G.D. Searle & Co. v. Hudson Pharmaceutical Corp.

• Citation: 715 F.2d 837
• Decision Date: 29 August 1983
• Docket Number: No. 82-5621,82-5621,No. 82-5600,Nos. 82-5600,82-5600,s. 82-5600
• Parties: G.D. SEARLE & CO. v. HUDSON PHARMACEUTICAL CORPORATION, G.D. Searle & Co., Appellant, inHudson Pharmaceutical Corp., Appellant in
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 837

715 F.2d 837

220 U.S.P.Q. 496

G.D. SEARLE & CO. v. HUDSON PHARMACEUTICAL CORPORATION G.D. Searle & Co., Appellant, in No. 82-5600 Hudson Pharmaceutical Corp., Appellant in No. 82-5621.

Nos. 82-5600, 82-5621.

United States Court of Appeals Third Circuit.

Argued June 6, 1983.

Decided Aug. 29, 1983.

Stuart J. Sinder (argued), Kenyon & Kenyon, New York City, Stuart J. Freedman, Cadence Industries Corp., West Caldwell, N.J., for appellant.

William J. Heller (argued), Stryker, Tams & Dill, Newark, N.J., for appellee.

Before SEITZ, Chief Judge, SLOVITER, Circuit Judge, and POLLAK, District Judge ^*.

OPINION OF THE COURT

LOUIS H. POLLAK, District Judge.

I.

Plaintiff Searle and defendant Hudson are pharmaceutical firms. This controversy, arising under pertinent provisions of the Lanham Act, ¹ centers on a vegetable laxative--psyllium hydrophilic mucilloid--produced by both firms. Since 1934 Searle has marketed psyllium hydrophilic mucilloid under the registered trademark METAMUCIL; a highly profitable product, METAMUCIL has been responsible for $275,000,000 in sales since 1970. Hudson began marketing psyllium hydrophilic mucilloid in 1964. Its first proposed trade name was REGUCIL, but when Searle opposed registration of that name, agreement was reached on REGACILIUM, the registered trademark under which Hudson has sought to compete with Searle's METAMUCIL ever since.

With REGACILIUM (as with a number of other products which Hudson and other pharmaceutical firms sell under different trade names), Hudson has sought to acquire a strong share of the market by aggressive price competition bolstered by an advertising strategy which identifies the competitive brand and stresses Hudson's price advantage. Comparative advertising of this kind has been pursued by Hudson for many years not only in trade catalogues but also in so-called "point of purchase" advertising which undertakes to bring product names and their respective prices to the consumer's attention at the retail display counter. ² Since 1972 Hudson has frequently included in its comparative advertising the recital that REGACILIUM is "Equivalent to METAMUCIL." ³

Until 1980, REGACILIUM and METAMUCIL were packaged in quite dissimilar ways. Each product was in a white plastic container, but the containers were entirely unlike:

The standard fourteen-ounce container of natural-flavored ⁴ REGACILIUM had the configuration of a conventional jelly-jar or pickle-jar, rounding at the shoulders to a yellow screw-top. Swathing the torso of the container was a blue-and-yellow-and-white label which, in black print, presented "REGACILIUM TM Brand of Psyllium Hydrophilic Mucilloid."

The standard fourteen-ounce container of natural-flavored METAMUCIL was a cylinder with a white screw-top. Eschewing labels, Searle proclaimed the virtues of its "natural-fiber laxative" in print on the container itself. Most of the printing was green against the white background of the container. But the principal legend--"METAMUCIL TM Brand of Psyllium Hydrophilic Mucilloid"--was white against green.

In November of 1980, the fourteen-ounce natural-flavored REGACILIUM graduated from its round shoulders, its yellow screw-top and its multi-colored label. It burst forth on America's laxative display counters as a cylinder with a white screw-top. The new container was unlabelled; Hudson's message was printed directly on the container. Most of the message was printed in green on the white plastic background. The single exception was a white-on-green legend which for the first time set forth in the text carried by a REGACILIUM container the recital Hudson had long included in trade catalogues and "point of purchase" advertising: "Equivalent to METAMUCIL."

The appearance of the newly-clad REGACILIUM precipitated this litigation. Searle sued Hudson in the District Court for the District of New Jersey to enjoin any mention of METAMUCIL on the REGACILIUM container. On May 29, 1981, Judge Meanor issued a temporary restraining order precluding further reference to METAMUCIL on the REGACILIUM container

unless the defendant's container is changed such that "METAMUCIL" appears in type no larger than the word "Equivalent" and in green letters on the white background. Defendant shall place an TM next to the METAMUCIL mark and shall state adjacent to said mark the statement "a product of G.D. Searle, not a Hudson product."

Joint Appendix ("J.A.") at 111.

