CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.
O'connor, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Blackmun, Powell, and Stevens, JJ., joined. White, J., filed an opinion concurring in the result, in which Marshall, J., joined, post, p. 859. Rehnquist, J., filed an opinion concurring in the result, post, p. 864.
JUSTICE O'CONNOR delivered the opinion of the Court.
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.*fn1 Ives marketed the drug, a white powder, to wholesalers, retail pharmacists, and hospitals in colored gelatin capsules. Ives arbitrarily selected
a blue capsule, imprinted with "Ives 4124," for its 200 mg dosage and a combination blue-red capsule, imprinted with "Ives 4148," for its 400 mg dosage.
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.*fn2 They intentionally copied the appearance of the CYCLOSPASMOL capsules, selling cyclandelate in 200 mg and 400 mg capsules in colors identical to those selected by Ives.*fn3
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.*fn4
The generic manufacturers also follow a normal industry practice by promoting their products primarily by distribution
of catalogs to wholesalers, hospitals, and retail pharmacies, rather than by contacting physicians directly. The catalogs truthfully describe generic cyclandelate as "equivalent" or "comparable" to CYCLOSPASMOL.*fn5 In addition, some of the catalogs include price comparisons of the generic drug and CYCLOSPASMOL and some refer to the color of the generic capsules. The generic products reach wholesalers, hospitals, and pharmacists in bulk containers which correctly indicate the manufacturer of the product contained therein.
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
own label attached. Hence, the final consumer sees no identifying marks other than those on the capsules themselves.
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).*fn6
Ives' claim under § 32, 60 Stat. 437, as amended, 15 U. S. C. § 1114,*fn7 derived from its allegation that some pharmacists had dispensed generic drugs mislabeled as CYCLOSPASMOL.*fn8
Ives contended that the generic manufacturers' use of lookalike capsules and of catalog entries comparing prices and revealing the colors of the generic capsules induced pharmacists illegally to substitute a generic drug for CYCLOSPASMOL and to mislabel the substitute drug CYCLOSPASMOL. Although Ives did not allege that the petitioners themselves applied the Ives trademark to the drug products they produced and distributed, it did allege that the petitioners contributed to the infringing activities of pharmacists who mislabeled generic cyclandelate.
Ives' claim under § 43(a), 60 Stat. 441, 15 U. S. C. § 1125(a),*fn9 alleged that the petitioners falsely designated the origin of their products by copying the capsule colors used by Ives and by promoting the generic products as equivalent to CYCLOSPASMOL. In support of its claim, Ives argued that the colors of its capsules were not functional*fn10 and that
they had developed a secondary meaning for the consumers.*fn11
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 ...