AstraZeneca AB et al v. Dr. Reddy's Laboratories, Inc.

Filing 31

MEMORANDUM. Signed by Judge Sue L. Robinson on 11/6/2015. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

ASTRAZENECA AB, ASTRAZENECA LP,
and ASTRAZENECA PHARMACEUTICALS
LP,
Plaintiffs,

v.
DR. REDDY'S LABORATORIES, INC.,
Defendant.

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) Civ. No. 15-988-SLR
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MEMORANDUM
At Wilmington this

5th

day of November, 2015, having reviewed the papers filed

in connection with plaintiffs motion for a temporary restraining order, and having heard
oral argument on same, the court issues its decision to grant the motion, for the
reasons that follow:
1. Background. 1 Since 1989, the AstraZeneca plaintiffs ("AZ") have used the
color purple to brand their gastrointestinal ("GI") products2 for treating severe heartburn
and acid reflux. The U.S. Patent and Trademark Office has confirmed the brand status
of AZ's purple color by awarding AZ three federal trademark registrations covering the
color purple for GI pharmaceuticals and one covering the phrase "THE PURPLE PILL®"
for the same goods ("the Purple Marks"). (D.I. 5 at 10) None of AZ's competitors have

1

The facts related to AZ are taken from the verified complaint filed in this
litigation, and/or have not been disputed by DRL.
2

Prilosec® and Nexium®.

challenged those registrations.
2. AZ has sold more than 7.1 billion purple Prilosec® capsules in the U.S. from
1989-2014, and more than 15.5 billion purple Nexium® capsules in the U.S. from 20012014, for a total of more than 22.6 billion purple capsules. On an average annual basis
since 2001, AZ has sold over $3 billion of Prilosec® and Nexium® in purple capsules in
the U.S. AZ has also provided hundreds of millions of purple Nexium® capsules as
free samples over the years to doctors who, in turn, provide them to their patients at no
cost.
3. The color purple has been used prominently by AZ in all of its efforts to
promote Prilosec® and Nexium®, from the AZ website ("PURPLEPILL.COM") to
advertising in many consumer publications that are widely distributed to the general
U.S. public, to advertising on network and cable television, radio, and popular and
highly trafficked websites. 3 According to AZ, such promotional materials have reached
tens of millions of people each year. Between 1995 and 2014, AZ spent an average of
over $250 million per year to build its purple brand as described above.
4. As a result of such promotional efforts, there is undisputed evidence that the
media and the public associate the color purple with AZ and its Prilosec® and Nexium®
products. (D.I. 5 at 8-9) Indeed, the FDA recognized the trademark significance of AZ's
purple color as early as 2001 as part of an advertising review, finding that a television
advertisement for Prilosec® (that did not mention Prilosec® by name) was nevertheless
a "product-specific advertisement" because it discussed acid-reflux disease in

3

Many examples of such are provided in D.I. 5 at 4-7.

2

conjunction with "the purple pill," and AZ's Prilosec® "[was] the only purple pill that
treats heartburn due to acid-reflux disease." (Id. at 7)
5. Nexium® is sold only in prescription form. In May 2014, Pfizer, under license
from AZ, began selling an over-the-counter ("OTC") non-prescription 20 mg version of
Nexium® called "Nexium24HR." Pfizer promotes the product on a predominantly purple
website that prominently displays purple Nexium® capsules and AZ's trademark 'The
Purple Pill®." According to AZ, Pfizer paid an up-front fee of $250 million to gain
access to exclusive global rights to sell OTC Nexium® and a license to use some of
AZ's Purple Marks. Pfizer also agreed to pay AZ milestone and royalty payments
based on product launches and sales. (D.I. 5 at 3)
6. Several companies have recently entered the market with generic versions of
AZ's Nexium® esomeprazole magnesium compound. The first two companies
permitted by the FDA to do so - Teva and Mylan - have used blue or white capsules.
The second wave of generic companies entering the market have been more
aggressive, choosing purple capsules for their generic Nexium®. More specifically,
defendant Dr. Reddy's Laboratories, Inc. (''DRL"), a maker of generic drugs, launched
its generic GI pharmaceutical (esomeprazole) in September 2015. AZ filed its verified
complaint and motions for injunctive relief on October 28, 2015. (D.I. 1, 3, and 4)
7. All of the different iterations of the products at issue are shown below, in
order to better illustrate the dispute at bar.

