The opinion of the court was delivered by: DICKINSON DEBEVOISE, Senior District Judge
Plaintiff, GlaxoSmithKline Consumer Healthcare, L.P. ("Glaxo")
commenced this action against defendant, Merix Pharmaceutical
Corporation ("Merix"), asserting claims for false advertising
under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and
the New Jersey Consumer Fraud Act, N.J.S.A. § 58:8-2. Glaxo moved
for a preliminary injunction. After a three-months expedited
discovery period the court held a five-day hearing during which
it heard testimony, received deposition transcripts and received
in evidence numerous exhibits. For the reasons that follow a
preliminary injunction will issue. This opinion constitutes the
court's findings of fact and conclusions of law.
I. The Parties and The Products
Glaxo is a Delaware limited partnership with its principal U.S.
office in Pennsylvania. It is the over-the-counter division of
GlaxoSmithKline, one of the largest pharmaceutical companies in
the world headquartered in the United Kingdom with extensive
operations in the United States. Among the many pharmaceutical
products that Glaxo sells are ABREVA, a non-prescription cold
sore remedy and VALTREX a prescription drug for cold sores and
Merix is an Illinois corporation with its principal place of
business in that state. In 1999 Meryl Squires formed Merix. Its
principal activity is the sale on the internet and at drug and
convenience stores nationwide of RELEEV, a cold sore remedy.
Merix employs four persons Ms. Squires, two of her daughters
and a clerical employee.
Glaxo's non-prescription cold sore product, ABREVA, is 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 over-the-counter sales. The product generally sells at retail
for approximately $15-$18 per 2-gram tube.
Ms. Squires, a cold sore sufferer since 1987, pursued relief
from its symptoms through the use of various products and
ultimately discovered that benzalkonium chloride (a common
topical antiseptic used for years in the United States) combined
with Echinacea (a natural remedy) provided her with such relief.
She asked friends to use her product and they reported enjoying
relief. She obtained two United States patents on the product,
one issuing on March 12, 2002 and one on April 19, 2002. She
named this substance VIRACEA, registering the name as a
trademark. RELEEV is now the product's name and is the name which
will be used throughout this opinion.
In 1998 Ms. Squires communicated with Glaxo and offered to
license her product to it. Glaxo declined the offer and in April,
1998 Ms. Squires began advertising and selling her product
through a website. Merix first entered the retail drug store
chains with RELEEV in June of 2003.
RELEEV is sold in a price range of $15-$20 per tube to
consumers nationwide through Merix's website and other buy-direct
web sites. It is also available at national and regional drug
retailers where RELEEV is often displayed adjacent to or in the
same shelf area as ABREVA and other cold sore remedies.
II. Glaxo's Challenges to Merix's Advertising
From the outset Merix made extravagant claims for RELEEV on the
internet, on its packaging and in its advertising and promotional
material, claims that Glaxo concluded were materially false and
misleading. The precise claims will be discussed at length below. In early 2003 Glaxo alerted the FDA to what it considered to be
Merix's unfounded claims concerning its RELEEV product. In May
2003 the FDA sent a warning letter to Ms. Squires, who, in
response, modified some of her claims about RELEEV. When Merix
entered the retail drug store chain market with RELEEV it
commenced head-to-head competition with Glaxo's ABREVA. Glaxo
thereafter monitored Merix's sales practices and the effect they
were having on Glaxo's sales.
It is Glaxo's contention that Merix on its packages and in its
advertising and promotional material made materially false claims
regarding RELEEV's efficacy in treating cold sores, thus unfairly
competing with Glaxo. The allegedly false claims include:
1. RELEEV has been "clinically proven": (a) to be a
"1 Day Cold Sore Treatment" and (b) to "prevent
2. RELEEV is endorsed by the University of Chicago;
3. Clinical research by RELEEV's Principal Clinical
Investigator has been published;
4. RELEEV uses the product name Vira Medx;
5. The RELEEV package bears "before and after"
photographs purportedly showing marked improvement
after 1 day, after 3 days and after 5 days.
