead's promotional campaign plays up Ricelyte's association with rice. First, it forges a direct link between Ricelyte and rice. To take an obvious example, the name "Ricelyte" conveys the message that the product contains or is made from rice. Further, some of Mead's advertisements describe Ricelyte as a "rice-based oral electrolyte solution," while others claim that Ricelyte contains "rice carbohydrate molecules." The visual background of many advertisements consists of an illustration of rice grains cascading into a clear liquid pool. Second, Mead's campaign implies, and at times directly states, that Ricelyte's link to rice makes it superior to Pedialyte. Some advertisements proclaim that "worldwide results confirm the benefits of rice" and that rice "has been used for centuries to help manage diarrhea." The statement "Rice Makes A Difference" appears in nearly all Ricelyte advertisements, in most instances as a subtitle to "New Ricelyte." In addition, a number of ads tout certain (alleged) specific benefits of Ricelyte vis-a-vis Pedialyte, including lower osmolality, better fluid absorption, and reduced stool output--all the consequence of Ricelyte's link to rice.

Abbott did not take kindly to Mead's promotional and advertising campaign. It filed suit, alleging that the campaign, up to and including the "Ricelyte" name, was false and misleading in violation of § 43(a)(2) of the Act. Abbott also alleged that Ricelyte's bottle, label and overall packaging infringed upon Pedialyte's trade dress in violation of § 43(a)(1) of the Act. Abbott asked for a preliminary injunction, seeking a wide variety of relief, ranging in severity from a product recall to modifications in Mead's advertising and promotional materials. The district court approved an expedited discovery schedule submitted by the parties, held a ten-day evidentiary hearing, and heard one day of oral argument. Shortly thereafter it issued an order, accompanied by a lengthy and thorough memorandum opinion, denying Abbott's preliminary injunction motion in full. Abbott Laboratories v. Mead Johnson & Co., No. IP 91-202C (S.D.Ind. Oct. 10, 1991) (hereinafter "Dist....