Procter & Gamble Co. v. Chesebrough-Pond's Inc.

• Decision Date: 30 October 1984
• Docket Number: CHESEBROUGH-POND,240,D,Nos. 195,s. 195
• Citation: 747 F.2d 114
• Court: U.S. Court of Appeals — Second Circuit
• Parties: The PROCTER & GAMBLE COMPANY, Plaintiff-Appellee, Cross-Appellant, v.'S INC., Defendant-Appellant, Cross-Appellee.'S INC., Plaintiff-Appellant, Cross-Appellee, v. The PROCTER & GAMBLE COMPANY and Benton & Bowles, Inc., Defendants-Appellees, Cross-Appellants. ockets 84-7549, 84-7569.

Page 114

747 F.2d 114

224 U.S.P.Q. 344

The PROCTER & GAMBLE COMPANY, Plaintiff-Appellee, Cross-Appellant, v. CHESEBROUGH-POND'S INC., Defendant-Appellant, Cross-Appellee.

CHESEBROUGH-POND'S INC., Plaintiff-Appellant, Cross-Appellee, v. The PROCTER & GAMBLE COMPANY and Benton & Bowles, Inc.,

Defendants-Appellees, Cross-Appellants.

Nos. 195, 240, Dockets 84-7549, 84-7569.

United States Court of Appeals Second Circuit.

Argued Sept. 10, 1984.

Decided Oct. 30, 1984.

James R. Phelps, Washington, D.C. (Thomas J. Donegan, Jr., Hyman, Phelps & McNamara, P.C., Washington, D.C., Proskauer, Rose, Goetz & Mendelsohn, New York City, Arnold I. Friede, Greenwich, Conn., of counsel), for Chesebrough-Pond's Inc.

Harold P. Weinberger, New York City (Geoffrey M. Kalmus, Greg A. Danilow, Steven E. Greenbaum, Kramer, Levin, Nessen, Kamin & Frankel, New York City, Thomas R. Hillhouse, Cincinnati, Ohio, of counsel), for Procter & Gamble Co. and Benton & Bowles, Inc.

Before MANSFIELD, MESKILL and KEARSE, Circuit Judges.

MANSFIELD, Circuit Judge:

Comparative television advertising on a national scale by manufacturers claiming superiority for their products over competing brands has magnified the risk of competitive harm from false advertising and has led to the proliferation of suits by competitors alleging violations of Sec. 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a). See, e.g., Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312 (2d Cir.1982); Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272 (2d Cir.1981); American Home Products Corp. v. Johnson & Johnson, 577 F.2d 160 (2d Cir.1978). These consolidated appeals represent another example of efforts to use the courts as a means of policing this relatively new practice, raising issues as to the scope of the Lanham Act and the court's role in evaluating tests relied upon as support for claims of product superiority.

Each of two giants in the soap and toilet goods market, Chesebrough-Pond's Inc. ("Chesebrough") and The Procter & Gamble Company ("P & G"), appeals from an order of the Southern District of New York, 588 F.Supp. 1082, Gerard L. Goettel, Judge, denying preliminary relief in its action to enjoin the other from using alleged false claims of superiority or equality for its product. ¹ We affirm the denial of preliminary injunctive relief in both actions.

The products forming the basis of the two actions are widely advertised and distributed hand and body lotions, P & G's "New Wondra" and versions thereof ² and Chesebrough's "Vaseline Intensive Care Lotion" ("VICL") and variations of it. ³ Beginning in November 1983, P & G began advertising New Wondra on TV and in print as superior to other leading lotions in the therapeutic treatment of dry skin. The parties do not dispute that both New Wondra and VICL are "leading lotions." Indeed, judged by volume of domestic sales, VICL was the nation's most popular brand of hand and body lotion in 1983. P & G advertised, for instance, (1) that "New Wondra beats the leading Lotions"; (2) that it is "[b]etter than any top lotion"; (3) that it "relieves dry skin better than any leading lotion"; (4) that "[d]ermatologists proved it in clinical tests. New Wondra improves the condition of rough dry skin better"; and (5) that New Wondra "works better than any other leading lotion at turning rough dry hands soft and smooth." At about the same time, Chesebrough began to run television commercials and advertisements making a somewhat less extravagant claim that P & G's assertion of superiority. Chesebrough claimed parity for VICL, i.e., that it was equal in effectiveness to any other leading brand. According to the ads "[w]hen it comes to relieving dry skin, no leading lotion beats Vaseline Intensive Care Lotion" and "you can't buy better lotions to heal winter dry skin."