3

Prilosec® capsules

Nexium® capsules with either two or three gold-colored bands

Generic Prilosec® sold by DRL since 2009

Pfizer’s Nexium® OTC capsules

First wave Nexium® generics

Second wave DRL Nexium® generic

4

8. Standard of review. As explained by the United States Court of Appeals for
the Third Circuit,
[p]reliminary injunctive relief is an "extraordinary remedy, which should be
granted only in limited circumstances." . . . "A plaintiff seeking a preliminary
injunction must establish that he is likely to succeed on the merits, that he
is likely to suffer irreparable harm in the absence of preliminary relief, that
the balance of equities tips in his favor, and that an injunction is in the
public interest." . . . The "failure to establish any element ... renders a
preliminary injunction inappropriate." ... The movant bears the burden of
showing that these four factors weigh in favor of granting the injunction.
Ferring Pharms., Inc. v. Watson Pharmaceuticals, Inc., 765 F.3d 205, 210 (3d Cir.

2014) (citations omitted). '"[O]ne of the goals of the preliminary injunction analysis is to
maintain the status quo, defined as the last, peaceable, noncontested status of the
parties."' Kos Pharms., Inc. v. Andrx Corp, 369 F.3d 700, 708 (3d Cir. 2004) (citation
omitted). In a trademark case, for example, "[it] is the situation prior to the time the
junior user began use of its contested mark." Id. (citation omitted). "[T]he decision
whether to grant or deny injunctive relief rests within the equitable discretion of the
district courts, and ... such discretion must be exercised consistent with traditional
principles of equity." eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 394 (2006). 4
9. Likelihood of success on the merits - trademark infringement. The
Lanham Act defines trademark infringement as use of a mark so similar to that of a
prior user as to be "likely to cause confusion, or to cause mistake, or to deceive." 15
U.S.C. § 1114(1 ). "Likelihood of confusion under the Lanham Act is not limited to

4

There is no indication that the standard for issuance of a temporary restraining
order is any different from that for issuance of a preliminary injunction. See, e.g.,
Globus Medical, Inc. v. Vortex Spine, LLC, 605 Fed. Appx. 126 (3d Cir. 2015);
Nutrasweet Co. v. Vit-Mar Enterprises, Inc., 112 F.3d 689 (3d Cir. 1997).

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confusion of products[; c]onfusion as to source is also actionable." Kos Pharms., 369
F.3d at 711. The Third Circuit has identified a number of factors to aid in determining
likelihood of confusion. Those factors include:
(1) the degree of similarity between the owner's mark and the alleged
infringing mark; (2) the strength of the owner's mark; (3) the price of the
goods and other factors indicative of the care and attention expected
of consumers when making a purchase; (4) the length of time the
defendant has used the mark without evidence of actual confusion
arising; (5) the intent of the defendant in adopting the mark; (6) the
evidence of actual confusion; (7) whether the goods, [even if] not
competing, are marketed through the same channels of trade and
advertised through the same media; (8) the extent to which the targets
of the parties' sales efforts are the same; (9) the relationship of the
goods in the minds of consumers because of the similarity of function;
(10) other facts suggesting that the consuming public might expect the
prior owner to manufacture a product in the defendant's market, or that
he is unlikely to expand into that market.

Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983) ("the Lapp factors").
'"None of these factors is determinative in the likelihood of confusion analysis and each
factor must be weighed and balanced one against the other.' ... '[T]he different factors
may properly be accorded different weights depending on the particular factual setting.
A district court should utilize the factors that seem appropriate to a given situation.' ... "
Kos Pharms., 369 F.3d at 709 (citations omitted). Where the marks are identical and/or
used for competing goods, "the court need rarely look beyond the mark itself."

