Glaxosmithkline LLC v. Laclede, Inc.

• Decision Date: 23 January 2019
• Docket Number: 18-CV-4945 (JMF)
• Parties: GLAXOSMITHKLINE LLC, et al., Plaintiffs, v. LACLEDE, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

GLAXOSMITHKLINE LLC, et al., Plaintiffs, v. LACLEDE, INC., et al., Defendants.

18-CV-4945 (JMF)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

January 23, 2019

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

In this action, GlaxoSmithKline LLC and GlaxoSmithKline Consumer Healthcare (US) IP LLC (together, "GlaxoSmithKline") bring intellectual property claims — namely, claims for trademark infringement, false advertising, deceptive practices, and unfair competition, under New York and federal law — as well as common law tort and breach-of-contract claims against Laclede, Inc. ("Laclede"), and its only two shareholders, Michael Pellico and Stephen Pellico. See Docket No. 26 ("Compl."). Plaintiffs' arguments turn principally on a 2011 Asset Purchase Agreement in which Plaintiffs agreed to purchase from Laclede the rights to BIOTENE, a line of over-the-counter medicines used to treat dry mouth. See id., Ex. A ("APA"). Plaintiffs claim that Defendants breached that agreement when, in 2018, Defendants launched SALIVEA, a competing line of medicines. See Compl. ¶¶ 97-157. Plaintiffs now move, pursuant to Rule 65 of the Federal Rules of Civil Procedure, to enjoin Defendants from selling SALIVEA altogether or, at a minimum, from using the BIOTENE mark in advertising SALIVEA. See Docket No. 28; see also Docket No. 35 ("Pls.' Mem."), at 23-24. Defendants oppose Plaintiffs' motion, and cross-move to dismiss for lack of jurisdiction or, in the alternative, to transfer this case to the United States District Court for the Central District of California. See Docket No. 39. For the reasons that follow, Plaintiffs' motion is GRANTED in part and DENIED in part, and Defendants' cross-motion is DENIED.

BACKGROUND

Laclede develops, markets, and sells a variety of over-the-counter and prescription medications. See Compl. ¶ 8. Laclede is wholly owned by Defendant Michael Pellico, who also serves as the company's President and Chief Executive Officer, and Defendant Stephen Pellico, who also serves as the company's Vice President and Secretary. See id. ¶¶ 9-11. In 2008, the predecessor-in-interest to Plaintiff GlaxoSmithKline LLC entered into the APA with Laclede. Id. ¶ 16. Pursuant to the APA, Plaintiffs' predecessor-in-interest paid approximately $170 million for the intellectual property, formulae, and goodwill relating to eighteen Laclede products in the "BIOTENE" line. See id. ¶ 18. These products are over-the-counter medicines, including mouthwashes and toothpastes, used in the treatment of xerostomia, commonly known as dry mouth. Id. ¶ 19.

Section 4.16 of the Asset Purchase Agreement is a non-compete provision. Referring to Laclede as "Seller," Subsection (a) of that Section provides that, "for a period of three (3) years following the Closing Date, Seller agrees that they will not and will cause their respective Affiliates not to, directly or indirectly, (i) distribute and market; or (ii) supply any Third Party with any oral care product in the Territory (1) for the treatment of xerostomia or dry mouth, or (2) which uses enzymes." APA § 4.16(a). Subsection (b), meanwhile, states that "Laclede, Inc.'s sole shareholders, Michael Pellico and Stephen Pellico, also agree they will not, directly or indirectly, (i) distribute and market; or (ii) supply any Third Party with any oral care product in the Territory (1) for the treatment of xerostomia or dry mouth, or (2) which uses enzymes." Id. § 4.16(b). "Territory" is defined, in turn, to mean "all countries in the world." Id. § 8.2, at 36.

To the extent relevant here, Plaintiffs took two actions after acquiring the rights to BIOTENE. First, they invested significant sums on advertising and promoting BIOTENE products; in 2017 alone, for example, they spent over $20 million. See Compl. ¶ 29. Their advertisements reached both ordinary consumers and healthcare professionals. See id. ¶ 30. Second, after "extensive research," Plaintiffs "determined that it was best to reformulate BIOTENE." Id. ¶ 33. In particular, they removed certain enzymes from BIOTENE products. See id. ¶ 34.

Around March 2018 — over three years after the Closing Date as defined in the Asset Purchase Agreement — Laclede introduced the SALIVEA line of products, a suite of over-the-counter medicines, including mouthwash and toothpaste, used to treat dry mouth. See Compl. ¶ 47. In April 2018, Defendants mailed fliers advertising SALIVEA to healthcare professionals. See id. ¶ 54. Defendants estimate that they sent "approximately 100,000 mailers . . . to [healthcare professionals] and others based on contacts generated at conventions and rebate recipients." Docket No. 41 ("S. Pellico Decl."), ¶ 26. Plaintiffs highlight two here, which the Court attaches as Exhibits A and B to this Opinion and Order for ease of reference. See Compl., Ex. C ("Toothpaste Mailer"); id., Ex. D ("Mouthwash Mailer"). In the first, the Toothpaste Mailer, attached as Exhibit A, there is a green banner at the top in which the following words appear: "Back Again! Salivary Enzymes and Components - Essential for Dry Mouth Care." Just below that banner, the advertisement reads — in smaller typeface — "From the Creators of ORIGINAL biotene," with "biotene" appearing in a stylized font and featuring a water droplet in the center of the "o." Just below that, the largest text on the flyer declares: "SALIVEA utilizes the same ingredients as the ORIGINAL Biotene. The Proven and Loved Formula!" Finally, at the far left of the advertisement, running vertically in by far the smallest typeface on the flyer, the following words appear: "Biotene is trademark [sic] owned by GlaxoSmithKline."

