Healthpoint, Ltd. v. Stratus Pharmaceuticals, Inc.
| Decision Date | 01 June 2001 |
| Docket Number | No. SA-00-CA-726-PM.,SA-00-CA-726-PM. |
| Citation | 273 F.Supp.2d 769 |
| Parties | HEALTHPOINT, LTD., Plaintiff, v. STRATUS PHARMACEUTICALS, INC., Defendant. Stratus Pharmaceuticals, Inc., Counterclaim Plaintiff, v. Healthpoint, Ltd., Counterclaim Defendant. |
| Court | U.S. District Court — Western District of Texas |
Charles W. Hanor, Gunn, Lee & Hanor, P.C., San Antonio, TX, C. David Kinder, Kirt S. O'Neill, Saul H. Perloff, Akin, Gump, Strauss, Hauer & Feld, L.L.P., San Antonio, TX, Eric W. Cernyar, San Antonio, TX, for plaintiff.
Lisa A. Vance, Law Offices of Lisa Vance, San Antonio, TX, Thomas Allen Rasmussen, Law Offices of Lisa A. Vance, PC, San Antonio, TX, Dawn Ferrell Clements, San Antonio, TX, Jacqueline M. Stroh, Crofts & Callaway, P.C., San Antonio, TX, Steven M. Davis, Becker & Pollakoff, P.A., Miami, FL, for defendant.
Pursuant to the consent of the parties to disposition before a United States Magistrate Judge1 and consistent with the authority vested in United States Magistrate Judges under the provisions of 28 U.S.C. § 636(c) and rule 1(i) of the Local Rules for the Assignment of Duties to United States Magistrates, effective January 1, 1994, in the Western District of Texas, the following Memorandum Decision and Order is entered regarding the parties' cross motions for preliminary injunction.
The Court has jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332, 1338, and 1367 and 15 U.S.C. §§ 1116 and 1121.
By way of introduction, this lawsuit concerns competing enzymatic wound ointments, Accuzyme and Panafil2 made by Healthpoint Ltd. ("Healthpoint") and Kovia and Ziox made by Stratus Corporation ("Stratus"). Each of the ointments is available by prescription only. Healthpoint began marketing Accuzyme in 1996 after reverse-engineering Panafil White, a papain-urea debridement ointment then marketed by Rystan. Thereafter, Healthpoint spent millions of dollars promoting Accuzyme, creating brand awareness and market acceptance. Prior to the filing of this lawsuit, Healthpoint acquired the rights to Panafil White. In April 2000, Stratus began marketing both Kovia, a papain-urea wound debridement ointment, which Stratus created by attempting to replicate Accuzyme, and Ziox, a wound care ointment which Stratus created by attempting to duplicate Panafil White.
When introducing the products, Stratus promoted Kovia and Ziox as a "generic to Accuzyme ointment"3 and Kovia as "generic to Panafil ointment."4 Stratus distributed a wholesale price list that referred to Kovia and Ziox as "branded prescription generic products."5 Using and industry form called a "wholesaler new item fact sheet," Stratus filled out the section of the form "for generic drug products," indicating, among other things, that the "brand name equivalent" for Kovia was Accuzyme6 and the "brand name equivalent" for Ziox was Panafil.7 Stratus provided these forms to data collection agencies such as First Data Bank (which then "linked" Accuzyme and Kovia and "linked" Ziox and Panafil White in its computer data base to which pharmacists and others subscribe), to drug wholesalers and to others. Stratus also submitted similar information to the Texas Department of Health when Stratus applied for Kovia and Ziox to be included in the Texas state medicaid formulary8 and to Alabama9 when seeking the inclusion of Kovia into the Alabama state medicaid formulary. Stratus represented Kovia to be "a generic of Accuzyme ointment" when bidding for a contract with Cook County Hospital in Illinois.10
At some point in the spring of 2001, well after the filing of this case, Stratus voluntarily stopped referring to Kovia and Ziox as "branded prescription generic products" and stopped promoting Kovia and Ziox as "generic" to Accuzyme and Panafil.11 Rather, its current promotional materials contain the following statements: Kovia "contains same active ingredients as Accuzyme"12 or "contains same ingredients as Accuzyme;"13 Ziox "contains same active ingredients as Panafil"14 or "contains same ingredients as Panafil;"15 and both Kovia and Ziox are "quality economical alternatives" in promotional materials that also mention Accuzyme and Panafil, respectfully.16