On July 2, 2004 Glaxo filed an advertising challenge with the
National Advertising Division of the Better Business Bureau (the
"NAD"), challenging the truthfulness and accuracy of the RELEEV
claims. In response Merix submitted several clinical studies
which purportedly substantiated its claims for RELEEV. Glaxo
asserted that the clinical studies suffer from serious
shortcomings in methodology, data collection and analysis and
fall far short of meeting U.S. drug testing standards. On December 24, 2004 the NAD issued its decision finding in
favor of Glaxo on all issues that Merix had contested. Thereupon
Merix filed an appeal to the National Advertising Review Board on
each ruling against it. Rather than proceeding further before the
NAD Glaxo commenced this action on February 16, 2005.
III. The Merix Claims for RELEEV
On the first day of the preliminary injunction hearing Merix
advanced the argument that injunctive relief should be denied on
mootness grounds because it had revised its packaging and
promotional material to remove the arguably false claims. Glaxo
asserts that remaining claims continue to be false and
misleading, and in any event the abandoned claims that Merix has
been making about RELEEV since its introduction into the market
cast light upon its remaining claims and are otherwise relevant
to the question whether preliminary injunctive relief should be
granted. At this stage of the proceeding Merix either concedes or
makes little if any effort to defend the accuracy of the claims
which it has removed from its packages and promotional material.
A. Prevention Claim: Merix claimed on its packaging when it
introduced RELEEV in the drug trade in 2003 and on its new
packaging introduced in March 2004 that RELEEV prevented cold
sores. The "Directions" on the packages instructed: "To prevent
outbreaks use one drop per day on area and surrounding area where
outbreaks occur." Merix's January 2005 Sales Presentation advised
that RELEEV "Prevents Outbreaks." A letter dated March 3, 2004
assured Walgreens that: "RELEEV deactivates the herpes virus. It
heals cold sores in as little as one day and it can prevent
outbreaks." Although this claim was typically placed in close
proximity to a "clinically proven" claim, suggesting that it was
clinically established, Ms. Squires admitted that RELEEV had not been clinically proven to prevent cold sores and
acknowledged that Merix did not have satisfactory support for the
claim. It was a false establishment claim.
B. One-Day Healing Claim: Merix's packaging and promotional
materials suggested that RELEEV healed cold sores in 24 hours.
Prominently displayed on the front of the package introduced in
March 2004 was the statement "1-Day Cold Sore Treatment." The
prior package assured that "lesions resolved in 24 hours." The
back panel of the revised packaging first shipped in the Spring
of 2005 stated: "In clinical testing . . . lesions resolved in 24
hours." Promotional material provided the same assurances.
There is no clinical evidence to support these claims, and Ms.
Squires testified at trial that she had decided to withdraw the
24-hour claim in late December 2004 or early 2005: "I decided I'm
not going to make that claim until I can get clinical trials
done, until we can substantiate it." The studies which Ms.
Squires characterized as clinical reports, the reports of Dr.
Betsy Singh and Professor Silvio Boraks, discredit the one-day
healing claim and demonstrate its falsity.
C. Clinical-Testing Claim: Throughout the packaging and
promotional material for RELEEV there appear frequent references
to "clinically proven" by means of clinical and other scientific
tests. The studies that Merix puts forth as clinical tests are i)
three Brazilian studies by Professor Boraks, Department of
Odontology, Cancer Institute, University of Sao Paulo, Brazil,
ii) an "interim report" by Betsy Singh, Ph.D. of the Southern
California University of Health Sciences and iii) a seven-year
study conducted by Ms. Squires, which was reported on the RELEEV
Materials that Merix's sales representatives presented to
retailers contained such representations as: "Clinically Proven"
"Clinical Study . . . of more than 300 people proves
RELEEV heals cold sores in 1 day.
"Clinical Study . . . comparison, double blind
testing against Zovirax and placebo showed RELEEV was
100% effective and much more effective against cold
sores than Zovirax."
An October 2004 radio advertisement for RELEEV stated: "In
clinical trials, [RELEEV] eased pain in minutes and sores were
gone in minutes."
Glaxo's witnesses, Dr. Paul Shiffman, Dr. Pedro Garbes and Dr.
Katie L. Dawson, testified about serious deficiencies in
methodology, data collection and accuracy in the Boraks studies.
Dr. Boraks did not testify, and Merix's expert, Dr. David ...