Opticians Ass'n of Am. v. lndep. Opticians of Am., 920 F.2d 187, 195 (3d Cir. 1990).
"The Lapp factors are best understood as 'tools to guide a qualitative decision."' Kos

Pharms., 369 F.3d at 709 (citation omitted).
10. Degree of similarity (Lapp #1 ). DRL's generic capsule is purple, albeit two
shades of purple. Although not identical to AZ's branded capsule, it does fit the

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description of the mark, "purple." It has been recognized that a registration for a color
covers all shades of that color. See, e.g., Wolf Appliances, Inc. v. Viking Range Corp.,
686 F. Supp. 2d 878 (W.D. Wis. 2010). It should be noted as well that the presence or
absence of markings on DRL's capsules do not avoid a likelihood of confusion. As
explained by the court in Ciba-Geigy Corp. v. Bolar Pharm. Co., 54 7 F. Supp. 1095
(D.N.J. 1982), aff'd, 719 F.2d 56 (3d Cir. 1983), "[r)ealistically, the likelihood of
confusion cannot be assessed by a side-by-side comparison of the plaintiff's and
defendant's products. It is the overall physical appearance of defendant's trade dress
which is critical. The vast majority of patients who take this type of medication do not or
cannot identify their medication, or its source, by reference to the matter imprinted on
the drug capsule of tablet." Id. at 1103. See a/so Fisons Horticulture, Inc. v. Vigoro

Indus., Inc., 30 F.3d 466, 477 (3d Cir. 1994) (the test for likelihood of confusion is
whether the marks create the same overall impression when viewed separately). This
factor weighs in favor of AZ.
11. Strength of AZ mark (Lapp #2). AZ has presented credible evidence that
its Purple Marks branding is of long duration, of value, and strong. 5 This factor weighs
strongly in favor of AZ.
12. Consumer care in purchase (Lapp #3). Given that the products in dispute
5

1n this regard, the court notes the following discussion in Kos Pharmaceuticals
relating to the admissibility of a declaration (called a "certification") that contained
hearsay: "It is well established that 'a preliminary injunction is customarily granted on
the basis of procedures that are less formal and evidence that is less complete than in
a trial on the merits.' . . . District courts must exercise their discretion in 'weighing all
the attendant factors, including the need for expedition,' to assess whether, and to what
extent, affidavits or other hearsay materials are 'appropriate given the character and
objectives of the injunctive proceeding."' 369 F.3d at 718-19.
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are prescription (not OTC) drugs, the consumers are not necessarily involved in the
decision to purchase one drug over another. Therefore, this factor weighs in favor of
DRL.
13. Defendant's use of mark (Lapp #4). DRL introduced its generic product in
September 2015. There has been no evidence presented of actual confusion. The
court would not necessarily expect such, however, given the mere weeks that DRL's
generic has been on the market; i.e., there has not been a meaningful opportunity for
confusion. This factor is neutral.
14. Defendant's intent (Lapp #5). Given the totality of the circumstances,
including the physical appearance of DRL's other generics (distinctive), the fact that
DRL is a second wave generic in this market (and perhaps has to be more aggressive
to get market share), and DRL's explanations for adopting an all-purple pill (which the
court will discuss below), the court concludes that DRL intended to test AZ's trademark,
rather than honor it. This factor weighs in favor of AZ.
15. Evidence of actual confusion (Lapp #6). There is no evidence of record of
actual confusion. Consistent with the discussion of Lapp factor #4, however, this factor
is neutral.
16. Competition and overlap (Lapp# 7-10). Despite the fact that Nexium® is
a branded product and DRL's generic is not, the court finds that AZ and DRL are still
competing in the same market for the same consumers in the first instance, even if DRL
is ultimately competing against other generics once the decision to buy a generic has
been made. These factors weigh in favor of AZ.

