This action requires us to consider the circumstances under which a manufacturer of a generic drug, designed to duplicate the appearance of a similar drug marketed by a competitor under a registered trademark, can be held vicariously liable for infringement of that trademark by pharmacists who dispense the generic drug.
In 1955, respondent Ives Laboratories, Inc. (Ives), received a patent on the drug cyclandelate, a vasodilator used in long-term therapy for peripheral and cerebral vascular diseases. Until its patent expired in 1972, Ives retained the exclusive right to make and sell the drug, which it did under the registered trademark CYCLOSPASMOL.
After Ives' patent expired, several generic drug manufacturers, including petitioners Premo Pharmaceutical Laboratories, Inc., Inwood Laboratories, Inc., and MD Pharmaceutical Co., Inc. (collectively the generic manufacturers), began marketing cyclandelate.
The marketing methods used by Ives reflect normal industry practice. Because cyclandelate can be obtained only by prescription, Ives does not direct its advertising to the ultimate consumer. Instead, Ives' representatives pay personal visits to physicians, to whom they distribute product literature and "starter samples." Ives initially directed these efforts toward convincing physicians that CYCLOSPASMOL is superior to other vasodilators. Now that its patent has expired and generic manufacturers have entered the market, Ives concentrates on convincing physicians to indicate on prescriptions that a generic drug cannot be substituted for CYCLOSPASMOL.
The generic manufacturers also follow a normal industry practice by promoting their products primarily by distribution
A pharmacist, regardless of whether he is dispensing CYCLOSPASMOL or a generic drug, removes the capsules from the container in which he receives them and dispenses them to the consumer in the pharmacist's own bottle with his
Ives instituted this action in the United States District Court for the Eastern District of New York under §§ 32 and 43(a) of the Trademark Act of 1946 (Lanham Act), 60 Stat. 427, as amended, 15 U. S. C. § 1051 et seq., and under New York's unfair competition law, N. Y. Gen. Bus. Law § 368-d (McKinney 1968).
Ives' claim under § 32, 60 Stat. 437, as amended, 15 U. S. C. § 1114,
Ives' claim under § 43(a), 60 Stat. 441, 15 U. S. C. § 1125(a),
Contending that pharmacists would continue to mislabel generic drugs as CYCLOSPASMOL so long as imitative products were available, Ives asked that the court enjoin the petitioners from marketing cyclandelate capsules in the same colors and form as Ives uses for CYCLOSPASMOL. In addition, Ives sought damages pursuant to § 35 of the Lanham Act, 60 Stat. 439, as amended, 15 U. S. C. § 1117.
The District Court denied Ives' request for an order preliminarily enjoining the petitioners from selling generic drugs identical in appearance to those produced by Ives. 455 F.Supp. 939 (1978). Referring to the claim based upon § 32, the District Court stated that, while the "knowing and deliberate instigation" by the petitioners of mislabeling by pharmacists would justify holding the petitioners as well as the pharmacists liable for trademark infringement, Ives had made no showing sufficiently to justify preliminary relief. Id., at 945. Ives had not established that the petitioners conspired with the pharmacists or suggested that they disregard physicians' prescriptions.
The Court of Appeals for the Second Circuit affirmed. 601 F.2d 631 (1979). To assist the District Court in the upcoming trial on the merits, the appellate court defined the elements of a claim based upon § 32 in some detail. Relying primarily upon Coca-Cola Co. v. Snow Crest Beverages, Inc., 64 F.Supp. 980 (Mass. 1946), aff'd, 162 F.2d 280 (CA1), cert. denied, 332 U.S. 809 (1947), the court stated that the petitioners would be liable under § 32 either if they suggested, even by implication, that retailers fill bottles with generic cyclandelate and label the bottle with Ives' trademark or if
After a bench trial on remand, the District Court entered judgment for the petitioners. 488 F.Supp. 394 (1980). Applying the test approved by the Court of Appeals to the claim based upon § 32, the District Court found that the petitioners had not suggested, even by implication, that pharmacists should dispense generic drugs incorrectly identified as CYCLOSPASMOL.
