Shire Us Inc. v. Barr Laboratories, Inc.

• Decision Date: 23 May 2003
• Docket Number: No. 02-3647.,02-3647.
• Citation: 329 F.3d 348
• Parties: SHIRE US INC., Appellant v. BARR LABORATORIES INC.
• Court: U.S. Court of Appeals — Third Circuit

329 F.3d 348 SHIRE US INC., Appellant
v.
BARR LABORATORIES INC. No. 02-3647. United States Court of Appeals, Third Circuit. Argued April 8, 2003. Filed May 23, 2003.

Page 349

Donald A. Robinson, Robinson & Livelli, Newark, NJ, Marie V. Driscoll, Barbara A. Solomon (argued), Fross, Zelnick, Lehrman & Zissu, New York, NY, for Appellant.

Kurt L. Shultz (argued), Winston & Strawn, Chicago, IL, Brian J. McCarthy, Virginia R. Richard, Gregory C. Vamos, Winston & Strawn, Newark, NJ, for Appellee.

Before ALITO, FUENTES, and GREENBERG, Circuit Judges.

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. FACTUAL AND PROCEDURAL HISTORY

A. Factual History

This matter comes on before this court on appeal from an order entered August 27, 2002, denying appellant Shire U.S. Inc.'s ("Shire") application for a preliminary injunction in its case against Barr Laboratories, Inc. ("Barr") charging Barr with trade dress infringement and trade dress dilution under sections 43(a) and (c) of the Lanham Act, 15 U.S.C. §§ 1125(a) and (c), and state unfair competition laws with respect to Shire's rights in Adderall, an unpatented drug Shire manufactures and sells. Adderall is a central nervous system stimulant used in treating attention deficit hyperactivity disorder (ADHD) available only by prescription and dispensed to patients in pharmacy vials labeled "prescription-only" as required by law. Adderall is composed of the mixed salts of a single-entity amphetamine and is a controlled substance. Shire first placed Adderall on the market in 1996 and since that time it has enjoyed substantial success so that by 2001 it had a 32% market share in the United States ADHD prescription market.¹

Page 350

Adderall originally came in two dosage strengths and colors, 10 mg. (blue, round) and 20 mg. (orange, round). The tablets are currently either blue or pale orange/peach and either round or oval. Color and size vary with the tablet's strength, seven of which currently are prescribed: 5 mg. (blue, round), 7.5 mg. (blue, oval), 10 mg. (blue, round), 12.5 mg. (orange/peach, round), 15 mg. (orange/peach, oval), 20 mg. (orange/peach, round), and 30 mg. (orange/peach, round). Adderall tablets are scored and stamped with the mark "AD" on one side and the dosage size, e.g., "10" on the other.

Recently, Shire sought a trademark for the Adderall trade dress. Shire's trademark applications sought protection for the overall configuration of the round tablet shape and the colors blue and orange used in conjunction with the "AD" marking. The United States Patent and Trademark Office (USPTO) initially has refused to register Shire's configuration.²

Shire's product literature, promotional materials, and mailings, which its sales staff distributed to physicians, feature color pictures of the Adderall tablets and sometimes direct patients to examine the tablets to ensure that they have received exactly the drug prescribed. Shire does not advertise its products in general consumer publications, but pictures of Adderall tablets appear in the Physician's Desk Reference and in certain consumer books. While Shire continues to sell Adderall, it altered its marketing strategy for 2002 and discontinued promoting Adderall, promoting instead a patented, sustained-release version of the drug, Adderall XR.

Barr, a public company that develops and manufactures generic and proprietary pharmaceuticals, was the first manufacturer of a generic equivalent to Adderall. It began developing a generic amphetamine salt alternative in 1998 and started marketing it in February 2002 after submitting an Abbreviated New Drug Application ("ANDA") to the United States Food and Drug Administration ("FDA") and obtaining its approval. The FDA has approved Barr's generic amphetamine salts as safe and effective, and has classified Barr's product, which it manufactures in accordance with FDA regulations, as therapeutically equivalent to Adderall. Barr's product is the bioequivalent³ of Adderall, for which it thus may be interchanged freely. According to Shire, however, the products contain different inactive ingredients, and, in particular, Barr's tablets contain saccharin, a once controversial ingredient the FDA only recently removed from its list of banned substances.

Page 351

Barr manufactures its generic amphetamine salts in 5 mg. (blue, oval), 10 mg. (blue, oval), 20 mg. (orange/peach, oval), and 30 mg. (orange/peach, oval) tablets.⁴ Barr's generic amphetamine salts are oval⁵ and convex in shape. Both the size and the color of Barr's tablets are linked to dosage. The face of the tablets has a "b" mark or the trade name Barr, and contains a numerical product code. The district court, on the basis of its physical examination of the tablets and the record before it, determined that while Barr's tablets, like Shire's, are blue and peach/light orange and those colors are keyed to dosage amounts, their shape and markings are different and "[j]uxtaposed against one another, the products are similar though not identical." JA 25.

