Opinion
04 Civ. 10213 (BSJ).
June 14, 2005
Order
Plaintiff Novartis Animal Health US, Inc. ("Novartis USA") brings this action against the Defendants LM Connelly Sons and National Pet Supplies d/b/a "petcaredirect.com" and "petmedspharmacy.com" (collectively, the "Defendants" or "National Pet Supplies") alleging trademark infringement arising from the illegal importation of pet medicines made for the Australian market into the United States. Plaintiff seeks to enjoin Defendants from any further importation of these Australian medicines and to recover damages and profits from Defendants' activities to date.
Plaintiff filed a motion for a preliminary injunction against Defendants under FED. R. CIV. P. 65(a). The Court has not received opposition from Defendants. For the following reasons, Plaintiff's motion for a preliminary injunction is GRANTED.
BACKGROUND
Plaintiff Novartis USA is a Delaware corporation that produces pharmaceuticals for parasite control and various pet health conditions. Novartis USA is the exclusive licensee of the NOVARTIS trademark for use in connection with pet medicines, in addition to the following marks registered in the United States Patent and Trademark Office ("USPTO") for use in connection with pet medicines: SENTINEL, INTERCEPTOR, INTERCEPTOR plus design, PROGRAM, and FLAVOR TABS (collectively, the "Novartis Marks").Under the NOVARTIS mark, Novartis USA sells leading brands of pet medicines in the United States, including SENTINEL FLAVOR TABS (milbemycin oxime/lufenuron) for protection against heartworm and fleas, INTERCEPTOR FLAVOR TABS (milbemycine oxime) for protection against heartworm, and PROGRAM FLAVOR TABS (lufenuron) for protection against fleas (collectively, the "U.S. Medicines"). All of these products have been approved for sale by the Food and Drug Administration ("FDA").
The packaging and accompanying inserts for the SENTINEL FLAVOR TABS, INTERCEPTOR FLAVOR TABS, and PROGRAM FLAVOR TABS medicines are also approved by the FDA. To receive FDA approval, these materials must comply with FDA requirements, and therefore must include disclosure of the weight of dog for which the dosage is appropriate, safe storage conditions, contact information in case a pet owner needs to contact the manufacturer with any questions, and information on indications, administration, dosage and precautions. In addition, in cases where the FDA requires that the drug be dispensed only by or on order of a licensed veterinarian, that requirement must prominently be displayed.
A Novartis affiliate, Novartis Animal Health Australia Pty, Ltd., sells different versions of these medicines in Australia. Its medicines include SENTINEL SPECTRUM (milbemycin oxime, lufenuron, and praziquantel), a new formulation for protection against fleas, heartworm and tapeworm, PROGRAM TABS, and INTERCEPTOR FLAVOR TABS (the "Australian Medicines"). All of these products are sold in Australia in differently labeled packages.
The Australian Medicines are not approved by the FDA for sale in the United States. The amount of active ingredient in each pill of the Australian Medicines is different in some cases than in the U.S. Medicines, and the recommended dosages listed in the instructional materials are different as well. There are also a number of differences between the packaging and the inserts of the U.S. Medicines and the Australian Medicines. These differences include that animal weights are given in metric units rather than pounds, storage recommendations are provided in degrees Celsius rather than Fahrenheit, and contact information in the event of questions or emergencies is directed specifically to Australian consumers.
There are also several other differences between the packaging and inserts of the foreign versions and U.S. versions of SENTINEL FLAVOR TABS and INTERCEPTOR FLAVOR TABS. First, the foreign versions merely advise purchasers to consult a veterinarian before use, whereas U.S. packages and inserts for the U.S. versions state that "Federal (USA) law restricts this drug to use by or on order of a licensed veterinarian." Australian law allows the sale of SENTINEL SPECTRUM, SENTINEL FLAVOR TABS, and INTERCEPTOR FLAVOR TABS without requiring a prescription. Second, foreign versions state that the products are safe for puppies over two weeks old, whereas in the United States, the FDA requires that pets be at least four weeks old before taking these medicines. Similarly, the PROGRAM medicines sold in Australia are silent on a minimum safe age, whereas PROGRAM FLAVOR TABS medicines sold in the United States say, as required by the FDA, that they are safe for puppies over six weeks old.