The temporary restraining order was continued in force pending disposition of Searle's application for a permanent injunction. On March 26, 1982, on the basis of a record substantially augmented by depositions, affidavits and exhibits, Judge Meanor filed a thoughtful opinion concluding that a permanent injunction should issue.

Referring to the REGACILIUM container as it appeared in November of 1980 (and without the modifications required by the 1981 temporary restraining order), the district court rejected Hudson's contention that there was no basis for a finding of likelihood of confusion (footnotes omitted):

In sum, the similarity in the packaging of the products, the distinctive eye-catching display of the METAMUCIL mark in white letters contrasted against the only shaded portion of the container, the absence of any reference to Searle's ownership rights in its trademark, and the overall presentation of the new REGACILIUM container point to the inevitable conclusion that there is in fact and in law a substantial likelihood that consumers will be confused and will purchase REGACILIUM thinking that they are buying a cheaper version of the product manufactured by the same company that manufactures METAMUCIL.

Furthermore, based on the evidence presented subsequent to the hearing in connection with the temporary restraining order, I find that Hudson intended to create consumer confusion in designing and marketing the new container. The statements of Mr. Sinclair [Hudson's Assistant Product Manager] concerning his understanding of the purpose of the repackaging, the handwritten comments contained on the initial launch proposals which revealed Hudson's design to "knock off" the METAMUCIL product, and the manner in which the new REGACILIUM container was designed lead this court to conclude that Hudson intended to promote the sale of REGACILIUM by encouraging the public to identify the source of its product with METAMUCIL and to thereby capitalize on the good will embodied in the METAMUCIL mark.

J.A. at 470-71. ⁵

The district court also rejected Searle's contention that, going beyond the relief embodied in the temporary restraining order, Judge Meanor should direct Hudson to make no mention of METAMUCIL whatsoever on the REGACILIUM container. The court was unpersuaded that references to METAMUCIL permitted in Hudson's trade catalogues or "point of purchase" advertising were, as a matter of law, impermissible when placed on the container of Hudson's competitive product. Further, the court found unconvincing the testimony adduced by Searle of one instance of a consumer who, looking for METAMUCIL, purchased REGACILIUM in a container conforming to the modifications required by the temporary restraining order. ⁶

Finally, the district court saw no merit in the proposition that Hudson's past "abuse of the Metamucil mark"--an apparent reference to the bad intent of Mr. Sinclair and Hudson's other marketing officials--should disable Hudson from an otherwise permissible reference to METAMUCIL on the REGACILIUM container:

Plaintiff is only entitled to that protection which the trademark laws confer. I have found that the modified REGACILIUM label avoids the possibility that plaintiff's rights in its registered mark will be diluted. I decline to augment the injunction with additional restraints that may serve to undermine competition.

J.A. at 474. ⁷

II.

Both Searle and Hudson have appealed from the permanent injunction.

Hudson contends, in essence, that the record does not permit a finding that the newly cylindrical November 1980 REGACILIUM container, complete with its white-on-green legend "Equivalent to METAMUCIL," created a likelihood of confusion. Bearing in mind the manifest similarity of the containers and that the similarity was achieved pursuant to Hudson's marketers' express desire to "knock off [i.e., copy ⁸ the container utilized by the national equivalent METAMUCIL," we find that Hudson's arguments are fully met by Judge Meanor's careful opinion.

Searle contends on appeal, as it did below, that it was entitled to a decree foreclosing Hudson from making any reference to METAMUCIL on the REGACILIUM container. Searle concedes that the Lanham Act is not an impediment to Hudson's truthful references to METAMUCIL in its trade catalogues and "point of purchase" advertising. The concession is proper: 15 U.S.C. § 1114(1)(a) proscribes only such uses of another's trademark "in connection with the ... advertising of any goods or services" as are "likely to cause confusion, or to cause mistake or to deceive." And, as Judge Van Dusen has put it, speaking for the Ninth Circuit, "The use of a competitor's trademark for purposes of comparative advertising is not trademark infringement 'so long as it does not contain misrepresentations or create a reasonable likelihood that purchasers will be confused as to the source, identity, or sponsorship of the advertiser's product.' " SSP Agricultural, Etc. v. Orchard-Rite Ltd., 592 F.2d 1096, 1103 (9th Cir.1979) ( quoting Smith v. Chanel, Inc., 402 F.2d 562, 563 (9th Cir.1968)). ⁹ But Searle contends that including a reference to a competitor's trademark in a text imprinted on the very package which brings one's product to the consumer is a qualitatively different form of communication--and different in a way which violates the Lanham Act.

The language of the Act offers no support for Searle's contention that the law of trademarks distinguishes in this fashion between packages and advertisements. 15 U.S.C. §...