B. Procedural History

On April 30, 2002, Shire filed this action against Barr, alleging that Barr's sale of generic amphetamine salts copying Adderall's appearance constituted unfair competition and diluted Shire's rights under federal and state law.⁶ On May 3, 2002, Shire filed a motion seeking a preliminary injunction precluding Barr's use of a tablet with an appearance similar to that associated with the appearance of Shire's Adderall tablets.

On June 3, 2002, after the parties had engaged in limited, agreed-upon discovery, the district court heard oral arguments on Shire's motion. In a comprehensive opinion dated August 26, 2002, the court denied Shire's motion on the grounds that Shire had not credibly carried its burden of establishing that the color and shape of Adderall is non-functional. Therefore the court concluded that Shire was not likely to succeed on the merits of its case. The court entered the order denying the motion for a preliminary injunction on August 27, 2002,⁷ but subsequently altered parts of its opinion by an amended opinion dated September 16, 2002, which corrected inaccuracies in certain terminology used in the original opinion.⁸ Shire filed a timely appeal on September 16, 2002.

Page 352

II. DISCUSSION

A. Standard of Review

We approach this case recognizing that when ruling on a motion for preliminary injunctive relief, a district court must be convinced that consideration of the four following factors favors the granting of preliminary relief: (1) the likelihood that the moving party will succeed on the merits; (2) the extent to which the moving party will suffer irreparable harm without injunctive relief; (3) the extent to which the nonmoving party will suffer irreparable harm if the injunction is issued; and (4) the public interest. See Clean Ocean Action v. York, 57 F.3d 328, 331 (3d Cir. 1995); AT & T Co. v. Winback and Conserve Program, Inc., 42 F.3d 1421, 1427 (3d Cir.1994). As we have indicated, the district court determined that Shire had failed to satisfy the first prong of the test for preliminary injunctive relief, finding that Shire was unlikely to succeed on the merits of its trade dress claim because it failed to demonstrate that the product configuration of Adderall is non-functional, which is one of the factors Shire needed to prove in order to prevail in an action for trade dress infringement.⁹

On this appeal we recognize that "[t]he decision whether to enter a preliminary injunction is committed to the sound discretion of the trial court, and will be reversed `only if the court abused its discretion, committed an obvious error in applying the law, or made a serious mistake in considering the proof.'" Duraco Prods., Inc. v. Joy Plastic Enters., 40 F.3d 1431, 1438 (3d Cir.1994) (quoting Loretangeli v. Critelli, 853 F.2d 186, 193 (3d Cir.1988)). However, "[a]lthough terms of an injunction are normally reviewed for abuse of discretion, any determination that is a prerequisite to the issuance of an injunction ... is reviewed according to the standard applicable to that particular determination." John F. Harkins Co. v. Waldinger Corp., 796 F.2d 657, 658 (3d Cir.1986); see AT & T v. Winback and Conserve, 42 F.3d at 1427. Thus, we review the district court's factual determinations for clear error but exercise plenary review with respect to its legal conclusions. See A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 210 (3d Cir.2000). Under the clearly erroneous standard, "a finding of fact may be reversed on appeal only if it is completely devoid of a credible evidentiary basis or bears no rational relationship to the supporting data." American Home Prods. Corp. v. Barr Labs., Inc., 834 F.2d 368, 370-71 (3d Cir.1987).¹⁰

Page 353

B. Likelihood of Success on the Merits

The Lanham Act, 15 U.S.C. § 1125(a),¹¹ establishes a cause of action for trade dress infringement. "Trade dress" refers to the design or packaging of a product which serves to identify the product's source. See TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 28, 121 S.Ct. 1255, 1259, 149 L.Ed.2d 164 (2001). The purpose of trade dress protection, like trademark protection, is to "secure the owner of the [trade dress] the goodwill of his business and to protect the ability of consumers to distinguish among competing producers." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 774, 112 S.Ct. 2753, 2760, 120 L.Ed.2d 615 (1992) (citation omitted).

Trade dress protection, however, is not intended to create patent-like rights in innovative aspects of product design. Eppendorf Netheler Hinz GmbH v. Ritter GmbH, 289 F.3d 351, 355 (5th Cir.2002). Thus, trade dress protection, unlike patent law which is not implicated here, does not foster innovation by preventing reverse engineering or copying of innovative product design features. Id. "Trade dress protection must subsist with the recognition that in many...