Norwich Pharmacal Company v. Sterling Drug, Inc.

• Citation: 271 F.2d 569
• Decision Date: 09 November 1959
• Docket Number: No. 290,Docket 25488.,290
• Parties: NORWICH PHARMACAL COMPANY, Plaintiff-Appellee, v. STERLING DRUG, INC., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

271 F.2d 569 (1959)

NORWICH PHARMACAL COMPANY, Plaintiff-Appellee, v. STERLING DRUG, INC., Defendant-Appellant.

No. 290, Docket 25488.

United States Court of Appeals Second Circuit.

Argued May 13, 1959.

Decided November 9, 1959.

Lewis C. Ryan, Syracuse, N. Y. (Hancock, Dorr, Ryan & Shove, Philip T. Seymour, Syracuse, N. Y., Paul R. Dohl, Norwich, N. Y., George A. Elber, New York City, Charles W. Shorter, Syracuse, N. Y., on the brief), for plaintiff-appellee.

John T. Cahill, New York City (Cahill, Gordon, Reindel & Ohl, New York City, Kernan & Kernan, Utica, N. Y., James A. Fowler, Jr., David Rasch, New York City, James S. Kernan, Jr., Utica, N. Y., Raymond L. Falls, Jr., New York City, on the brief), for defendant-appellant.

Before SWAN, HINCKS and MOORE, Circuit Judges.

MOORE, Circuit Judge.

Plaintiff, a New York corporation, and defendant, a Delaware corporation, both engage in the manufacture of drugs and pharmaceutical products. For several years, plaintiff has marketed a pink liquid preparation, "Pepto-Bismol," designed to remedy minor stomach disorders. With the aid of extensive advertising, the sales of Pepto-Bismol have steadily increased; by 1955 plaintiff's product was nationally recognized and was undoubtedly the leader in the field of stomach assuagement. Defendant in 1955 introduced a comparable proprietary medicine, "Pepsamar," which was virtually identical to Pepto-Bismol as regards chemistry, color and flavor but dissimilar as regards container and label. The evidence indicates that defendant's decision to manufacture Pepsamar was prompted in part by retaliatory as well as competitive motives,¹ that defendant previously investigated plaintiff's sales and advertising techniques, and that the pink color was emphasized in the advertising of Pepsamar.

Upon the theory that secondary meaning is no longer required in New York² to sustain a finding of unfair competition and the fact that pink is a nonfunctional attribute of plaintiff's product which defendant intentionally copied, the court below^* permanently enjoined defendant from simulating the pink color of Pepto-Bismol in its product Pepsamar and manufacturing and selling such a product. This injunctive direction was immediately qualified by a proviso that it should not apply so long as the pink Pepsamar were sold in blue bottles or bottles of any other color which would "effectively conceal the pink color of the Pepsamar contained therein." Defendant was also enjoined "from describing its Pepsamar as pink in color, by words or illustrations, in any advertising of Pepsamar or any promotional material * * *." From this judgment defendant appeals.

Distaste for sharp or unethical business practices has often caused the courts to lose sight of the fundamental consideration in the law of unfair competition — protection of the public.³ Added to this standard is a developing body of law which pertains only to business conduct, namely, that a court of equity will restrain such practices as constitute palming off, actual deception or appropriation of another's property. Viewed against this background, misunderstanding as to the essential elements of an unfair competition cause of action may well be dissipated.

Consumer protection has been limited to the prevention of confusion, i. e., the customer should not mistake defendant's article for that of plaintiff or believe that it derives from the same source as plaintiff's goods. It is in such context that secondary meaning inheres, and when this special significance attaches in the public mind to the non-functional attributes of its wares, a plaintiff need further establish merely the likelihood of confusion — or a defendant may rebut the effect of secondary meaning by proving that confusion is unlikely. Restatement of Torts, Sec. 741 (1938), Lucien Lelong, Inc. v. Lander Co., 2 Cir., 1947, 164 F.2d 395.