Defendants LM Connelly Sons, Pty Ltd. and National Pet Supplies are entities based in Victoria, Australia, and are controlled by Mr. Leigh Connelly. National Pet Supplies is a business entity organized and existing under the laws of Australia and is engaged in the distribution, advertising and sale of pet medicines. National Pet Supplies also does business in the United States by selling pet medicines directly to consumers through the internet at the web addresses "www.petcaredirect.com" and "www.petmedspharmacy.com."
Novartis USA asserts that National Pet Supplies is selling Australian versions of SPECTRUM FLAVOR TABS, INTERCEPTOR FLAVOR TABS, and PROGRAM FLAVOR TABS to consumers in the United States through these internet sites. Novartis USA asserts that by selling and offering these products in the United States, National Pet Supplies is not only violating U.S. law, but also is likely to confuse U.S. consumers about the source and affiliation of these medicines, including whether they are distributed by Novartis USA.
As a result of these actions, on December 23, 2004, Novartis USA filed the Complaint in this action alleging that National Pet Supplies, inter alia, infringed and diluted the Novartis Marks under federal and state law and had engaged in unfair competition by offering for sale and selling in the United States these Australian Medicines bearing the Novartis Marks that were materially different from U.S. Medicines. On January 18, 2005, Novartis USA filed the instant motion for a preliminary injunction. Defendants have not submitted an opposition to this motion.
Plaintiff stated that by March 31, 2005, "the defendants appeared to have stopped all sales of foreign Novartis pet medicines into the United States." See Letter from Christopher J. Robinson to the Hon. Barbara S. Jones at 1 (May 27, 2005). However, Plaintiff now requests expedited consideration of its motion for a preliminary injunction after "[learning] that the defendants have resumed their illegal activities . . . [and] have resumed shipment to US consumers of SENTINEL SPECTRUM FLAVOR TABS medicines . . . and of the Australian version of INTECEPTOR FLAVOR TABS." Id. at 1-2.
DISCUSSION
A Plaintiff is entitled to a preliminary injunction upon a showing of (1) irreparable harm, and (2) either a likelihood of success on the merits or the existence of serious questions going to the merits and a balance of hardships tipping decidedly in the Plaintiff's favor. Virgin Enterprises, Ltd. v. Nawab, 335 F.3d 141, 145 (2d Cir. 2003).In trademark infringement cases, irreparable harm is presumed once the plaintiff has shown a likelihood of success on the merits. New Kayak Pool Corp. v. R.P. Pools, Inc., 246 F.3d 183, 185 (2d Cir. 2001). Therefore, the Court first addresses whether Plaintiff can show a likelihood of success on the merits in this case.
To establish a likelihood of success on the merits, Novartis USA must show (1) that it has valid trademark rights, and (2) that the Defendants' sale of foreign medicines is likely to confuse United States consumers. Virgin Enterprises, 335 F.3d at 146.
I. Novartis USA has Valid Trademark Rights
Novartis USA is the exclusive licensee of the NOVARTIS, SENTINEL, INTERCEPTOR, PROGRAM, and FLAVOR TABS trademarks for use in connection with pet medicines. These marks, owned by Novartis USA's parent, Novartis A.G., are licensed to the Novartis Corporation, which in turn has sublicensed them to Novartis USA for its exclusive use in the United States in connection with pet medicines. As the exclusive licensee and an indirect subsidiary of the ultimate trademark owner, Novartis USA has the right to prosecute this trademark infringement claim. G.H. Mumm Champagne v. Eastern Wine Corp., 142 F.2d 499 (2d Cir. 1944).
The SENTINEL, INTERCEPTOR, PROGRAM, CAPSTAR, and FLAVOR TABS marks are registered in the U.S. Patent and Trademark Office ("PTO") for use in connection with pet medicines. These marks are presumed to be valid under 15 U.S.C. § 1115(a) and are incontestable under 15 U.S.C. § 1065. The use of these marks by Defendants therefore constitutes infringement of registered trademarks in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114(1).
Although the NOVARTIS mark also is registered in the PTO, it is not yet specifically registered for pet medicines, and therefore Defendants conduct constitutes infringement of an unregistered trademark in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). An application to register NOVARTIS for pet medicines is pending. See Klug Declaration, Exhibits 1-8.
