Biocraft Laboratories, Inc. v. Merck & Co., Inc.

Citations: 532 F. Supp. 1068; 1980 U.S. Dist. LEXIS 16979Docket: Civ. 77-693

Court: District Court, D. New Jersey; October 2, 1980; Federal District Court

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Merck & Co. manufactures and markets the antidepressant amitriptyline HCL under the trade name ELAVIL since April 1961, which is a prescription drug due to its potential side effects and required professional monitoring as outlined in the Physician's Desk Reference. The drug must be labeled with a cautionary statement regarding prescription requirements to avoid being misbranded. Biocraft Laboratories, Inc., a generic competitor, markets a version of amitriptyline HCL but does not manufacture the active ingredient. The case involves claims of patent validity and infringement, alongside allegations of unfair competition and violations of the Lanham Act. Merck's motion for summary judgment, focusing on these unfair competition claims, was filed in March 1980, with a full day of hearings held on June 16, 1980. Merck offers ELAVIL in various forms, including a clear solution and film-coated tablets of different dosages, while Biocraft's tablets are designed to closely resemble Merck’s in color and size, indicating intentional trade dress copying as confirmed by Biocraft's president. Biocraft's product is marketed as a generic substitute for ELAVIL.

Biocraft has obtained an abbreviated New Drug Application (NDA) for amitriptyline HCL, which is classified as a generic and included in the Pennsylvania formulary. Although Biocraft does not produce the active ingredient, it manufactures the tablets and is recognized as a manufacturer supplying various distributors. In New Jersey, acceptable manufacturers listed include Barr, Biocraft, and Merck, with Phillips Roxane and Roche added later. Four pharmaceutical companies market amitriptyline HCL under different brand names, each using distinct colors for their dosages. The U.S. Department of Health and Human Services’ “Guide to Prescription Costs” categorizes amitriptyline HCL as a psychotherapeutic anti-depressant and lists more suppliers than those in the New Jersey and Pennsylvania formularies, possibly due to varying national marketing and FDA approval statuses. The Guide also warns that while therapeutic equivalents may be available, differences in characteristics such as color, taste, and packaging can lead to patient confusion or allergic reactions. It emphasizes the need for healthcare providers to exercise caution when prescribing and dispensing these products, particularly in cases where specific product characteristics are crucial for patient therapy. Pharmacists are advised to be aware of expiration dates and storage conditions, especially for reconstituted products, to ensure proper patient guidance during substitutions.

The N.J. Formulary from October 1979 emphasizes that generic medications may vary in color, shape, or size compared to brand-name products, but these differences do not affect their efficacy. The court is assessing a motion for summary judgment under F.R.Civ.P. 56, requiring a determination of any genuine issues of material fact and whether Merck is entitled to judgment as a matter of law. Biocraft must provide substantial evidence beyond mere allegations to support its case. Merck argues that its color coding for different dosages (e.g., bright blue for 10 mg, lemon yellow for 25 mg) is functional and does not constitute unfair competition or a violation of the Lanham Act. The court finds that while color coding serves a purpose in dosage identification, Merck's claim relies on the arbitrary selection of colors rather than established coding standards. An examination of pharmaceutical products reveals that many manufacturers employ color coding without a uniform system; the choice and arrangement of colors are inconsistent across the industry. Thus, there is no standard protocol for color usage in medication identification.

Arbitrary color selection for pharmaceuticals differs significantly from standardized industry color codes, such as the RMA color code for carbon resistors, which assigns specific colors to numerical values for consistent identification. The RMA standard includes a specific sequence of ten colors, each representing a digit from zero to nine, along with bands indicating precision levels. In contrast, no standardized color coding exists for pharmaceuticals, as evidenced by the diverse color codes used by manufacturers, reflecting brand identity rather than a uniform system. 