This case began on or about July 28, 2000 when Healthpoint filed its original complaint seeking damages and preliminary and permanent injunctive relief against Stratus for unfair competition, dilution, and false advertising in violation of the Trademark Act of 1946, 15 U.S.C. §§ 1051, et seq., and for unfair competition, palming off, false advertising, misappropriation and dilution under Texas law.17 Healthpoint's third amended complaint, its "live" pleading in this case, alleges eight causes of action.18 Five of the causes of action allege: federal false designation of origin, false description and false representations of fact in violation of § 1125(a)(1)(B) of the Lanham Act; common law false advertising; federal unfair competition in violation of § 1125(a) of the Lanham Act; common law unfair competition; common law palming off. These causes of action are based on false representations that: Kovia and Ziox are "generic" to Accuzyme and Panafil; Kovia and Ziox can be substituted for prescriptions of Accuzyme and Panafil; Kovia and Ziox "deliver the same amount of active ingredient in the same time frame and have the same quality, strength, purity and stability as Healthpoint's debridement agents;" Kovia and Ziox "have undergone clinical testing to confirm that it is equivalent to" Healthpoint's two ointments; and Kovia contains "papain in sufficient quantities to debride" when not all of Kovia contains papain and some of Kovia contains "little or no papain." Additional causes of action allege: misappropriation "of Healthpoint's reputation and good will;" tortious interference "with the business of Healthpoint;" and civil conspiracy "to wrongfully and unfairly misappropriate Healthpoint's goodwill and business."19 Healthpoint demands a jury and requests, on certain of its claims as specified, damages, an accounting of profits, treble damages, punitive damages, a recall of Stratus' debridement products, attorney's fees, costs, prejudgment interest, and permanent and preliminary injunctive relief.20
On January 31, 2001, after initially contesting the Court's personal jurisdiction, Stratus consented to personal jurisdiction21 and filed a counterclaim alleging five causes of action alleging claims of: false advertising in violation of § 1125(a) of the Lanham Act in connection with allegedly false statements which Healthpoint made about Kovia that Kovia is "not an alternative" to Accuzyme, that Kovia is "inferior" and is "not safe," that "under federal law manufacturers must seek approval to market a generic drug by submitting data demonstrating that one drug product is therapeutically equivalent to the other," and that "the amount of papain in Kovia is an inefficient and ineffective quantity;" both false advertising and unfair competition in violation of § 1125 of the Lanham Act in connection with the alleged misbranding of Accuzyme; and common law claims of unfair competition, injurious falsehood and interference with prospective business relationships.22 Stratus requests damages, punitive damages, treble damages, an accounting of Healthpoint's profits, a recall of Healthpoint's debridement products, attorney's fees, costs, pre-judgment interest and preliminary and permanent injunctive relief on various of its claims.23
With respect to the requests for preliminary injunctive relief, Healthpoint filed a motion for preliminary injunction against Stratus on October 19, 2000,24 as supplemented.25 On November 14, 2000, Stratus filed its response and objection to the motion for preliminary injunction.26
On January 31 2001, the same day on which it consented to personal jurisdiction, Stratus filed its cross motion for preliminary injunction and brief in support.27 On April 18, 2001, after several unopposed extensions of time, Healthpoint filed its response to the motion for preliminary injunction.28
On February 27, 2001, both Healthpoint's motion for preliminary injunction and Stratus' cross motion for preliminary injunction were set for a hearing to begin on May 7, 2001.29 Beginning May 7, 2001 and ending on May 10, 2001 the Court held a consolidated evidentiary hearing on the two, cross motions for preliminary injunction.
At the beginning of the May 7 hearing, Healthpoint orally moved to expand the scope of its motion for preliminary injunction to include Ziox as well as Kovia and proffered that it would rely on the same legal arguments as already expressed in its legal briefs but requested permission to develop the record regarding claims made by Stratus in marketing Ziox. Healthpoint proffered that Stratus' representations about Ziox were very similar to the claims made about Kovia and often were made at the same time (given that both ointments concern wound care). Initially Stratus opposed the expansion of the hearing, arguing that it would be prejudiced by Healthpoint amending its motion at such a late date, but later offered that its witnesses on "FDA issues" who had been scheduled to testify at the May 7 hearing would cover "FDA issues" regarding both Kovia and Ziox. It was resolved that so long as Stratus could supplement the record with any Ziox-related issues, the hearing beginning May 7 would address Ziox as well as Kovia.30
Healthpoint called eight witnesses to testify in person at the May 7, 2001 hearing: Philip Johnson, Gerald Meyer, Gary G. Heyland, Charles R. Cervantes, M.D., Alberto Hoyo, Mr. J.R. Locey, Larry Anderson and Angela Davis. In addition, Healthpoint presented deposition excerpts of the testimony of Juan Carlos Billoch, Peggy Goodnight and Lawrence Allen Rheins, Ph.D.31
Stratus called two witnesses to testify in person at the May 7...
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