Ortho Pharmaceutical Corp. v. Cosprophar, Inc.

Decision Date10 August 1993
Docket NumberNo. 91 Civ. 3003 (CHT).,91 Civ. 3003 (CHT).
Citation828 F. Supp. 1114
PartiesORTHO PHARMACEUTICAL CORPORATION, Plaintiff, v. COSPROPHAR, INC., Defendant.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

Patterson, Belknap, Webb & Tyler, New York City (Thomas C. Morrison, Andrew D. Schau, David C. McIntyre, and Madonna M. Malin of Johnson & Johnson, of counsel), for plaintiff.

Piper & Marbury, New York City (I. Scott Bass, Alfred Ferrer III and Diane C. McEnroe, of counsel), for defendant.

OPINION and ORDER

TENNEY, District Judge:

Plaintiff Ortho Pharmaceutical Corporation ("Ortho"), a Delaware corporation and wholly owned subsidiary of Johnson and Johnson, Inc., brought this suit in 1991 alleging false description and representation of goods in interstate commerce pursuant to section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1993) and sections 349 and 350 of the New York General Business Law (McKinney 1988). Defendant Cosprophar, Inc., ("Cosprophar") is an Italian-based corporation organized under the laws of New York and doing business within this country under the name Korff USA ("Korff"). Cosprophar manufactures and distributes lines of cosmetics under the name ANTI-AGE. Ortho seeks a permanent injunction to prevent Cosprophar from advertising that the ANTI-AGE products contain retinol, that they are effective in diminishing wrinkles or other effects of photoaging, and that they have been proven effective by scientific evidence. Ortho further seeks an order requiring Cosprophar to disseminate corrective advertising, to recall the ANTI-AGE products and consumer brochures, and to pay attorneys' fees pursuant to Section 35 of the Lanham Act, 15 U.S.C. § 1117(a) (1993). At the close of plaintiff's case in a bench trial in December 1992, Cosprophar moved for dismissal of plaintiff's claims, arguing that Ortho had failed to establish either that they had standing or that the statements made in Cosprophar's advertising are false. The court reserved decision. For the reasons given below, the relief requested by Ortho is denied because this court concludes that the plaintiff has not established the elements of standing required by the Lanham Act. The court also dismisses Ortho's state law claims as Ortho failed to show that defendant's advertising mislead consumers.

BACKGROUND

Some basic chemical nomenclature is a prerequisite to understanding several issues in the case. Vitamin A is necessary for the growth, development, and maintenance of the skin. All of the chemical isomers and metabolites of Vitamin A are known by the generic term "retinoid." The naturally occurring form of Vitamin A is "retinol," also known as Vitamin A acid.1 When retinol is esterified with either palmitic acid or acetic acid, it forms "retinyl palmitate" or "retinyl acetate," respectively. These esters are classified by the Food and Drug Administration ("FDA") as "cosmetic" ingredients, and are considered safe and non-irritating in concentrations of up to 1%.

Cosprophar manufactures cosmetics.2 Many of its products contain either retinyl palmitate or retinyl acetate.3 Ortho manufactures drugs, including the prescription medication RETIN-A which contains tretinoin, a retinoid that the FDA classifies as a drug.4 Ortho sells RETIN-A in a variety of formulations in which the strength of the tretinoin ranges between .01% and .1%. Tretinoin is approved by the FDA only for the treatment of acne. Although Ortho may not promote or encourage use of the drug for purposes other than those on the FDA-approved labeling, physicians may lawfully prescribe RETIN-A for "off-label" purposes.5

In January 1988, an article appeared in the Journal of the American Medical Association ("JAMA") that advocated the use of tretinoin for the treatment of photodamaged skin.6 Jonathan S. Weiss et al., Tropical Tretinoin Improves Photodamaged Skin, 259 JAMA 527-32 (1988). The JAMA article and subsequent articles verifying the study upon which the initial article was based received widespread media attention. One result of the publicity was that "off-label" prescriptions for RETIN-A increased. A second result was that Ortho began developing a product called RENOVA, which is identical to RETIN-A .05% concentration, except that its vehicle cream is formulated with different inactive ingredients. Ortho has sought FDA approval of RENOVA as a drug prescribed for the treatment of photoaged skin.

Also in 1988, Cosprophar introduced its ANTI-AGE RETARD line of products to the United States market. Cosprophar later introduced additional lines of varying "power" including ANTI-AGE SUPER (in 1990), ANTI-AGE SPECIAL (in 1991), ANTI-AGE "LIPOSOME" (in 1991) and ANTI-AGE SUPER LIPOSOME (in 1991). Cosprophar also has a line of makeup called ANTI-AGE COLOUR. Cosprophar has created a variety of products for sale within each line, and further divided each line into age-related sub-categories.7 Thus, this lawsuit concerns 117 products listed within several different product lines.

