Petitioners Brief — Inwood Laboratories, Inc. v. Ives Laboratories, Inc.

Supreme Court brief1981

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No. 80-2182 FILED

No, 81-1) JAN—1LB.. 1967

In The ALEXANOGR L. GTEVAS,

CLERK

Supreme Court of the nited Sakon

October Term, 1981

INWOOD LABORATORIES, INC. and PREMO

PHARMACFUTICAL LABORATORIES, INC.,

Petitioners,

vs.

IVES LABORATORIES, INC.,

Respondent.

On Writ of Certiorari to the United States Court of Appeals for

the Second Circuit

BRIEF ON THE MERITS FOR PETITIONER

INWOOD LABORATORIES, INC,

MILTON A, BASS

BASS, ULLMAN & LUSTIGMAN

Attorneys for Petitioner

Inwood Laboratories, Inc.

747 Third Avenue

New York, New York 10017

(212) 751-9494

JACOB LAUFER

STEVEN R. TROST

LAWRENCE H. ROTH

Of Counsel

QUESTIONS PRESENTED

I. Whether the truthful, comparative use of another's

trademark in labeling and advertising gives rise to liability for

trademark infringement.

Il. Whether Section 32 of the Lanham Act [15 U.S.C.

$1114) grants a trademark owner monopoly rights in the color

of its product.

PARTIES TO THE PROCEEDING BELOW

The parties to the proceeding whose judgment is sought to

be reviewed, in addition to Inwood Laboratories, Inc.

(“Inwood”), are: Premo Pharmaceutical Laboratories, Inc.

aan dat wees 4 Co., Inc. (“Darby”); MD Pharmaceutical

Company, Inc. (“M Rugby Laboratories, Inc. Canghy

and Sherry Pharmaceutical Co., Inc. (“Sherry”).

petitioners are filing separate briefs with this Court.

Court Rule 34.1(b). Additionally, as required by Supreme Court

Rule 28.1, Inwood listed its corporate affiliations in its petition

for certiorari. Said listing is currently accurate.

CORR ape

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ...........eseeeeeceeceeees i

PARTIES TO THE PROCEEDING BELOW ........... ii

TABLE OF CONTENTS. .........cceeeccecceeeeeseeees iii

TABLE OF AUTHORITIES .........cseeeeeeceeveeees v

OPINIONS BELOW. ........cccccccccscccccccccccscces 1

JURISDICTION Sesiscesccccccccccccccccccccccccceces 2

CONSTITUTIONAL PROVISIONS AND STATUTES

BPUWOMIVINED sccUbehcabewecccccccccccs..-cccetsszeseons 2

STATEMENT OF THE CASE ..........-ceeeeceeeeeees 3

TRIO Fo eed occ csccccccnccbuscvccesccccncces 3

Parties Hereto and the Nature of their Business ..... 4

The Impact of Drug Substitution Laws ............. 7

The Course of Proceedings Below .........s++s+++++ 9

The “Additional Evidence” Produced By Ives ........ 14

The Role of Capsule Colors for Prescription Drugs .. 17

The Ruling of the District Court After Trial ........ 23

SUMMARY OF ARGUMENT. ...........seceeeeeeenee 24

Contents

ARGUMENT:

Il.

THE TRUTHFUL COMPARATIVE USE OF A

TRADEMARK IN LABELING AND

ADVERTISING FORMS NO LEGAL BASIS FOR

A FINDING OF TRADEMARK

INFRINGEMENT OR CONTRIBUTORY

TRADEMARK INFRINGEMENT. ............

A. THE IVES IV MAJORITY OPINION ERRED

IN ASSUMING THAT PHARMACISTS

HAD COMMITTED TRADEMARK

INFRINGEMENT .........seseeceeeeecees

B. THE IVES IV OPINION ERRONEOUSLY

APPLIED THE DOCTRINE OF

CONTRIBUTORY TRADEMARK

INFRINGEMENT AND IN SO DOING

INTERFERED WITH PETITIONERS’

EXERCISE OF THEIR’ FIRST

AMENDMENT RIGHT TO FREE SPEECH.

SECTION 32 OF THE LANHAM ACT MAY

NOT GRANT A TRADEMARK OWNER

MONOPOLY RIGHTS IN THE COLOR OF ITS

PRODUCT» cccccccccccccccccvveececvccsecces

CONCLUSION svicccicccccccccccccccccccccccnccsccveces

Contents

TABLE OF AUTHORITIES

Cases Cited:

Abhott Laboratories v. Celebrezze, 228 F.Supp. 855 (D.Del.

1964), vacated on other grounds, 352 F.2d 286 (3d Cir.

SE Aa curresmbuerseaees cocecessabhachbuetesesets

A.H. Robins Co. v. Medicine Chest Corp., 206 U.S.P.Q. 1015

GMAMEO. SOME) ccwuscccdocccscccccccdcedbnensecese

A. Leschen & Sons Rope Co. v. Broderick & Bascom Rope

CO. tren: BOO (ISTE) oc ec cccccccdccascnccescts

American Safety Table Co. v. Schreiber, 269 F.2d 255 (2d

Cir.), cert. denied, 361 U.S. 915 (1959) ..........005:

Amstar Corp. v. Domino's Pizza, Inc., 615 F.2d 252 (Sth Cir.),

cert. denied, 449 U.S. 899 (1980) .......ccceeeeeecees

Andrew Jurgens Co. v. Bonded Products Corp., 21 F.2d 419

(2d Cir. 1927), cert. denied, 275 U.S. 572 (1928) .....

Application of Deister Concentrator Co., 289 F.2d 496

SE EE oh G b's cushs ocnacwssccvdphicedecsegie

Application of E.1.DuPont & De Nemours & Co., 476 F.2d

RECUR ROTOD Walle b Es acc ccc cc dane wth eben ens acs

Bates v. State Bar of Arizona, 433 U.S. 350 (1977) ......

Bayer Co. v. United Drug Co., 272 F. 505 (S.D.N.Y. 1921).

Contents

Page

Biocraft Laboratories, Inc. v. Merck & Co., Inc., _.. F.Supp.

——, Civ. Action No. 77-693 (D.N.J. Oct. 2, 1980)..21, 42

Bliss v. Gotham Industries, Inc., 316 F.2d 848 (9th Cir. 1963). 44

Boeringer-Ingelheim GmbH v. Pharmadyne Laboratories,

211 U.S.P.Q. 1163 (D.N.J. 1980) ........cc cece eees 42

Boots Co. Ltd. v. Approved Prescription Services, Ltd.,

[1980] _. Ch. _., B.No. 140 (Unreported: Martin

Meredith) (Ch. Div’l. Ct. March 6, 1980), aff'd, [1980] B.

No. 140 (Unreported: Association) (Court of Appeal Civ.

Div. March 28, 1980) ........cceecccsccccceceves 21, 22

Campbell Soup Co. v. Armour & Co., 175 F.2d 795 (3d Cir.),

cert. denied, 338 U.S. 847 (1949) .....ccccccccenveess 4l

Champion Spark Plug Co. v. Sanders, 331 U.S. 125 (1947). 28

Coats v. Merrick Thread Co., 149 U.S. 562 (1893) ....... 41

Coca-Cola Co. v. Dorris, 311 F.“ pp. 287 (E.D.Ark. 1970). 28

Coca-Cola Co. v. Snow Crest Beverages, 64 F.Supp. 980

(D.Mass. 1946), affd, 162 F.2d 280 (ist Cir.), cert.

denied, 332 U.S. 809 (1947) .......cceeececeees 33, 34, 38

Coca-Cola Co. v. The Koke Company of America, 254 U.S.

NS UN calc bis Kalb oe Ch. 0. dn Cebbcccupedees 38, 41

Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234

(1964) ne reeeccrsecccsenccccccccseenenees 34, 41, 44, 46

vii

Contents

Page

Corning Glass Works v. Jéanette Glass Co., 308 F.Supp. 1321

(S.D.N.Y.), aff'd per curiam, 432 F.2d 784 (2d Cir. 1970) . 32

Cuervo v. Jacob Henkell Co., 50 F. 471 (S.D.N.Y. 1892).. 32

Diamond Match Co. v. Saginaw Match Co., 142 F. 727 (6th

Cir. 1906), cert. denied, 213 U.S. 598 (1908) ......... 4l

DuPont Cellophane Co. v. Waxed Products Co., 85 F.2d 75

(2d Cir.), cert. denied, 299 U.S. 601 (1936) .......... 30

Electric Auto-Lite Co. v. P&D Mfg. Co., 78 F.2d 700 (2d Cir.),

cert. denied, 296 U.S. 648 (1935) .....ceeeeeceeeeees 28

Famolare, Inc. v. Melville Corp., 472 F.Supp. 738 (D.Haw.

1979), aff'd without opinion, 652 F.2d 62 (9th Cir. 1981)

scceseveneacumeae oot Nudie sc) sec cudawahe veces eucouy aay ee

Fortnightly Corp. v. United Artists Television, Inc., 392

SEE CRUODD k's UCR aes c ccsecepecesebendboebwas 39

Fur Information and Fashion Council, Inc. v. E.F. Timme

& Son, Inc.,364 F.Supp. 16 (S.D.N.Y. 1973), aff'd on other

grounds, 501 F.2d 1048 (2d Cir.), cert. denied, 419 U.S.

ME MEN IETE Sine UE URUk Ua ec’ 6 cence cg cdanadebe eeeacs

Geisel v. Poynter Products, 295 F.Supp. 331 (S.D.N.Y.

SOP RENAE Sb UMAR PRET S 00s v0.00 Se enbotes ethee ne eps 28

Goland vy. CIA, 607 F.2d 339 (D.C.Cir. 1978), cert. denied,

GED ATG GAT AAOOD hee oh co nivcccdesccveecccovakeRs 35

viii

Contents pins

Goldstein v. California, 412 U.S. 546 (1973) ..........6-- 46

Heide v. Wallace & Co., 129 F. 649 (D.N.J. 1904), aff'd, 135

F. 346 (3d Cir. 1905) .....cccesceccsscceecsceceees 6

Henry v. A.B. Dick Co., 224 U.S. 1 (1912) .......eeeee, 39

Hoffman-La Roche v. Premo Pharmaceutical Laboratories,

Inc., 210 U.S.P.Q. 374 (D.N.J 1980) .........00005- 42

Howard Dustless Duster Co. v. Carleton, 219 F. 913 (D.Conn.

FEEE WECM WEF: Alias 00s cD Sowa bsdee doe bnceuneosad 39

International Order of Job’s Daughters v. Lindeburg & Co.,

633 F.2d 912 (9th Cir. 1980), cert. denied, U.S.

69 L.Ed.2d 956 (1981) .......cceccccececcccvcceenss 41

Ives Laboratories, Inc. v. Bioline Laboratories, Inc., ¢. al.,

Civ. Action No. 81-914 (D.N.J., Complaint filed Mar. 3,

SBEE. bp cE sSROUDY Dak ee oc és ccbbckhbbeb ace debesace 23

Ives Laboratories, Inc. v. Darby Drug Co., Inc. [Ives I], 455

F. Supp. 939 (E.D.N.Y. 1978) .......cceeeeccees 1, 12, 34

Ives Laboratories, Inc. v. Darby Drug Co., Inc., [Ives II]

601 F.2d 631 (2d Cir. 1979) ..... cece cece eeseseees

.-- 1, 5, 9, 10, 12, 13, 14, 16, 23, 24, 26, 33, 34, 35, 45, 46

Ives Laboratories, Inc. v. Darby Drug Co., Inc. [Ives IIT],

488 F. Supp. 394 (E.D.N.Y. 1980) .........eeeeeeees

ceaenge \¥ee beans 2, 4, 5, 12, 16, 19, 20, 23, 29, 33, 35, 47

ix,

Contents .

Page

Ives Laboratories, Inc. v. Darby Drug Co., Inc, [Ives IV],

638 F.2d 538 (2d Cir, 1981) ...ccccccccccceveeneees

.2,3, 8, 10, 12, 14, 15, 16, 26, 28, 31, 32, 33, 35, 36, 37, 41,46

Ives Laboratories, Inc. v. Darby Drug Co., Inc. [Ives V],

—— F.Supp. _... No. 78C372 (E.D.N.Y. May 12, 1981). 41

J.C. Penney Co. v. H.D. Lee Mercantile Co., 120 F.2d 949

CUE Cig, IFGE) cass cccecccccccvacscccceccedeoseess 44

Jellibeans, Inc. v. Skating Clubs of Georgia, Inc., ._.. F.

Supp. —_... No. C-80-1689A (N.D. Ga. May 19, 1981), re-

ported in 540 BNA Patent, Trademark & Copyright Jour-

nal, A-5 (August 6, 1981) .....ccccccccceneeeeenenns 43

John B. Stetson Co. v. Stephen L. Stetson Co., 14 F.Supp.

74 (S.D.N.Y.), modified, 85 F.2d 586 (2d Cir.), cert. denied,

PPS. GES CIFDS) Necccccccvcccscccsoccvcccooes 26, 32

Johnson & Johnson v. Quality Pure Mfg. Co., 484 F.Supp.

DIR AERIS UNTO). We Wuee bas cocdovecccedeonebasesecs 42

Keene Corp. v. Paraflex In:lustries, Inc., 653 F.2d 822 (3d

Cir. 1981) ....... Hoses Tp cvcvecvoes ohuneaeuy bens 41, 44

Kellogg Co. v. National Biscuit Co., 305 U.S, I11 (1938)

ceveewens coccerccceesevescsvecscsesscecces Gl, 42, 45, 46

Kewanee Oil Corp. v. Bicron Corp., 416 U.S. 470 (1974).. 46

L.E. Waterman Co., 34 App.D.C. 185 (D.C.Cir, 1909) ... 41

Contents

Page

Marion Laboratories, Inc. v. Michigan Pharmacal Corp., 338

F.Supp. 762 (E.D.Mich. 1972), aff'd without opinion, 473

F.2d 910 (6th Cir, 1973) ......ccceeees SOV e ede vewed 23

Martin H. Smith Co. v. American Pharmaceutical Co., 270

PR UOe LIDUOD, vcecdcccccccccccnseedescssoccssecs 37

Mattel, Inc. v. Goldberger Doll Mfg. Co., Inc., 200 F.Supp.

DIMEN: GUUEM anc ccccccccctoedecdovcccendes: 34

Mead Johnson & Co. v. Premo Pharmaceutical Laboratories,

Inc., 207 U.S.P.Q. 820 (D.N.J. 1980) ...ccccseeecees 10

Merrell-National Laboratories, Inc. v. Zenith Laboratories,

Inc., 194 U.S.P.Q. 157 (D.N.J. 1977), aff'd on procedural

grounds, 579 F.2d 786 (3d Cir. 1978) .......+5. 11, 12, 42

Newcomer & Lewis v. J.A. Scriven Co., 168 F. 621 (6th Cir.),

cert. deniad, 214 U.S. S518 (1909)... cc ccc cccnceeuees 4l

Norwich Pharmacal Co. v. Sterling Drug, Inc., 271 F.2d 569

(2d Cir. 1959), cert. denied, 362 U.S. 919 (1960). .21, 41, 44

Nugrape Co. of America v. Glazier, 22 F.2d 596 (Sth Cir.

ADST) ceric sevrvcrccvedseccorccccccccvevcaccccosece 33

Pagliero v. Wallace China Co., 198 F.2d 339 (9th Cir.

