Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc.

• Decision Date: 24 April 1990
• Docket Number: RICHARDSON-VICK,INC,No. 89-3654,89-3654
• Citation: 902 F.2d 222
• Parties: SANDOZ PHARMACEUTICALS CORPORATION, Appellant, v., Appellee.
• Court: U.S. Court of Appeals — Third Circuit

Page 222

902 F.2d 222

SANDOZ PHARMACEUTICALS CORPORATION, Appellant, v. RICHARDSON-VICKS, INC., Appellee.

No. 89-3654.

United States Court of Appeals Third Circuit.

Argued Jan. 17, 1990.

Decided April 24, 1990.

John W. Nields, Jr. (argued), Kathleen H. McGuan, Howrey & Simon, Washington, D.C., Thomas Herlihy, III, Herlihy, Harker & Kavanaugh, Wilmington, Del., Anne S. Davidson, Michael McGrane, Sandoz Pharmaceuticals Corp., East Hanover, N.J., for appellant.

Harold P. Weinberger (argued), Jonathan M. Wagner, Samuel Friedman, Kramer, Levin, Nessen, Kamin & Frankel, New York City, Jack B. Blumenfeld, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., Robert N. Anderson, Richardson-Vicks, Inc., Shelton, Conn., for appellee.

Before BECKER, GREENBERG and NYGAARD, Circuit Judges.

OPINION OF THE COURT

BECKER, Circuit Judge.

This appeal, from an order of the district court denying plaintiff/appellant Sandoz Pharmaceuticals Corp.'s request for a preliminary injunction against defendant/appellee Richardson-Vicks, Inc., is another installment in the cough syrup marketing wars. Sandoz alleges that Vicks's representations about its product, Vicks Pediatric Formula 44 ("Pediatric 44"), constituted false and deceptive advertising in violation of section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a) (1988).

At the nub of the controversy is Vicks's assertion that Pediatric 44 starts to work the instant it is swallowed. Sandoz alleges that the representations about the instant action of the product are false. It also alleges that such representations constitute per se violations of the Lanham Act, given Vicks's failure to disclose, on Pediatric 44's label, that the demulcents which theoretically effectuate the immediate relief are intended to be active ¹ yet are not approved by the Food and Drug Administration ("FDA"). ² Additionally, Sandoz challenges Vicks's advertising claims that Pediatric 44 is superior to its competitors.

After an extensive hearing, the district court found that Sandoz: (1) had failed to meet its burden of proving that any of Vicks's advertising claims was false or deceptive, and (2) had not proved irreparable injury. Upon review, we are satisfied that the district court's findings of fact are not clearly erroneous and that it did not abuse its discretion or commit an error of law in refusing to enjoin Vicks's advertising. Hence, we affirm.

Our conclusions depend on the resolution of an interesting legal issue arising out of the interface between the Lanham Act and the Food, Drug and Cosmetic Act, 21 U.S.C. Secs. 301-92 (1982). The controversy centers on whether a Lanham Act plaintiff needs to show only that the defendant's advertising claims of its own drug's effectiveness are inadequately substantiated under FDA guidelines, or whether the plaintiff must also show that the claims are literally false or are misleading to the public. For the reasons that follow, we conclude that the additional proof that a defendant's claims are literally false or actually misleading is necessary to sustain a Lanham Act claim.

I. FACTS AND PROCEDURAL HISTORY

Sandoz manufactures and sells various pharmaceutical products. Its offerings include Triaminic-DM and Triaminicol, leading cough medicines which may be used by children as well as adults. Like Sandoz, Vicks produces and markets a wide array of pharmaceuticals, but, unlike Sandoz, it has not had a market leader in the over-the-counter (OTC) children's cough medicine market. In the fall of 1989, Vicks sought to develop such a leader by introducing a new product, Pediatric 44.

Before its nationwide release of Pediatric 44, Vicks developed a consumer advertising campaign which claimed that Pediatric 44 "starts to work the instant they [the children] swallow" by "shielding irritated cough receptors on contact." Vicks planned to carry this message to consumers via television commercials and print advertisements in consumer magazines, and to pediatricians via "information sheets" mailed to doctors. In addition to claiming that Pediatric 44 "starts working from the very first swallow," the information sheets also state that "Pediatric FORMULA 44 provides more cough relief in the first thirty minutes [than] those thin, watery cough medicines." To support this statement, the Vicks circular used a bar graph which compared Pediatric 44 with "the leading OTC cough syrup," and showed Pediatric 44 apparently outperforming the competitor.