The retail prices of the various products depend on the individual product and the target group, with products targeting older women costing more within each line. For example, in the ANTI-AGE RETARD 25 to 35 line, a 5-ounce container of "Milk Cleanser" or "Toner" sells for $23.00, whereas the same product costs $32.00 in the ANTI-AGE RETARD 55 and Over line. Similarly, a 1.6 ounce container of ANTI-AGE RETARD 55 and Over "Repair Complex" costs $110.00, while a 1.6 ounce container of ANTI-AGE "LIPOSOME" 45 to 55 "Repair Complex" costs $410.00 and a 1.6 ounce container of ANTI-AGE "LIPOSOME" 55 and Over "Repair Complex" costs $440.00. Plaintiff's Exhibit 97. These latter two products are among the most expensive cosmetics sold in this country.

Cosprophar has developed the marketing approach of selling its cosmetics solely through pharmacies. It advertises and promotes its products through newspaper and magazine "advertorials"8 in publications such as The New York Times, Cosmopolitan, and Vogue. Cosprophar also distributes product bulletins to consumers at retail pharmacies. Cosprophar does not employ a retail sales staff, but provides training to the pharmacies' sales staffs; it also provides them with product bulletins that contain technical and marketing information.

Several of Cosprophar's ads associated their products to "retinol" or claimed that the products contained "Super retinol." The ads indicated that the primary difference between the Cosprophar products and those based on tretinoin is that the former had no side effects. Frequently, the ads referred to scientific testing that had shown the efficacy of the Cosprophar products in the "war on wrinkles." Evidence of the products' success was said to come from the tests of Professor Puschmann of the Hamburg Clinic of Experimental Dermatology, in Germany, who found that the products "visibly reduced the number and depth of wrinkles" in tests "carried out ... on men and women between 22 and 43 years old."

Cosprophar, in fact, had three studies performed involving Dr. Puschmann. The studies were conducted at the Alfred-Marchionini-Institute ("AMI") in Reinbeck, Germany, a contract research facility partially owned by Dr. Puschmann. Cosprophar also had its products tested by AMA Laboratories, Inc., in New City, New York and by the Xienta Institute for Skin Research in Pennsylvania. Cosprophar also tried to have the psychological effects of its products measured by having a New York psychologist study the response to questions about self-image asked of twenty-six women using either ANTI-AGE SUPER or NIVEA cream. Ortho and Cosprophar heatedly dispute what the results of these tests mean, as well as the validity of the tests themselves.

DISCUSSION
I. POST-TRIAL EVIDENTIARY SUBMISSIONS

Along with their voluminous post-trial briefs and proposed findings of fact, both parties have submitted additional evidence for the court's consideration. Ortho seeks to introduce three market research surveys that this court rejected at trial. Cosprophar seeks to introduce advertising of certain skin care products by other cosmetic companies that purport to have "anti-age" qualities. The court accepts neither submission.

A. Ortho's Market Surveys

At trial, Ortho offered three surveys which it had commissioned. Plaintiff's premarked exhibits are Exhibit 8, a report dated May 13, 1988 and entitled "Update on Physicians Usage of and Attitudes toward RETIN-A"; Exhibit 9, a report dated June 13, 1988 and entitled "RETIN-A Consumer Awareness and Usage Telephone Survey"; and Exhibit 10, a report dated April 16, 1990 and entitled "RETIN-A Consumer Awareness and Usage Study." Plaintiff claims that the surveys "corroborate the testimony and the evidence from the print and news media regarding the overwhelming consumer awareness of RETIN-A's use for the treatment of photo-aged skin." Plaintiff's Memorandum of Law in Support of the Admissibility of Its Market Surveys at 2. Ortho attempted to introduce these items during the direct examination of Alfred Altomari, the director of consumer marketing for the dermatological division of Ortho. The court ruled the surveys were inadmissible because they were hearsay not falling within any exception under Federal Rule of Evidence 803. Trial Transcript ("Tr.") 396-416. Ortho urges again that the surveys are admissible because they fall within the business records exception of Rule 803(6). Ortho also argues that these types of surveys are routinely admitted in Lanham Act litigation.

1. Rule 803(6)

The relevant portion of Rule 803(6) provides:

The following are not excluded by the hearsay rule, even though the declarant is available as a witness:
(6) Records of regularly conducted activity. A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a
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