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GLAXOSMITHKLINE CONSUMER HEALTHCARE v. MERIX PHARMACEUTICAL

May 10, 2005.

GLAXOSMITHKLINE CONSUMER HEALTHCARE, L.P., Plaintiff,
v.
MERIX PHARMACEUTICAL CORP., Defendant.



The opinion of the court was delivered by: DICKINSON DEBEVOISE, Senior District Judge

OPINION

Presently before the court is the motion of Defendant Merix Pharmaceutical Corporation ("Merix" or "Defendant") to dismiss for lack of personal jurisdiction or, in the alternative, to transfer and the motion of Plaintiff Glaxosmithkline Consumer Healthcare ("GSK" or "Plaintiff") to enjoin Merix from prosecuting a lawsuit that was filed in the Northern District of Illinois after the instant action was filed. For the reasons set forth herein, Merix's motion to dismiss or to transfer will be denied and GSK's motion to enjoin the Illinois lawsuit will be denied.

  FACTS

  I. The parties

  GSK is a Delaware limited partnership with its principal U.S. office in Moon Township, Pennsylvania. GSK is the over-the-counter ("OTC") division of GlaxoSmithKline, a pharmaceutical company headquartered in the United Kingdom with extensive operations in the United States. GSK's Research and Development Group is located in Parsippany, New Jersey.

  Merix is an Illinois corporation based in Barrington, Illinois. Merix has no offices or employees in New Jersey. It is not registered to do business in New Jersey and does not maintain a registered agent in New Jersey to accept service of process. Merix distributes its products for sale directly through the internet and at drug and convenience stores nationwide, including New Jersey. Sales are accomplished in part through Performance Sales & Marketing, a sales representative,*fn1 which is located in New Jersey and, as GSK alleges upon information and belief, has called on drug and convenience stores in New Jersey. In addition, Merix has had direct dealings with Pathmark in New Jersey. GSK alleges that Merix has advertised to New Jersey customers through the packaging of its product Releev, radio advertisements, and an internet website.

  II. The products

  GSK makes Abreva, a non-prescription cold sore remedy approved by the Food and Drug Administration to shorten the healing time for cold sores. Abreva has been publicly available since the fall of 2000 following the FDA's July 25, 2000 approval of New Drug Application 20-941 for OTC sale. Abreva generally sells at retail for approximately $15-$18 per 2-gram tube. In addition to Abreva, GSK also makes Valtrex, a prescription drug for cold sores and herpes.

  In or before February 2003, Merix introduced Releev, an OTC cold sore remedy. GSK alleges that Releev has not been approved by the FDA for use in treating cold sores and has not been generally recognized as safe and effective for use in treating cold sores. According to the current packaging, the active ingredient in Releev is benzalkonium chloride, which is a recognized antiseptic agent but, according to GSK, has never been shown to be an effective "Cold Sore/Fever Blister Treatment" as asserted by Merix on the Releev package. Releev is sold, in a price range of $15-$20 per tube, to consumers nationwide through Merix's website and other buy-direct websites. Releev is also available in national and regional drug retailers, many of which have outlets in New Jersey. In 2004, sales of Releev in New Jersey constituted approximately 4.5% of Merix's total sales of Releev.

  III. The claims

  GSK's Complaint asserts claims under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and the New Jersey Consumer Fraud Act, N.J. Stat. § 56:8-2. GSK seeks an injunction to stop Merix from using allegedly false and deceptive advertising and promotional claims to win market share from GSK and destroy good will. The Complaint alleges that Merix made materially false claims regarding Releev, including but not limited to the following claims:
1. Releev has been "clinically proven": (a) to be a "1 Day Cold Sore Treatment" and (b) to "prevent outbreaks" (these two claims are located on the front panel of the Releev package);
2. Releev is endorsed by the University of Chicago;
3. Clinical research by Releev's Principal Clinical Investigator has been published; and
4. Releev uses the product name ViraMedx.
GSK alleges that Merix has disseminated false and deceptive advertising for Releev in New Jersey in three principal ways: (a) on the Releev packaging; (b) on the website operated by Merix; and (c) in radio advertisements in New Jersey and the New York metropolitan area. GSK alleges that Merix's false claims for Releev are deceiving consumers, diverting sales away from GSK to Merix, and causing GSK to suffer immediate and severe irreparable injury to its investment in the good will of the Abreva brand.

  IV. Procedural history

  On July 2, 2004, GSK filed an advertising challenge with the National Advertising Division of the Council of Better Business Bureaus, Inc. (the "NAD"). In response, Merix submitted several clinical studies which purportedly substantiated its claims for Releev. GSK alleges that the clinical studies suffer from serious shortcomings in methodology, data collection, and analysis and fall short of meeting U.S. drug testing standards. The NAD recommended that Merix discontinue its efficacy claims and use of its "before and after" pictures for Releev.

  According to the Complaint, the FDA sent a "Warning Letter" to Merix on May 20, 2003, advising Merix that statements made on the product packaging and Merix's website made the ViraMedx products "drugs" as defined in Section 201(g) of the Federal Food Drug and Cosmetic Act. The Warning Letter stated that the labeling claims made for the ViraMedx products subjected them to the requirements for new drugs "because there is no evidence that these products are generally recognized as safe and effective for their claimed uses." GSK alleges that the Warning Letter concluded that the drugs are "misbranded" because their labeling fails to contain adequate directions for the conditions for which they are offered as treatment.

  The instant action was filed in the District of New Jersey on February 16, 2005. Merix filed an action in the Northern District of Illinois on March 9, 2005 (the "Illinois Action"). The Illinois Action concerns GSK's false advertising relating to its Abreva and Valtrex products and its anticompetitive actions directed at Merix. More specifically, Merix's complaint in the Illinois Action asserts the following claims against GSK:
1. False advertising under the Lanham Act and Illinois law for advertising claims concerning GSK's Abreva and prescription drug Valtrex, and
2. Sherman Act and state law antitrust claims.
On March 14, 2005, Merix filed an amended complaint which eliminated the antitrust claims and contained only the false advertising claims. The allegedly false claims made by GSK are as follows: Allegedly false advertising concerning Abreva:
• Speeds healing like a prescription, without a prescription
• Speeds healing like a prescription, without one
• Heals cold sores fast
• Heal it fast with Abreva
• Makes cold sores disappear fast with Abreva
• Allegedly false advertising concerning Valtrex:
• One-day cold-sore treatment
• 3-day outbreak therapy
DISCUSSION
I. Exercising personal jurisdiction

  Rule 4(e) of the Federal Rules of Civil Procedure authorizes the court to assert personal jurisdiction over a non-resident to the extent permissible under the law of the state where the court sits, in this case New Jersey. New Jersey's long-arm rule, N.J. Civ. P.R. 4:4-4, extends jurisdiction over a non-resident defendant to the "to the uttermost limits permitted by the United States Constitution." Charles Gendler Co. v. Telecom Equity Corp., 102 N.J. 460, 469 (N.J. 1986) (citation omitted). Constitutional due process permits the court to exercise personal jurisdiction over a non-resident defendant who has "minimum contacts" with the forum state, ...


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