In the second flyer, the Mouthwash Mailer, attached as Exhibit B, a header in all capital letters reads: "DID YOU KNOW BIOTENE HAS CHANGED?" Slightly below the header, the flyer states: "Over 35 years ago, Laclede developed Biotene enzyme toothpaste and mouthwash that became the #1 brand for dry mouth. Biotene was acquired by the GSK Company and was reformulated. After years of perfecting formulas, we now introduce SALIVEA mouthwash and toothpaste that utilizes the Proven Enzyme Technology as in the ORIGINAL Biotene." Meanwhile, in the top right, highlighted in red, the flyer lists "CURRENT Biotene Changes," including "ENYZMES (Removed)," and "PARABENS (Added)," alongside a picture of a Biotene oral rinse bottle. A footer at the bottom of the flyer states: "Back Again! Salivary Enzymes and Components - Essential for Dry Mouth Care." Just above the footer, there is a comparison of the "SALIVEA Mouthwash Utilizing ORIGINAL Biotene Formula" with the "ORIGINAL Biotene Formula / The #1 Recommended Brand for Dry Mouth." Finally, like the Toothpaste Mailer, the Mouthwash Mailer contains a small disclaimer that "Biotene is trademark [sic] owned by GlaxoSmithKline," running vertically on the far left of the flyer.

Plaintiffs also highlight various advertisements appearing on SALIVEA's website. See Declaration of Amardeep S. Kahlon ("Kahlon Decl."), Ex. 10.¹ In one, attached to this Opinion and Order as Exhibit C, SALIVEA declares: "It's Back! The Original Formula that made Biotene #1 for Dry Mouth." Id. ("Website"). In a smaller typeface just below that text, the website reads: "From the Creators of biotene," with "biotene" once against appearing in stylized script and featuring the water droplet. The website also displays text similar to that on the Mouthwash Mailer: "Over 35 years ago, our researchers developed an enzyme technology system that became The #1 Treatment in The World for Dry Mouth Care. Now, after years of perfecting formulas, we're proud to introduce the New SALIVEA Dry Mouth Care Products." Another page on the website reads: "Proven Enzyme Technology / Over 35 years ago, Laclede developed Biotene enzyme toothpaste and mouthwash that became The #1 Brand for Dry Mouth. Biotene was later acquired by the GSK Company and was reformulated. / We Listened! We brought back salivary enzymes . . . ." Here, too, a disclaimer appears, this time at the bottom of the page. It states as follows: "Biotene is trademark [sic] owned by GlaxoSmithKline."

As noted, Plaintiffs now move for preliminary injunctive relief. In particular, they seek relief with respect to both their contract claims and their trademark claims. With respect to the former, Plaintiffs seek an injunction prohibiting Defendants from selling, "offering for sale, distribution, advertising, promotion and marketing of SALIVEA." Pls.' Mem. 24. With respect to the latter, Plaintiffs ask the Court to enjoin Defendants from taking at least eight actions: (1) using "the blue-and-red BIOTENE logo"; (2) using "the BIOTENE Droplet"; (3) using "the words '#1 Brand for Dry Mouth,' 'It's Back,' 'Back Again,' 'Brought Back' or variations thereof"; (4) using "any images of the packaging for GSK's BIOTENE products"; (5) continuing to disseminate the Toothpaste Mailer and the Mouthwash Mailer;² (6) disseminating "any and all claims referencing Laclede's prior ownership of the BIOTENE brand, or Laclede's development or creation of the original formulation for BIOTENE"; and (7) disseminating "any sales . . . material, in any media, using the BIOTENE trademark that is likely to confuse customers or [healthcare professionals] to believe that SALIVEA is a product of GSK" or that GSK "authorized or sponsored" SALIVEA. Id. at 24-25. Finally, Plaintiffs request (8) that the Court "require Defendants to disclose prominently in any of their advertising mentioning BIOTENE that SALIVEA is not a product of GSK, and that SALIVEA is not an authorized successor or alternative to BIOTENE, or a replacement for BIOTENE." Id. at 25. Defendants oppose Plaintiffs' motion and, as noted, cross-move for dismissal based on lack of jurisdiction or, in the alternative, to transfer the case to the Central District of California. See Docket No. 39.

DEFENDANTS' MOTION TO DISMISS OR TRANSFER

The Court begins with Defendants' motion to dismiss ...