In reaching that conclusion, the court first looked for direct evidence that the petitioners intentionally induced trademark infringement. Since the petitioners' representatives do not make personal visits to physicians and pharmacists, the petitioners were not in a position directly to suggest improper drug substitutions. Cf. William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526, 530-531 (1924); Smith, Kline & French Laboratories v. Clark & Clark, 157 F.2d 725, 731 (CA3), cert. denied, 329 U.S. 796 (1946). Therefore, the court concluded, improper suggestions, if any, must have come from catalogs and promotional materials. The court determined, however, that those materials could not "fairly be read" to suggest trademark infringement. 488 F. Supp., at 397.
The trial court next considered evidence of actual instances of mislabeling by pharmacists, since frequent improper substitutions of a generic drug for CYCLOSPASMOL could provide circumstantial evidence that the petitioners, merely by making available imitative drugs in conjunction with comparative price advertising, implicitly had suggested that pharmacists substitute improperly. After reviewing the evidence
The District Court also found that Ives failed to establish its claim based upon § 43(a). In reaching its conclusion, the court found that the blue and blue-red colors were functional to patients as well as to doctors and hospitals: many elderly patients associate color with therapeutic effect; some patients commingle medications in a container and rely on color to differentiate one from another; colors are of some, if limited, help in identifying drugs in emergency situations; and use of the same color for brand name drugs and their generic equivalents helps avoid confusion on the part of those responsible for dispensing drugs. Id., at 398-399. In addition, because Ives had failed to show that the colors indicated the drug's origin, the court found that the colors had not acquired a secondary meaning. Id., at 399.
Without expressly stating that the District Court's findings were clearly erroneous, and for reasons which we discuss below, the Court of Appeals concluded that the petitioners violated § 32. 638 F.2d 538 (1981). The Court of Appeals did not reach Ives' other claims. We granted certiorari, 454 U.S. 891 (1981), and now reverse the judgment of the Court of Appeals.
As the lower courts correctly discerned, liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another. Even if a manufacturer does not directly control others in the chain of distribution,
It is undisputed that those pharmacists who mislabeled generic drugs with Ives' registered trademark violated § 32.
In reviewing the factual findings of the District Court, the Court of Appeals was bound by the "clearly erroneous" standard of Rule 52(a), Federal Rules of Civil Procedure. Pullman-Standard v. Swint, ante, p. 273. That Rule recognizes and rests upon the unique opportunity afforded the trial court judge to evaluate the credibility of witnesses and to weigh the evidence. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123 (1969). Because of the deference due the trial judge, unless an appellate court is left with the "definite and firm conviction that a mistake has been committed," United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948), it must accept the trial court's findings.
In reversing the District Court's judgment, the Court of Appeals initially held that the trial court failed to give sufficient weight to the evidence Ives offered to show a "pattern of illegal substitution and mislabeling in New York. . . ."
Next, after completing its own review of the evidence, the Court of Appeals concluded that the evidence was "clearly sufficient to establish a § 32 violation." Ibid. In reaching its conclusion, the Court of Appeals was influenced by several factors. First, it thought the petitioners reasonably could have anticipated misconduct by a substantial number of the pharmacists who were provided imitative, lower priced products which, if substituted for the higher priced brand name without passing on savings to consumers, could provide an economic advantage to the pharmacists. Ibid.
Each of those conclusions is contrary to the findings of the District Court. An appellate court cannot substitute its interpretation of the evidence for that of the trial court simply because the reviewing court "might give the facts another construction, resolve the ambiguities differently, and find a
The Court of Appeals erred in setting aside findings of fact that were not clearly erroneous. Accordingly, the judgment of the Court of Appeals that the petitioners violated § 32 of the Lanham Act is reversed.
Although the District Court also dismissed Ives' claims alleging that the petitioners violated § 43(a) of the Lanham Act and the state unfair competition law, the Court of Appeals did not address those claims. Because § 43(a) prohibits a broader range of practices than does § 32, as may the state unfair competition law, the District Court's decision dismissing Ives' claims based upon those statutes must be independently
Reversed and remanded.