In cases where the New York courts have occasionally granted relief without proof of secondary meaning, one of the aforementioned predatory practices was established: In Santa's Workshop, Inc. v. Sterling, 3d Dept. 1956, 2 A.D.2d 262, 153 N.Y.S.2d 839, it was palming off; in Oneida, Ltd. v. National Silver Co., Sup.Ct.Madison Co.1940, 25 N.Y.S.2d 271 and Avon Periodicals v. Ziff-Davis Publishing Co., 1st Dept. 1953, 282 App.Div. 200, 122 N.Y.S.2d 92, it was actual deception; in Dior v. Milton, Sup.Ct.N.Y.Co.1956, 9 Misc.2d 425, 155 N.Y.S.2d 443, affirmed 1st Dept. 1956, 2 A.D.2d 878, 156 N.Y.S.2d 996, and Metropolitan Opera Ass'n v. Wagner-Nichols Record Corp., Sup.Ct.N.Y. Co.1950, 199 Misc. 786, 101 N.Y.S.2d 483, affirmed 1st Dept. 1951, 279 App. Div. 632, 107 N.Y.S.2d 795, it was violation of plaintiff's property rights.⁴ The federal decisions fall into the same pattern: Artype, Incorporated v. Zappulla, 2 Cir., 1956, 228 F.2d 695, and Flint Co. v. Oleet Jewelry Manufacturing Co., D.C.S.D.N.Y.1955, 133 F.Supp. 459 (actual deception); Upjohn Company v. Schwartz, 2 Cir., 1957, 246 F.2d 254 (palming off); International News Service v. Associated Press, 1918, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (appropriation of property rights). Hence, the first comer may prevail if he proves secondary meaning plus likelihood of confusion on the one hand or that the second comer has indulged in one of the proscribed practices which equity will enjoin, on the other. The facts here neatly illustrate application of this rule.

Plaintiff, while correctly asserting that proof of secondary meaning is not always a prerequisite to securing relief, must fit its case into one of the remaining categories. This it fails to do. There is no evidence of an attempt or intent to pass off Pepsamar as Pepto-Bismol or to divert plaintiff's customers by means of deception. Defendant's finished product is quite dissimilar from that of plaintiff, not only in most of the details, e. g., shape of the bottle, color of the label and appearance of the cap, but also in the overall effect upon the observer.⁵ To the prospective purchaser the names on both bottles are in type large enough to be distinguished at a reading distance of over twenty feet. The label covers most of the bottle. Pepto-Bismol's label is yellow with large red letters; Pepsamar's is white with even larger blue letters. Indeed, it stretches credulity to imagine a purchaser confusing these disparate articles. Moreover, the essential distinction in this area of the law, overlooked by the court below, is the difference between a deliberate attempt to deceive and a deliberate attempt to compete. Absent confusion, imitation of certain successful features in another's product is not unlawful and to that extent a "free ride" is permitted. Charles D. Briddell, Inc. v. Alglobe Trading Corporation, 2 Cir., 1952, 194 F.2d 416.

Similarly, there is here no violation of plaintiff's property rights,⁶ notwithstanding the fact that defendant investigated and presumably utilized some of the Pepto-Bismol marketing techniques. Such skills cannot be cornered; the competitor must only refrain from using them in such a way that the public is misled. To say that it is unethical for defendant to emphasize pink in its advertising merely begs the question, viz., can the color pink be monopolized in connection with an upset stomach remedy? That a color may become someone's exclusive property as a perpetual monopoly in connection with a specific product has been rejected by the courts throughout the years (Upjohn Company v. Schwartz, supra, note 5; Campbell Soup Co. v. Armour & Company, 3 Cir., 1949, 175 F.2d 795, certiorari denied 1949, 338 U.S. 847, 70 S.Ct. 88, 94 L.Ed. 518; Doeskin Products, Inc. v. Levinson, D.C.S.D.N.Y. 1955, 132 F.Supp. 180; Radio Corporation of America v. Decca Records, Inc., D.C.S.D.N.Y.1945, 51 F.Supp. 493; 3 Callman, Unfair Competition and Trade-Marks, p. 1105 (2nd Ed.1950)).

Despite the fact that the trial court found "that the pink color has no functional value as the word is commonly used and understood," this conclusory finding rests upon too narrow a foundation. The function of a remedy "For Upset Stomach" is to quiet the upset. Hence, although the court found "that the pink color and the ingredients producing same have no healing value in themselves," yet it recognized that the pink color was "designed to present a pleasing appearance to the customer and to the sufferer." From the court's premise that "a disordered stomach will accept that which is pleasing and reject that which is repulsive," a finding of functional value might well be made because a rejected stomach medicine scarcely has a fair opportunity to fulfill its function. See Columbus Plastic Products v. Rona Plastic Corp., D.C.S.D. N.Y.1953, 111 F.Supp....