II. Defendants' Sale of Australian Medicines is Likely to Confuse United States Consumers
The Australian Medicines sold by Defendants are parallel imports that are known as "gray market goods" or "gray goods." Gray market goods are "goods made by a foreign manufacturer, legitimately sold abroad under a particular trademark[,] . . . imported into the United States and sold in competition with goods of the owner of the United States trademark rights in the identical mark." Helene Curtis v. National Wholesale Liquidators, Inc., 890 F.Supp. 152, 154 (E.D.N.Y. 1995) (internal quotations omitted).
In cases involving gray goods, courts have adopted a special test for "likelihood of confusion." Courts have held that a likelihood of confusion should be found in gray goods cases if: (1) the goods were not intended to be sold in the United States, and (2) they are materially different from the goods typically sold in the United States. Original Appalachian Artworks, Inc. v. Granada Electronics, Inc., 816 F.2d 68, 73 (2d Cir. 1987).
Because the goods are authentic goods but were made for sale in foreign countries, the typical factors to show "likelihood of confusion" under Polaroid Corp. v. Polarad Elec. Corp., 287 F.2d 492 (2d Cir. 1961), are inapplicable.
Novartis Medicines Sold by Defendants Were Not Intended for Sale in the United States
It is clear from a review of the labeling and package inserts that the Australian Medicines were made for sale in Australia. The products clearly indicate that they were distributed by Novartis Animal Health Australasia Pty Ltd., located at 140-150 Bungaree Road, Pendle Hill, Sydney, New South Wales 2145, Australia. See Klug Decl., Exhibit 9. The products also specify weights using the metric system (which is used in Australia); use Australian spellings (e.g., FLAVOUR TABS instead of FLAVOR TABS); and include information uniquely designed for the Australian market (including the telephone number for the Australian Poisons Information Centre in the event of accidental ingestion). See id.
Moreover, in the case of SENTINEL SPECTRUM pet medicines, those drugs, which have been approved for sale in Australia, cannot be sold in the United States because they have not been approved by the FDA. See id. at 7. In the case of PROGRAM, the PROGRAM tablets sold by Defendants have not been manufactured for sale in the United States for many years due to the development and marketing of a newly formulated medicine called PROGRAM FLAVOR TABS. See id. at 9.
Defendants' Medicines are Materially Different From the Goods Typically Sold in the United States
As an initial matter, even minor differences between the two versions are material under the Lanham Act. As the First Circuit held in Societe des Produits Nestle, S.A. v. Case Helvetia, Inc., 982 F.2d 633, 641 (1st Cir. 1992), "when dealing with the importation of gray goods, a reviewing court must necessarily be concerned with subtle differences, for it is by subtle differences that consumers are most easily confused." Therefore, in gray goods cases, "the threshold of materiality is always quite low." Id.
Among the specific material differences between Novartis USA's U.S. Medicines and the Australian Medicines are:
Regulatory Requirements for Packaging and Inserts
United States law mandates disclosure of certain information on the labeling and package inserts for drugs. These included the phrase, "U.S. Federal law restricts this drug to use by or on the order of a licensed veterinarian," and certain safety information, including information about potential adverse events and precautions. 21 C.F.R. 201. FDA Guidelines, which reflect industry practice, recommend labeling with the new animal drug application ("NADA") number and providing a notice that the product is "FDA Approved." All of these are absent from the Australian medicines. See Klug Decl., Exhibits 8-9. The absence of this information represents a material difference between these medicines and their U.S. versions. See Curtis, 890 F.Supp. at 159 (lack of information on hair product's ingredients and weight "as required by federal law" is a material difference).
Different Formulation of Certain Drugs
Defendants are selling SENTINEL SPECTRUM medicine, a new Novartis medication containing milbemycin oxime, lufenuron, and praziquantel, to consumers in the United States through the internet. See Agione Declaration, Exhibit E; see also Frizell Declaration, Exhibit A. This drug, however, has not been approved by the FDA. As a result, in the United States, Novartis USA sells SENTINEL, which contains only milbemycin oxime and lufenuron. The sale of drugs with different active ingredients is a clear material difference between the U.S. Medicines and the Australian Medicines.
In addition, Defendants are also selling PROGRAM TABLETS, a product that has not been manufactured for distribution in the United States since 1996 and that has been replaced in the United States by an improved product, PROGRAM FLAVOR TABS. See Klug Decl. at 9.