In support of its advertising claims, P & G relied on two large-scale clinical tests (SC-207 and SC-215). Both were "double-blind" tests in which each of several groups of individuals used a version of P & G's New Wondra or one of the leading skin lotions over a period of several weeks, with a dermatologist periodically grading the efficacy of the product on the subjects' dry skin. The products tested in the SC-207 study included Chesebrough's VICL and a slightly earlier version of P & G's New Wondra. Test SC-215 compared New Wondra with Chesebrough's "Extra Strength" VICL and "Vaseline Dermatology Formula Lotion," ("VDL") among other products. P & G used an "ad libitum" procedure in these tests, that is, the subjects were told to apply the test lotions to the skin as they customarily used skin lotions, in whatever quantity and locations of the body they preferred. P & G maintains that its tests led it to conclude that its New Wondra was superior to the competitors' products in improving skin condition. SC-207 revealed the difference in effectiveness between the earlier formula of New Wondra and VICL to be statistically significant. SC-215 documented a statistically significant difference between New Wondra and the Chesebrough lotions VICL Extra Strength and VDL, but this difference was evident only when the analysis was confined to data taken from a subgroup of those persons tested, i.e., only those subjects who had initially had rough skin. To reflect the results of this second test, P & G limited its claims of product superiority to those with "rough, dry skin."

When Chesebrough became aware of P & G's claims for the newest New Wondra formula, it did not abort its parity claims, but initiated its own tests to compare VICL with the reformulated New Wondra. Its two small-scale tests (involving 28 and 11 subjects, respectively) and one larger-scale clinical test (73 subjects) revealed no significant difference between the two lotions.

With the fat thus in the advertising world's fire, P & G brought its present action against Chesebrough in January 1984, claiming the latter's ads violated the Lanham Act and seeking preliminary injunctive relief against the Chesebrough advertisements. On the next day, Chesebrough countered by suing for similar injunctive relief against P & G's advertisements and joining P & G's advertising agency, Benton & Bowles, Inc., as a co-defendant. ⁴

There followed extensive hearings before Judge Goettel, which were devoted principally to evidence and expert testimony about the tests conducted by each manufacturer. Chesebrough attacked P & G's tests on the ground that, unlike Chesebrough's tests, they did not compare the currently advertised products at issue, New Wondra and VICL, but compared in one case an earlier version of New Wondra with VICL, and in the other instance, the current version of New Wondra with Chesebrough formulas claimed to be significantly different ("Extra Strength" VICL and VDL). P & G replied with evidence that the variations were not significant for purposes of the claims at issue. Chesebrough also attacked P & G's tests and results as unreliable and the product of highly questionable data manipulated to reach a pre-designed conclusion. P & G, on the other hand, challenged Chesebrough's tests as either too small to produce meaningful results or as "poorly designed, sloppily executed and improperly analyzed," pointing to such deficiencies as failure to use an articulated grading scale and employment of an erroneous and inappropriate statistical analysis.

The hearings were taken up with a "battle of the experts" on the appropriateness of the testing methodologies used by the parties to support their claims. Expert testimony, much of it conflicting, was adduced regarding the reliability and acceptance of the "ad libitum" procedure, the "parametric" system of statistical analysis, the use of a "one-tail" test (which seeks only to determine superiority) rather than a "two-tail" test (designed to discover whether one product is equal to or better than another), the separation out and reanalysis of a "subset" from the total body of statistical data derived from a study, and reliance upon subjective rather than purely objective scientific judgments.

Judge Goettel, after reviewing in detail the tests made by P & G and Chesebrough, concluded that, although P & G's tests were not worthless, they "were far from perfect and are subject to various infirmities." Chesebrough's tests, he found, were "more questionable than P & G's," but he noted that they had been used only to support a lesser claim of parity rather than a claim of superiority such as that asserted by P & G for New Wondra. Although some of the weaknesses in each party's tests and analytical methods were noted, none was found sufficiently significant to call for outright rejection of the test results. ⁵

Relying on our decision in Vidal Sassoon, Inc. v. Bristol-Myers Co., supra, the district court held that false statements in advertising regarding consumer test results or methodology are actionable when they would deceive a person as to a product's inherent quality or characteristics. However, after some asides on the subjects of good faith and the qualifications of the judiciary (as distinguished from the Federal Trade Commission) to evaluate such tests, Judge Goettel concluded that he could not determine whether each company's claim was true or false and that "neither party has shown a likelihood of success on the merits of its claim."

DISCUSSION

Upon an appeal from denial of injunctive relief sought under Sec. 43(a) of the Lanham Act the district court's decision may be reversed only upon a showing that it abused its discretion, which may occur when a court bases its decision on clearly erroneous findings of fact or on errors as to applicable law. See Coca-Cola v. Tropicana Products, Inc., supra, 690 F.2d at 315 (2d Cir.1982). The burden is upon the party seeking preliminary relief from the district court to show not only that it is likely to suffer irreparable injury if relief is denied but also that there is either (1) a likelihood of success...