Vicks's advertising claims with regard to Pediatric 44 are based on the effect of certain locally-acting, inert sugary liquids known as "demulcents," which operate directly on cough receptors in the recipient's throat and respiratory passages. Demulcents are topically acting antitussives, in contrast to centrally acting antitussives, which are the traditional cough antidotes. ³ Because these demulcents work on contact, Vicks claims that Pediatric 44 begins to reduce coughs as soon as it is swallowed. ⁴

Vicks performed various tests to support this conclusion. The record contains test results which support, if only marginally, Vicks's arguments that Pediatric 44 starts to work right away, that there is a scientific basis for this claim, and that Pediatrics 44 is superior to its competitors. However, the FDA has never approved any "demulcents" as effective for the relief of coughs, see supra note 1, and whether Vicks's level of testing could meet the high standards for drug approval set by the FDA is far from certain. ⁵

On September 22, 1989, the district court filed an opinion and order denying Sandoz's motion for preliminary injunction. The court first found that Vicks's consumer advertising claims were not literally false, because Vicks's test results indicated that the demulcents in Pediatric 44 could begin to work immediately. In addition, the court found no evidence to support Sandoz's contentions that Vicks's consumer advertising claims were misleading, because Sandoz had failed to advance any substantial proof indicating that the advertising was deceptive. The court further concluded that advertising claims are not per se misleading if inadequately substantiated under FDA guidelines.

Without addressing the claim directly, the district court apparently rejected Sandoz's contention that it is misleading for a manufacturer to promote a certain ingredient in its cough medicine as "start[ing] to work the instant" it is swallowed, yet list this ingredient as inactive on the medicine's label. The issue was extensively briefed and argued, but the court found that Sandoz never advanced any evidence that consumers were misled by any aspect of Vicks's campaign.

The court also found that Vicks's claims on its information sheets, including the claim that Vicks starts to work "from the first swallow," while thin syrups start to work "within the first 30 minutes", were not literally false and that Sandoz had failed to prove that these sheets were misleading to the pediatricians who received them. There was no evidence that trained pediatricians would interpret the graph contained in these sheets as implying that Pediatric 44 was clearly superior to competing brands.

Finally, the court held that Sandoz was unable to prove irreparable harm in view of the lack of proof of how consumers or pediatricians would be affected by Vicks's advertising. The court concluded that the record did not support the determination that, as a result of Vicks's advertising, Sandoz would lose part of its customer base, stating that no consumer surveys had been presented demonstrating a causal link between Vicks's advertising and Sandoz's sales. The court took special note of the evidence showing that, despite Vicks's test advertising in Pittsburgh, Sandoz's sales of Triaminic in that city increased the same 27% as was reflected in national figures.

We review the district court's conclusions of law in plenary fashion, Premier Dental Prods. Co. v. Darby Dental Supply Co., 794 F.2d 850, 852 (3d Cir.), cert. denied, 479 U.S. 950, 107 S.Ct. 436, 93 L.Ed.2d 385 (1986), its factual findings under a clearly erroneous standard, Eisenberg ex rel. NLRB v. Lenape Prods., Inc., 781 F.2d 999, 1003 (3d Cir.1986), and its decision to deny the injunction on an abuse of discretion standard, id. Because our scope of review of fact findings is so narrow, and, as noted above and explained below, the record supports the district court's findings of fact, we will not elaborate on the intricacies of the record. Rather, we will devote the bulk of our time to discussing the legal issues.

II. STATUTORY BACKGROUND

Three different federal statutory schemes regulate OTC drug marketing, but the interplay among the regulations is somewhat ambiguous. The primary regulatory system covering prescription and non-prescription drugs was created by the Food, Drug and Cosmetic Act (the "FD & C Act"). 21 U.S.C. Secs. 301-92 (1982). Under the FD & C Act, a "new" drug may not be marketed and sold in the United States without prior approval by the FDA. See id. at Secs. 331(d), 355(a). To obtain this approval, an applicant must demonstrate, by the presentation of substantial evidence, that the drug is safe and effective for the uses recommended in its labeling. See id. at Sec. 355.

The approval process usually consists of three stages of review. First, the FDA appoints an advisory review panel of independent qualified experts. This panel submits a recommendation to the FDA stating whether a drug is or is not safe and effective for its designated purposes or whether there is insufficient evidence upon which to base a recommendation. Second, the FDA publishes a tentative "final monograph" presenting its initial position on the drug's safety and effectiveness. Third, after an extensive comment and review period, the FDA publishes a final monograph that establishes the conditions under which a drug is considered safe and effective. See 21 C.F.R. Sec. 330.10 (1988). Once a final monograph goes into...