Johnson & Johnson v. Carter-Wallace, Inc.

• Decision Date: 25 September 1980
• Docket Number: D,No. 1253,CARTER-WALLAC,INC,1253
• Citation: 208 USPQ 169,631 F.2d 186
• Parties: JOHNSON & JOHNSON, Plaintiff-Appellant, v., Defendant-Appellee. ocket 80-7318.
• Court: U.S. Court of Appeals — Second Circuit

Page 186

631 F.2d 186

208 U.S.P.Q. 169

JOHNSON & JOHNSON, Plaintiff-Appellant, v. CARTER-WALLACE, INC., Defendant-Appellee.

No. 1253, Docket 80-7318.

United States Court of Appeals Second Circuit.

Argued June 12, 1980.

Decided Sept. 25, 1980.

Thomas C. Morrison, New York City (David F. Dobbins, Christine H. Miller, Frederick J. Baumann, Roger S. Fine, Patterson, Belknap, Webb & Tyler, New York City, of counsel), for plaintiff-appellant.

Stephen R. Lang, New York City (Paul J. Weiner, Robert S. Getman, Breed, Abbott & Morgan, New York City, of counsel), for defendant-appellee.

Before LUMBARD and MANSFIELD, Circuit Judges. ^*

MANSFIELD, Circuit Judge:

Johnson & Johnson ("Johnson"), manufacturer of Johnson's Baby Oil and Johnson's Baby Lotion, appeals from a judgment of the United States District Court for the Southern District of New York, entered by Judge Constance Baker Motley, dismissing at the end of the plaintiff's case during a non-jury trial its suit for injunctive relief brought under § 43(a) of the Lanham Act, ¹ Johnson's claim arises out of Carter's use of baby oil in NAIR and its advertising campaign regarding that inclusion. In 1977, Carter added baby oil to its NAIR lotion and initiated a successful advertising campaign emphasizing this fact. NAIR is sold in a pink plastic bottle with the word "NAIR" written in large, pink letters. A bright turquoise-blue banner, open at both ends, contains the words "with baby oil." In addition to its packaging of NAIR, Carter's television advertisements emphasize that NAIR contains baby oil. ²

15 U.S.C. § 1125(a), against Carter-Wallace ("Carter"), the manufacturer of NAIR, a leading depilatory product. Because we believe Johnson's showing on the required elements of its false advertising claim was sufficient to withstand a motion to dismiss, we reverse and remand for further proceedings.

Alleging (1) that Carter is making false claims for NAIR with baby oil and (2) that it is packaging and advertising NAIR so as to give consumers the false impression that NAIR is a Johnson & Johnson product, plaintiff filed the instant suit for injunctive relief under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and under New York's common law of unfair competition. Section 43(a) of the Lanham Act provides for two separate causes of action: one is for "false designation of origin," the other for a "false description or representation, including words or symbols tending falsely to describe or represent" the product. Johnson's false representation claim alleges that Carter's "NAIR with baby oil" campaign falsely represents to consumers that the baby oil in NAIR has moisturizing and softening effect on the skin of the user. While recognizing that Carter's advertising makes no explicit claims for its product, Johnson alleges that this claim is implicit in the manner in which NAIR has been marketed. It contends that these false claims have unfairly dissuaded consumers from using its products in favor of NAIR with baby oil.

Johnson's application for a temporary restraining order was denied by the district court, as was its motion for a preliminary injunction. The motion for a preliminary injunction was denied in a memorandum order dated August 15, 1979, D.C., 487 F.Supp. 740, in which the district court found that plaintiff had failed to make the requisite showing for either its false designation of origin claim or its false advertising claim.

The bench trial of the suit was conducted from March 31, 1980 to April 7, 1980. Pursuant to Rule 65(a) of the Federal Rules of Civil Procedure, the parties relied upon previous testimony and evidence presented at the preliminary injunction hearing. Although plaintiff offered no new evidence on its false designation of origin claim, it did present new testimony and evidence on the false advertising claim. At the close of plaintiff's case, the trial court granted defendant's motion to dismiss the action. Plaintiff appeals from the dismissal of its false advertising claim under § 43(a). The propriety of the dismissal of its false designation of origin claim is not raised on appeal.

In dismissing Johnson's false advertising claim, the trial court did not reach either

the question of whether Carter advertises or implies in its advertising that baby oil as an ingredient in NAIR has a moisturizing and softening effect, or the issue of whether such a claim is false. Instead, its dismissal was "granted on the ground that (Johnson) failed to carry its burden of proving damage or the likelihood of damage." Just what that burden is and what evidence will satisfy it, are the central issues in this appeal.

