United States District Court, D. New Jersey
September 13, 2005.
GLAXOSMITHKLINE CONSUMER HEALTHCARE, L.P., Plaintiff,
MERIX PHARMACEUTICAL CORP., Defendant.
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 Riley
did not successfully rebut the testimony of Glaxo's expert
The Singh study which, even as proposed, was only a pilot
study, was cancelled by Merix before it was one-third completed
with results from only 16 patients out of a planned 50. Ms.
Squires testified that she directed Dr. Singh to halt the study
prior to completion because "[t]here seemed to be some problem
with the study."
The seven-year study upon which Merix relied was so defective
that in responding to Glaxo's NAD challenge in August 2004, Merix
did not attempt to defend it and instead agreed to delete it from
In its proposed findings of fact submitted after the hearing
Merix did not seek to justify use of the clinical studies as
supporting Merix's more extravagant claims that RELEEV healed
cold sores in one day or that sores were gone in about 24 hours.
All Merix now claims for the various studies is that they
establish that "RELEEV alleviated the symptoms of cold sores
in less than a day" (emphasis added) or that "RELEEV relieves the
symptoms of cold sores in less than 24 hours." (emphasis
Akin to statements about clinical studies were Merix's
references in their packaging and advertising to Dr. Kenneth
Thompson, the University of Chicago and laboratory testing that
Dr. Thompson conducted on RELEEV. Dr. Thompson of the University
of Chicago had in fact tested RELEEV in a "basic science study"
in a laboratory to test its effectiveness against certain herpes
strains. He published his findings in the Journal of Antiviral
Research to the effect that RELEEV was "shown to have good
in-vitro activity against clinical strains of the herpes virus
that causes cold sores." Although these laboratory tests do not,
and cannot, establish drug efficacy in human beings, in its
advertising Merix referred to them, to Dr. Thompson and to the
University of Chicago to bolster its claims that RELEEV cured and
prevented cold sores.
The March 2004 package had the following claim on the back
Publications of the testing conducted on Viracea
(RELEEV) by Dr. Ken Thompson at the Clinical
Microbiology Laboratory at The University of Chicago
can be obtained from The Journal of Anti-viral
Research or contact Merix Pharmaceutical Corp.
The new packaging introduced in the Spring of 2005 revised the
language to read: "Published laboratory testing at the leading
University in Chicago proves . . ." These references to Dr.
Thompson and the University of Chicago which appeared prominently
and frequently throughout Merix's packaging and advertising were
clearly designed to lead the public to believe that the curative
and preventive qualities which Merix claimed for RELEEV were
supported by the eminent Dr. Thompson's laboratory experiments.
These were false endorsements as neither Dr. Thompson nor the
University of Chicago consented to the use of his/its name. D. FDA Approved/Registered Claims: In its advertising Merix
claimed that RELEEV was registered, regulated or approved by the
FDA as a cold sore drug, thus attempting to clothe its
extravagant claims with the FDA's blessing. For example:
FDA REGISTERED "Over the Counter" Treatment
Regulated by the FDA as an OTC product, the
formulation is comprised of Category I substances
that meet the FDA Tentative Final Cold Sore
Monograph for the status and the claims indicated.
(emphasis in original)
There was conflicting testimony as to whether RELEEV's active
ingredient, benzalkonium chloride comes within an FDA OTC
Monograph for treatment of cold sores. Glaxo's Sue James
testified that it does not. She noted that upon receipt of the
report of the Panel studying fever blister and cold sore
treatment drug products the FDA referred benzalkonium chloride to
the Panel studying rule making concerning OTC first-aid
antiseptic drug products for use on cuts and wounds and that,
therefore, benzalkonium chloride was not available under an FDA
Monograph for fever blisters and cold sores. Merix's Robert
Pinco, a knowledgeable witness in the FDA regulatory field,
testified that read together the various applicable Monographs,
one of which approved benzalkonium chloride as an OTC first-aid
antiseptic drug product, entitled Merix to market RELEEV as a
cold sore treatment drug product pursuant to an FDA Monograph. No
one questions the legality of Merix's sale of RELEEV as a cold
sore remedy, and it will be assumed that the product comes within
an FDA Monograph. That being said, however, neither Pinco's
testimony nor the Monographs themselves support Merix's
statements that RELEEV is "FDA REGISTERED," or that RELEEV is
"Regulated by the FDA as an OTC product," or that because it is
within an FDA monograph RELEEV "meet[s] . . . the claims
indicated." Quite the contrary, as the Monographs themselves make
clear. The FDA has never approved RELEEV or its ingredients as a cold
sore drug. Plaintiff's Exhibit 45 contains two OTC Monographs,
each dated January 31, 1990: i) the proposed rule for Skin
Protectant Drug Products for Over-the-Counter Human Use; Fever
Blister and Cold Sore Treatment Drug Products, and ii) the
proposed rule for External Analgesic Drug Products for
Over-the-Counter Human Use; Proposed Rulemaking for Fever Blister
and Cold Sore Treatment Products. In each Monograph the proposed
definition of "fever blister, cold sore" is "A vesicle that
occurs at the junction of the mucous membrane and skin on the
lips or nose and is caused by the virus herpes simplex, type
Both of these Monographs set forth the FDA approved claims that
may be made with respect to the products covered by the
"Relieves dryness and softens colds sores and fever
blisters," which may be followed by the optional
statement "softens crusts (scabs) associated with
cold sores and fever blisters." (Pl. Ex. 45, at
"For the temporary relief of" (select one of the
following: "Pain," "itching," or "pain and itching")
(which may be followed by: "associated with" (select
one or more of the following: "fever blisters," "cold
sores," or "fever blisters and cold sores")). (Pl.