An affidavit presented by Biocraft included samples of medications grouped by color, specifically shades of yellow, peach, and orange, but failed to provide information on the uses or contraindications of these drugs, leaving the court to research them independently. This exhibit aimed to challenge the distinctiveness of Merck's color choices for its antidepressant, Elavil, but was deemed insufficient. The analysis of other exhibits showed marked differences between products, even among those categorized by similar colors. For instance, Merck and Schering's combination drugs exhibited differing colors for similar dosages, demonstrating that the mere grouping by color does not establish a genuine issue for trial regarding the distinctiveness of Merck's color coding.

The treatment referenced is indicated as an alternative to electro-shock therapy when that treatment poses risks. It influences various enzyme systems and can result in multiple side effects. The characteristics, contraindications, and precautions associated with this treatment significantly differ from Elavil, which does not feature peach coloring. Merck's Vivactil, an alternative, is highlighted, containing protriptyline HCL in 5 mg orange and 10 mg yellow oval tablets, with the latter acting faster than amitriptyline HCL and lacking sedative effects. Warner/Chilcott’s Nardil, another medication, is phenelzine sulfate in a 15 mg orange tablet and functions as a potent MAO inhibitor.

Various medications are categorized by color and function, with examples provided for yellow, peach/salmon, and orange tablets. The document references a legal case (SK. F Co. v. Premo), where a comparison of brand-name drugs and their generic counterparts was analyzed, noting that while several manufacturers market amitriptyline HCL, the generic marketers have imitated Merck’s trade dress rather than that of other brands. It concludes that Biocraft's imitation of Merck's trade dress allows it to compete more effectively, raising no genuine issue for trial. 

Biocraft has obtained FDA approval as a "me-too" drug, listed as a permissible substitute in New Jersey and Pennsylvania formularies, allowing pharmacists to dispense it in place of Elavil when prescribed. However, the FDA approval does not justify the copying of trade dress, similar to other consumer products. The excerpt also notes that some prescription drugs are delivered to patients in their original containers, primarily liquids, creams, or suppositories.

The document highlights the challenges manufacturers face in ensuring their products are identifiable due to how pharmacists dispense medications. Most pharmaceutical forms, such as tablets and capsules, are transferred from the manufacturer's packaging to anonymous vials, obscuring the brand identity from patients. Consequently, manufacturers rely on trade dress—characteristics like size, shape, finish, texture, and color—to distinguish their products. The excerpt references case law, specifically SK. F v. Premo, noting that the small size of pharmaceutical products limits the ability to imprint readable identifying information, thus necessitating reliance on trade dress. 

The text discusses instances of "palming off," where pharmacists dispense generic substitutes that resemble the original brand, misleading patients. Evidence from Merck indicates that this deceptive practice is prevalent, with no substantial counterarguments presented. The court underscores that it is actionable for manufacturers to distribute products in a manner that could lead to confusion with another's product, regardless of intent.

Biocraft's argument that trade dress features are significant for psychotropic drugs is addressed, referencing an affidavit that fails to demonstrate whether Biocraft's generic drug matches the original's trade dress. The affidavit suggests that Biocraft's marketing strategy aims to compete effectively by imitating Merck’s trade dress, but it does not establish a genuine dispute regarding its compliance with trade dress regulations. Overall, the document emphasizes the importance of trade dress in pharmaceutical identification and the legal implications of practices that could mislead consumers.

The court finds no genuine issue of material fact in the case, relying on Dr. Taylor's affidavit, which parallels Dr. Shaefer's in SK. F v. Premo and mirrors Edward Stemple's affidavit regarding emergency identification of medications. The argument that each medication should have unique trade dress lacks legal or customary support and does not constitute a valid defense in an unfair competition claim. Accepting such a position would necessitate costly packaging changes that may not align with patient preferences. The court references prior rulings that reject similar theories, noting the absence of standardized color coding in pharmaceuticals. Additionally, Dr. Taylor's affidavit fails to address scenarios where patients change dosages but maintain the same pill color, a point echoed by other affidavits. A review of various relevant articles presented does not create a genuine factual issue for trial and does not warrant a shift in the case's focus to the technical aspects of color selection for pharmaceuticals.