1932) wcsoccseces De veeecoseceeovecvccegevescess 23, 44

Pennwalt Corp. v. Zenith Laboratories, Inc., 472 F.Supp. 413

(E.D.Mich. 1979), appeal dismissed, 615 F.2d 1362 (6th

Cir. 1980) SPC eee eee eee ee 13, 45

ae = ae

Contents

Page

Pezon et Michel v. Ernest R. Hewin Associates, Inc., 270

F.Supp. 423 (S.D.N.Y. 1967) ....csccceeeeeeeeeeeees 34

Pfizer & Co. v. Generic Formulae, Inc., 275 F.Supp. 421

(E.D.N.Y. 1967) ......55- Weecedecscdcccuesueuppns 29

Pharmaceutical Mfrs. Ass’n v. Kennedy, 471 F.Supp. 1224

(D.Md. 1979) eseeeeeeee e*eeeeeeeeeeeeeeeeeeeeeeeeeee 9

Pharmaceutical Mfrs. Ass'n v. Whelan, — Mise.2d

Index No. 15831/78 (Sup.Ct.N.Y.Co., Aug. 15, 1980), aff'd

without opinion, 79 A.D.2d 876, 435 N.Y.S.2d 618 (Ist

Dept., Dec. 4, 1980), appeal pending .....6..00000+ 9

Pharmaceutical Society of New York, Inc. v. Lefkowitz, 586

P28 SoS CF0 Cle: 1978) vcccccccccvcieoscccscvceses 9

Pignons S.A. De Mecanique De Precision v. Polaroid Corp.,

657 F.2d 482 (Ist Cir, 1981) ccc ccc ceeeeeeeeweeees 27

Plastilite Corp. v. Kassnar Imports, 508 F.2d 824 (CCPA

1975) eseeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeee ee eee 4l

Prestonettes, Inc. v. Coty, 264 U.S, 359 (1924) ......005. 28

Reid, Murdoch & Co, v. H.P. Coffee Co., 48 F.2d 817 (8th

Cir.), cert. denied, 284 U.S. 621 (1931)... ceeeeeeeeee 26

Rice-Stix Dry Goods Co. v. J.A. Scriven Co., 165 F. 621 (6th

Cir. 1908), cert. denied, 223 U.S. 708 (1911) .......5. 41

Roche Products Ltd. v, Berk Pharmaceuticals, Ltd., [1973]

RPC 473 (Supreme Court of Judicature) ..........+. ea”

xii

Contents Page

Rosemont Enterprises, Inc. v. Random House, Inc,, 366 F.2d

303 (2d Cir, 1966), cert. denied, 385 U.S. 1009 (1967).. 40

Ross-Whitney Corp. v. Smith, Kline & French Laboratories,

207 F.2d 190 (9th Cir. 1953) eeeeeeeeee eeeeeeeeeeeee 37

Samson Cordage Works v. Puritan Cordage Mills, 211 F. 603

(6th Cir, 1914) ..ccccccccccccceccceeeeeeceneees ooo 41

Saxlehner v. Wagner, 216 U.S. 375 (1910) .......... 27, 28, 40

Schlitz Brewing Co. v. Houston Ice Co., 250 U.S. 28

GEGEED onc div cried accueonses Vewerdedecavegevesedes 4l

Sears, Roebuck & Co. v. Stiffel Co., 376 U.S, 225 (1964). .

Pe eeeeecrereseeeeeeccecenccones seeeeeeees 34, 41, 44, 4

Singer Mfg. Co. v. June Mfg. Co., 163 U.S. 169 (1896) .. 46

SK&F Co. v. Premo Pharmaceutical Laboratories, Inc., 625

F.2d 1055 (3d Cir, 1980), affg 481 F.Supp. 1184(D.N.J.

PETER. bis CURDURARA MADD elecins Coc code Coad cenee leashes 42

Smith, Kline & French Laboratories v. Broder, 125 U.S.P.Q.

299 (S.D. Tex. 1959) .......005. Sodecensoccerecsces 37

Smith, Kline & French Laboratories v. Clark & Clark, 157

F.2d 725 (3d Cir.), cert. denied, 329 U.S, 796 (1946)...

bD dais ieiiinte vibiete aidins's-4btuet seceeeeeeeeeeee OM 41, 44, 45

Smith, Kline & French Laboratories v. Heart Pharmaceuti-

cal Corp., 90 F.Supp. 976 (S.D.N.Y. 1950) ....... soe BF

xiii

Contents

Page

Smith, Kline & French Laboratories v. Waldman, 69 F.Supp.

Se MER, BORED ceebubcccccvcccncdoccecotsnese 33, 44

Smith v. Chanel, Inc., 402 F.2d 562 (9th Cir. 1968) ...... 28

Societe Comptoir de L’Indus., etc. v. Alexander’s Dept.

Stores, 299 F.2d 33 (2d Cir. 1962) .....sssceseeevees 28

Stix Products, Inc. v. United Merchants & Mfrs., Inc., 295

F.Supp. 479 (S.D.N.Y.1968) ....ccececeeeeeeeeees 26, 33

Stop the Olympic Prison v. U.S. Olympic Committee, 489

F.Supp. 1112 (S.D.N.Y. 1980) ......seeeceeeeeeeenes 40

Swank, Inc. v. Anson, Inc., 196 F.2d 330 (Ist Cir. 1952).. 34

Syntex Laboratories, Inc. v. Norwich Pharmacal Co., 315

F.Supp. 45 (S.D.N.Y. 1970), aff'd, 437 F.2d 566 (2d Cir.

SEES 5 oss Wika VERS URNS s Cows cceadensdenhy chdne dae 29

19ST) secrdvvcccccedsvscccccscdevecvcecevvvecscsece 4l

Taylor Instrument Companies v. Fawley-Brost Co., 139 F.2d

98 (7th Cir. 1943), cert. denied, 321 U.S. 785 (1944).. 28

Time, Inc. v. Bernard Geis Associates, 293 F.Supp. 130

eho RET) EU a Ne WANE Gh 00 UE dp cc abainieecbdvoehs 40

Triangle Publications, Inc. v. Knight-Ridder Newspapers,

Inc., 445 F.Supp. 875 (S.D. Fla. 1978), aff'd on other

grounds, 626 F.2d 1171 (Sth Cir. 1980) ........0005- 40

xiv

Contents

Page

Unistrut Corp. v. Power, 280 F.2d 18 (ist Cir. 1960) ..... 41

United States v. Ciba-Geigy Corp., 508 F.Supp. 1118 (D.N_J,

IOTD) wcccdccincocseivesccocees Meibaicevdsnvecuaele 5

United States v. Lowell, 649 F.2d 950 (3d Cir. 1981) ..... 35

Universal City Studios, Inc. v. Sony Corp. of America,

> 659 F.2d 963 (Sth Cir. 1981) .....ccsccceveveceveees 39

Upjohn Co. v. Schwartz, 246 F.2d 254 (2d Cir. 1957) ....

Coen eerereccveerseneessccoeeceeseevvceess 37, 41, 44, 45

Viavi Co. v. Vimedia Co., 245 F. 289 (8th Cir. 1917), cert.

denied, 246 U.S. 664 (1918) ...ccccccceececceceecs 28, 41

Virginia State Board of Pharmacy v. Virginia Citizens Con-

sumer Council, Inc., 425 U.S. 748 (1976) .......0605- 39

Warner-Lambert Co. v. FTC, 562 F.2d 749 (D.C.Cir. 1977),

cert, denied, 435 U.S. 750 (1978) .cccseccccveesenees 21

Weinberger v. Hynson, Westcott & Dunning, 412 U.S. 609

CUMIED "ks cited o dbs Meule'c code vcnespseabedcabesstive 10, 21

William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526

(1924) ...eeee Roce voriecevevesvecesceceres 33, 41, 44, 45

Zangerle & Peterson Co. v. Venice Furniture Novelty Mfg.

Co,, 133 F.2d 266 (7th Cir. 1943) ......... 32, 34, 41, 46

Statutes and Regulations Cited:

SE ee ssc cn svc cad doasldante passim

TE en) eae 3, 12, 13, 23, 34, 42

Ne LLCO, oc ceveccssubausmnant kee 2

MB US.C, $2100) v0.eeessecrrnsssssseseseecesscseenns 2

ee seals esvapcneeuubis 39

MICH. COMP. LAWS ANN, §338.1114a (Supp. 1975-76).. 13

MICH. COMP. LAWS ANN. §338.1114a(3Xb) (Supp.

IE 1s Fes in SHAN URER ov bse 0 sche Cokin he Ui en'ncad 13

N.Y. EDUCATION LAW §6810 (McKinney's Supp. 1981)..

N.Y. EDUCATION LAW §6815(2Xh) (McKinney's Supp.

}\ ) RP trae Saab b-0:0 0'0'div t.4i0 @ 9.0 ars-a-0 Ce Phim’ é wieresele 3, 8

N.Y. EDUCATION LAW §6815(2)j) (McKinney’s Supp.

Ne i a a 3, 8

N.Y. EDUCATION LAW §6816 (McKinney's Supp. 1981)..

N.Y. EDUCATION LAW §6816-a (McKinney's Supp. 1981).

eeeeee ee 3, 8

xvi

Contents

Page

N.Y. GEN. BUS. LAW §368-d (McKinney's 1968) ....... 12

N.Y, PUBLIC HEALTH LAW §206(IXo0) (McKinney's

Supp, 1961) .rccccvcccccscccccccccccccccccsvvccecs 3

BU ate OT AEDEED Shc cccccccccccvevccnsccccsesocs 4

United States Constitution Cited:

MEME i. cin cscccccyecsccsancescciscess 2

First Amendment ..........ssseeeescessccevess 2, 25, 32, 40

Rule Cited:

PAs GD). cctbduenceccdvccccccccccccsceeucupeste 35

Other Authorities Cited:

Annotation, What Constitutes In Commerce Within Meaning

of §32(1 a) of Lanham Trade- Mark Act, 15 ALR Fed 368

SENET a SUC GE hn be ecccocgvabsdecceeestayees 30

20 APhARMACY WEEKLY (November 4, 1981) ........ 35

R, Bond and D. Lean, SALES, PROMOTION AND PROD-

UCT DIFFERENTIATION IN TWO PRESCRIPTION

DRUG MARKETS (1977) .........-ceseceeeeeeeees 7

3R Callman, UNFAIR COMPETITION §82.1(m) (Supp.

SPWO) soccctsccevnpesesovcccecccvcsccss 21, 29, 39, 43, 44

xvii

Contents

Page

Comment, Product Simulation in the Eighth Circuit, 57 NEB.

EEE REED WRUS UR es cdrececcebdbabegesccess 24, 42

Competition ir the Drug Industry: Hearings Before the Sub-

comm. on Oversight and Investigations of the House Com-

mittee on Energy and Commerce (97th Cong., Ist Sess.,

DE EDT h racdinh's pos cdpsdbirdcrvecescachoves 6

Competitive Problems in the Drug Industry: Hearings

Before the Subcomm. on Monopoly of the Senate Select

Comm. on Small Business (93d Cong., 2d Sess. 1974).. 6

Cooper, Trademark Aspects of Pharmaceutical Product De-

SE PL RREEE LEOUED occ dtcccccccccccecceascoven 32

Department of Health and Human Services, GUIDE TO

PRESCRIPTION DRUG COSTS; HCFA-02104 (April,

SED CLD MURS Gily CANE s6 v'c bcos sc dpadecerhesgocse 23

S. Dichter, Handbook of Consumer Motivations, (1964) .. 21

DRUG PRODUCT SELECTION, STAFF REPORT TO

THE FEDERAL TRADE COMMISSION (Bureau of

Consumer Protection, Jan. 1979) ........cceeeeeeees 6, 9

FDA Drug List: Key to Generic Substitution, FDA CON-

SRR AM OWN CES’, oc a cao Gio chshcee sect. «

1 Gilson, TRADEMARK PROTECTION AND PRAC-

TICE, (1980) ..... ewe sbercctocccoscodeocenesienes 26

xviii

Contents

Page

C.W. Gowdy, J.T. Hamilton and R.B. Philip, A Controlled

Clinical Trial Using Placebos in Normal Subjects: A

Teaching Exercise, 96 CAN.MED.ASS'N J. 1317 (1967). 21

Haddad, Generic Drugs — Tomorrow’s Market, 33 FOOD,

DRUG & COSM.L.J. 488 (1978) ......eeeeeeeeeeees 9

A. Leslie, Ethics and Practice of Placebo Therapy, 16 AM.

PEERS ENUOD ccidinncccccndccdadsbaseautnace cee 21

J.T. McCarthy, TRADEMARKS AND UNFAIR COMPE-

MEET AIEED) cibowrccccccccccsepedeebes 27, 28, 30, 39

1-Part 2 MOORE’S FEDERAL PRACTICE (2d Ed. 1979)

biinins CaMEE Gide cUURMa nb cce-concccsedeveeséionecnan 18

National Association of Board of Pharmacy Survey of

Pharmacy Law (1981-82) .......cccecseeceececesnce 8

Note, Consumer Protection and Prescription Drugs: The

Generic Drug Substitution Laws, 67 KY.L.J. 384 (1978-

PR: womeheas vi eri nes -abchcotins CUmbirek ees bua 4, 7,8

Note, Jmproving Michigan’s Generic Drug Law, 9 MICH.

Fike RE PO EADIE) Si occducccctcmadbecdobecs 13

Note, Unfair Competition and the Doctrine of Functionality,

64 COLUM. L. REV. 544 (1964) ....... PEE

xix

Contenzs

Page

Prescription Drug Labeling and Price Advertising, Hearings

Before the Subcomm. on Consumer Protection and Fin-

ance for the House Comm. on Interstate and Foreign Com-

merce (94th Cong., 2nd Sess. April 22, 1976) ....... 22, 23

Report of New York State Assembly Office of Legislative

Oversight and Analysis, Are Generics Safe? (June 23,

SE Cine h dia hak dteeWabebeccdpctadecnsodoannanss $ 6

RESTATEMENT OF TORTS, §742 (1938) ......--0e00. 45

Schapira, et al., Study on the Effects of Tablet Colour in the

Treatment of Anxiety States (1970) BRIT. MED J. 2:446. 21

A. Seidel, S. Dubroff, and E. Gonda, TRADEMARK LAW

AND PRACTICE (1963) .......ccceeesceecsceeeees 29

SRI International, Pharmaceutical Industry Perspectives:

A U.S. Generics Breakthrough? (May 1980) ......... 9

Stern, The Persantine, Librax & Elavil Decisions: Colourful

Brands of Drugs, 2 EUR. INTEL. PROP. REV. 59 (1981) . 43

Stern & Hoffman, Public Injury and the Public Interest: Sec-

ondary Meaning in the Law of Unfair Competition, 110

eR PE EOED 0.0 viliccc.cccen detiddebedeence 42

D.S. Trouton, Placebos and Their Pschycological Effect,

103 JIMENTAL SCL., 344 (1957) .......cceeceeeeees 21

Willig, The Prosubstitution Trend in Modern Pharmacy Law,

6 U.MICH.J.L. REFORM | (1972) ........ceessees 4

INDEX TO APPENDICES TO THE PETITION FOR

CERTIORARI

For the convenience of the Court, the appendices to Inwood’s

petition for certiorari are listed below.

Page

Appendix A - Opinion of the United States District la

Court for the Eastern District of New

York, Ives Laboratories, Inc. v.

Darby Drug Co., Inc., 455 F.Supp.

939 (E.D.N.Y. 1979)

Appendix B - Opinion of the United States Court of 28a

Appeals for the Second Circuit, /ves

Laboratories, Inc. v. Darby Drug

Co., Inc., 601 F.2d 631 (2d Cir. 1979)

Appendix C - Opinion of the United States District 56a

Court for the Eastern District of New

York, Jves Laboratories, Inc. v.

Darby Drug Co., Inc., 488 F.Supp.

394 (E.D.N.Y. 1980)

Appendix D - Opinion of the United States Court of Tla

Appeals for the Second Circuit, /ves

Laboratories, Inc. v. Darby Drug

Co., Inc., 638 F.2d 538 (2d Cir. 1981)

Appendix E - Order of the United States Court of 94a

Appeals for the Second Circuit, /ves

Laboratories, Inc. v. Darby Drug

Co., Inc. (2d Cir., Feb. 25, 1981)

Appendix F -

xxi

Memorandum and Order of the

United States District Court for the

Eastern District of New York, ——

F.sepp. au, ‘No. 78 €.372

(E.D.N.Y., May 12, 1981)

Article I, §8, clause 8 of the 105a

Constitution of the United States

First Amendment to the Constitution 106a

of the United States

§32 of the Lanham Act, 15 U.S.C. 107a

$1114

§43(a) of the Lanham Act, 15 U.S.C. 110a

§1125(a)

New York Education Law, §§6810; 112a-120a

6815(2)(h), (j); 6816; 6816-a

(McKinney’s Supp. 1981)

New York Public Health Law, 12la

§$206(1)(0) (McKinney’s Supp. 1981)

No. 80-2182

No. 81-11

In The

Supreme Court of the Huited States

October Term, 1981

INWOOD LABORATORIES, INC. and PREMO

PHARMACEUTICAL LABORATORIES, INC.,

Petitioners,

vs.

IVES LABORATORIES, INC.,

Respondent.

On Writ of Certiorari to the United States Court of Appeals for

the Second Circuit

BRIEF ON THE MERITS FOR PETITIONER INWOOD

LABORATORIES, INC.

OPINIONS BELOW

For convenience, the five opinions rendered below were

reprinted in the Appendices to the Petition for Certiorari

(“Pet.App.”) in chronological order.

