Ortho Pharmaceutical Corp. v. Cosprophar, Inc.
| Decision Date | 12 August 1994 |
| Docket Number | No. 1137,D,1137 |
| Citation | 32 F.3d 690 |
| Parties | 1994-2 Trade Cases P 70,683 ORTHO PHARMACEUTICAL CORPORATION, Plaintiff-Appellant, v. COSPROPHAR, INC., Defendant-Appellee. ocket 93-7936. |
| Court | U.S. Court of Appeals — Second Circuit |
Thomas C. Morrison, New York City (Andrew D. Schau, Patterson, Belknap, Webb & Tyler, Madonna M. Malin, Johnson & Johnson, of counsel), for plaintiff-appellant.
Stuart A. Smith, New York City (I. Scott Bass, Piper & Marbury, Alfred Ferrer III, Diane C. McEnroe, of counsel), for defendant-appellee.
Before: MAHONEY, WALKER, and SPROUSE, * Circuit Judges.
This appeal arises from a suit brought by Ortho Pharmaceutical Corporation ("Ortho"), the manufacturer of two products effective for treating skin aged by exposure to the sun, seeking to enjoin Cosprophar, Inc.
("Cosprophar") from advertising that its cosmetics have an "anti-aging effect" or are otherwise effective at diminishing wrinkles and other signs of sun damage. Ortho appeals from a judgment of the United States District Court for the Southern District of New York (Charles H. Tenney, Judge ), entered after a bench trial, dismissing Ortho's complaint on the basis that Ortho failed to establish standing under Sec. 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a) (1993), and failed to show that Cosprophar's advertising misled consumers and therefore violated Secs. 349 and 350 of the New York General Business Law. Ortho Pharmaceutical Corp. v. Cosprophar, Inc., 828 F.Supp. 1114 (S.D.N.Y.1993). This appeal requires us to decide what evidence a plaintiff suing under Sec. 43(a) of the Lanham Act must submit to demonstrate that its interests were or will likely be damaged by another business's allegedly false or misleading advertising. We hold that since Ortho's products are not obviously in competition with Cosprophar's, Ortho was required to submit proof demonstrating that consumers view Cosprophar's cosmetics as a comparable substitute for Ortho's drugs. Because Ortho failed to do so, and because Ortho failed to submit sufficient proof on its state law claims, we affirm the judgment of the district court.
Ortho is an American corporation that manufactures prescription drugs. One of its products is RETIN-A, which contains tretinoin, also known as transretinoic acid, a chemical form of Vitamin A. The Food and Drug Administration ("FDA") classifies RETIN-A as a drug and has approved it only for the treatment of acne. The Federal Food, Drug, and Cosmetic Act's definition of the term "drug" includes "articles (other than food) intended to affect the structure or any function of the body...." 21 U.S.C. Sec. 321(g)(1)(C).
In January 1988, an article was published in the Journal of the American Medical Association ("JAMA") recommending tretinoin for the treatment of photodamaged skin. Photodamage refers to the changes caused in an individual's skin as a result of exposure to the sun. It is characterized by wrinkling, sallowness of color, increased coarseness, and irregular pigmentation. Photodamage is sometimes called "photoaging," to be distinguished from "intrinsic aging" which is the inevitable aging process that occurs over time in accordance with a person's genetic characteristics. The 1988 JAMA article sparked widespread media coverage in daily newspapers and news magazines and was the subject of a feature story on network television the day it was published.
In the wake of the publicity surrounding tretinoin, prescriptions for RETIN-A increased dramatically. Sales of the product increased from $40 million in 1987 to $100 million in 1988. Because the FDA has not approved RETIN-A for the treatment of photodamaged skin, Ortho is barred by law from promoting it for this purpose. See 21 U.S.C. Secs. 321(m), 331(a), 331(l ), 352(a), and 355(a). Nonetheless, the FDA permits doctors to prescribe drugs for "off-label" uses. Ortho estimates that approximately 45% of its current RETIN-A sales are attributable to public demand for the drug as an answer to photoaging.
In addition to its off-label sales of RETIN-A, Ortho has developed a new tretinoin-based drug, RENOVA, aimed specifically at treating sun-damaged skin. Ortho has spent $75 million on research and development of RENOVA and another $25 million on developing marketing support for it. Ortho currently is awaiting FDA action on its New Drug Application submitted in 1989 seeking approval of RENOVA as a drug safe and effective for the treatment of photodamaged skin.
