Ives Laboratories, Inc. v. Darby Drug Co., Inc.

• Citation: 601 F.2d 631,202 U.S.P.Q. 548
• Decision Date: 11 June 1979
• Docket Number: No. 529,D,529
• Parties: IVES LABORATORIES, INC., Plaintiff-Appellant, v. DARBY DRUG CO., INC., Inwood Laboratories Incorporated, Lowitt Labs., Inc., MD Pharmaceutical Company, Inc., Premo Pharmaceutical Laboratories, Inc., Rugby Laboratories, Inc., and Sherry Pharmaceutical Co., Inc., Defendants-Appellees. ocket 78-7454.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 631

601 F.2d 631

202 U.S.P.Q. 548

IVES LABORATORIES, INC., Plaintiff-Appellant, v. DARBY DRUG CO., INC., Inwood Laboratories Incorporated Lowitt Labs., Inc., MD Pharmaceutical Company, Inc., Premo Pharmaceutical Laboratories, Inc., Rugby Laboratories, Inc. and Sherry Pharmaceutical Co., Inc., Defendants-Appellees.

No. 529, Docket 78-7454.

United States Court of Appeals Second Circuit.

Argued May 2, 1979.

Decided June 11, 1979.

Marie V. Driscoll, New York City (Rogers, Hoge & Hills, New York City, William F. Weigel, Charles J. Raubicheck, Egon E. Berg, and Steven Baron, New York City, of counsel), for plaintiff-appellant, Ives Laboratories, Inc.

Robert V. Marrow, New York City (Salon, Bloustein & Raybin, Leon Salon, and Lauren Friedman, New York City, of counsel), for defendants-appellees, Darby Drug Co., Inc., MD Pharmaceutical Co., Inc., Rugby Laboratories, Inc., and Sherry Pharmaceutical Co., Inc.

Sheldon S. Lustigman, New York City (Bass, Ullman & Lustigman, New York City), for defendant-appellee, Inwood Laboratories Inc.

Peter T. Cobrin, New York City (Kirschstein, Kirschstein, Ottinger & Cobrin, P.C., New York City, David B. Kirschstein, New York City, of counsel), for defendant-appellee, Premo Pharmaceutical Laboratories, Inc.

John H. Shenefield, Asst. Atty. Gen., U. S. Dept. of Justice, Washington, D.C., Barry Grossman, Roger B. Andewelt, Robert J. Wiggers, and Andrew L. Pringle, Attys., Dept. of Justice, Washington, D.C., of counsel), for the United States as amicus curiae.

Before FRIENDLY and MULLIGAN, Circuit Judges, and GAGLIARDI, District Judge. ^*

FRIENDLY, Circuit Judge:

This appeal from an order of the District Court for the Eastern District of New York denying a motion of plaintiff, Ives Laboratories, Inc., for a preliminary injunction, 455 F.Supp. 939 (1978), raises interesting questions of the application of Sears, Roebuck & Co. v. Stiffel Company, 376 U.S. 225, 84 S.Ct. 784, 11 L.Ed.2d 661 (1964) and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 84 S.Ct. 779, 11 L.Ed.2d 669 (1964), to the imitation of a peripheral vasodilator, dispensed only on a physician's prescription, once covered by a patent now expired and still covered by a registered trademark "Cyclospasmol". Although we find the case more difficult than did the district judge, we affirm the denial of a temporary injunction as within the discretion accorded to him.

I.

Plaintiff Ives Laboratories, Inc. (Ives) manufactures and sells Cyclospasmol to wholesalers, retail pharmacists, and hospitals. The drug, a powder whose generic name is cyclandelate, is sold in two kinds of labeled packages. One type of package is filled with pale blue capsules imprinted "Ives 4124", each containing a dosage of 200 mg. The other is filled with red-and-blue capsules imprinted "Ives 4148", each containing a dosage of 400 mg. The blue capsule had been used during the life of the patent; the blue-and-red capsule was introduced after its expiration.

Ives directs its advertising not to the consumer but to prescribing physicians and to pharmacists in hospitals and elsewhere. Until April 26, 1972, when the patent expired, the primary object of the advertising (which included the large-scale distribution of "starter" samples) was to convince the physician of the superiority of Cyclospasmol over other vasodilators; since then the advertising has had the additional objective of persuading the physician to specify Cyclospasmol rather than writing prescriptions which can be filled with competing cyclandelate preparations. The latter objective has assumed increased importance because of the enactment of "generic drug laws" by many states. ¹