The first opinion of the District Court, denying

respondent’s request for preliminary injunctive relief on its

primary claims, is officially reported at 455 F.Supp. 939

(E.D.N.Y. 1978), and reprinted in Pet.App. A at la-27a

(hereinafter referred to as “Ives I”). The Court of Appeals’

decision, affirming the District Court’s denial of preliminary

injunctive relief, is officially reported at 601 F.2d 631 (2d Cir.

rm and reprinted in Pet.App. B at 28a-53a (hereinafter “/ves

The second opinion of the District Court, dismissing

respondent's complaint, is officially reported at 488 F.Supp, 394

(E.D.N.Y. 1980), and reprinted in Pet.App. C at -70a

(hereinafter “/ves 111"). The opinion of the Court of Appeals at

issue herein, reversing the District Court, is officially reported at

638 F.2d 538 (2d Cir. 1981), and reprinted in Pet.App. D at 7la-

93a (hereinafter “/ves 1V"), A subsequent order by the Court of

Appeals denied petitioners’ timely petition for rehearing or

rehearing en banc without opinion on February 25, 1981. The

order is not officially reported, and a copy of this order is

reprinted in Pet.App. E at 94a-95a. Acting on the mandate of

the Court of Appeals, on May 12, 1981, the District Court

entered an order which, inter alia, enjoined petitioners from

marketing a drug product in the same capsule colors as those

sold by respondent. The memorandum and order are not yet

officially reported, and copies thereof are reprinted in Pet.App.

F at 96a-104a (hereinafter “/ves V").

JUAISDICTION

The judgment of the United States Court of Appeais for the

Second Circuit, sought to be reviewed herein, was entered on

January 8, 1981. itioners’ subsequent timely peution for

rehearing with tion for rehearing en banc was denied on

February 25, 1981. Court granted petitioners’ request for an

extension of time within which to file their petition for a writ of

certiorari to and including June 25, 1981. The ae for a writ

of certiorari in Case No. 80-2182 was duly on June 24,

1981, and granted on October 13, 1981. 28 U.S.C. §2101(c);

Supreme Court Rules, 20.2, 20.4, 20.6 (1981). By order of the

Court, the petition was consolidated with Petition No. 81-12

filed on behalf of Darby, Sherry, Rugby and MD. See 50

U.S.L.W. 3278 (October 13, 1981).

The jurisdiction of this Court is invoked under 28 U.S.C.

§1254(1).

CONSTITUTIONAL PROVISIONS AND STATUTES

INVOLVED

The constitutional provisions involved herein are Article I,

§8, clause 8 of the Constitution of the United States and the

First Amendment to the Constitution of the United States. The

federal statutory provisions involved herein are §§32 and 43(a)

of the Lanham Act [15 U.S.C. §§1114; 1125(a)]. The state

statutory provisions involved herein are N.Y. Education Law

§$§6810; 6815(2)(h), (j); 6816; 6816-a (McKinney's Supp. 1981);

o and N.Y. Public Health Law §206(l)(o0) (McKinney's Supp.

1981).

Due to the length of these provisions, they are all reprinted

in full in Pet.App. G at 106a-122a.

STATEMENT OF THE CASE

Introduction

This proceeding arises from the opinion of the United

States Court of Appeals for the Second Circuit in /ves IV,

directing the issuance of an injunction against petitioner Inwood

and the other petitioners herein [/ves IV at Pet.App. 83a, 86a).

The court held that petitioners could not continue to market a

drug product identified generically as “cyclandelate” in capsules

which are colored either blue or blue/red in 200 and 400-mg.

dosages, respectively.

Respondent Ives Laboratories, Inc. (“Ives”) markets a

cyclandelate drug product under the brand name

“CYCLOSPASMOL”. Ives claims in this action that. with

respect to cyclandelate, it has the exclusive right to these

otherwise common capsule colors.

After the Second Circuit had affirmed a denial of Ives’

motion for a preliminary injunction, a bench trial was held in

the United States District Court for the Eastern District of New

York (Nickerson, J.). The trial court rejected all of Ives’

numerous factual and legal theories. On the second appeal,

however, the Court of Appeals reversed. The reversal was based

upon what throughout the proceedings had been

the least significant of all ytam * claims for relief —

that petitioners were liable for “contributory trademark

infringement”.' See /ves IV at Pet.App. 86a, n.1 (Mulligan, J.,

d It is therefore nevessary to review the facts and

course of proceedings below in some detail.

complaint mentioned ‘contributory trademark infringement

tangy i hemi of aleing' sommor iw unr competion cm

(Cont'd)

Parties Hereto and the Nature of their Business

Ives is 2 pharmaceutical company which manufactures and

sells, among other items, a drug product in interstate commerce

under the aforementioned name “CYCLOSPASMOL”.

The active ingredient in the CYCLOSPASMOL product is

identified as cyclandelate.2» CYCLOSPASMOL is a

trademark owned by Ives [Pre-trial Order (“PTO”),

pulated Fact #10, J.A. 34a}.

In the trade, Ives is known as a brand-name pharmaceutical

house. It heavily enor and advertises the sale of brand-name

drugs, such as CYCLOSPASMOL [Tr. 27a-30a, J.A. 86a-89a).’

See also Ives Ul at Pet.App. 57a. focus of its nationwide

efforts is to popularize its brand name for a given

drug product. These promotional efforts are directed only to

eee ee ee ae nn ecto . 64a,

A. 97a; Tr. 67a, J.A. 98a].4 Ives employs a nation sales

force which “details” its brand-name drugs by personal

visits to doctors’ offices [Tr. 8B-10B, J.A. 107a-108a}. Doctors

are thereby encouraged to recommend and prescribe Ives’ brand-

(Cont'd)

(Complaint, Count 11,437, J.A. 21a). “J.A."" references are to the Joint

. All J.A. references which refer to the trial record are preceded by

PER AN nine ca cored yernay gdh hbhpedmarmerte cance Fey pmb ag

All 3:A., suena ehhdld pide to ealihiee axe gresnded by ta “Gx.” ond vt.”

2. Cyclandelate is a cusiraction of the chemical pame 3,5,5

trimethyicyclohexyl mandelate [See P1.Ex. 7, 8; Tr. 35a, 48a, J.A. 570a-S71a}.

See, generally, Abbott Laboratories v. Celebrezze, 228 F.Supp. 855, 863 (D.Del.

1964), vacated on other grounds, 352 F.2d 286 (3d Cir. 1965).

3. hoelyme 6 wr anteples ona eden ager. Ae fo Fe hg

The Pharmacy

U.MICH.J.L. REFORM 1, 16 (1972). The cost of this advertising is, ‘of course,

prop nb te bap saw 9 hp of their drugs.’ See Note, Consumer Protection

Drugs: na ago reser ams Laws, 67 KY.L.J. 384,

in te (hereinafter Consumer Protection)

4. Drug companies may not advertise prescription drugs to the public. See,

8, 21 C.F.R. §200.7 (1981).

name drugs to the exclusion of available alternatives. /ves II at

Pet.App. 3la.’

Petitioner Inwood is known in the pharmacentical trade as

a “generic drug manufacturer,” branch of the

385a]. Inwood, for example, has three outside agents who call

on wholesalers, distributors, large chain stores and to

solicit orders for its drug products [P1.Ex. 144 at 9-10, Tr. 109B,

Tr. 947, J.A.409a], These products are not promoted by brand

name, but rather are labeled and sold under their generic

designation [Tr. 655-656, J.A, 223a-224a; PLEx. 48-60, Tr.

107B-108B, J.A. 586a-652a]. Inwood also solicits its accounts by

mailing price sheets which list its available drugs [P1.Ex. 49, Tr.

107B, 108B, J.A. 609a-618a]. Inwood, like most generic drug

manufacturers (including Premo), does not for the most part sell

to or solicit orders from individual retail pharmacies.’

The key factor in Inwood's ability to com with brand-name

houses such as Ives is the extent to w generic drugs are

acce in the marketplace on their own merit, rather than on

fi advertising and promotion. Inwood and other generic

drug manufacturers compete against each other in selling generic

drug products to distributors and wholesalers [PTO, Stipulated

Facts 27-30, J.A. 37a). Many of the same distributors and

wholesalers also drug products from the brand-name

companies. Petitioners Darby and Sherry, for example, thus

offer both the brand-name product and the generic product to

the individual retail pharmacy® [P1.Ex. 50-56, 58-59; J.A.

643a, 647a-65 la].

5. $e py wont ylonnnpegy Nag wade wags tah oneag ys br

three

aay she United States v. Ciba-Geigy Corp., 508 F. Supp. 111

6. Petitioners Premo and MD are also manufacturers. The remaining

petitioners, Darby, Rugby and Sherry, are distributers of generic drug products.

7. As noted by Judge Nickerson, Inwood does sell to some retail accounts

[/ves Ill at Pet 57a]. These accounts are primarily chain stores, which

function as a for a large number of their own individual

Lapras apc pe ghabaaaehly coaglon A sadn “awn citation

(Finding of Fact #26, noting ‘Inwood only sells to

8. Petitioner R sells generic products [PI.Ex. 145 Tr.

MMA

Certain competitive realities in the marketing of brand-

name and generic drugs are undisputed.’ Inwood and other

generic companies sell their products for far less than do brand-

name companies [Tr. 657, J.A. 225a; Tr. 972-973, J.A. 312a]}.

See generally, Inwood Ex. 6, (Tr. 950, J.A.795a], Report of New

York State Assembly Office of Legislative Oversight and

Analysis, Are Generics Safe? (June 23, 1978). It is also

undisputed that consumers realize savings from the purchase of

generic drugs; in fact generic competition after brand-name

patent expiration drastically reduces the previous monopoly

price structure set during the patent life of a brand-name drug.'®

Another central fact is that the generic names of

pharmaceutical products are generally unfamiliar to the

consuming public, and that even pharmacists and physicians are

often hard-pressed to identify the generic names of popular

pharmaceutical products [Tr. 589-590, J.A. 213a-214a; Tr. 656-

657, J.A. 225a; Tr. 816, J.A. 271a; Premo Ex. 63 at 58-59, Tr.

761-762, J.A. 46la]. See Note, Pharmaceutical Trademarks, 15

TULSA L.J. 327, 342 (1979). Generic drug products are

therefore typically identified as equivalents or comparable

versions of the well-known brand-name pharmaceuticals [P1.Ex.

48-60, J.A. 586a-652a]. Finally, it is undisputed that for at least

26 years,'' it has been the general, if not universal, practice to

market generic drug products in the same color as their brand-

name counterparts. '?

9. For a comprehensive analysis of generic/brand-name drug competition,

see DRUG PRODUCT SELECTION, STAFF REPORT TO THE FEDERAL

TRADE COMMISSION (Bureau of Consumer Protection, Jan. 1979)

(hereinafter ‘‘FTC STAFF REPORT"’’]. See also Competition in the Drug

Industry: Hearing Before the Subcomm. on Oversight and Investigations of

faa eT ee Ist Sess., Mar.

10, 1981).

10. See Competitive Problems in the Drug Industry: Hearings Before the

Subcomm. on Monopoly of the Senate Select Comm. on Small Fiusiness, at

10,268 (93d Cong., 2d Sess. 1974). See also FTC STAFF REPORT at 41.

11. See also (for an early example of this practice in the context of a non-

prescription product) Heide v. Wallace & Co., 129 F. 649 (D.N.J. 1904), aff'd,

135 F. 346 (3d Cir, 1905).

12. Ives’ witness, the President of the New York State Pharmaceutical

Society, stated that such has been the general practice during his entire 24 years

of experience as a pharmacist [Tr. 327, J.A. 176a]. Similar testimony was given

by petitioners’ witnesses [Tr. 770, J.A. 263a-264a; PI.Ex. 144 at 22, J.A. 41 1a;

(Cont'd)

The Impact of Drug Substitution Laws

Unlike most other commodities where trademark or unfair

competition issues arise, the ultimate user of the prescription

drug plays virtually no controlling role in selecting the product

to be purchased: the choice of drug is nade by the physician.

Ives and other brand-name companies therefore seek to induce

physicians to prescribe their product by engaging in extensive

brand-name promotion [Tr. 27a-30a, J.A. 85a-88a; Tr. 85a-89a,

J.A. 100a-103a]. Central to this marketing strategy is the fact

that in all states the law permits physicians to write prescriptions

by brand-name. Some 90% of all prescriptions are so written.

See R.Bond and D.Lean, SALES, PROMOTION AND

PRODUCT DIFFERENTIATION IN TWO PRESCRIPTION

DRUG MARKETS, 85, 89 (1977).

At least until the late 1970's, most state laws required that a

written prescription for a brand-name product be filled only by

dispensing the identified brand. These laws, known as

“antisubstitution laws”, reached their highwater mark by 1972,

when 47 states had laws making it illegal to substitute even

chemically equivalent drugs for the particular brand named in

the prescription. Consumer Protection, 67 KY.L.J. at 389-390.

Given this setting, and in light of extensive brand-name

promotion, brand-name prescribing has become, and continues

to be, the predominant way in which prescription drugs are

idenufied.

Particularly in the case of patented drugs, promotion during

the life of the patent virtually obscures the generic chemical

name for most prescription pharmaceuticals. Upon patent

expiration, the smaller generic competitors are thereby faced

with the formidable obstacle of attempting to market a product

known to and prescribed by physicians primarily under the

former patentholder’s brand name. Under the former law of

almost all states, the ingrained practice of brand-name

prescribing acted as a virtual bar to effective competition, except

for the limited number of instances where physicians prescribed

(Cont'd)

PI.Ex. 145 at 52, J.A. 43la]. At the hearing on the preliminary injunction,

the undisputed evidence was that this practice has been prevalant for at least

40 years [Affidavit of Seymour Blackman in opposition to plaintiff’s motion

for a preliminary injunction, sworn to May 11, 1978 at 414}.

y"3 [Tr. 765, J.A. 262a-263a]. See also Consumer

Protection, 67 KY.L.J. at 390.

In the mid-1970’s, various states began enacting what are

commonly known as “drug substitution” statutes. Recognizing

that physicians prescribe by brand name, even after patent

expiration, due to a lack of familiarity with the generic name,

these statutes specify circumstances under which the pharmacist

may, and in some states must, dispense a lower-cost generic drug

product, even if the physician has identified a brand name on his

written prescription. See, e.g, N.Y. EDUC. LAW §§6810;

6815(2)(h), (j); 6816; and 6816-a (Pet.App. at 112a-122a).'* These

statutes do not prohibit brand-name prescribing. Rather, they

recognize that the physician’s utilization of a brand-name

identification may simply be a shorthand description of the

active ingredient, without the exercise of any medical judgment

or preference that solely the brand-name product be utilized.

The enactment of drug substitution laws by 49 states, the

District of Columbia and Puerto Rico, was accomplished despite

13. “‘It is understandable that physicians do and will continue to prescribe

by brand name . . . It’s easier and quicker. Most drug products have three names.

bl orgigene It has a chemical name intelligible only to accomplished organic

not pronouncable here; Se chlordiazepoxide

seameaieiitiras tome wadeauee chick: © ceatéliiad: as Oolacd tnaliemiite.

What busy physician wouldn’t prefer a tradename such as Librium to the

generic." FDA Drug List: Key to Generic Substitution, FDA CONSUMER

(Feb. 1979) at 17. [See also Tr. 589-590, J.A. 213a]

14. For a comprehensive analysis of the drug substitution laws, see

Consumer Protection, 67 KY.L.J. at 395-407. For an updated compilation, see

National Association of Board of Pharmacy Survey of Pharmacy Law (1981-82)

at 27-28. The format for these statutes varies from state to state. In many,

the law is permissive in nature, i.e., the pharmacist is permitted, usually with

the patient’s consent, to dispense a less-expensive generic product. In some states,

as in the case of New York, generic dispensing is mandatory if the product

in question and its generic manufacturer are listed in an approved state formulary.

Mest states require that written prescriptions be on a form which contains two

lines for the physician’s signature. The physician indicates whether substitution

is permissible or by signing his name on the appropriate line.

(In New York, otherwise mandatory substitution becomes ‘‘permissible”’ if the

product is not listed in the official formulary. See Ives IV at Pet.App. 77a,

n.5). In other states, generic dispensing is automatically authorized unless the

physician indicates to the contrary by affirmatively writing on the prescription

such terms as ‘‘dispense as written’’ or ‘‘no substitution.”’

diet. We

the vigorous opposition of the brand-name companies.'> The

impact of the generic substitution laws on the more than 8

billion dollar prescription drug market is therefore clear.'* After

a patent expires, brand-name drug companies can no longer rely

on the fact that prescribing physicians are unfamiliar with the

generic names of the drug products which they prescribe. They

must instead seek to persuade the prescriber to affirmatively

insist on the brand name by indicating on the prescription forms

that substitution is impermissible, or that the prescription should

be dispensed as written. /ves II at Pet.App. 3la.