DISCUSSION

Prior to the enactment of § 43(a) of the Lanham Act, false advertising claims were governed by the common law of trade disparagement. Under the common law, liability was generally confined to "palming-off" cases where the deceit related to the origin of the product. Ely-Norris Safe Co. v. Mosler Safe Co., 7 F.2d 603 (2d Cir. 1925), revd. on other grounds, 273 U.S. 132, 47 S.Ct. 314, 71 L.Ed. 578 (1926); 2 McCarthy, Trademarks and Unfair Competition, § 27:1 at 242 (1973). In these cases the offending product was foisted upon an unwary consumer by deceiving him into the belief that he was buying the plaintiff's product (normally an item with a reputation for quality). Other instances of false advertising were safe from actions by competitors due to the difficulty of satisfying the requirement of proof of actual damage caused by the false claims. In an open market it is normally impossible to prove that a customer, who was induced by the defendant through the use of false claims to purchase the product, would have bought from the plaintiff if the defendant had been truthful.

The passage of § 43(a) represented a departure from the common law action for trade disparagement and from the need to prove actual damages as a prerequisite for injunctive relief. This departure marked the creation of a "new statutory tort" intended to secure a market-place free from deceitful marketing practices. L'Aiglon Apparel v. Lana Lobell, Inc., 214 F.2d 649, 651 (3d Cir. 1954); Bose Corp. v. Linear Design Labs, Inc., 467 F.2d 304, 311 (2d Cir. 1972). The new tort, as subsequently interpreted by the courts, differs from the common law action for trade disparagement in two important respects: (1) it does not require proof of intent to deceive, and (2) it entitles a broad range of commercial parties to relief. See, Alfred Dunhill Ltd. v. Interstate Cigar Co., Inc., 499 F.2d 232, 236 (2d Cir. 1974); L'Aiglon Apparel, supra, 214 F.2d at 651.

The broadening of the scope of liability results from a provision in § 43(a) allowing suit to be brought "by any person who believes that he is or is likely to be damaged by the use of any false description or representation." 15 U.S.C. § 1125(a). Whether this clause is viewed as a matter of standing to sue, see, Potato Chip Institute v. General Mills, 333 F.Supp. 173, 179 (D.Neb.1971), affd., 461 F.2d 1088 (8th Cir. 1972), or as an element of the substantive claim for relief, certain bounds are well established. On the one hand, despite the use of the word "believes," something more than a plaintiff's mere subjective belief that he is injured or likely to be damaged is required before he will be entitled even to injunctive relief. See, Chromium Industries v. Mirror Polishing & Plating, 448 F.Supp. 544, 554 (N.D.Ill.1978); D.M. Antique Import Corp. v. Royal Saxe Corp., 311 F.Supp. 1261, 1269 n. 6 (S.D.N.Y.1970). On the other hand, as the district court in this case recognized, a plaintiff seeking an injunction, as opposed to money damages, need not quantify the losses actually borne. What showing of damage in between those two extremes will satisfy the statute is the subject of the instant dispute.

Johnson claims, in effect, that once it is shown that the plaintiff's and the defendant's products compete in a relevant market and that the defendant's ads are false, a likelihood of damage sufficient to satisfy the statute should be presumed and an injunction should issue "as a matter of course." ³ The district court, in contrast drew the line as follows: "Of course, J&J (Johnson) need not quantify its injury in order to obtain injunctive relief. But J&J must at least prove the existence of some injury caused by Carter." The court had said that "J&J has failed to prove that its loss of sales was in any way caused by NAIR's allegedly false advertising."

Both the case law and the policy behind § 43(a) indicate that the district court's construction of the statute placed too high a burden on the plaintiff in this case. To require a plaintiff to "prove the existence of some injury caused by" the defendant, is to demand proof of actual loss and specific evidence of causation. Perhaps a competitor in an open market could meet this standard with proof short of quantified sales loss, but it is not required to do so. The statute demands only proof providing a reasonable basis for the belief that the plaintiff is likely to be damaged as a result of the false advertising. The correct standard is whether it is likely that Carter's advertising has caused or will cause a loss of Johnson sales, not whether Johnson has come forward with specific evidence that Carter's ads actually resulted in some definite loss of sales. Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 649 (3d Cir. 1958); Ames Publishing Co. v. Walker-Davis Publications, Inc., 372 F.Supp. 1, 13 (E.D.Pa.1974); 2 J.T. McCarthy, Trademarks and Unfair Competition § 27:5 at 249-50 (1973). Contrary to Johnson's argument, however, the likelihood of injury and causation will not be presumed, but must be demonstrated. If such a showing is made, the plaintiff will have established a reasonable belief that he is likely to be damaged within the meaning of § 43(a) and will be entitled to injunctive relief, as distinguished from damages, which would require more...