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17. The above analysis of the Lapp factors directs the conclusion that AZ has
carried its burden to prove likelihood of success on the merits of its trademark
infringement claim. For completeness, however, the court will address the remaining
issues raised by the parties.
18. Likelihood of success on the merits - dilution. Liability for dilution occurs
if, "at any time after the owner's mark has become famous, [defendant] commences
use of a mark or trade name in commerce that is likely to cause dilution by blurring [... ]
regardless of the presence or absence of actual or likely confusion, of competition, or of
actual economic injury." 15 U.S.C. § 1125(c)(1 ). Blurring "is association arising from
the similarity [... ] that impairs the distinctiveness of the famous mark." Id. §
1125(c)(2)(B). The statute characterizes a "famous" mark as one that is "widely
recognized by the general consuming public of the United States as a designation of
source." Id. § 1125(c)(2)(A). The Supreme Court has held that single-color marks are
entitled to trademark protection, see Qualitex Co. v. Jacobson Prods. Co., 514 U.S.
159, 163-64, 174 (1995), and also have been recognized as "famous" marks, see, e.g.,

Binney & Smith v. Rose Art Indus., 2001 WL 910943 (E.D. Pa. Aug. 9, 2001) (finding
Crayola's yellow and green color scheme famous).
19. AZ has provided sufficient evidence to demonstrate that its trademarks are
"famous." Specifically, it is evident that DRL, in its marketing of its GI generics, has
progressed from using colors in its two-tone capsules that are not at all similar to AZ's
purple pills, to a two-tone capsule that is (1) all purple and (2) uses AZ's shade of
purple. This encroachment is likely to dilute AZ's Purple Marks.

9

20. DRL's contract defense. In its response to AZ's motion for a temporary
restraining order, DRL raises several defenses, including a contract defense based on a
settlement agreement ("the Agreement") entered into by, among others, the parties at
bar in January 2011. The Agreement explains that AZ and DRL "are involved in
litigation ... concerning, inter alia, the validity of the [AZ Patents], as well as the alleged
infringement by DRL of the [AZ Patents] resulting from DRL's requesting approval from
the [FDA] for the distribution and sale of the DRL Product (as defined ... ) prior to
expiry of the [AZ Patents]." (D.I. 17, ex. Bat 2) The "DRL Product" was defined as "a
Generic Esomeprazole product sold, offered for sale or distributed pursuant to ANDA
No. 78-279, including any supplements or amendments to ANDA No. 78-279 that do
not change the mode of administration .... " (Id. at 4) The "Mutual Release" referred to
by DRL states that, "[i]n settlement of the disputed claims in the Actions," AZ releases
DRL "from any and all claims, demands, damages, liabilities, obligations, and causes of
action known or unknown, suspected or unsuspected, in law or equity, .. that were
asserted, or that could have been asserted, by" AZ "in connection with the DRL Product
... arising before the Effective Date of this Settlement Agreement." (Id. at 7) In ANDA
litigation, of course, the only claims that are allowed to be presented before market
entry of the generic in the artificial environment created by Congress under the HatchWaxman Act are those relating to patent infringement and validity. 6 The only context in
6

DRL argues in this regard that the Agreement covered its right to use a purple
capsule because its generic product was described as "purple opaque" in four sections
of DRL's ANDA submission, which submission was made part of the litigation record
before the Agreement was executed. DRL does not fully describe its ANDA submission
for purposes of the record at bar. (D.I. 16 at 5-7) From the court's extensive ANDA
litigation experience, however, the court takes judicial notice of the fact that such
10

which AZ's trademark rights are mentioned in the Agreement is in

~

9.13, in which DRL

agrees that it "shall have no right, title or interest in or to (a) any trademark, trade dress,
brand mark, service mark, trade name, brade name, logo or other similar business
symbol of [AZ] ... , including the trademark Nexium® or any trade dress of any
Nexium® product .... " (Id. at 11)
21. Contract interpretation is usually a question of law in New Jersey. Dome
Petroleum Ltd. v. Employers Mut. Liab. Ins. Co., 767 F.2d 43, 47 (3d Cir. 1985)

(citations omitted). Under New Jersey law, courts should interpret a contract
considering "the objective intent [of the parties] manifested in the language of the
contract in light of the circumstances surrounding the transaction." Id. (citations
omitted). Although the New Jersey Supreme Court has "extolled the use of extrinsic
evidence to aid in ascertaining the intent of the parties, even when the term of the
instrument are otherwise unambiguous, it cautioned that such evidence may not be
used 'for the purpose of modifying or enlarging or curtailing' the terms of the contract."
American Cyanamid Co. v. Fermenta Animal Health Co., 54 F.3d 177, 182 (3d Cir.