The Course of Proceedings Below

Cyclandelate, a prescription drug product, has been

marketed as a vasodilator for use in the treatment and

management of peripheral and cerebral vascular diseases'’

[PTO, Stipulated Fact #19, J.A. 36a]. It is not used to cure any

disease; rather its action is for the purpose of inhibiting the

otherwise progressive and debilitating effects of the indicated

conditions, which generally occur in the elderly [Tr. 43a, J.A.

94a; Tr. 859, J.A. 286a]. Once prescribed, and assuming the

‘physician is satisfied with the therapeutic effect, the use of this

drug necessarily becomes long-term and continues for the

duration of the patient's lifetime [PTO, Stipulated Fact #19, J.A.

36a}. By reason of the nature of their conditions, patients taking

cyclandelate are often disoriented and subject to emotional fears

and stress [Tr. 859, J.A. 286a].

phenomenon,

| 11, Tr. 29a-31a}.

15. See Haddad, Generic Drugs — Tomorrow's Market, 33 FOOD, DRUG

& COSM.L.J. 488, 489 (1978). See also Pharmaceutical Mfrs. Ass'n v. Kennedy,

471 F.Supp. 1224 (D.Md. 1979); Pharmaceutical Society of New York, Inc.

v. Lefkowitz, $86 F.2d 953 (2d Cir. 1978); Pharmaceutical Mfrs. Ass’n v.

Misc.2d ____, Index No. 15831/78 (Sup.Ct.N.Y.Co., Aug. 15,

_ Whelan, —

1980), aff'd without opinion, 79 A.D.2d 876, 435 N.Y.S.2d 618 (ist Dept.,

Dec. 4, 1980), appeal pending (attacking generic substitution law as

unconstitutional, promoting trademark infringement and unfair competition,

and depriving brand-name companies of due process).

NOE akon sy hn FTC STAFF REPORT at 25-28. See also SRI

Pharmaceutical Indusiry Perspectives: A U.S. Generics

Sonkiveeah? Gan toann

17. Its rationale for use under these conditions is that upon ingestion there

is an increase in the blood flow of otherwise-constricted peripheral blood vessels.

it is indicated as adjunctive therapy in such conditions as intermittent

claudication, arteriosclerosis obliterans, thrombophlebitis (to control associated

vasospasm and muscular ischemia), nocturnal leg cramps, Reynaud’s

and for selected cases of ischemic cerebral vascular Uiseuse [P1.Ex.

Since 1958, Ives has sold cyclandelate as a heavily promoted

brand-name product known as “CYCLOSPASMOL”. By 1962,

Ives was marketing two CYCLOSPASMOL dosage forms; an

orange, 100-mg. tablet,'* and a blue, 200-mg. capsule. Until

April 26, 1972, Ives was immune from competition in the United

States f eer ees a vor ope ae

such are not unique or distinctive in the pharmaceutical trade

(See, e.g., Tr. 596, J.A. 2182; Pl.Ex. 137, Tr. 939 — Physician's

Desk Reference, Product Identification Section at 434 for E.R.

Squibb’s VELOSEF product]. Ives has never applied for

i ee

ics Gs eter hte omens to dou Ad Gate te

and that Ives’ prior approval to market CYCLOSPASMOL be

revoked. 44 F.R. 30436-37; 30443-46 (May 25, 1979) [Inwood

Ex.7, Tr. 950; see also Tr. 92B, J.A. 122a-123a]

The foregoing is relevant in two respects. First, efficacy

questions have prevented the listing of cyclandelate in certain

state formularies, with the result that substitution in such states

as New York is permissive, rather than mandatory. See /ves IV

at Pet.App. 77a, n.5. Second, the possible lack of efficacy

raises the distinct possibility that the primary, if not entire, effect

of cyclandelate is due to its function as a placebo. For an

example of a widely prescribed drug being classified as a

placebo, see Mead Johnson & Co. v. Premo Pharmaceutical

Laboratories, Inc., 207 U.S.P.Q. 820, 826 (D.N.J. 1980) [finding

of fact #136]. It is undi that the placebo effect can play an

important role, even for medications which are considered

18. The tablet is not at issue in this litigation.

iin See Weinberger v. Hynson, Westcott & Dvaning, 412 U.S. 609, 614-615

therapeutically effective. [See Tr. 57B, J.A. 118a-119a; Tr. 414-

415, J.A. 19$a-196a]

In 1976, Inwood commenced manufacturing and marketing

a generic cyclandelate product to compete with

CYCLOSPASMOL [PI.Ex. 144 at 20, J.A. 410a]. Inwood

marketed its cyclandelate product to its wholesaler and

distributor accounts in exactly the same way that it and other

generic companies have marketed their products for the last 40

years. Inwood sold its 200-mg. dosage form in a blue capsule

and its 400-mg. dosage form in a blue/red capsule, viz., the same

colors previously used by Ives. As with other products, Inwood’s

was listed on the price sheets it distributed [P1.Ex.

49, J.A. 609a]) These sheets merely identified the generic name,

color and price of Inwood’s product. A separate column

identified the brand-name product to which each generic

product corresponded.”®

At trial, Ives’ witnesses admitted that it had known of the

competitive marketing by Inwood from its very inception [Tr.

69a, J.A. 98a-99a]. This lawsuit, however, was not commenced

until more than two years later—Feb. 28, 1978.7! By this time,

the nationwide sweep of the movement towards “drug

substitution” was almost complete. Also underway was a

widespread effort by brand-name manufacturers, seeking to

reverse the historical trend by which generic drug products were

marketed in colors similar to the brand-name products.”2

Thus, on the eve of the effective date of the New York

substitution law (April 1, 1978), Ives commenced the instant case

against the petitioners. One individual retail pharmacy located in

New York State was also included as a defendant. Ives alleged,

inter alia, that this pharmacy (Lowitt Labs, Inc.) had filled two

20. This innocuous dccument [P1.Ex. 49] ultimately became the key factor

in the finding that Inwood. was liable as a contributory trademark infringer.

A replication of this document is set forth in the Joint Appendix [J.A. 609a-618a].

21. Ives asserted that it had only ‘‘gradually’’ become aware of the injury

ae ee

22. The first of these appears to have been Merrell-National Laboratories,

Inc. v. Zenith Laboratories, Inc., 194 U.S.P.Q. 157 (D.N.J. 1977), aff'd on

procedural grounds, $79 F.2d 786 (3d Cir. 1978). The instant case is the first

of a series of essentially contemporaneous lawsuits against generic companies

to reach this Court. See discussion at Point II, in/ra.

prescriptions for CYCLOSPASMOL by dispensing a generic

version thereof [Complaint 47-52, J.A. aoe The

pharmacy and Ives promptly entered into a consent decree under

which the pharmacy admitted having committed the acts

complained of, and consented to an injunction against any

unlawful substitution [J.A. 29a].

Ives also alleged: (a) one trademark infringement count

against petitioner Sherry;” (b) an unfair competition count

claiming that petitioners’ use of similar capsule colors violated

Ives’ proprietary rights; (c) a claim under §43(a) of the Lanham

Act [15 U.S.C. §1125(a)] that petitioners had engaged in false

advertising by claiming their generic cyclandelate products as

equivalents of Ives’ CYCLOSPASMOL;* and (d) that

petitioners’ actions violated §368-d of the New York State

General Business Law.

Ives moved for a preliminary injunction primarily on the

that the use of identical capsule colors constituted a per

se violation of both §43(a) of the Lanham Act, and the New

York State law of unfair competition. Ives further claimed that

petitioners were liable for “contributory trademark

infringement.” Relying upon Merrell-National Laboratories, Inc.

v. Zenith Laboratories, Inc., supra, Ives contended that mere

copying of capsule colors was enough to establish “secondary

meaning” and its exclusive right to blue and biue/red colors.

The District Court denied the motion (/ves I), and the

Second Circuit affirmed (/ves II). The Second Circuit rejected

Ives’ claim that secondary meaning could be established by

merely that the capsule colors in question had been

copies (/ves Il at Pet.App. 50a-Sla). It held that Ives would have

to establish that consumers had come to associate the capsule

colors as indicating a particular source of origin. Further,

referring to the evidence of functionality described by Judge

Nickerson in /ves I at Pet.App. 22a-24a, the Court of Appeals

23. The complaint’s only reference to statutory trademark infringement

is not at issue here. Sherry had discontinued the name ““SPASMOL"’ for its

cyclandelate. /ves I at Pet.App. 7a.

24, This claim was not supported at trial by any evidence, /ves III at Pet.

ee tee eee he Pe Ae. a ot Oe

noted that such evidence, if confirmed at trial, would defeat Ives’

claim under §$43(a) (/ves II at Pet.App. 48a-Sla).

In support of its motion, Ives introduced evidence

consisting of 15 test-shoppings where Ives personnel presented

prescriptions to one pharmacy in Mississippi, one pharmacy in

Pennsylvania, two pharmacies in New York, and five

sgn Michigan (P1.Ex. 95-107, Tr. 248-249, J.A. 732a-

]. These locations were selected because Ives suspected that

the ists in question were “bad actors” having a

pr towards illegal substitution [PTO, Stipulated Fact

#25, J.A. 37a]. Ives claimed that its suspicions were confirmed

by the results of these test-shoppings and that these pharmacies

had unlawfully substituted a generic brand where the

had called for CYCLOSPASMOL.*

"s opinion in /ves II held that this sparse

enough to make the petitioners vicariously

of the few supposedly unscrupulous

that Ives had shown only that similarity

made it easier for a druggist, already

unlawful conduct, to do so. /ves II at

Ives would have to show that petitioners

if only by implication”, that pharmacists

uct which infringed Ives’ trademark, and that

pa fcage more widespread” than suggested by

nce introduced by Ives below. /d. at Pet.App.

PegRERE°EE

a i

s ¥

ee een eran ot og

The “Additional Evidence” Produced By Ives

At trial, Ives did not attempt to show any further evidence

of “illegal substitution” beyond that already found in /ves II to

be insufficient to ‘support a finding of contributory

infringement.” Accordingly, at trial, Ives did not contend that

“illegal substitution” for CYCLOSPASMOL was any more

than the original 15 instances which had been

adduced in connection with the motion for a i

a a 85-86, J.A. 145a; Tr. 394]. In fact, Ives’ own

the Executive Director of the New York State

jena Society, further testified that “illegal

substitution” was, in fact, not widespread [Tr. 352-353, J.A.

182aP’. Attempting nevertheless to satisfy the Second Circuit’s

standard regarcing contributory trademark infringement,” Ives

a survey intended to show that instances of lawful

substitution under the New York State drug substitution law

might produce instances of trademark infringement. To this end,

Ives surveyed 83 pharmacies in New York State, 42 of which

were selected by Ives personnel and 41 of which were selected at

paver nih wiecourea yf pte ptissay Noomyereccon Ives’

test-shoppers presented a prescription to these pharmacists,

which mentioned CYCLOSPASMOL, and was signed on the

line of the New York prescription form affirmatively

“substitution permissible” [P!.Ex. 83, Tr. 83, 92, J.A. 354a].

26. The evidence showed that a survey could have easily been done to reveal

the extent of “‘illegal substitution,’’ if any, with respect to CYCLOSPASMOL

{Tr. 567-568, J.A. 20Sa]. Ives expressly advised the Court that it would not

undertake to do so (Tr. 86, J.A. 145a; Tr. 394; see also Tr. 1202, J.A. 106a-

107a}.

27. See also Ives IV at Pet.App. 89a, n.2 (Mulligan, J., dissenting).

28. ‘*The authorities later reviewed by us indicte that a manufacturer or

A total of 35 pharmacists in this limited survey”? lawfully

dispensed a generic product* [Tr. 85-86, J.A. 145a]. Of these, 10 |

included the word “CYCLOSPASMOL” in some fashion on the

label of the dispensing container. Five of this latter group

labeled the product as follows:

“Generic Cyclospasmol” [P1.Ex. 82-000, J.A.

691a;3' PLLEx. 82S, J.A. 695a?2].

ol Generic” [P1.Ex. 82E, J.A. 699a;

P1.Ex. 82SSS, J.A. 703a].

“Cyclospa:.aol Gen (Spencer Mead)” [P1.Ex.

82TTT, J.A. 707a]. [All bottles which make up

Exhibit 87. were offered into evidence at the same

time. (Tr. 85-86, 92)]

Of the remaining five, two pharmacists appeared to have listed

the name of the manufacturer, as required under New York law,

viz., “Cyclospasmol 400mg. (Rugby)” [Pi.Ex. 82BB, J.A. 7llapP?

and “Hylan: Cyclospasmol” [P1.Ex. 82A, J.A. 715a]. The other

three [P1.Ex. 82DDD, J.A. 726a; 82 HHH, J.A. 723a; 82T, J.A.

719a] listed only the name “Cyclospasmol”. Thus, a total of

seven pharmacists wrote the term “generic” either on the label or

on a receipt and/or listed the name of the generic manufacturer.

All of the pharmacists except one either spontaneously or in

response to an inquiry expressly informed the customer that the

generic product had been dispensed. For example, as indicated

by PLEx. 82BB, J.A. 712a, the pharmacist informed the patient

orally, “[TJhe generic was dispensed on account of its lower

cost.” See also P1.Ex. 82S, J.A. 696a, where the pharmacist told

31. This pharmacist also listed the name of the generic manufacturer.

32. This pharmacist applied a label stating, ‘{A] generic equivalent drug

has been dispensed of the same quality and at a lower price.”’

33. In addition, this pharmacist gave the customer a receipt expressly stating

that a generic had been dispensed.

the customer that CYCLOSPASMOL was three times more

expensive than the generic. This was consistent with the practice

of many other pharmacists in the survey who dispensed the

and emphasized the cost-savings to customers. (See

Ex. 82-000; 82L; 82W; 82X; 82V VV; 82XXX.) As found by

Judge Nickerson, /ves III at Pet.App. 60a, and noted by Judge

Mulligan in his dissent, /ves IV at Pet.App. 88a, only one

pharmacist “appeared” to have charged a brand-name price.”

The /ves Il opinion had directed that petitioners could be

liable for contributory infringement only if they suggested to

pharmacists, even by implication, that they infringe Ives’

trademark, or if petitioners continued to sell to a pharmacist

whom they knew were infringing the trademark. On the latter

score, Ives introduced no evidence, and did not claim below that

the petitioners continued sales to a pharmacist whom

or should have known was engaged in illegal

tion or mislabeling. /ves III at Pet.App. 59a. See also

Ives IV at Pet.App. 87a-88a (Mulligan, J.). Instead, Ives sought

to satisfy the “suggestion by impl.cation” prong of the standard

established in /ves II by introducing various catalogs and

promotional materials disseminated by petitioners. Ives claimed

that by way of these materials, petitioners “suggested by

implication” that pharmacists mislabel lawfully dispensed

generics as CYCLOSPASMOL.

In the case of Inwood, these “catalogs” consisted solely of

Poe sheets listing various drug products, including cyclandelate

Ex. 49, J.A. 609a-618a]. The price sheets, under appropriate

headings, list (1) the name of the equivalent brand-name

(2) the generic description of the product available

from Inwood, (3) the strength of each drug, (4) the color of each

dosage form, and (5) Inwood’s price. Cyclandelate is in no way

singled out by the price sheet or by any catalogs distributed by

the other petitioners.

Inwood's price sheets were distributed only to its

wholesaler, distributor, chain store and hospital accounts [P1.Ex.

144 at pp. 9-10, J.A. 409a]. Ives introduced no evidence that any

34. An additional survey of 25 pharmacies showed that when lawful

substitution occurred, 23 pharmacists labeled the container as cyclandelate

without reference to CYCLOSPASMOL, and 2 pharmacists labeled it as

“Cyclopasmol Generic” [PI.Ex. 142, Tr. 957, J.A. 375a-382a}.

retail or dispensing pharmacist had seen the price list.*° As a

matter of evidence, there was thus no possible basis for a finding

that Inwood or the other two manufacturer-petitioners had

actually or impliedly suggested anything to any pharmacist.*¢

Ives also introduced the catalogs of the wholesaler

petitioners [P1.Ex. 50-59, J.A. 619a-652a]. In the case of Darby,

which sells both the Ives CYCLOSPASMOL brand and generic

cyclandelate, one section of the catalog advertised the

availability from Darby of both brand-name and generic

products. Cyclandelate is one of the products listed in this

section. Darby’s prices for cyclandelate and Ives’

CYCLOSPASMOL are listed; no reference is made to color

| dae Dio nip 4, J.A. 622a]. Other sections of Darby's catalog

and brand-name products and their prices separately

Age at p. 3, J.A. 62la]. In the generic listing, products are

as a generic for the brand-name, and the color of

Darby’s product is noted.” Although the catalogs of the

wholesaler petitioners are distributed to pharmacists, it is

difficult to understand how these catalogs constituted an implied

suggestion to pharmacists to engage in illegal conduct.**

The uncontradicted evidence below established that a

change in the color of a prescription pharmaceutical plays an

important role in the patient’s initial reaction to the drug

35. There was no such evidence for any of the other manufacturer’s price

lists as well.