Ex. 45, at 3383).
Merix's claim that RELEEV was registered with the FDA was false
and in violation of an FDA regulation. 21 C.F.R. § 207.39(2005).
The limited claims which the Monographs approved demonstrate the
falsity of Merix's assertion that the Cold Sore Monograph
establishes that RELEEV meets the extravagant claims Merix made
E. Miscellaneous Claims: Merix in its promotional material
and advertising made a number of other claims for RELEEV which
have no basis in fact.
An October 2004 radio advertisement on WOR-AM in New York
contained the following purported consumer testimonials:
One man wrote to say that he is now in his 50's and
has suffered from this curse since 17. Sores would
last ten days. He bought RELEEV and applied it
immediately. Pain eased in minutes and by the next
day, the sores were almost entirely gone. He now
won't leave home without it. And a woman wrote saying
that she had tried everything, nothing worked. Then
she tried RELEEV and it worked like it said it would.
"Thank you, thank you," she says, "RELEEV gave me
back my life."
This, in effect was a repetition of the insupportable false
curative claims contained in the packaging and promotional
The use of the brand name "Vira Medx" conveys to consumers,
falsely, that RELEEV is a medication that has been proven to cure
cold sores by killing viruses. Merix achieves this effect by
combining "Vir" from virus, "Med" from medication and "x" from
Rx. The packaging that Merix proposed at the outset of the
hearing changed the brand name to "VIMDX."
There appeared in Merix's April 2005 sales sheet the statement
that RELEEV has been "[r]ated best and most effective by
consumers." "Rated" suggests that the statement is based upon
proper consumer research. Admitting that the only support for
this claim was letters and calls it receives from consumers, Ms.
Squires testified that she had withdrawn the statement.
Similarly, the assertion in its sales material of "99.8% Repeat
Customer" is totally unsubstantiated as there was no evidence to
support such a claim.
The assertion contained in versions of the Sales
Presentation/Manual and Broker Manual that RELEEV "[s]tops the
virus at the cell surface level" was also false as
unsubstantiated. Ms. Squires testified that she has withdrawn the
F. Totality of the Claims: The claims that Merix has made for
RELEEV have thus been examined individually and have been found
to be literally false or false in a variety of other ways. When all the claims, whether verbal or pictorial are considered
together the consumer cannot help but receive the impression that
here is a wonder drug that can prevent cold sores and can cure
them in a 24-hour period, as contrasted to the untreated cold
sore's eight to nine day healing cycle-a claim that no other cold
sore remedy can make. When analyzed, Merix's own evidence and
admissions negate this overarching claim.
IV. Merix's Proposed Claims for RELEEV: Apparently
recognizing the indefensible nature of its claims, on the eve of
the June 14, 2005 hearing Merix abandoned many of them and
proferred a new package design for RELEEV. Counsel stated in his
opening argument that Merix had halted shipment of the prior
versions of the packaging and that the new packaging was already
being shipped. In fact the new packaging was not yet in use.
The front of the new package design stated:
1 Day Cold Sore Treatment
Relieves Symptoms in Just a Day!
The top line is printed in bolder, larger type than the bottom
line that is italicized and printed in smaller type.
In the upper right corner of the front panel the purchaser is
advised to "See actual Before and After Photos on back panel."
The top of the back panel states that "Publications regarding
this product can be obtained by contacting Merix Pharmaceutical
Corp." Below this statement and to the right is the following:
"Symptoms of cold sores relieved within 24 hours." To the left of
this statement is the three side-by-side photographs purporting
to show "Before" and "After" results from application of RELEEV
at 1-, 3-, and 5 day stages of a cold sore. Each "After"
photograph shows healing of the cold sore lesions.