In 1988, Cosprophar, an Italian-based corporation organized under the laws of New York, began distributing a new line of cosmetics to the United States market under the name ANTI-AGE RETARD. Cosprophar subsequently introduced several related lines of cosmetics, bearing the names ANTI-AGE HYDRATE, ANTI-AGE RETARD LIPOSOME, ANTI-AGE SUPER, ANTI-AGE SUPER LIPOSOME, ANTI-AGE SPECIAL, and ANTI-AGE COLOUR. Each line includes several products, the prices of which range from $23 to $440.
Many of Cosprophar's products contain retinyl acetate or retinyl palmitate. The first of these is a combination of retinol, which is the naturally occurring form of Vitamin A, and acetic acid. The latter is a combination of retinol and palmitic acid. These chemical combinations are classified by the FDA as "cosmetic" ingredients. The Federal Food, Drug, and Cosmetic Act defines the term "cosmetic" as "articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance...." 21 U.S.C. Sec. 321(i)(1).
Cosprophar's cosmetics were introduced into the United States market by a series of advertisements discussing the recent publicity surrounding transretinoic acid and its usefulness in treating photodamaged skin. The advertisements stated that the ANTI-AGE cosmetics contain "retinol," a chemical which "belongs to the same family" as transretinoic acid and is similarly "effective[ ] in reducing wrinkles." They also indicated that the main distinction between retinol and transretinoic acid is that "[r]etinol is used as a cosmetic, whereas transretinoic acid is used as a drug and can cause reddening and irritation." As proof of the cosmetics' efficacy, the advertisements referred to studies by a Professor Puschmann of the Hamburg Clinic of Experimental Dermatology in Germany which demonstrated that Cosprophar's cosmetics "visibly reduced the number and depth of wrinkles" in tests "carried out ... on men and women between 22 and 43 years old."
Cosprophar styled its advertisements as "advertorials," which are newspaper and magazine advertisements that are formatted in the same style as news articles and are placed adjacent to news items. As the district court noted, the advertorial format was designed "to enhance the seriousness and credibility of [Cosprophar's] advertising." 828 F.Supp. at 1118 n. 8. In line with this marketing scheme, Cosprophar sold its products only through pharmacies. Instead of deploying its own retail staff, Cosprophar trained the sales staff of the pharmacies about its products and also provided them with product bulletins containing technical and marketing information.
In 1991, Ortho brought this suit alleging two claims under Sec. 43(a) of the Lanham Act and two claims under Secs. 349 and 350 of the New York General Business Law. As relief, Ortho sought an injunction barring Cosprophar from selling cosmetics under any of the ANTI-AGE names and from distributing advertisements stating that the ANTI-AGE products (1) contain retinol or "super retinol," (2) have an "anti-aging effect," (3) are effective for diminishing wrinkles or other effects of photoaging, and (4) have been proven reliable by scientific evidence for diminishing wrinkles or other effects of photoaging.
The case proceeded to a one-week bench trial before Judge Tenney. At the close of Ortho's case, Cosprophar moved to dismiss on the basis that Ortho did not have standing under the Lanham Act and did not demonstrate that Cosprophar's advertising was materially misleading as required under the state law claims. The district court reserved decision. After receiving post-trial briefs, Judge Tenney issued an opinion denying Ortho's request for an injunction and dismissing its complaint. On the Lanham Act claims, Judge Tenney ruled that Ortho lacked standing because it failed to establish (a) that it had a protectable interest in either its off-label sales of RETIN-A or its future sales of RENOVA, and (b) that Cosprophar's advertising was causing or would likely cause it injury. On the state law claims, Judge Tenney ruled that Ortho failed to show that Cosprophar's advertising was materially misleading to consumers. This appeal followed.
In reviewing a judgment entered after a bench trial, we accept the district court's findings of fact unless they are clearly erroneous and review the district court's legal conclusions de novo. See A/S Dampskibsselskabet Torm v. Beaumont Oil Ltd., 927 F.2d 713, 716 (2d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 183, 116 L.Ed.2d 144 (1991); Fed.R.Civ.P. 52(a); accord Rent Stabilization Ass'n v. Dinkins, 5 F.3d 591, 594 (2d Cir.1993)
(discussing standard of review of dismissal for lack of standing).
Section 43(a) of the Lanham Act as amended provides in relevant part, that:
shall be...
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