Shire US Inc v. Barr Laboratories

Citation: Not availableDocket: 02-3647

Court: Court of Appeals for the Third Circuit; May 23, 2003; Federal Appellate Court

Original Court Document: View Document

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Shire U.S. Inc. appealed a decision from the United States District Court for the District of New Jersey, which denied its request for a preliminary injunction against Barr Laboratories, Inc. The case involved allegations of trade dress infringement and dilution under sections 43(a) and (c) of the Lanham Act, as well as state unfair competition laws, concerning Shire's drug Adderall, a controlled substance prescribed for ADHD. Adderall, on the market since 1996, holds a significant 32% share of the U.S. ADHD prescription market. The drug's tablets vary in color and shape based on dosage, featuring a unique marking. Shire has sought trademark protection for Adderall's trade dress, including the tablet's configuration and the colors blue and orange, but the USPTO has initially denied registration. Other ADHD treatments mentioned include Ritalin and Dexedrine.

The USPTO denied Shire's registration of a configuration mark, concluding it was functional as it served a utilitarian purpose in holding pharmaceutical preparations for attention deficit disorder. The examining attorney noted that a mark can be functional either de jure, rendering it unregisterable, or de facto, allowing for possible registration if it is inherently distinctive or has acquired distinctiveness. The attorney found Shire's proposed mark not inherently distinctive and indicated that no evidence of acquired distinctiveness was submitted. Shire's marketing strategy evolved in 2002, focusing on a patented, sustained-release version of Adderall, known as Adderall XR, while also altering promotional approaches. 

Barr, a company that developed a generic equivalent to Adderall, began marketing its product in February 2002 after FDA approval, classifying it as therapeutically equivalent to Adderall despite differences in inactive ingredients. Shire introduced mid-range dosages after Barr's ANDA was filed, motivated by a desire to protect its market share against upcoming generic competition. The district court, after examining the tablets, found that while Barr’s and Shire’s tablets shared color cues for dosages, their shapes and markings differed, leading to a similarity but not identity. 

On April 30, 2002, Shire initiated legal action against Barr for unfair competition and dilution of its rights, followed by a motion for a preliminary injunction to prevent Barr from using tablets resembling Adderall's appearance.

On June 3, 2002, the district court held oral arguments concerning Shire's motion after limited discovery. In an opinion issued on August 26, 2002, the court denied Shire's motion, concluding that Shire failed to establish that the color and shape of Adderall were non-functional, indicating Shire was unlikely to prevail in its trade dress claim. The order denying the preliminary injunction was entered on August 27, 2002, but was amended on September 16, 2002, to correct terminology inaccuracies. Shire appealed on the same day.

The legal standards for granting a preliminary injunction require consideration of four factors: likelihood of success on the merits, irreparable harm to the moving party without relief, potential irreparable harm to the nonmoving party if relief is granted, and public interest. The district court found Shire did not meet the first requirement, as it did not demonstrate the non-functionality of Adderall's configuration, essential for a trade dress infringement claim.

The appellate review acknowledges the district court's discretion in granting preliminary injunctions, which is only overturned for abuse of discretion, legal misapplication, or serious factual errors. While factual determinations are reviewed for clear error, legal conclusions are subject to plenary review. The Lanham Act provides the basis for trade dress infringement, defining "trade dress" as the product's design or packaging that identifies its source, aimed at protecting business goodwill and aiding consumer distinction among products.

Trade dress protection does not equate to patent-like rights for innovative product designs. It is intended to safeguard only arbitrary or ornamental features that identify a product’s source, acknowledging that copying of goods is often permissible. To prove infringement of unregistered trade dress, a plaintiff must demonstrate that the feature is non-functional, inherently distinctive or has acquired secondary meaning, and that consumer confusion regarding the source is likely. The functionality doctrine serves dual purposes under the Lanham Act: protecting manufacturers and consumers by eliminating features that signify source and quality, while also preventing monopolization of essential product features by any single manufacturer.

The Supreme Court's TrafFix case established two tests for functionality: a feature is functional if it is essential for the product's use or affects its cost or quality, and a functional feature disadvantages competitors significantly without regard to reputation. In a related case, the district court ruled that Shire's product features were not proven to be non-functional, observing that Barr did not replicate Shire's trade dress. The court found that while the products were similar, they were not identical, and Shire failed to rebut Barr’s argument that the color and shape were significant for ADHD patients' identification and efficacy of the medication. Expert declarations highlighted that similar visual cues aid ADHD patients in recognizing medications and adjusting dosages, confirming the clinical functionality of the color-coding in Shire's tablets.

Dr. Blume’s affidavit emphasized that the similarity in appearance between generic and branded ADHD medications enhances patient safety and adherence to prescribed dosing, especially when administered by non-medical personnel like school secretaries. He noted that dosage form similarities improve patient acceptance, citing examples of other CNS drugs with identical or similar colors to their branded counterparts. The district court referenced Gregory Drew’s declaration, a pharmacist and Vice President at Rite Aid, who stated that Rite Aid prefers generic tablets to closely resemble branded ones to boost patient acceptance and compliance. 

The court determined that Barr had not replicated features indicating the source of Adderall and that the color and shape of Barr's product were essential for its efficacy in treating ADHD. The ruling concluded that Shire had not demonstrated the necessary non-functionality to obtain relief. This factual finding can only be overturned on appeal if it lacks a credible evidentiary basis. Shire argued the district court erred by not applying Third Circuit precedent, yet Barr countered that most of Shire's cited cases were from the 1980s and not binding. Additionally, those cases involved prescription drugs, not controlled substances, and included evidence of pharmacists passing off products, which was absent in Shire’s case.

Shire also referenced SK&F, but it was distinguished as that case had evidence of actual passing off, while Shire did not. Although Shire claimed similarities in affidavits regarding functionality, the district court chose to credit the testimonies of Drs. Bernstein and Blume, as well as Mr. Drew, over those in earlier cases. The court upheld its findings of fact, consistent with its approach in SK&F.

Deferential appellate review allows a court to uphold seemingly inconsistent outcomes based on the records presented. Shire acknowledged that the district court did not ignore all precedents, despite not discussing most case law. The court credited Dr. Bernstein’s declaration, which stated that similar physical attributes between a generic and branded drug can indicate clinical functionality. This was contrasted with the Ciba-Geigy case, which affirmed a finding of non-functionality due to a lack of compelling medical or business reasons for a drug's size and shape.

While some district courts in the circuit rejected similar functionality arguments, others, like in Ives Laboratories, Inc. v. Darby Drug Co., found that certain characteristics, such as capsule color, were functional. The Ives court noted that elderly patients associate medication appearance with therapeutic effects, and color aids in drug identification for both patients and medical professionals. The Supreme Court later upheld this finding in Inwood Laboratories, Inc. v. Ives Laboratories, Inc.

The district court concluded that Barr’s generic amphetamine salts tablets materially benefitted patients due to their physical similarity to Adderall, ruling that Shire failed to prove the non-functionality of its product configuration. Consequently, Shire did not demonstrate a likelihood of success on the merits, leading to the denial of its preliminary injunction. The appellate court affirmed the district court's order from August 27, 2002. 

Shire attempted to distinguish the Supreme Court’s TrafFix decision and the appellate court's Standard Terry Mills ruling, arguing that these did not change the law. However, TrafFix emphasized that trade dress protection must balance the right to copy goods and cautioned against overextending trade dress protection. The court found the district court's reliance on Standard Terry Mills as relevant for defining functionality and the functionality doctrine appropriate.