The only claim that Merix can truthfully make for RELEEV is
that it provides relief from cold sore symptoms. There is no
dispute that the symptoms of a cold sore are the subjective
manifestations of pain, tingling and burning sensations. The
symptoms are not the physical manifestations of the ulcer,
blister and crust. Glaxo objects to the new packaging's
representations that RELEEV "Relieves Symptoms in Just a Day" and
"Symptoms of cold sores relieved within 24 hours." In fact Merix
could legitimately represent that RELEEV relieves the symptoms,
at least temporarily, shortly after application, long before the
expiration of 24 hours. The reference to 24 hours is a rather
obvious ploy to tie in the new packaging design to the old design
which falsely promised a cure within 24 hours. However, if Merix
wishes to make this lesser claim for the effect its product has
upon cold sore symptoms there is no reason why it should not do
so provided it is not used in association with other claims that
suggest that RELEEV is a cure for the physical effects of cold
sores. A relief of symptoms claims comes within a reasonable
adaptation of the Monographs' permitted claims.
Other elements of the new packaging continue to suggest,
falsely, that RELEEV is a cure for cold sores. The emphasis
placed on "1 Day Cold Sore Treatment" is not cured by the
statement under it printed in smaller italicized type: "Relieves
Symptoms in Just a Day!"
The "Before" and "After" photographs, which accompanied the
highly questionable Boraks studies, convey the unmistakable
impression that RELEEV effects a cure of the physical
manifestations of colds sores. As explained above, this is false.
The falsity of (i) the statement "1 Day Cold Sore Treatment"
and (ii) the "Before" and "After" photographs is accentuated by
the history of the packaging and promotional materials that were in use since 2003. For two years sellers and purchasers
of RELEEV have been exposed to the claims of 24-hour or 1 Day
cures, the "Before" and "After" photographs evidencing such cures
and all the false or misleading material purportedly evidencing
such cures. Continued use "1 Day Cold Sore Treatment" and the
"Before" and "After" photographs will necessarily lead former
retailers and consumers to believe that the now abandoned claims
are still viable, and thus encourage their continued purchasing
of RELEEV. One cannot help but infer that this was the intent of
continued use of these claims.
In ruling on a motion for a preliminary injunction, the court
must consider i) the likelihood that the moving party will
prevail on the merits at the final hearing; iii) the extent to
which the moving party is being irreparably harmed by the conduct
complained of; ii) the extent to which the non-moving party will
suffer irreparable harm if the preliminary injunction is issued;
and iv) the public interest. Duraco Products, Inc. v. Joy
Plastic Enterprises, Ltd., 40 F.3d 1431, 1438 (3d Cir. 1994).
A. Likelihood of Success: In its post-trial Proposed Findings
of Fact and Conclusions of Law Merix makes no attempt to defend
the claims of cure, prevention, validation by clinical studies,
FDA registration and approval endorsement by Dr. Thompson and the
University of Chicago and others discussed in Part III of this
opinion. Unquestionably those claims violated Section 43(a) of
the Lanham Act which provides:
Any person who . . . uses in commerce any word, term,
name, symbol, or device, or any combination thereof,
or any . . . false or misleading description of fact,
or false or misleading representation of fact, which
. . . in commercial advertising or promotion,
misrepresents the nature, characteristics, qualities,
or geographic origin or his or her or another
person's goods, services, or commercial activities, shall be liable in a civil action by any person who
believes that he or she is or is likely to be damaged
by such act.
15 U.S.C. § 1125(a).
These claims met all the criteria for a Lanham Act violation:
i) Merix made false and misleading statements about its own
product, ii) there was a tendency to deceive the retailers and
consumers of RELEEV; iii) the deception was material in that it
was likely to influence purchasing decisions, iv) RELEEV traveled
in interstate commerce, and v) there was a likelihood of injury
to Glaxo in terms of declining sales or loss of good will.
Warner-Lambert Co. v. Breath Assure, Inc., 204 F.3d 87, 91-92
(3d Cir. 2000).
As noted above, certain of the claims were literally false,
such as the claim that RELEEV prevents outbreaks of cold sores,
that RELEEV resolved cold sores lesions in 24 hours and that this
was established in clinical testing. Ms. Squires admitted that
the clinical evidence did not support these claims and withdrew
them. See Johnson & Johnson Merck Consumer Pharms. Co. v.
Rhone-Poulenc Rorer Pharms., Inc. 19 F. 3d 125 (3d Cir. 1994);
Castrol Inc., v. Quaker State Corp., 977 F. 2d 57 (2d Cir.
