Sterling Drug Inc. v. Lincoln Laboratories, Inc.

• Decision Date: 30 September 1963
• Docket Number: No. 13893.,13893.
• Parties: STERLING DRUG INC., George A. Breon & Company and Breon Laboratories, Inc., Plaintiffs-Appellants, v. LINCOLN LABORATORIES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

322 F.2d 968 (1963)

STERLING DRUG INC., George A. Breon & Company and Breon Laboratories, Inc., Plaintiffs-Appellants, v. LINCOLN LABORATORIES, INC., Defendant-Appellee.

No. 13893.

United States Court of Appeals Seventh Circuit.

September 30, 1963.

Mercer L. Stockell, New York City, James M. Winning, Springfield, Ill., W. Hubert Plummer, New York City, James F. Hoge, Lenore B. Stoughton, New York City, of counsel, for appellants.

Carl R. Miller, Decatur, Ill., John D. Dewey, Chicago, Ill., for appellee.

Before HASTINGS, Chief Judge, and CASTLE and SWYGERT, Circuit Judges.

CASTLE, Circuit Judge.

Plaintiffs-appellants, Sterling Drug Inc., George A. Breon & Company, and Breon Laboratories, Inc., brought this action in the District Court against Lincoln Laboratories, Inc., defendant-appellee, charging trademark infringement and unfair competition based on defendant's use of the word DYPRIN as a trademark identifying its medicinal product for prevention of diaper rash. Plaintiff Sterling is the owner of the registered trademark DIAPARENE.¹ George A. Breon & Company was the marketing subsidiary for Sterling's DIAPARENE products until it was succeeded as such by Breon Laboratories, Inc. The Plaintiffs sought an injunction, an accounting of defendant's profits, and treble damages. The District Court, following a trial on the merits, made and entered findings of fact and conclusions of law on the basis of which it granted judgment for the defendant. Plaintiffs appealed.

The main contested issue presented by plaintiffs' appeal is whether the District Court's conclusion that the evidence adduced fails to establish the "likelihood of confusion" requisite to plaintiffs' right to relief represents the application of correct legal criteria to the court's factual findings.

The following summary is limited to those facts established by the record which are pertinent to the resolution of the issue above delineated and to consideration of additional points of contention which merit but brief comment.

The record discloses that with one exception plaintiffs' products marketed under the DIAPARENE trademark are sold for the purpose of treating and preventing infant diaper rash (ammonia dermatitis) and the similar condition afflicting adults who are unable to control urination. Ammonia dermatitis is caused by urine on the skin and in diapers, bed clothes, bed linens and other linens. The DIAPARENE products are designed to prevent ammonia dermatitis through the use of the antiseptic methyl benzethonium chloride to retard bacterial decomposition of urine and consequent release of free ammonia. Other ingredients are incorporated to soothe and reduce irritation. The products are in the form of an ointment, a creme, a lotion, and a dusting powder intended for direct application to the skin; a rinse solution and precrushed tablets for making such solution, in which diapers and linens are rinsed; and a sudsing cleanser containing hexachlorophene recommended for use to cleanse and de-germ the skin prior to application of the other products. The one exception, Cradol, contains methyl benzethonium chloride in an emulsified base and is sold for use in the prevention and treatment of cradle cap and dandruff.

Defendant's DYPRIN is a powder sold in capsule form to be taken internally. The capsule may be taken orally intact or opened and the contents dissolved in a liquid carrier such as a baby's formula. DYPRIN is designed to treat and prevent ammonia dermatitis through the use of an amino acid, dl methionine, taken internally, to reduce the ammonia content of the urine to a level which prevents diaper rash or its related condition in adults.

The DIAPARENE products are sold through normal drug channels — drug wholesalers and retailers — and to hospitals and nursing homes. No prescription is required for their purchase and most of the sales are over-the-counter sales to the public by drug stores. The products have been widely advertised and promoted. Annual sales approximate $2,000,000 and annual advertising expenditures are approaching $400,000. The products have been heavily promoted to the medical and nursing professions and to hospitals and other institutions. Doctors rarely purchase the products but many purchases are made on the recommendation of doctors, nurses and pharmacists.

Defendant's DYPRIN product is sold primarily to physicians and drug stores but also to hospitals and nursing homes. A substantial number of the purchasing physicians are dispensing physicians. Defendant has confined promotion of its product to physicians and pharmacists. Sales of DYPRIN amount to less than $10,000 annually and are mostly in the midwest although the product is distributed nationally. Defendant's president testified that there was no reason why the manner in which DYPRIN is promoted could not be changed to promote sales to the general public.

The users of the DIAPARENE and DYPRIN products are the same class of persons — those caring for infants and adults afflicted with ammonia dermatitis, whether at home or in hospitals, nursing homes or other institutions.

Defendant commenced the sale of its DYPRIN product in September or October, 1958.

Prior to 1958 the DIAPARENE line of products with the exception of the sudsing skin cleanser (Todl) had been sold by Homemakers' Products Corporation the then owner of the registered trademark DIAPARENE. On November 6, 1957, plaintiff Sterling Drug Inc. acquired the assets and business of Homemakers' as a going concern, including good will and the registered trademark DIAPARENE. Sterling added the sudsing skin cleanser (Todl) to the DIAPARENE line in 1961. The DIAPARENE dusting powder has been manufactured for plaintiffs by Sterling's wholly owned subsidiary Cook-Waite Laboratories, Inc. Since their acquisition from Homemakers' all of the other DIAPARENE products have been manufactured by Sterling, and Sterling manufactures the sudsing skin cleanser which it added to the line. Sterling commenced manufacture of the products sometime during the first six months of 1958. Prior to that time they had been manufactured by Homemakers' contract manufacturers Norwich Chemical Co. and Orlin Laboratories. Until December 31, 1960, the George A. Breon & Company, a wholly owned marketing subsidiary of Sterling Drug Inc., was its licensee for the sale and distribution of the DIAPARENE products. The name of the subsidiary, not Sterling's, appeared on the labels bearing the trademark. In January, 1961, Breon Laboratories, Inc., also a wholly owned subsidiary of plaintiff Sterling, became such licensee and marketing subsidiary.

The labels used on the products by Breon & Company as licensee and marketing subsidiary of Sterling contained the word "Chloride" in association with DIAPARENE (either following or below) as an identification of the antiseptic chemical methyl benzethonium chloride.

Defendant's president testified that he was aware of plaintiffs' DIAPARENE products when he selected the DYPRIN mark for defendant's product; that of other marks reviewed the "one we were most concerned about" was DIAPARENE; and that the proposed mark DIAPRIN was rejected for the reason that "we felt that was too close."

The conclusion of the District Court that "the Defendant's trademark is not a colorable imitation of the prior trademark Diaparene, and when used on or in connection with the sale, advertising or offering for sale of Defendant's product is not likely to cause confusion and mistake and to deceive purchasers as to the identity and source of origin of Defendant's product, and to divert the benefit of the business reputation and good will symbolized by the trademark Diaparene" is based on the court's findings which point up the differences between plaintiffs' and defendant's marks and between their products. The content of those findings characterize these differences as dissimilarity in the appearance and...