36. Petitioner MD’s ‘‘catalog’’ was similarly only a product list which,

moreover, did not contain any color references [P1.Ex.60, J.A. 652a].

37. Sherry’s catalog was similar, except that cyclandelate and

CYCLOSPASMOL were not listed side by side, but rather separately at their

respective alphabetic positions [P1.Ex. 51 at pp.2-3, J.A. 624a-625a]. As already

noted, Rugby sells only generic drugs. Its catalog includes a chart identifying

which of its generic products correspond to the national brand and a separate

section where the price of the generic product (but not CYCLOSPASMOL)

listed [P1.Ex. 57 at p.3, J.A. 646a].

38. Since Judge Mansfield’s discussion does not accurately describe any

of the catalogs, we respectfully ask this Court to examine these catalogs in order

to” what significance, if any, they have on the issue of contributory

infringement

product after it is dispensed. Some of the strongest evidence in

this respect came from Ives. In its unsuccessful attempt to prove

that the blue and blue/red capsule colors have a secondary

meaning, Ives established that for patients taking

CYCLOSPASMOL, the color of the product is central to the

patient’s identification of their medication.*® The Ives survey on

secondary meaning, for all its deficiencies,“ showed that 79% of

patients surveyed identified the capsules presented to them by

their color alone [P1.Ex. 74 at 7, Tr. 70-72, 92, J.A. 332a]. No

one disputed the result of an unexplained change in capsule

color: it was agreed that virtually all patients would believe that

a mistake had been made in filling their prescription in the

absence of a prior explanation by the pharmacist or dispensing

physician [Tr. 62a-63a, J.A. 96a; Tr. 37B, J.A. Illa; Tr. 51B,

J.A. 116a; Tr. 311, J.A. 172a; Tr. 316, J.A. 173a; Tr. 353, J.A.

182a-183a; Tr. 577, J.A. 206a; Tr. 582, J.A. 210a-21 1a; Tr. 667-

668, J.A. 230a; Tr. 687, J.A. 233a-234a; Tr. 691, J.A. 236a; Tr.

39. As the Vice President of Ives stated in his affidavit in support of Ives’

motion for a preliminary injunction at 418:

“*(Tjhe patient receiving his prescription for

CYCLOSPASMOL cyclandelate capsules relies on their

mao confirmed his affidavit statements at trial [Tr. 62a-63a, J.A.

40. The survey was plagued with significant difficulties of execution.

Statistical projectibility was completely compromised by the fact that only a

20% response rate at the initial level could be obtained [Tr. 610-613]. See

generally, \-Part 2 MOORE’S FEDERAL PRACTICE at 123-157 (2d Ed. 1979),

708-709, J.A. 246a; Tr. 734-735, J.A. 249a; Tr. 748, J.A. 257a;

Tr. 775, J.A. 265a; Tr. 868-872, J.A. 291a-294a].

Further, many patients associate the appearance of a

medication with its therapeutic effect*' [Tr. 578, J.A. 207a; Tr.

684, J.A. 23la; Tr. 774, J.A. 264a; Tr. 865, J.A. 289a; Tr. 878,

J.A. 299a]. Some patients accept a pharmacist’s explanation that

a color difference results merely from a change in brand. Many,

however, refuse to accept their pharmacist’s explanation and

insist on contacting their physician [Tr. 690-691, J.A. 236a; Tr.

735-736, J.A. 250a; Tr. 975, J.A. 3)3a]. Thus, some patients may

eventually accept changes in color, but only after having

experienced considerabie anxiety and confusion. /ves III at

Pet.App. 63a. Finally, there was extensive testimony that some

patients refuse to accept equivalent drugs, even after all

explanation, solely because of differences in color [Tr. 581-583,

J.A. 209a-21ia; Tr. 695, J.A. 238a; Tr. 735-736, J.A. 250a; Tr.

826-827, J.A. 277a].

The problem of anxiety and confusion is particularly

important in the case of a maintenance drug such as

cyclandelate, where the patient, by reason of his or her long

period of use, becomes strongly accustomed to a single

appearance [Tr. 579, J.A. 208a; Tr. 698-699, J.A. 240a; Tr. 734,

J.A. 249a; Tr. 869, J.A. 292a-293a]. There was testimony that on

occasion doctors insist on a specific brand for institutionalized

patients solely because they wish to avoid an anxiety producing

color change [Tr. 828-829, J.A. 278a]. Elderly patients are

apprehensive, and even frightened, by changes in

color of their medication [Tr. 582, J.A. 206a; Tr. 695, J.A. 238a;

Tr. 734, J.A. 249a; Tr. 870-871, J.A. 292a-293a].

Uniformity of color was considered critical in institutional

settings where a central pharmacy must dispense medications to

numerous patients without the benefit of immediate container

labeling at the point where each patient receives the product [Tr.

823-826, J.A. 274a-277a]. It was shown that one manufacturer

who attempted to sell cyclandelate in a color different from that

marketed by Ives was forced to discontinue the product within a

41. Such descriptions as ‘‘my red heart pill’’ or ‘‘blue stroke pill’ are

common [Tr. 578, J.A. 207a; Tr. 734, J.A. 249a; Tr. 865, J.A. 289a. cf., Tr.

48B. J.A. l16a: Tr. 318, J.A. 173],

year after its introduction when its hospital clientele refused to

accept it precisely because of the color difference [Tr. 830-831,

J.A. 279a-281a; PILEx. 144 at 28-29, 66-68, J.A. 412a, 417a-

418a]. The Chief Pharmacist of one such hospital testified that,

in making decisions on which generic products to purchase, he

first tried to ascertain whether the generic is available in the

same color as its brand-name counterpart [Tr. 835, J.A. 282a].“

The significance of color also extends beyond the point

where the product is first dispensed. Patients taking multiple

medications, as do many elderly, frequently comingle various

drugs in a single container.*? These patients rely on color to

identify the time and frequency for taking their medications [Tr.

54B, J.A. 118a; Tr. 739, J.A. 253a; Tr. 864-865, J.A. 288a-289a

Even without comingling, physicians in instructing t

patients on occasion specify regimens with specific reference to

color [Tr. 737-738, J.A. 25la-252a; Tr. 870, J.A. 292a]. See also

Ives Ill at Pet.App. 63a.

Changes in color among different brands for the same

product are thus a certain source of confusion, anxiety and

potential danger for these patients [Tr. 576, J.A. 206a; Tr. 862,

J.A. 288a]. Moreover, in emergency situations, where every

possible clue must be used in quickly determining or at least

estimating which drug an overdose victim has ingested, color, to

the extent feasible, was shown to be a valuable aid [Tr. 583-584,

J.A. 21 la-212a; Tr. 695-696, J.A. 238a-239a, Tr. 742, J.A. 254a;

Tr. 874-877, J.A. 296a-298a]. See also Ives Ill at Pet.App. 63a.

Colors serve to identify different dosage strengths of the

same therapeutic entity. Ives uses different colors to identify the

200-mg. and 400-mg. dosages, respectively. Ives admitted that

for this, as well as its other drug products, color performs this

valuable identification function [Tr. 2la, J.A. 83a; Tr. 52a, J.A.

42. Although it is no longer a general practice, at least one state (New

Jersey) required all bidders for cyclandelate procurement contracts to offer the

product in blue and blue/red colors [Inwood Ex.11, Tr. 978-980, 986, J.A. 833a].

43. There is extensive testimony that this is done despite the recommendation

of doctors that it is not a desirable practice (Tr. 53B-54B, J.A. 117a-118a; Tr.

319, J.A. 174a; Tr. 576-580, J.A. 205a-209a; Tr. 685, { A. 231a-232a; Tr. 739,

J.A. 2528; Tr. 864, J.A. 289a; Tr. 865, J.A. 290a].

95a-96a; see also Tr. 832-833, J.A. 28la-282a; Tr. 883, J.A.

Wia).

As noted previously the placebo effect for a drug which, like

CYCLOSPASMOL, may be of only marginal effectiveness, is of

great significance. One of Ives’ principal witnesses acknowledged

that the placebo effect is often even stronger than the actual

pharmacological effect [Tr. 415a, J.A. 195a]. It is undisputed

that changes in color can significantly alter the placebo effect for

a given patient [Tr. 57B, J.A. 118a-119a; Tr. 414-415, J.A.

195a}. The scientific literature shows that specific color

configurations are directly related to psychological efficacy of a

_ drug > gvong iLe., green being preferred for anxiety, yellow

or » etc.

The District Court's finding of functionality of the capsule

colors was therefore firmly rooted in the evidence.*’ If generic

44. At the hearing on a preliminary injunction, it was shown that one

company prominently advertised its various dosage strengths: ‘‘No other

antidepressant offers SIX TABLET STRENGTHS EACH WITH ITS OWN

COLOR. ... An important feature: The six tablet strengths which makes

ELAVIL (Amitryptaline HCL, MSD) so versatile are color coded to facilitate

identification and help accurate dispensing.’’ See Ex.3 to the Affidavit of

Seymour Field in opposition to plaintiff's motion for preliminary injunction,

sworn to May 11, 1978. But cf., Judge Biunno’s varying, if not novel, discussion

of the same evidence in Biocraft Laboratories, Inc. v. Merck & Co., Inc., —..

F.Supp. —., Civ. Action No. 77-693 at 17-18 (D.N./. Oct. 2, 1980).

45. This Court has taken note of the well-established fact that identity of

appearance is an essential aspect of the placebo effect. See Weinberger v. Hynson,

Westcott & Dunning, 412 U.S. at 635 (Appendix). See also Warner-Lambert

Co. v. — $62 F.2d 749, 754, n.9 (D.C.Cir. 1977), cert. denied, 435 U.S.

750 (1978).

46. See, generally, Schapira, et al., Study on the Effects of Tablet Colour

in the Treatment of Anxiety States (1970) BRIT. MED J, 2:446-449; A. Leslie, |

Ethics and Practice of Placebo Therapy, 16 AM.J.MED. 854, 859 (1954); D.S.

Trouton, Placebos and Their Pschycological Effect, 103 J.MENTAL SCI. 344

(1957); S. Dichter, Handbook of Consumer Motivations, 228 (1964); C.W.

Gowdy, J.T. Hamilton and R.B. Philip, A Controlled Clinical Trial Using

Placebos in Normal Subjects: A Teaching Exercise, 96 CAN.MED. ASS'N J.

1317, 1320 (1967). See a!so Norwich Pharmacal Co. v. Sterling Drug, Inc., 271

F.2d 569, 572 (2d Cir. 1959), cert. denied, 362 U.S. 919 (1960); 3 R. Callman,

ny me §82.1(m) at 196 (Supp. 1980). (hereinafter

47. Significantly, courts outside the United States have recently made

findings virtually identical to those of the District Court, See Boots Co. Lid.

(Cont'd)

companies are required to introduce their product in a color

different from that of the brand-name company, it will, in the

hands of the ultimate consumer, be regarded in the first instance

as a mistake [Tr. 699, J.A. 240a]. The generic company’s

product is therefore placed at the discretion of pharmacists and

physicians in terms of their ability to effectively convince

patients that the color differences should not affect therapeutic

. A requirement for use of a different color on an

equivalent drug thereby places a burden on the marketing of the

generic company’s product which is not present in the case of the

brand-name product. The ~1d result is that color, because of its

special role in the eyes of the patient, becomes a factor in the

decision of the patient to take a product, the decision of the

physician to prescribe a product, and the decision of institutions

such as hospitals to purchase the product.“

(Cont'd)

v. Approved Prescription Services, Lid., (1980) _. Ch. —., B.No. 140

(U : Martin Meredith) (Ch. Div’l. Ct. March 6, 1980), aff'd, [1980]

‘com 140 (Unreported: Association) (Court of Appeal Civ. Div. March 28,

“There is a good deal of evidence which shows that in

connection wit! other drugs different manufacturers do use

exactly the same shape and colour or shapes and colours which

are, to a fair approximation, the same; and the reason why

they do so is because apparently, if patients have been used

See also Roche Products Lid v. Berk Pharmaceuticals, Lid., [1973] RPC 473

part

(Cont'd)

As pointed out in Department of Health and Human

Services, GUIDE TO PRESCRIPTION DRUG COSTS;

HCFA-02104 (April, 1980):

“The FDA proposes to consider products as

therapeutically equivalent if they meet the

policies outlined in this document, even though

they may differ in certain other characteristics,

¢.g., color, flavor, packaging, expiration date and

minor aspects of labeling. When such differences

are important in the care of a particular patient,

it is appropriate for the prescribing physician to

require that a particular brand be dispensed as a

medical necessity.” /d. at i59.

It may be fairly said, as Judge Nickerson found, that identity of

color is an important ingredient in the commercial success of the

marketing of generic drug products. See /ves Ill. See also

Pagliero v. Wallace China Co., 198 F.2d 339, 343 (9th Cir.

1952), accord, Ives Il at Pet. App. 49a-50a.

The I°uling of the District Court After Trial

The District Court rejected Ives’ principal claim under

$43(a) of the Lanham Act. It held that the functionality of

capsule colors for pharmaceutical products precluded the

monopoly which Ives was seeking to establish, and that in any

event Ives failed to show that its capsule colors had developed

secondary meaning of a single, albeit anonymous, source to the

patients who received the medication.” In fact, the court found

(Cont'd)

Lawrence A. Tilis, M.D., Prescription Drug Labeling and

Price Advertising, Hearings Before the Subcomm. on

Consumer Protection and Finance for the House Comm. on

Interstate and Foreign Commerce at 176 (94th Cong., 2nd

Sess. April 22, 1976).

49. In fact, it was almost impossible for Ives to demonstrate secondary

meaning as of the late date it conducted its survey, see Marion Laboratories,

Inc. v. Michigan Pharmacal Corp., 338 F Supp. 762, 769 (E.D.Mich. 1972),

aff'd without opinion, 473 F.2d 910 (6th Cir. 1973). By that time, approximately

22 companies were manufacturing and/or distributing cyclandelate in the same

colors as those used by Ives [See Inwood Ex.12, Tr. 955, J.A. 444a, and /ves

Laboratories, Inc. v. Bioline Laboratories, Inc., et al., Civ. Action No. 81-914

(D.N.J., Complaint filed Mar. 3, 1981)]. It was not true that the colors

(Cont'd)

that patients regarded the name “CYCLOSPASMOL” as a

generic description of the product, rather than as a brand name.

Ives III at Pet.App. 67a-68a.

On the issue of contributory trademark infringement, the

district court noted that Ives had failed to introduce any

additional evidence of “illegal substitution” beyond that already

found insufficient in Jves Il. The trial court also rejected the

“additional evidence” submitted by Ives showing so-called

“mislabeling” during instances of lawful substitution. The Court

found that the “mislabeling” had not been shown to have been

induced by petitioners; that with only one exception, no

pharmacist had intended to profit from the listing of the word

“CYCLOSPASMOL” on the label of the lawfully dispensed

generic substitute; and all but one pharmacist had actually told

the customer that the product was a generic version. The court

concluded that the evidence hardly justified an inference that

defendants had impliedly invited druggists to “mislabel”.*

SUMMARY OF ARGUMENT

A. Petitioner Inwood was held liable for “contributory

trademark infringement” under Section 32 of the Lanham Act.

However, there was no “trademark infringement” for which

petitioner could be held liable as a contributor. A few

pharmacists were shown by a survey (of dubious statistical

relevance) to have /awfully dispensed the generic product

cyclandelate, and to have labeled or described it as “Generic

Cyclospasmol”. These pharmacists derived no unfair profit to

themselves and caused respondent no injury. The description

which they used does not constitute trademark infringement

since “Generic Cyclospasmol” is an accurate description of the

(Cont'd)

constituted an identification of one source, since the same colors had been

available for almost five years from many sources. C/., Comment, Product

Simulation in the Eighth Circuit, 57 NEB.L.REV. 91, 139-140 (1978) (hereinafter

Product Simulaiion). See also Ives Il at Pet.App. 48a, n.14.

50. In view of this finding, the District Court did not reach the issue of

whether there had been trademark infringement as such in the case of the

instances of so-called mislabelling.

contents of the container. In view of the manner in which

prescription pharmaceuticals are sold, there was no evidence of

any actual or likelihood of confusion. Therefore, such use is not

prohibited by the trademark laws.