Defendants Premo Pharmaceutical Laboratories, Inc. (Premo), Inwood Laboratories, Incorporated (Inwood), and MD Pharmaceutical Company, Inc. (MD), (collectively the manufacturers), purchase empty capsules which they fill with the cyclandelate powder and sell the capsules to wholesalers, hospitals, retail pharmacies and others. Premo and Inwood manufacture and sell both 200 mg. and 400 mg. capsules in colors essentially identical to Ives'; MD has done the same with 200 mg. capsules. Until shortly before the district court's decision, none imprinted any mark on their capsules; on June 26, 1978, Premo filed an affidavit stating that in the future it would imprint "Premo" on all its capsules. Three other defendants, Darby Drug Co., Inc. (Darby); Rugby Laboratories, Inc. (Rugby); and Sherry Pharmaceutical Co., Inc. (Sherry), (collectively "the wholesalers") purchase capsules of the sort described and resell them to other wholesalers, doctors, pharmacies and others. Both categories of defendants promote the generic product as "comparable" or "similar" or "equivalent" to Cyclospasmol; in some catalogs they refer to the color of the capsules. ² Defendants' advertising, like plaintiff's, is directed to physicians, pharmacists, and other intermediaries, and not to the ultimate consumer. Ives conceded for the purpose of the temporary injunction motion that the cyclandelate used by defendants had the same therapeutic properties as that used in Cyclospasmol.

The complaint claimed that defendants' use of capsules having the same color or colors as those previously adopted by Ives violated its rights in three ways:

(1) as contributory infringements in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114, in that the similarity encouraged retail druggists to use Ives' mark "Cyclospasmol" in selling capsules not manufactured by it;

(2) as "a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent" the goods sold by defendants in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); ³

(3) as unfair competition under New York common and statutory law, N.Y. General Business Law § 368-d.

In a considered opinion, 455 F.Supp. 939, Judge Nickerson found that there was no sufficient evidence that defendants had been encouraging, as distinguished from merely facilitating, druggists in using Ives' mark in prescriptions filled with generic cyclandelate, and that the other claims were probably invalid, either because of the "general" law of trademarks and unfair competition or as contravening Sears and Compco. In his view, therefore, "none of plaintiff's contentions has sufficient merit to warrant issuance of a preliminary injunction." Id. at 952. ⁴

Ives' complaint related to a wide spectrum of acts. In a state with a generic drug law like New York's these range from the most serious case, where the physician has specified Cyclospasmol and the druggist has filled the prescription with the generic product but has labeled it "Cyclospasmol" admittedly actionable against the druggist to the most innocent one, where the physician has permitted substitution and the druggist has filled the prescription with capsules of the competing manufacturer and so labeled the package. Intermediate cases are where the prescription requires Cyclospasmol and the druggist substitutes a product of the defendants naming it or not, and where the prescription permits substitution and the druggist fills it with defendant's product but names it Cyclospasmol (again clearly actionable against the druggist) or gives no name at all. ⁵ Similar variations can occur in other states with or without generic drug laws.

II.

It will be useful to discuss at the outset plaintiff's claim of contributory infringement in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114. The judge was right in concluding that the protection conferred by that section is narrower than that afforded by § 43(a), 15 U.S.C. § 1125(a), in that the former relates only to infringement of the trademark itself and thus would apply only to cases where Ives' mark or a confusingly similar one had been used. We fear, however, that his approach to the issue may have been unduly narrow. He referred to "the knowing and deliberate instigation of such a practice", 455 F.Supp. at 945, and said that before "passage of the Lanham Act the doctrine of contributory trademark infringement went no further than to hold one who actively shared a retailer's infringement, as in the case, for example, of one who places the infringing label on the articles before delivering them to the retailer." Id. at 946, citing cases. While such cases would surely constitute contributory infringement, they do not mark the limits of the doctrine. The authorities later reviewed indicate to us that a manufacturer or wholesaler would be liable under § 32 if he suggested, even if only by implication, that a retailer fill a bottle with the generic capsules and apply Ives' mark to the label, or continued to sell capsules containing the generic drug which facilitated this to a druggist whom he knew or had reason to know was engaging in the practices just described. The proper criteria are stated in Coca-Cola Co. v. Snow Crest Beverages, Inc., 64 F.Supp. 980, 989 (D.Mass.1946) (Wyzanski, J.), affd., 162 F.2d 280 (1 Cir.), Cert. denied, 332 U.S. 809, 68 S.Ct. 110, 92 L.Ed. 386 (1947). As will be shown below, nothing in Sears or Compco allows such practices. If the judge considered a narrower view of the doctrine of contributory infringement to be warranted because mislabeling by a New York pharmacist "would put him at risk of criminal and civil penalties and would subject him to the loss of his license" and thought that defendants would be liable for contributory infringement only if they could be held "as accessories to the crime", 455 F.Supp. at 945-46, he was in error. New York's provision of additional sanctions for confusing consumers by infringement of a trademark cannot limit the rights bestowed by federal law. However, the court was justified in concluding that Ives failed to adduce the quantum of proof necessary to require issuance of a temporary injunction for contributory infringement even on what we deem the proper standard...