Most articles reviewed do not address the therapeutic effects of tablet color, with the exception of the study at Tab 19, which tested the effects of oxazepam in different colors (green, yellow, and red) on 48 patients with anxiety. The study found no statistically significant differences between colors, although green tablets were preferred by anxious patients, while depressed patients favored yellow, despite its lowest ranking for anxiety. The court expresses doubt about its ability to determine which color would be appropriate for amitriptyline HCL, especially as the study does not establish any color's therapeutic efficacy for specific conditions. The reference to U.S. v. Ghadiali highlights historical skepticism regarding color therapy. Additionally, an article at Tab 28 argues against vague medication descriptions and advocates for mandatory labeling in Canada. No significant material issues for trial emerge from these articles. Biocraft's internal memos and Merck ads reveal that Merck has utilized color coding to reduce patient confusion and differentiate its products from competitors, particularly Roche's Endep, which uses a single color. While the memos indicate a functional aspect to color coding, they do not establish a genuine material issue regarding Biocraft's right to replicate Merck's color coding for Elavil. Biocraft also claims that Merck has abandoned its rights to enforce its color code against Biocraft for alleged unfair competition under the Lanham Act.

Merck licensed Barr and Lederle under its patent but did not sue them despite their copying of Merck's color code, similar to Biocraft's actions. Merck's patent relates not to the active ingredient, amitriptyline HCL, but to its application as an anti-depressant/tranquilizer as specified in product labeling. The active ingredient is covered by U.S. Patent No. 3,384,663, owned by Hoffmann-LaRoche, which does not disclose its anti-depressant use, allowing Merck to obtain a process patent (No. 3,428,735). While the validity of Merck's patent is contested, it is not part of the current motion for partial summary judgment. Merck's application for reissue was denied, and an appeal was pending at the time of the motion. Biocraft's cited cases pertain to trademark licensing rather than patent licensing. The Dawn case involved trademark use by bakers, which lacked evidence of supervision by the licensor, while the Sterling case reversed a trial court ruling due to confusingly similar product names. There is no evidence that Merck licensed the registered trademark Elavil or its unique color-coding, and it expressed dissatisfaction with the unauthorized copying. Biocraft is noted as the first to imitate Merck's trade dress, which others subsequently followed, and it supplies numerous distributors.

The court finds no genuine issue of abandonment in Merck's assertion of its claim against Biocraft, as there is no legal requirement for simultaneous lawsuits against all parties involved in unfair competition. It is a common practice to target the perceived initiator of the piracy first. A patent license does not extend to trademark or trade dress use, which undermines Biocraft's arguments. 

Regarding discovery, Biocraft contended it lacked time to gather evidence to oppose the summary judgment motion, but the court noted that Biocraft had nearly three months for discovery and had requested a three-month adjournment, which was only partially granted. The court emphasized that Biocraft had sufficient time to identify genuine issues for trial and could also obtain information from public sources, such as industry representatives and market research, rather than relying solely on formal discovery. Affidavits submitted by Biocraft were criticized for being vague and not directly addressing the specific issues in the case. Additionally, Biocraft's failure to explain the absence of certain product colors in its exhibits further weakened its position. The deposition of Biocraft's president indicated he had the necessary knowledge and resources to gather relevant information independently.

Access to customers, including distributors and chain drug stores, was highlighted during the hearing. The court found that claims of inadequate discovery time were made to delay proceedings, noting that Biocraft had nearly three months to conduct discovery after the motion was served, with adequate time allowed for gathering necessary information. Biocraft's failure to produce evidence demonstrating a genuine issue of material fact indicated there was no such issue needing further time. 

The court also reviewed documents produced in response to interrogatories, which included market surveys investigating potential passing off of Merck's trade dress for Elavil. Biocraft initially contended that Merck's answers to interrogatories were self-serving and lacked personal knowledge. However, the court clarified that party testimony and affidavits are admissible, despite being self-serving. 