B. The finding of contributory infringement was in any

event erroneous. Such a finding under the applicable legal

precedent laid down by the /ves II ruling required a showing

that petitioner had implicitly suggested to druggists that they

engage in an act of trademark infringement and that such acts

were widespread. No such showing was made. The mere fact

that petitioners used functional capsule colors similar to those of

respondent is not a permissible basis for finding liability under

Section 32 of the Lanham Act. The decision of the court below

found the above-described requisite “suggestion” to druggists in

“catalogs”, most of which are not even distributed to druggists.

The content of these catalogs cannot be reasonably read as

suggesting any unlawful conduct. They contain standard trade

information of relevance and lawful interest to the parties to

whom they are directed. Basing a finding of liability on

petitioner’s dissemination of this truthful information amounts

to an impermissible infringement on the First Amendment right

to free speech.

Even assuming that a technical finding of liability can be

supported, the Court of Appeals’ direction that an injunction be

entered prohibiting petitioner from utilizing the capsule colors at

issue was improper. The prior decisions of this Court have

clearly enunciated a public policy in favor of lawful imitation

precluding such an injunction. Moreover, since colors of the

prescription pharmaceuticals at issue were found by the District

Court to be functional, the decision of the Second Circuit has

given respondent an unlawful monopolistic, anti-competitive

advantage. In effect respondent’s expired patent monopoly has

been extended in a significant respect to the detriment of

consumers who derive the benefit of lower cost, high quality

generic drugs. The Court of Appeals simply declined to adhere

to this Court’s earlier decisions, which hold that other

prophylactic measures, but not a ban on utilization of color,

could be applied. The continued force of such earlier rulings

should be reaffirmed.

ARGUMENT

I. THE TRUTHFUL COMPARATIVE USE OF A

TRADEMARK IN LABELING AND ADVERTISING

FORMS NO LEGAL BASIS FOR A FINDING OF

TRADEMARK INFRINGEMENT OR

CONTRIBUTORY TRADEMARK INFRINGEMENT

Petitioner Inwood respectfully submits that the /ves IV

holding, which found petitioners liable for contributory

trademark infringement under §32 of the Lanham Act should be

reversed since neither trademark infringement nor contributory

trademark infringement occurred under the applicable legal

criteria.

A. THE IVES IV MAJORITY OPINION ERRED IN

ASSUMING THAT PHARMACISTS HAD

COMMITTED TRADEMARK INFRINGEMENT

It is axiomatic that Inwood and the other petitioners could

not have been held liable for contributory trademark

infringement unless the acts to which they supposedly

contributed constituted trademark infringement in the first

instance.5' Yet, the /ves IV decision fails to deal with the

threshold issue raised by petitioners below as to whether the

supposed “additional evidence” of mislabeling established

trademark infringement under the statutory criteria and

applicable case law.

As noted by the District Court and Judge Mulligan in his

dissent, the pharmacists in question had labeled or orally

described the drug products at issue as a generic version of

CYCLOSPASMOL [Ives II at Pet.App. 60a, 88a-89a].

The trademark laws do not grant a right “in gross” which is

protectible against the whole world, in the abstract, without

consideration of the facts and circumstances of each particular

case. | Gilson, TRADEMARK PROTECTION AND

PRACTICE, §5.09[3] at 5-76, 5-77 (1980). This basic tenet of

51. Cf., Reid, Murdoch & Co. v. H.P. Coffee Co., 48 F.2d 817 (8th Cir.),

cert. denied, 284 U.S. 621 (1931); Stix Products, Inc. v. United Merchants &

Mfrs., Inc., 295 F.Supp. 479 (S.D.N.Y.1968); John B. Stetson Co. v. Stephen

L. Stetson Co., 14 F.Supp. 74 (S.D.N.Y.), modified, 85 F.2d 586 (2d Cir.),

cert. denied, 299 U.S. 605 (1936).

trademark law is central to the Lanham Act’s definition of what

constitutes trademark infringement:

“(1) Any person who shall, without the consent

of the registrant (a) use in commerce any

reproduction ... of a registered mark. . .which

such use is likely to cause confusion, or to cause

mistake, or to deceive; . . .shall be liable in a civil

action for the remedies hereinafter provided.” [15

U.S.C. §1114(1)(a)] [emphasis added}>?

While the commentators have identified a split among the

Circuits, as yet unaddressed by this Court, as to whether the

requisite test of likelihood of confusion, mistake or deceit is one

of fact, law or a mixed question of law or fact, see J.T.

McCarthy, TRADEMARKS AND UNFAIR COMPETITION

§23:22 (1973) (*“McCARTHY”), there is no dispute that the

finding must be made. /d., and cases cited at §23:1 n.1. In this

case no such finding was made.

Never before has any court held that the mere description of

one product as a generic equivalent of a trademark product is

sufficient to constitute trademark infringement under the

Lanham Act. To state, as occurred here, that a product is

“Generic Cyclospasmol” clearly indicates that it is not the

trademarked product but rather a generic version thereof. There

was no evidence that patients receiving such a drug product

pursuant to a lawful substitution were in any way confused or

deceived. Nor has there been any judicial finding of even a

likelihood of confusion. Indeed the absence of evidence of actual

confusion in cases of lawful substitution after more than five

years of marketing by petitioners raises a strong presumption

that there is little likelihood of confusion. See Pignons S.A. De

Mecanique De Precision y. Polaroid Corp., 657 F.2d 482, 490-91

(Ist Cir. 1981); Amstar Corp. v. Domino's Pizza, Inc., 615 F.2d

252, 263 (Sth Cir.), cert. denied, 449 U.S. 899 (1980).

That a comparative identification of one product by

reference to another’s trademark does not give rise to liability

was established by this Court in the landmark case of Saxlehner

v. ‘Wagner, 216 U.S. 375 (1910), where Justice Holmes

recognized that:

$2. The same criteria are also found in §32(1)(b) of the Act [15 U.S.C.

§1114(1)(b)).

“{tJhe real intent of the plaintiff's bill, it seems, is

to extend the monopoly of her type of bitter

water, by preventing manufacturers from telling

the public in a way that will be understood what

they are copying and trying to sell. But the

plaintiff has no patent for the water, and the

defendants have a right to reproduce it as nearly

as they can. They have a right to tell the public

what they are doing and to get whatever share

they can in the popularity of the water by

advertising that they are trying to make the same

article and think that they succeed . . .By doing

so they are not trying to get the good will of the

name, but the good will of the goods.” /d. at 380.

The clear precedent prior to /ves IV established that the use

of such written and oral terms*? “generic Cyclospasmol” or

“same as Cyclospasmol” or “equivalent to Cyclospasmol” by the

pharmacist did not constitute an infringement of the

CYCLOSPASMOL trademark. See Champion Spark Plug Co.

v. Sanders, 331 U.S. 125, 128 (1947); Prestonettes, Inc. v. Coty,

264 U.S. 359, 368-369 (1924); Societe Comptoir de L’Indus., etc.

v. Alexander's Dept. Stores, 299 F.2d 33, 36 (2d Cir. 1962);

Taylor Instrument Companies v. Fawley-Brost Co., 139 F.2d 98,

102-103 (7th Cir. 1943), cert. denied, 321 U.S. 785 (1944);

Electric Auto-Lite Co. v. P&D Mfg. Co., 78 F.2d 700, 702-703

(2d Cir.), cert. denied, 296 U.S. 648 (1935); Geisel v. Poynter

Products, 295 F.Supp. 331, 352-354 (S.D.N.Y. 1968).5

Consideration of the question of trademark infringement in

the context of a product dispensed by a pharmacist for.a patient

‘begins with a recognition that the patient does not purchase a

prescription drug product by unilaterally selecting the drug

product of his or her choice. As found by the district court,

patients do not perceive the significance of a trademark as

identifying source for prescription drugs, since brand-name

promotion is limited exclusively to professionals:

$3. Oral exp!anations are clearly sufficient and in fact have sometimes been

required to avoid liability for trademark infringement. See, e.g., Coca-Cola

Co. v. Dorris, 311 F.Supp. 287 (E.D.Ark. 1970).

54. See also Smith v. Chanel, Inc., 402 F.2d 562, 564 (9th Cir. 1968); Viavi

Co. v. Vimedia Co., 245 F. 289, 292 (8th Cir. 1917), cert. denied, 246 U.S.

664 (1918); McCARTHY at §25.14 at 192.

“Ives argues that because ‘Cyclospasmol’ is a

trademark which only it can use, a patient who

identifies a cyclandelate capsule as

‘Cyclospasmol’ is necessarily indicating that he

believes the drug comes from a single source. But

even as to the trademark itself. we must

‘remember that relief always depends upon the

idea that no man shall be allowed to mislead.

people into supposing that his goods are the

plaintiff's, and that there can be no right or

remedy until plaintiff can show that at least

presumptively this will result.’ Bayer Co. v.

United Drug Co., 272 F. 505, 509-510 (S.D.N.Y.

1921) (L.Hand, J.)”

“No doubt to physicians and pharmacists the

word ‘Cyclospasmol’ signifies a source. But there

is no reason to suppose this is so as to patients.

They have not been the target of the sales

campaign, and they play no role in choosing

what drug to buy. Nothing in the record suggests

that they ‘understand by the word anything more

than a kind of drug to which for one reason or

another they [have] become habituated.’ /d. at

510. Such patients as read their prescriptions do

not attribute to Cyclospasmol ‘any other meaning

than as an ingredient in a general compound, to

which faith and science might impart therapeutic

value.’ Jd.” Ives III at Pet.App. 66a-67a.

See Bayer Co. v. United Drug Co., 272 F. 505 (S.D.N.Y. 1921);

Syntex Laboratories, Inc. v. Norwich Pharmacal Co., 315

F.Supp. 45, 49 (S.D.N.Y. 1970)55, affd, 437 F.2d 566 (2d Cir.

1971). As noted by Professor McCarthy:

“Some products, such as prescription drugs, may

be sold only to or through a professional class of

55. In Syntex, Judge Mansfield noted that, ‘‘[e]xcept for the remote

possibility of confusion on the part of a patient who has a quantity of both

products, prescribing physicians and dispensing pharmacists constitute the class

within which confusion between plaintiff's and defendant's products is of concern

to us."” Id. at 49. Cf., Pfizer & Co. v. Generic Formulae, Inc., 275 F.Supp.

421, 423 (E.D.N.Y. 1967). See also A. Seidel, S. Dubroff, and E. Gonda,

TRADEMARK LAW AND PRACTICE 416.08 at 424 (1963); CALLMAN

§83.1(m) at 195 (Supp. 1980).

customers. Such professionals may be trained to

recognize long and complicated terms as the

generic name of a product, whereas the ordinary

customer would unconsciously reject a

complicated term and long for some short, easy

to remember generic name. For example, medical

doctors are familiar with the long, tongue-

twisting generic terms such as dextro-

amphetamine sulfate, or oxytetracycline. But the

consumer may reject such terms and seize upon

what the seller considers a trade mark—such as

Dexedrine or Terramycin. The consumer may

consider such short terms as the generic ‘name’ of

the drug, whereas doctors are trained to know

that Dexedrine and Terramycin are merely brand

names—legal trademarks of only one producer of “

the drug.” McCARTHY at §12.2B at 407.%

In arguing that the acts of the pharmacists constituted

trademark infringement, Ives was in effect claiming that their

trademark functions as such to patients as a class—contrary to

historical experience in the industry. It was therefore error for

the Second Circuit to assume sub silentio that any appearance of

the word “CYCLOSPASMOL” on the label of a dispensing

container per se produced patient confusion.

The “additional evidence” demonstrated not only an absence

of actual confusion, but in fact the “unlikelihood” of confusion:

(1) The prescription presented to the pharmacists expressly

affirmed that substitution was permissible; (2) almost all of the

pharmacists did not use the word “CYCLOSPASMOL!’ alone,

but explained, either orally or in writing, that a generic product

was being dispensed; (3) each patient received the drug

authorized by the physician and the New York drug substitution

law; (4) all but one pharmacist charged an appropriately reduced

generic price; and (5) Ives suffered no competitive injury from

the sales. To classify these instances as trademark infringement

is to exalt form over substance.’

56. See also Tr. 226-227, J.A. 161a; Premo Ex. 63 at 58-59, Tr. 760, J.A.

46la. Cf., DuPont Cellophane Co. v. Waxed Products Co., 85 F.2d 75, 84

(2d Cir.), cert. denied, 299 U.S. 601 (1936).

$7. In the context of lawful substitution, an interesting jurisdictional

question is raised concerning the interstate commerce requirement of §32(1)(a)

of the Lanham Act. See Annotation, 15 ALR Fed 368 (1973).

It appears that the /ves IV majority was oblivious to the

distinction under the trademark law between utilizing a

trademark as a deceptive and misleading source of origin and

the innocent use by the pharmacist, as shown by the survey

which comprised the “additional evidence” introduced by Ives.**

It is important to emphasize that the action of these

pharmacists were not characterized as “mislabeling” because

they falsely identified the product as “Generic Cyclospasmol”.

To the contrary, this term accurately described the product. The

pharmacists’ “offense” was that they varied from the technical

labeling requirements of the New York drug substitution law in

not listing the unfamiliar generic name and/or the name of the

generic manufacturer [Tr. 813-814, J.A. 270a]. Having charged

the generic price, the pharmacists could not have made such

omissions for any ulterior or unlawful motive [Tr. 820, J.A.

273a]. Ives suffered no loss of sales from the action of the

pharmacist in filling the prescription correctly.

Ives IV has thus erroneously transformed a technical

violation of the New York drug labeling law into a finding of per

se trademark infringement. Under applicable trademark

principles, infringement simply did not occur. Infringement can

only be of the public’s right to be free of confusion and the

markholder’s right to be free of unfair competition—neither was

shown to have occurred here. Infringement does not exist, even

though the marks are identical and the goods very similar, where

the evidence indicates no likelihood of confusion. See

Application of E.1.DuPont & De Nemours & Co., 476 F.2d 1357

(CCPA 1973). It is respectfully submitted that the Court of

Appeals’ finding of infringement is erroneous and must be

reversed.

58. For example, the opinion states that 2 out of 25 pharmacists in a survey

conducted by Premo, demonstrating a complete absence of illegal substitution,

had nevertheless labeled the generic cyclandelate as CYCLOSPASMOL [/ves

IV at Pet.App. 81a-82a, n.7]. However, a stipulation entered into in the District

Court expressly states that the two vials in question were labeled “‘Cyclospasmol

Generic,’’ and the pharmacists charged the appropriately lower generic price

(PI.Ex. 142, Tr. 726-731, J.A. 37Sa-382a].

B. THE IVES IV OPINION ERRONEOUSLY

APPLIED THE DOCTRINE OF CONTRIBUTORY

TRADEMARK INFRINGEMENT AND IN SO

DOING INTERFERED WITH PETITIONERS’

EXERCISE OF THEIR FIRST AMENDMENT

RIGHT TO FREE SPEECH

The Second Circuit’s finding that petitioners implictly

suggested that pharmacists engage in trademark infringement is

erroneous and stretches the doctrine of contributory trademark

infringement to a point where it threatens competition in the

field of prescription drugs.

The Lanham Act makes express provision in §32 for

primary trademark infringement. It also makes an express

provision for a type of contributory trademark infringement not

at issue here, i.e., where a party affixes an infringing mark to

goods which are intended for subsequent infringing use in

interstate commerce [15 U.S.C. §1114(1)(b)]. However, the

statute makes no express provision for the species of

contributory trademark infringement at issue in this case. See

Cooper, Trademark Aspects of Pharmaceutical Product Design,

70 TMR i, 39-40 (1980).

It is well-established that liability for contributory

trademark infringement may nevertheless be extended beyond

those who affix the infringing mark or sell goods with such a

mark. Persons who knowingly cooperate in illegal and tortious

activity by encouraging others to engage in trademark

infringement have been found liable. This category of

contributory trademark infringement has historically developed

as a matter of common law outside the direct provisions of the

Lanham Act.% Prior to the decision of Judge Mansfield below,

no court had ever held that this type of contributory trademark

59. See, e.g., Stetson, 85 F.2d at 588; Andrew Jurgens Co. v. Bonded

Products Corp., 21 F.2d 419, 424 (2d Cir. 1927), cert. denied, 275 U.S. 572

(1928); Cuervo v. Jacob Henkell Co., 50 F. 471 (S.D.N.Y. 1892). See also

Corning Glass Works v. Jeanette Glass Co., 308 F.Supp. 1321 (S.D.N.Y.), aff'd

per curiam, 432 F.2d 784 (2d Cir. 1970). But see Judge (later Justice) Minton’s

holding in Zangerie & Peterson Co. v. Venice Furniture Novelty Mfg. Co.,

133 F.2d 266 (7th Cir. 1943).

infringement was actionable directly under §32 of the Lanham

Act.