Lack of Prescription and Veterinarian Evaluation
United States law requires a prescription for the dispensing of certain drugs, including pet medicines such as SENTINEL and INTERCEPTOR. 21 C.F.R. 201.105. This requirement is designed to ensure that a veterinarian evaluates a pet and determines which medicines will be appropriate for the pet's weight, age, and condition. However, Australian law allows the sale of SENTINEL SPECTRUM, SENTINEL FLAVOR TABS, and INTERCEPTOR FLAVOR TABS without requiring a prescription. See Bayer Corp. v. Custom School Frames, LLC, 259 F.Supp.2d 503, 506-07 (E.D.La. 2003) (selling pet medicine over the counter rather than by prescription is a material difference); see also Curtis, 890 F.Supp. at 159 (recognizing material difference when defendant's imported version does not meet certain states' clean air standards, whereas U.S. version does).
Geographically Specific Information
Another material difference between the Australian Medicines and the U.S. Medicines is that the Australian versions of the Novartis pet medicines contain Australia specific contact information. For example, packages of SENTINEL SPECTRUM medicine made for the Australian market inform consumers to call a "Poisons Information Centre" if poisoning occurs, but the Australian telephone number provided does not work if dialed from the United States. See Klug Decl., Exhibit 9; see Bayer, 259 F.Supp. at 506-07 (emergency and customer service numbers and addresses which are missing or for a different country are material differences).
Additionally, the packaging for the U.S. Medicines and the Australian Medicines each refer to conditions specific to their countries of origin and intended use. For instance, U.S. Medicines contain directions for use in geographic areas where fleas and mosquitoes are seasonal, whereas Australian Medicines do not, since flea infestation is a year-round problem.
Lastly, information about dosage and storage of the Australian Medicines is also Australia specific. For all pet medicines, the proper dosage is, in part, dependant on the weight of the animal. On U.S. Medicines, weights are given in pounds; the Australian Medicines, however, use the metric system. See Klug Decl., Exhibits 8-9. Therefore, a consumer in the U.S. who purchases the Australian Medicines could give his pet an improper dose if confused between pounds and kilograms. Similarly, storage temperatures are given in degrees Fahrenheit on the product inserts of U.S. Medicines but in degrees Celsius on Australian Medicines. Id. Such differences also represent material differences between the Australian and U.S. versions of the pet medicines. See Bayer, 259 F.Supp. at 506-07 (metric measurements for dosage instructions, pet weight, and other matters of consumer usage and pet safety are a material difference from imperial measurements on U.S. products).
CONCLUSION
The Court finds that Novartis USA has shown that it has valid trademark rights and that Defendants sale of Australian medicines is likely to confuse United States consumers and therefore, Novartis USA has a likelihood of success on the merits of this case. Moreover, the nature of the material differences discussed above amply demonstrates irreparable harm to Plaintiff. Accordingly, Plaintiff's Motion for a Preliminary Injunction is GRANTED.
It is hereby ordered as follows:
1. LM Connelly Sons, Pty Ltd. and National Pet Supplies, d/b/a "petcaredirect.com" and "petmedspharmacy.com," their officers, directors, agents, representatives, successors, and assigns (including Leigh Connelly), and all persons acting in concert or in participation with any of them are:
(a) enjoined and restrained from distributing, selling, offering for sale, advertising, or promoting, or being involved in the distribution, sale, offering for sale, advertisement, or promotion of, in the United States:
(i) Novartis pet medicines manufactured for sale outside the United States, including but not limited to INTERCEPTOR FLAVOR TABS, SENTINEL SPECTRUM FLAVOR TABS, and PROGRAM medicines; and
(ii) Any Novartis pet medicines for which a prescription is required (including SENTINEL FLAVOR TABS and INTERCEPTOR FLAVOR TABS) unless they have first obtained a valid written prescription from a licensed veterinarian.
(b) Enjoined and restrained from using any false designation of origin or false description or representation or any other thing calculated or likely to cause confusion or mistake in the mind of the trade or public or to deceive the trade or public into believing that the Novartis pet medicines manufactured for sale outside the United States and sold by Defendants are genuine U.S. Medicines;
(c) Required to file with the Court and serve on counsel for Novartis USA within thirty (30) days after entry of this preliminary injunction a sworn written statement pursuant to 15 U.S.C. § 1116(a) setting forth in detail the manner and form in which they have complied with this preliminary injunction.
2. Novartis USA shall post a bond with the Clerk of the Court in the amount of $25,000 as security pursuant to Rule 65(c) of the Federal Rules of Civil Procedure within seven days of the entry of the Order.
SO ORDERED.