Biocraft was permitted to submit a memorandum and referenced several cases to support its arguments regarding the admissibility of evidence. The Maryland decision reflected prior practices before amendments allowed interrogatory answers to be considered in Rule 56 motions. The court emphasized that admissible evidence need not be based on personal knowledge, citing that various forms of proof can be accepted, including hearsay exceptions recognized by the Supreme Court. The documents in question were identified as test survey results, which have specific admissibility criteria under Federal Evidence rules, thus negating the necessity for individual shoppers or technicians to testify about specific instances of passing off.

Individual sales slips are often discarded post-transaction, leading to a lack of evidence in the case at hand. Biocraft claimed there was no evidence of "palming off," prompting the court to reference interrogatories regarding field sampling. The results revealed that 26.6% of pharmacies substituted another product for Elavil, with 73.9% of generics illegally labeled as "Elavil" or "Elavil substitute." While test reports were provided, Biocraft could not clarify their findings. The court noted that the assertion of "no evidence" was misleading, as some evidence of palming off existed, though Biocraft dismissed it due to time constraints.

Biocraft's president, Harold Snyder, previously indicated he aimed to mimic Merck's product characteristics but claimed he did not care about illegal substitutions by druggists, provided they were legal. The court emphasized that it does not need to rule on the admissibility of field sampling data; rather, it is actionable to distribute products that may be mistaken for another's. Merck demonstrated that its product and Biocraft's are visually similar, and Biocraft failed to contest this issue effectively. The law permits Biocraft to compete with Merck, but not to copy its trade dress. The court concluded that whether the trade dress similarity is unreasonable and likely to confuse is a material fact, and there is no genuine dispute regarding this fact.

The motion filed by Merck seeks summary judgment under Rule 56(a) for its counterclaims and Rule 56(b) for Biocraft's claims. Specifically, Merck's Second and Third Counterclaims pertain to unfair competition and false designation of origin under 15 U.S.C. § 1125(a), based on Biocraft's production and marketing of amitriptyline HCL tablets resembling Merck's Elavil tablets. Biocraft's Count II requests a declaratory judgment affirming that its actions do not constitute unfair competition, while Count III seeks an injunction against Merck's accusations of unfair competition. The court's role in the summary judgment motion is to determine if there are genuine issues of material fact. If no triable issues exist, the moving party is entitled to judgment as a matter of law. The moving party must provide specific factual evidence beyond mere allegations to support its claims. The principles governing unfair competition and Lanham Act violations are similar, with the latter requiring goods to enter commerce. If a genuine issue of material fact is identified, summary judgment cannot be granted, and ambiguities must be resolved in favor of the party opposing the motion. However, speculative issues or unsupported facts are insufficient to prevent summary judgment.

Both parties agree on the key facts of the case. Both Merck and Biocraft produce tablets with the same active ingredient in various dosages: 10 mg, 25 mg, 50 mg, 75 mg, and 100 mg. Merck uniquely markets a 150 mg capsule, which Biocraft does not produce. Merck's tablets are round, convex, and film-coated, with distinct colors for each dosage: blue for 10 mg, yellow for 25 mg, beige for 50 mg, orange for 75 mg, and mauve for 100 mg. Merck has sold the 10 mg and 25 mg tablets since 1961, the 50 mg since 1967, the 75 mg since 1977, and the 100 mg since the same year. Roche also produces tablets in the same dosages as Merck, but uses a single light orange color and different sizes. Roche entered the market between late 1975 and early 1976. Biocraft began imitating Merck's trade dress in March 1977, copying the colors and sizes to closely resemble Merck’s products. Biocraft's abbreviated New Drug Application (NDA) was approved in early 1977, except for the 100 mg tablet, which was approved mid-1977. Other generic manufacturers entered the market later and used different color codes. Biocraft did not present any facts to dispute these points, effectively admitting them, including its intent to copy Merck's trade dress. Consequently, the matter is purely legal, allowing Merck to seek a declaratory judgment. The court is requested to grant summary judgment in favor of Merck, declaring Biocraft's actions as unfair competition and false designation of origin under 15 U.S.C. § 1125(a), while dismissing Biocraft's respective claims.