Whether or not Judge Mansfield was correct in reading the

doctrine of contributory trademark infringement directly into

§32 of the Lanham Act, the criteria established by Judge

Friendly in /ves Il were the guidelines and framework within

which the case was tried by the District Court, and pursuant to

which Judge Mansfield applied and conducted appellate review.

The two-prong standard articulated in /ves II was as follows:

“The authorities later reviewed indicate to us that

a manufacturer or wholesaler would be liable

under Section 32 if he suggested, even if only by

implication, that a retailer fill a bottle with the

generic capsules and apply Ives’ mark to the

label, or continued to sell capsules containing the

generic drug which facilitated this to a druggist

whom he knew or had reason to know was

engaging in the practices just described. The

proper criteria are stated in Coca-Cola Co. v.

Snow Crest Beverages, ...” Ives Il at Pet.App.

35a.

No claim was ever made that any of the petitioners had

continued to sell capsules to a druggist after learning or knowing

that the druggist was actually engaging in trademark

infringement. /ves III at Pet.App. 59a, /ves IV at Pet.App. 87a

(Mulligan, J.). The sole issue, therefore, was whether petitioners

had suggested, even if only by implication, that druggists engage

in such conduct.

Under this prong, mere imitation of color configuration

without more is not sufficient to establish liability. See William

R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526, 531 (1924);

Nugrape Co. of America v. Glazier, 22 F.2d 596, 597 (5th Cir.

1927); Smith, Kline & French Laboratories v. Waldman, 69

F.Supp. 646, 648 (E.D.Pa. 1946); Coca-Cola Co. v. Snow Crest

60. Ives Il, for example, refers to the leading decision of Coca-Cola Co.

v. Snow Crest Beverages, 64 F.Supp. 980 (D.Mass. 1946), aff'd, 162 F.2d 280

(Ist Cir.), cert. denied, 332 U.S. 809 (1947). In that case, contributory

infringement was clearly raised as a matter of common law rights, rather than

as a federal cause of action under §32. C/., Stix Products, Inc. v. United

Merchants & Mfrs., Inc., supra.

Beverages, 64 F.Supp. at 990.°' For a finding of liability, there

must be some actual suggestion, express or implied, that the

infringer engage in the unlawful conduct.® See, e.g., Smith,

Kline & French Laboratories v. Clark & Clark, 157 F.2d 725 (3d

Cir.), cert. denied, 329 U.S. 796 (1946).

Applying this standard, Judge Friendly in /ves Il found:

“{TJhe court was justified in concluding that Ives

failed to adduce the quantum of proof necessary

to require issuance of a temporary injunction for

contributory infringement even on what we deem

the proper standard of liability under §32. Ives’

proof was limited to 15 instances of improper

substitution and defendants conceded only that

the identity of color made this easier if a druggist

were so inclined.” /ves Il at Pet.App. 35a-36a.

“As noted above, the evidence of improper

substitution was limited to 15 prescriptions.

Discovery and trial might show that the practice

was much more widespread or, on the other

hand, as defendants suggest, that the pharmacies

in question were known bad actors and few

a engaged in such practices.” /d. at Pet.App.

At trial, Ives abandoned all efforts to show that “illegal

substitution” of cyclandelate*? was more widespread than the

61. See also Swank, Inc. v. Anson, Inc., 196 F.2d 330 (ist Cir. 1952);

Zangerle & Peterson Co. v. Venice Furniture Novelty Mfg.Co., supra; Famolare,

Inc. v. Melville Corp., 472 F.Supp. 738 (D.Haw. 1979), aff'd without opinion,

652 F.2d 62 (9h Cir. 1981); Pezon et Michel v. Ernest R. Hewin Associates,

Inc., 270 F.Supp. 423 (S.D.N.Y. 1967); Mattel, Inc. v. Goldberger Doll Mfg.

Co., Inc., 200 F.Supp. 517 (E.D.N.Y. 1961). C/., Sears, Roebuck & Co. v.

Stiffel Co., 376 U.S. 225 (1964); and Compco Corp. v. Day-Brite Lighting,

Inc., 376 U.S. 234 (1964).

62. Ives had argued in the appeal of /ves | that mere copying of color

was sufficient to establish liability under §32, as well as secondary meaning

under §43(a). This was rejected. /ves Il at Pet.App. 50a-Sia.

63. i.¢., a prescription which by law may be filled only with the specific

brand product is filled instead with a different product. See Pet.App. at

112a-120a.

original evidence submitted. /ves III Pet. at App. 59a. A survey

to determine the extent (if any) of illegal substitution of

cyclandelate could easily have been done [Tr. 120a, J.A. 106a-

107a; Tr. 568, J.A. 204a], but the record shows that Ives

deliberately chose not to do so [Tr. 86, J.A. 145a].® Instead,

Ives attempted to show that in cases of /awful substitution, the

word Cyclospasmol was sometimes applied to the dispensing

container. Ives thus sought to satisfy Judge Friendly’s

requirement that the trademark infringement be “much more

widespread” solely with reference to lawful substitution, and

conducted its survey attempting to provide such “additional

evidence” as previously described.

In /ves IV, Judge Mansfield accepted Ives’ claim that the

“additional evidernce’’—described as evidence of

“mislabeling”—was sufficient and that petitioners could thereby

be found liable for having implicitly suggested that pharmacists

engage in such “mislabeling”. According to the majority opinion,

the criteria laid down in /ves II were satisfied as follows:

“The additional evidence introduced by Ives at

trial was clearly sufficient to establish a §32

violation. By using capsules of identical color,

64. At trial, the following colloquy took place:

“THE COURT: I take it that you are not — I think I may

have asked you this — you are not going to offer any

testimony of shopping that shows an illegal substitution.’’

“MS. DRISCOLL: Not other than those we had on the initial

motion."’ Tr.394. [See also Tr. 86, J.A. 145Sa].

65. The evidence of illegal substitution was thus confined to a total of

either four, or at most nine, pharmacies. See n.25 supra, and accompanying

text. In confusing dicta, Judge Mansfield nevertheless describes ‘‘illegal

substitution’’ as widespread. At the request of Ives, judicial notice was taken

of six indictments of pharmacies, which were handed down after the trial was

completed. /ves IV at Pet.App. 84, n.5. These pharmacies were alleged to have

illegally substituted cyclandelate. If judicial notice was intended as a means of

filling a huge gap in the evidence below, it was clearly improper. See Goland

v. CIA, 607 F.2d 339, 371-372 (D.C.Cir. 1978), cert. denied, 445 U.S. 927 (1980);

F.R.Civ.P. 60(b). Cf., United States v. Lowell, 649 F.2d 950 (3d Cir. 1981).

We cannot believe, however, that Judge Mansfield seriously intended that by

raising the total number of pharmacists to fifteen, at most, that illegal substitution

of cyclandelate could be characterized as ‘‘widespread’’. There are more than

140,000 pharmacists in the United States. See 20 APhARMACY WEEKLY at

170 (November 4, 1981). See also Ives IV at Pet.App. 90a (Mulligan, J.).

size and shape, together with a catalog describing

their appearance and listing comparative prices

of CYCLOSPASMOL and generic cyclandelate,

appellees could reasonably anticipate that their

generic drug product would by a substantial

number of druggisis be substituted illegally for

Ives’ trademarked CYCLOSPASMOL* or that

bottles of their lower-priced product might be

mislabeled as CYCLOSPASMOL, all to the

druggists’ economic advantage. This amounted to

a suggestion, at least by implication, that the

druggists take advantage of the opportunity to

engage in such miscohdu.t.” /ves IV at Pet.App.

82a.

No such implicit suggestion can be found in the so-called

catalogs. As regards Inwood, the statement that its price sheet

amounted to a suggestion by implication that druggists take

advantage of an opportunity to engage in misconduct defies.

rational analysis. Even assuming that this price sheet would have

been seen by some druggists, the mere advertising of the

availability of products for sale, a listing of the product to which

they were generically equivalent and a description of the

oe of all products could hardly amount to an

plication” to druggists that they engage in misconduct. On

the contrary, it simply was a notification that the product was

available for sale at the prices stated. The manufacturers’

66. This is the first of various instances where Judge Mansfield comingles

the concept of “‘illegal substitution’’ with that of technical ‘‘mislabelling’’. The

additional evidence referred to in this paragraph of the opinion and described

earlier by Judge Mansfield dealt only with mislabeling and not illegal substitution.

There are other troublesome factual errors in the opinion. As part of the

‘additional evidence’’, Judge Mansfield refers to ‘*9 out of 17 instances’’ of

alleged mislabeling. We are unable to find any testimony in the Record identifying

the seventeen instances of which these nine are said to be a part. Significantly,

no such reference is found in Judge Nickerson's opinion. The /ves IV opinion

also states that many generic drugs are successfully marketed in capsules or

do not copy Ives’ product. The court lists one example. See /ves

IV at Pet.App. 85a. The actual evidence, was that the relied-upon example was

such product [Tr. 20]. There were no others and, as discussed, one

company which had tried to market in a different color was forced to discontinue

it because the unfamiliar color was not acceptable to its hospital customers.

Another error with respect to the characterization of the testimony of an /ves

witness, Lawlor, as a ‘‘witness called by appellees’’ was corrected. See /ves IV

at Pet.App. 85a, 93a. After the correction, the statement loses its force.

catalogs did not, as Judge Mansfield suggests, list comparative

prices of CYCLOSPASMOL and generic cyclandelate. Some of

the wholesaler catalogs did so simply because these companies

offered both products for sale. Moreover, as noted by Judge

Mulligan:

“{I}t was common in the industry to list the

generic drug next to the brand name drug...

Thus, it would seem that juxtaposition of the

generic and brand-name drug would be

imperative for generic manufacturers to compete

effectively.” Ives IV at Pet.App. 90a, n.4. See also

Tr. 657-659, J.A. 225a-227a.

The most that Judge Mansfield could state in describing

petitioners’ price sheets was that they were “pro-substitution”

catalogs. [ves IV at Pet.App. 76a. Assuming arguendo that this

description is accurate, it highlights the error made in the court

below. In some of the early cases, companies dealing directly

with pharmacies were found to have advertised one or two

products in their literature which emphasized similarity of color

(e.g., “Color Guaranteed”) and differences in price where the

brand-name product was not offered for sale by the company.°’

Additional illicit suggestions such as “keep the substitution cards

out of sight” were also found.®* These cases occurred at a time

when substitution was unlawful in almost all states and generic

prescribing was extremely limited [Tr. 765-766, J.A. 263a]. Under

those circumstances, a finding that an isolated company’s action

was “pro-substitution” might fairly be construed as an implied

suggestion to unlawfully substitute. Today, as previously noted,

the situation is far different. Even if petitioners’ catalogs are

“pro-substitution”, that can be no basis for an implication that

unlawful criminal activity is suggested thereby.”

67. See, e.g., Ross-Whitney Corp. v. Smith, Kline & French Laboratories,

207 F.2d 190 (9th Cir. 1953); Smith, Kline & French Laboratories v. Broder,

125 U.S.P.Q. 299 (S.D.Tex. 1959); Smith, Kline & French Laboratories v. Heart

Pharmaceutical Corp., 90 F.Supp. 976 (S.D.N.Y. 1950); Martin H. Smith Co.

v. American Pharmaceutical Co., 270 N.Y. 184 (1936).

68. See Upjohn Co. v. Schwartz, 246 F.2d 254, 260-61 (2d Cir. 1957).

69. Contrary to the statements in the /ves IV opinion, the instances of

mislabeling did not constitute any economic advantage to the druggists or

petitioners.

38 .-

Instructive in this regard is Judge Wyzanski’s decision in

Coca-Cola Co. v. Snow Crest Beverages, supra, which describes

a situation somewhat comparable to the case at bar. The Coca-

Cola Company there attempted to hold a competitor liable as a

contributory trademark infringer because patrons of certain

bars, upon requesting a drink consisting of or supposedly

including Coca-Cola, were in fact receiving a substitute cola

marketed by the defendant. Presumably the substitution might

not have occurred if the colors of the colas had been different.”

In Snow-Crest, as Ives does here, Coca-Cola argued that it was

not seeking to prohibit competition from another cola drink, but

merely to hold the competitor liable for the acts of bartenders in

unlawfully substituting the competitive cola to the ultimate

customer. In what has become the classic and definitive answer

to Ives’ argument, Judge’ Wyzanski held: '

“But in the case at bar plaintiff seems to urge that

defendant’s obligation goes further. Plaintiff

appears to contend that once a defendant has

knowledge that some customers of bars

specifically order ‘rum (or whiskey) and Coca-

Cola’ and that there are in all probability some

rogues in the bar business as in other businesses,

the defendant has a duty either (a) not to sell to

any bar a cola until defendant first creates for

that cola special consumer demand, or (b) at least

not sell a cola to a bar before defendant has

particularly cautioned the bar to be scrupulous

against substitution. The law does not go that

far.” 64 F.Supp. at 989.

The record here shows far fewer instances of illegal

substitution of cyclandelate than those which were present in

Snow Crest. See Id. at 986-987. The admitted fact that some

unscrupulous pharmacists will engage in illegal substitution

should not be a basis for imposing contributory liability on

70. Coca-Cola for many years had attempted without success to compel

other companies to use a different coloring for the cola drinks. Almost uniformly,

the courts, including this Court, held that the public, having become accustomed

to the color of cola as found in the Coca-Cola beverage, could not be deprived

of the familiar color when ths same product was sold by a competitor. See

Coca-Cola Co. v. The Koke Company of America, 254 U.S. 143 (1920). See

also Note, Unfair Competition and the Doctrine of Functionality, 64 COLUM.

L REV. 544, 558, n.94 (1964) (hereinafter ‘*Functionality’’).

Inwood or the other petitioners’'. That others in a minority of

instances will label lawfully dispensed generic products as

Cyclospasmol without any ill motive or prejudice to Ives should

not support a hindsight conclusion that this inadvertent conduct

was implicitly suggested by petitioners in price sheets and

catalogs. Cf. Fortnightly Corp. v. United Artists Television, Inc.,

392 U.S. 390, 397 (1968).’?

A very serious constitutional issue is also raised by the

Second Circuit’s attempt to utilize the exercise of petitioners’

gommercial free speech rights as a basis for subjecting them to

liability for contributory infringement. This Court has noted

that constitutional free speech protections apply to pharmacists

when they convey price information to consumers.”? Virginia

State Board of Pharmacy v. Virginia Citizens Consumer

Council, Inc., 425 U.S. 748 (1976). See also Bates v. State Bar of

Arizona, 433 U.S. 350 (1977). The same right applies to

petitioners’ attempts to market a product in competition with

that of Ives. Significantly, cyclandelate is a drug for which

71. See Famolare, Inc. v. Melville Corp., 472 F.Supp. at 744. See also

McCARTHY,§25.2 at 175 (doctrine of contributory infringer.ent does not

demand that defendants refuse to sell to dealers who merely might pass-off

its goods).

72. The doctrine of contributory trademark infringement first originated

as a derivative of the same doctrine in the field of patents. Howard Dustless

Duster Co. v. Carleton, 219 F. 913, 915 (D.Conn. 1915). Under the patent law,

it is an absolute defense to a charge of contributory patent infringement if the

contributorily infringing item is a staple item of commerce having a substantial

non-infringing use. 35 U.S.C. §271(b). See also Henry v. A.B. Dick Co., 224

U.S. 1, 48 (1912). To hold otherwise, this Court has observed, would ‘‘block

the wheels of commerce."’ Jd. There can be no doubt of the substantial non-

infringing use of petitioners’ products in the marketplace. In fact, the primary

and overwhelming majority use of petitioners’ products is by pharmacists who

commit no act of which Ives can complain. See Callman’s discu**ion of the

substantial non-infringing use doctrine in the context of trademarks.

CALLMAN, §82.1(m) at 203-206 (Supp. 1980). See also discussion in

Universal City Studios, Inc. v. Sony Corp. of America, 659 F.2d 963 (9th Cir.

1981). It surely cannot be the law that under the doctrine of contributory

trademark infringement. Ives is entitled to an even greater degree of protection

" after its patent has expired.

73. In the context of prescription pharmaceuticals, the capsule colors

themselves emerge as a form of speech. See discussion, supra. Petitioners cannot

constitutionally be compelled by way of capsule color to make a negative and

inaccurate statement about their own product. Their free speech rights should

further protect the truthful statement which identity of color implies, i.e., that

grape products are not therapeutically different from those previously taken

substitution is permissive rather than mandatory. Petitioners’

price sheets and catalogs indicate the truthful information that

their products are generic versions of the brand-name product

and thereby eligible for permissive substitution.