JUSTICE WHITE, with whom JUSTICE MARSHALL joins, concurring in the result.
We granted certiorari in these cases in order to review the legal standard employed by the Second Circuit in finding that a generic drug manufacturer is vicariously liable for trademark infringement committed by pharmacists who dispense the generic drug. The Court implicitly endorses the legal standard purportedly employed by the Court of Appeals, ante, at 853-854, but finds that the court erred in setting aside factual findings that were not clearly erroneous. The question whether the Court of Appeals had misapplied the clearly-erroneous rule, however, was not presented in the petitions for certiorari. This was conceded at oral argument.
In its first opinion in this litigation, the Court of Appeals indicated that a "manufacturer or wholesaler would be liable
Ives II required a showing that petitioners intended illegal substitution or knowingly continued to supply pharmacists palming off generic cyclandelate as CYCLOSPASMOL; Ives IV was satisfied merely by the failure to "reasonably anticipate" that illegal substitution by some pharmacists was likely. In my view, this is an erroneous construction of the statutory law governing trademark protection.
William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526 (1924), made clear that a finding of contributory infringement requires proof of either an intent to induce illegal substitution or continued sales to particular customers whom the manufacturer knows or should know are engaged in improper palming off. In that case, it was shown that the manufacturer's salesmen actively induced, either in direct terms or by insinuation, the filling of requests for Coco-Quinine with
These cases reflect the general consensus. 2 J. McCarthy, Trademarks and Unfair Competition § 25:2 (1973) ("[T]he supplier's duty does not go so far as to require him to refuse to sell to dealers who merely might pass off its goods"). The mere fact that a generic drug company can anticipate that some illegal substitution will occur to some unspecified extent, and by some unknown pharmacists, should not by itself be a predicate for contributory liability. I thus am inclined to believe that the Court silently acquiesces in a significant change in the test for contributory infringement.
Diluting the requirement for establishing a prima facie case of contributory trademark infringement is particularly unjustified in the generic drugs field. Preventing the use of generic drugs of the same color to which customers had become accustomed in their prior use of the brand name product interferes with the important state policy, expressed in New York and 47 other States, of promoting the substitution of
The Court of Appeals concluded that there was no "persuasive evidence of a legitimate reason" for petitioners to use imitative colors. The District Court, however, had expressly found that for purposes of § 43(a), the capsule colors were functional. With respect to functionality, I fully agree with the Court that the Court of Appeals erred in setting aside factual findings without finding that they were clearly erroneous. The District Court found that capsule color was functional in several respects: patient anxiety and confusion were likely if accustomed medicine were dispensed in a different color; capsule colors assist patients in identifying the correct pill to take; standard colors help physicians identify the drug involved in case of overdose.
Finally, although the Court states that a "finding of functionality may also be relevant to an action involving § 32," it does not explicate the relationship of functionality in a § 32 case. It is my view that a finding of functionality offers a complete affirmative defense to a contributory infringement
I am also mindful that functionality is a defense to a suit under § 43(a) of the Lanham Act alleging damages from a competitor's "false designation of origin" on a good.
I would reverse the decision of the Court of Appeals and remand for review of the District Court's findings consistent with the principles stated above.
JUSTICE REHNQUIST, concurring in the result.
I agree that the judgment of the Court of Appeals should be reversed. That court set aside factual findings of the District Court without having found them to be clearly erroneous as required by Rule 52(a) of the Federal Rules of Civil Procedure. I disagree, however, with the Court's determining for itself that the findings of the District Court were not clearly erroneous. I think in the usual case this is a question best decided by the courts of appeals, who have a good deal more experience with the application of this principle than we do, and I see no reason to make an exception in this case.
I also assume, correctly I hope, that the Court's discussion of appellate review of trial court findings in bench trials, ante, at 855, is limited to cases in which the appellate court has not found the trial court findings to be "clearly erroneous." United States v. United States Gypsum Co., 333 U.S. 364 (1948), upon which the Court relies, establishes the authority of a reviewing court to make its own findings, contrary to those of the trial court, where it has determined the latter to be "clearly erroneous."