1995) (citing Atlantic Northern Airlines, Inc. v. Schwimmer, 96 A.2d 652, 656 (1953)).
22. The court concludes that the plain meaning of the Agreement, especially
when viewed in the context of the ANDA litigation resolved by the Agreement, did not
release DRL from any liability for selling its purple-colored generic product. If anything,
the language of the Agreement specifically preserved AZ's trademark rights against the

submissions are voluminous by nature, and that the focus of ANDA litigation is on the
formulation of the generic product for infringement purposes (not on the color of the
proposed commercial product, which is not on the market as not even approved by the
FDA yet).
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very conduct in which DRL has engaged.
23. DRL's acquiescence defense. DRL asserts in this regard that its sale of
the half-purple Prilosec generic capsules since 2005 demonstrates that "the market
history of overlap between" the products undermines any argument for irreparable
harm. (D.I. 16 at 13-14) As discussed above, the court rejects the notion that DRL's
marketing strategies in the past excuse its encroachment now.
24. Irreparable harm. "Grounds for irreparable injury include loss of control of
reputation, loss of trade, and loss of good will,'' intangible harms for which "it is virtually
impossible to ascertain the precise economic consequences." Kos Pharms., 369 F.3d
at 726 (citation omitted); Ferring Pharms., 765 F.3d at 211 (citation omitted). By using
AZ's Purple Marks, it is likely that DRL will create (and intended to create) the false
impression that its generic esomeprazole magnesium capsules are identical to
Nexium®, not merely bioequivalent, and may be an "authorized generic,'' that is, a
generic drug made or authorized by the brand name company, i.e., by AZ. Such
identity of source, sponsorship or affiliation with AZ not only dilutes AZ's Purple Marks,
but puts at risk AZ's reputation in the event of quality or safety issues with DRL's
generic. The court concludes that AZ has demonstrated a likelihood of irreparable
harm.
25. Balance of harms. The question to be addressed is whether, and to what
extent, DRL will suffer irreparable harm if injunctive relief is granted. Such irreparable
harm "must be of a peculiar nature, so that compensation in money alone cannot atone
for it." Kos Pharms., 369 F.3d at 727. As noted by the Third Circuit in this regard,

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"[i]njury to goodwill does constitute irreparable harm .... But, when the potential harm
to each party is weighed, a party 'can hardly claim to be harmed [where] it brought any
and all difficulties occasioned by the issuance of an injunction upon itself."' Id. at 728
(citation omitted). The court recognizes that imposing injunctive relief on DRL (i.e.,
forcing DRL to take its generic off the market) will be costly, both monetarily (see 0.1.
30) and in terms of such intangibles as market share and loss of good will. The court
nevertheless concludes that DRL engaged in the conduct at issue fully aware of such
consequences and, therefore, cannot be heard to complain that the risks it took did not
pay off.
26. Public interest. "The most basic public interest at stake in all Lanham Act
cases [is] the interest in prevention of confusion, particularly as it affects the public
interest in truth and accuracy." Kos Pharms., 369 F.3d at 730. Although the public
certainly has an interest in having access to less expensive drugs, there are other
generics on the market that did not test AZ's trademarks, a risk that DRL took and lost
(at least momentarily).
27. Conclusion. Weighing all of the factors discussed above in the "totality of
the circumstances," Kos Pharms., 369 F.3d at 711, the court concludes that AZ has
carried its burden to prove that it is likely to succeed on the merits of its case, that it is
likely to suffer irreparable harm if the requested relief is not granted, that the balance of
hardships and the public interest weigh in its favor. If DRL's arguments were carried to
their logical end, the loss of a branded company's patent monopoly would inevitably
result in a loss of its trademark rights, a result not consistent with the law or the market

13

place. Moreover, so long as injunctive relief is available to prevent harm, the court
declines to force such plaintiffs such as AZ to actually incur harm that is likely, but not
provable, at the outset. Therefore, AZ's motion for a temporary restraining order will be
granted. An order shall issue.

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