In recognition of this Court’s affirmation of the right to

commercial free speech, lower courts have recognized that the

Lanham Act should not be construed in a manner that would

bring it into conflict with First Amendment interests. See Stop

the Olympic Prison v. U.S. Olympic Commitiee, 489 F.Supp.

1112, 1124 (S.D.N.Y. 1980). See also Triangle Publications, Inc.

v. Knight-Ridder Newspapers, Inc., 445 F.Supp. 875, 884 (S.D.

Fla. 1978), aff'd on other grounds, 626 F.2d 1171 (Sth Cir. 1980)

(court observed that comparative advertising which uses

another’s trade name “is in harmony with the fundamental

objectives of free speech and free enterprise in a free society.”);

Fur Information and Fashion Council, Inc. v. E.F. Timme &

Son, Inc., 364 F.Supp. 16, 22 (S.D.N.Y. 1973), affd on other

tong 501 F.2d 1048 (2d Cir.), cert. denied, 419 U.S. 1022

(1974).74

The Second Circuit’s holding has placed generic drug

companies on the horns of a dilemma. If they choose to engage

in the standard forms of advertising long prevalent in the

industry, they now run the risk that, under the Second Circuit

opinion, they may be automatically liable for contributory

trademark infringement and thereby lose the right to market an

important functional and competitive feature of their product.’5

If they choose not to advertise under this threat of liability, then,

as against them, the competitor’s trademark (as Justice Holmes

observed) has been impermissibly extended to the product itself.

See Saxlehner v. Wagner, 216 U.S. at 380. First Amendment ~

rights should not be so cavalierly restricted by the expansive

approach to contributory trademark infringement taken by the

74. Cf., Rosemont Enterprises, Inc. v. Random House, Inc., 366 F.2d 303,

311 (2d Cir. 1966) (Lumbard, J., concurring), cert. denied, 385 U.S. 1009 (1967);

Time, Inc. v. Bernard Geis Associates, 293 F. Supp. 130, 145 (S.D.N.Y. 1968).

75. The extensive evidence of functionality discussed supra rebuts any

supposed inference that petitioners intended the identity of capsule color as

‘an implied suggestion.’’ See Famolare, Inc. v. Melville Corp., supra. Whether

or not Judge Mansfield was convinced on the question of functionality cannot

belie the fact that identical colors were used consistent with the long-standing

industry practice.

lower court. It is respectfully submitted that the finding of

contributory trademark infringement is thus factually erroneous,

legally unsound, and constitutionally impermissible.

Il. SECTION 32 OF THE LANHAM ACT MAY NOT

GRANT A TRADEMARK OWNER MONOPOLY

RIGHTS IN THE COLOR OF ITS PRODUCT

Although the holding of /ves IV is caught up in the

complexities of trademark infringement and contributory

trademark infringement, the end result is remarkably clear. The

court held that as a remedy for the supposed violation of law,

Ives must be granted a perpetual monopoly on the colors blue

and blue/red for cyclandelate and an injunction to that effect

was promptly entered by the District Court. See /ves V at

Pet.App. 96a, 98a. Judge Mansfield explained that such an

injunction would be the “simplest way” to grant plaintiff relief.

Ives IV at Pet.App. 86a.

In other contexts, simplicity undoubtedly has its virtue.

Here, the sought-after simplicity directly contravenes almost 100

years of controlling precedent. See Coats v. Merrick Thread Co.,

149 U.S. 562, 573-574 (1893); A. Leschen & Sons Rope Co. v.

Broderick & Bascom Rope Co., 201 U.S. 166, 171 (1906); Schlitz

Brewing Co. v. Houston Ice Co., 250 U.S. 28, 29-30 (1919);

Coca-Cola v. The Koke Company of America, 254 U.S. at 147;

William R. Warner v. Eli Lilly & Co., 265 U.S. at 531; Kellogg

Co. v. National Biscuit Co., 305 U.S. 111, 121-123 (1938); Sears,

376 U.S. at 230-233; Compco, 376 U.S. at 239.”

76. Accord, Diamond Match Co. v. Saginaw Match Co., 142 F. 727, 729

(6th Cir. 1906), cert. denied, 213 U.S. 598 (1908); Newcomer & Lewis v. J.A.

Scriven Co., 168 F. 621 (6th Cir.), cert. denied, 214 U.S. 518 (1909); Rice-Stix

Dry Goods Co. v. J.A. Scriven Co., 165 F. 621 (6th Cir. 1908), cert. denied,

223 U.S. 708 (1911); L.£. Waterman Co., 34 App.D.C. 185 (D.C.Cir. 1909);

Samson Cordage Works v. Puritan Cordage Mills, 211 F. 603 (6th Cir. 1914);

Viavi Co. v. Vimedia Co., 245 F. 289 (8th Cir. 1917), cert. denied, 246 U.S.

664 (1918); Zangerle & Peterson Co., 133 F.2d at 270; Smith, Kline & French

Laboratories v. Clark & Clark, 157 F.2d at 731; Campbell Soup Co. v. Armous

& Co., 175 F.2d 795, 798-799 (3d Cir.), cert. denied, 338 U.S. 847 (1949); Tast-

T-Nut Co. v. Variety Nut & Date Co., 245 F.2d 3, 6-7 (6th Cir. 1957); Upjohn

Co. v. Schwartz, 246 F.2d at 256; Norwich Pharmacal Co. v. Sterling Drug

Inc., 271 F.2d at $72-573; Unistrut Corp. v. Power, 280 F.2d 18, 23-24 (Ist

Cir. 1960); Plastilite Corp. v. Kassnar Imports, $08 F.2d 824 (CCPA 1975).

Cf., Keene Corp. v. Paraflex Industries, Inc., 653 F.2d 822, 827-828 (3d Cir.

1981); International Order of Job’s Daughters v. Lindeburg & Co., 633 F.2d

912 (9th Cir. 1980), cert. denied, __. U.S. ___., 69 L.Ed.2d 956 (1981).

The central principle of the foregoing cases is that free and

open competition necessarily requires that “imitation” be

encouraged and that the right to imitate, absent legitimate

patent, trademark or copyright protection, cannot be

constricted:

“Sharing in the goodwill of an article unprotected

by patent or trademark is the exercise of a right

possessed by all—and in the free exercise of

which the consuming public is deeply interested.”

Kellogg Co. v. National Biscuit Co., 305 U.S. at

122.

See also American Safety Table Co. v. Schreiber, 269 F.2d 255,

272 (2d Cir.), cert. denied, 361 U.S. 915 (1959); Stern &

Hoffman, Public Injury and the Public Interest: Secondary

Meaning in the Law of Unfair Competition, 110 U.PA.L.REV.

935, 942 (1962); Product Simulation, 57 NEB. L.REV. at 91-92.

A competing philosophy has emerged which expounds the

exact opposite of the principles noted above. Articulated most

forcefully in a string of decisions rendered in the United States

District Court for the District of New Jersey, this view asserts

that there is a duty upon “second comers” to make their product

appear as “different as possible” from that of that of their

competitors.”” The “simplicity” preference ennunciated in /ves

IV accepts by implication the rationale (although not the legal

holdings) of these cases.7®

71. SK&F Co. v. Premo Pharmaceutical Laboratories, Inc., 625 F.2d 1055

(3d Cir. 1980) aff’g, 481 F.Supp. 1184 (D.N.J. 1979); Biocraft Laboratories,

Inc. v. Merck & Co., Inc., __. F.Supp. —_., Civ. Action No. 77-693 (D.N.J.

Oct. 2, 1980); Boeringer-Ingelheim GmbH v. Pharmadyne Laboratories, 211

U.S.P.Q. 1163 (D.N.J. 1980); Hoffman-La Roche v. Premo Pharmaceutical

Laboratories, Inc., 210 U.S.P.Q. 374 (D.N.J. 1980); Merrell-National

Laboratories, Inc. v. Zenith Laboratories, Inc., supra. See also Johnson &

Johnson v. Quality Pure Mfg. Co., 484 F. Supp. 975, 982 (D.N.J. 1979).

78. The cases cited above have reached their result upon alleged violations

of §43(a) of the Lanham Act [15 U.S.C. §1125(a)] and an expansive view of

the concept of secondary meaning and the scope of the New Jersey state law

of unfair competition. These legal issues are not before this Court.

The far-reaching consequences of the “different as possible”

rule as a restraint on free competition are self-evident.” Some of

the commentators have taken note of and seriously questioned

the strength of the analysis which forms the basis of this

protectionist trend. See Stern, The Persantine, Librax & Elavil

Decisions: Colourful Brands of Drugs, 2 EUR. INTEL. PROP.

REV. 59 (1981); CALLMAN at §82.1(m) at 195-206 (Supp.

1980). ;

The importance of the overall issue notwithstanding, the

issues raised here relate to the following specific framework:

(1) The product at issue is a prescription drug for which

patent protection has expired;

(2) During the life of the patent, patients receiving

cyclandelate inevitably become accustomed to the color

configuration used by Ives by virtue of its exclusive

monopoly;

(3) Irrespective of patent (e.g., the blue/red 400-mg.

capsule), patients become familiar with a particular color

configuration by virtue of long-term therapy;

(4) No secondary meaning has been found for either color

configuration;

(5) Should the law permit the generic competitor to sell the

prescription drug in the color to which the patient has

become accustomed or should the law require it to use a

color which is as different as possible?

(6) Should the Court now abandon its historic rule that a

prohibition on copying is not permissible absent express

federal statutory protection?

Petitioner respectfully submits that this Court should

reaffirm the traditional rule that, whatever the theory of liability,

79. For example, in a variant of the same theme, one district court has

gone so far as to hold that an amusement center trading under the name

**Jellibeans’’ has the right to prevent a competitor from opening a similar

establishment using the name ‘‘Lollipops.’’ Jellibeans, Inc. v. Skating Clubs

of Georgia, Inc., _. F.Supp. ____ No. C-80-1689A (N.D.Ga. May 19, 1981),

pager in $40 BNA Patent, Trademark & Copyright Journal, A-5 (August

» 1981).

under these circumstances the utilization of similar capsule

colors may not be enjoined. William R. Warner v. Eli Lilly &

Co., supra; Norwich Pharmacal Co. v. Sterling Drug, supra;

Upjohn Co. v. Schwartz, supra; Smith, Kline & French

Laboratories v. Clark & Clark, supra; Smith, Kline & French

Laboratories v. Waldman, supra. Cf., Sears, supra, and

Compco, supra.

First, the lower courts have too quickly dismissed the

problem inherent in any sanction for monopoly of color. It is

true that it is easy enough for one company to distinguish its

capsule colors from those of a single competitor, but what

happens when each subsequent manufacturer must utilize

different colors for each dosage strength and still be as different

as possible from every other color configuration of every other

company making the same drug product?

“Thus, a producer might market a red-and-white

capsule to indicate 5 mg. strength, a red-and-

green capsule for 10 mg. dosage and a red-and-

yellow capsule for a 25 mg.

strength. ... Consider the confusion if a rival

produced a generic red and yellow for 5 mg., red

and white for 10 mg., and red and green for 25

mg. content? Then multiply the confusion with

the other generic producers who may use the

constant color red but vary the other colors for

the different dosages of their product.” See

CALLMAN, §82.1(m) at 196-197 (Supp. 1980).

Second, the evidence of functionality, as found by the

District Court, should as a matter of law and public policy

preclude any company from monopolizing the colors of a

prescription drug. The prior cases have recognized that a public

which becomes accustomed to a particular color configuration

should be entitled to receive the same configuration from a

competing company at least in the absence of secondary

meaning. Pagliero v. Wallace China Co., 198 F.2d at 343. See

also Keene v. Paraflex, supra; Bliss v. Gotham Industries, Inc.,

316 F.2d 848, 855 (9th Cir. 1963); Application of Deister

Concentrator Co., 289 F.2d 496, 505 (CCPA 1961); Norwich

Pharmacal Co. v. Sterling Drug, Inc., supra; J.C. Penney Co. v.

H.D. Lee Mercantile Co. 120 F.2d 949, 954 (8th Cir. 1941);

RESTATEMENT OF TORTS, §742 (1938); Functionality, 64

COLUM. L.REV. at 558-563.

Functionality of capsule colors was demonstrated in that

patients would be “put off” by different colors, lawful

substitution would be impeded, therapeutic efficacy could be

compromised in terms of the psychological placebo function,

and emergency and dosage identification would be hindered.

Due to these factors, the prior cases, even after a finding of

liability, refused to grant monopoly color rights to brand-name

manufacturers and limited relief to other appropriate and less

drastic measures. William R. Warner v. Eli Lilly & Co., supra;

Upjohn Co. v. Schwartz, supra; Smith, Kline & French

Laboratories v. Clark & Clark, supra. Petitioners do not

contend that it would be absolutely impossible to sell these drugs

in different capsule colors. Petitioners’ grievance is that they

should not in the first instance be burdened with the significant

competitive disadvantage of marketing a product whose first

reception in the hands of the ultimate consumer leads that

consumer to the erroneous (if not anxiety-producing and

irreversible) conclusion that a mistake has been made in filling

the prescription.

The infringement of petitioners’ rights is particularly severe

where, as here, patient association of color with therapeutic

effect is developed during the lifetime of a patent monopoly.

Upon expiration of the patent, petitioners should be entitled to

the full enjoyment of the product as it enters the public domain.

Since capsule-color is rightly or wrongly regarded by consumers

as being associated with therapeutic efficacy, the color here is

not mere trade dress, but functions at least in the patient's mind

as an integral part of the product itself. The prohibition on

copying capsule colors thereby impermissibly extends a

significant aspect of the former patent monopoly. Kellogg Co. v.

80. In Jves II, Judge Friendly suggested that this Court’s approach in

Warner v. Lilly and Kellogg Co. v. National Biscuit Co., could be appropriate

here. Jves II at Pet.App. 53a. For an example of supplemental labeling which

could eliminate the so-called mislabeling problems, see P!.Ex. 82S, J.A. 695a.

Additionally, in Pennwalt Corp. v. Zenith Laboratories, Inc., 472 F.Supp. at

422-423, the court granted preliminary injunctive relief, but refused to extend

it across the board to prohibit sales to dispensing physicians. Here, a blanket

injunction was authorized, prohibiting sale to even institutional accounts and

federal and state governments, even though there can be no opportunity for

illegal substitution or mislabeling.

National Biscuit Co., supra; Singer Mfg. Co. v. June Mfg. Co.,

163 U.S. 169, 185 (1896). See also Zangerle, 133 F.2d at 269. It

is the exclusive patent monopoly which gives the brand-name

company the opportunity to develop color as an associational

factor in the minds of patients.

The essence of the error in the /ves IV opinion lies in its

utilization of the trademark laws as a means toward the end of

creating a new, absolute, and perpetual property right in capsule

colors. /ves IV thus turns the law of trademarks on its head.

When this Court in Sears and Compco referred to “federal

statutory protection” as a permissible basis for prohibiting

copying, it did not intend that §32 of the Lanham Act could be

so broadly construed as to effectively make color an automatic

property right incident to a registered trademark. The public

policy factors identified in those decisions should apply with no

less force to the interpretation of federal statutes than to a

restriction on state laws of unfair competition. If state laws of

unfair competition may not, under Sears and Compco, prohibit

copying where the federal laws have spoken and declined to do

so, then those decisions may not be bypassed by the expedient

holding that the trademark laws can accomplish the very same

result.®!

In Goldstein v. California, 412 U.S. 546, 571 (1973); and

Kewanee Oil Corp. v. Bicron Corp., 416 U.S. 470, 479-480

(1974), the majority opinions emphasized that it was not the

intention of this Court to abandon the underlying principles of

Sears and Compco. See also Ives Il at Pet.App. 43a-45a.

Petitioner Inwood respectfully requests that unless Sears and

Compco are now to become devoid of any meaning, the Court

should definitively reconfirm their validity be reversing the

ruling of the Second Circuit.

81. In effect, /ves IV reads the state law doctrine of contributory trademark

infringement into §32 as a means of escaping the strictures of Sears and Compco.

CONCLUSION

Petitioner Inwood respectfully submits that the judgment of

the Court of Appeals for the Second Circuit be reversed, and

that the judgment of the District Court in /ves III, dismissing the

complaint, be reinstated.

Dated. New York, New York

November 27, 1981

Respectfully submitted,

MILTON A. BASS

JACOB LAUFER

STEVEN R. TROST

LAWRENCE H. ROTH

BASS, ULLMAN & LUSTIGMAN

Attorneys for Petitioner

Inwood Laboratories, Inc.

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