I agree with the Court that these cases should be remanded to the Court of Appeals to review the District Court's dismissal of respondent's claims under § 43(a) of the Lanham Act and its state-law claims.
Briefs of amici curiae urging affirmance were filed by Gerald W. Gorman for the American Academy of Family Physicians; by Michael R. Sonnenreich, Michael X. Morrell, and William H. Kenety for Medicine in the Public Interest; and by Joel E. Hoffman, Jerry D. Anker, Daniel L. Koffsky, and Louis G. Santucci for the Pharmaceutical Manufacturers Association.
Alfred B. Engelberg filed a brief for the Generic Pharmaceutical Industry Association as amicus curiae.
If a pharmacist mislabels a drug or improperly substitutes, he is guilty of a misdemeanor and subject to a fine, §§ 6811, 6815, 6816, and to revocation of his license. § 6808.
"(1) Any person who shall, without the consent of the registrant —
"(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or
"(b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive,
"shall be liable in a civil action by the registrant for the remedies hereinafter provided. Under subsection (b) of this section, the registrant shall not be entitled to recover profits or damages unless the acts have been committed with knowledge that such limitation is intended to be used to cause confusion, or to cause mistake or to deceive."
"(a) Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to be transported or used in commerce or deliver the same to any carrier to be transported or used, shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation."
JUSTICE WHITE'S concern is based on a comment by the Court of Appeals that the generic manufacturers "could reasonably anticipate" illegal substitution of their drugs. Id., at 543. If the Court of Appeals had relied upon that statement to define the controlling legal standard, the court indeed would have applied a "watered down" and incorrect standard. As we read the Court of Appeals' opinion, however, that statement was intended merely to buttress the court's conclusion that the legal test for contributory infringement, as earlier defined, had been met. See infra, at 856-857.
The District Court concluded that that evidence did not justify the inference that the petitioners' catalogs invite pharmacists to mislabel. Ibid. The Court of Appeals, emphasizing that 10 of the 35 druggists who dispensed a generic drug mislabeled it as CYCLOSPASMOL, found a pattern of substitution and mislabeling. 638 F. 2d, at 543. The dissenting judge on the appellate panel, emphasizing that only 1 of 83 pharmacists attempted an illegal substitution and reaped a profit made possible by the color imitation, concluded the facts supported the District Court's finding that mislabeling resulted from confusion about the substitution laws rather than from profit considerations. Id., at 546.
On the basis of the record before us, the inferences drawn by the District Court are not, as a matter of law, unreasonable.
While the precise basis for the Court of Appeals' ruling on this issue is unclear, it is clear that the Court of Appeals erred. The appellate court was not entitled simply to disregard the District Court's finding of functionality. While the doctrine of functionality is most directly related to the question of whether a defendant has violated § 43(a) of the Lanham Act, see generally Note, The Problem of Functional Features: Trade Dress Infringement Under Section 43(a) of the Lanham Act, 82 Colum. L. Rev. 77 (1982), a finding of functionality may also be relevant to an action involving § 32. By establishing to the District Court's satisfaction that uniform capsule colors served a functional purpose, the petitioners offered a legitimate reason for producing an imitative product.
Nor was the Court of Appeals entitled simply to dismiss the District Court's finding of functionality as not "persuasive." If the District Court erred as a matter of law, the Court of Appeals should have identified the District Court's legal error. If the Court of Appeals disagreed with the District Court's factual findings, it should not have dismissed them without finding them clearly erroneous.
"[I]f the generic producer is constrained by § 43(a), trademark law, or the law of unfair competition to adopt a substantially different color . . . the therapeutic value of his generic drug might be seriously impaired and confusion at the pharmacist level could be compounded beyond redemption." 3 R. Callmann, Unfair Competition, Trademarks and Monopolies § 82.1(m), pp. 217, 213 (Supp. 1981).