Where, as in the present case, a claim is completely
unsubstantiated a plaintiff need not offer affirmative evidence
in support of its contention that a challenged claim is false.
Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck
Consumer Pharms. Co., 290 F. 3d 578, 590 (3d Cir. 2002); Sandoz
Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222,
228 n. 7 (3d Cir. 1990).
The "Before" and "After" photographs contributed to the message
Merix intended to convey, that RELEEV cured cold sores. Pictorial
representations can convey false advertising claims. Coca-Cola Co. v. Tropicana Prods., Inc., 690 F.2d 312,
317-18 (2d Cir. 1982); Gillette Co. v. Norelco Consumer Prods.,
Co., 946 F. Supp. 115, 128 (D. Mass. 1996).
Despite the fact that Merix has ceased using certain of its
false claims and certain of the statements which implied the more
explicit false claims, its most recent packaging and presumably
its promotional material perpetuate the false claims of
prevention and cure by use and emphasis of the phrase "1 Day
Cold Sore Treatment" and by use of the "Before" and "After"
photographs. The phrase 1 Day Cold Sore Treatment" is not
neutralized by placing beneath it in much less prominent type the
phrase "Relieves Symptoms in Just a Day!" There is nothing to
modify the effect of the "Before" and "After" photographs.
Even without the prior history of deceptive packaging and
advertising these two elements would convey the false impression
that RELEEV effects a cure and prevents cold sores. In the
context of two years usage of this phrase and the photographs,
retailers and consumers who had been exposed to them would be
more likely to interpret the language as suggesting that RELEEV
cures and prevents cold sores.
Merix defends on the ground that it has ceased using the
offending packaging and promotional material, and that when a
defendant has ceased the allegedly offensive activity, no basis
exists for an injunction. Oil Heal Institute v. Northwest
Natural Gas, 708 F. Supp. 1118 (D. Or. 1988). In other words,
Merix contends that the claim for injunctive relief has become
moot. The short answer to this contention is that Merix has not
ceased using elements of the offensive claims and that its new
packaging continues to suggest falsely that RELEEV cures cold
sores. It still has not limited its claims for RELEEV to
alleviating symptoms of cold sores, which would come within the
claims approved in the Monographs upon which it relies. It
asserts in its post trial Proposed Findings of Fact and Conclusions of Law that its
claim is a "non-establishment claim" that RELEEV is a "one day
treatment of cold sore symptoms" (at p. 18). However, the language
and photographs on the packaging as now written are not so
limited. From June 2003 until the present Merix has modified its
claims from time to time, but the claims are continually
suggestive that RELEEV can do far more than relieve cold sore
symptoms. Glaxo has established that it is likely to succeed on
the merits of its federal Lanham Act cause of action, and by the
same token it is likely to succeed on its New Jersey Consumer
Fraud Act cause of action.
B. Irreparable Injury: Glaxo's Vice President Jeffrey Brown
testified about the damage which Glaxo has suffered and, unless
Merix is preliminarily enjoined, is likely to continue to suffer
by reason of RELEEV's packaging and advertising claims. RELEEV
competes directly with Glaxo's ABREVA, the only other brand
selling in the price range of $15-$20 per unit. Glaxo spends
millions of dollars each year advertising ABREVA, the only OTC
product approved by the FDA to shorten healing time.
RELEEV is marketed in the same area of stores as ABREVA and
placed in proximity to it on the shelves. While ABREVA claims to
shorten healing time it does not and cannot claim to cure cold
sores in 24 hours or is a "1 Day Cold Sore Treatment" or prevents
future cold sores. In the normal course of events a consumer will
choose RELEEV over ABREVA by reason of RELEEV's purported
superior curative properties.
The evidence demonstrates that Glaxo has suffered loss of
sales. According to Mr. Brown ABREVA's sales have declined in
stores carrying RELEEV as compared to increased sales of ABREVA
during the same period of time in retail chains where RELEEV was
not sold. He estimated that ABREVA's loss of market share to
RELEEV in 2005 has been $2 million in sales.
Merix notes the enormous sales of ABREVA and the over-all
increase in its sales during the period RELEEV has been on the
market. By October 2004 Glaxo's gross sales of ABREVA were more
than $60 million. ABREVA had approximately 40% of the market
share, while RELEEV had approximately 1.3%. By September 10,
2004, despite RELEEV's impact, ABREVA's over-all sales were up
10% from the prior year. This suggests that Glaxo's estimated $2
million loss of sales to Merix's RELEEV constituted a relatively
slight degree of injury. Be that as it may, the injury was
inflicted by the effect of false claims for RELEEV and, if Merix
were allowed to continue making such claims, the degree of injury
would likely increase in the future.
Failure of RELEEV to live up to its promises could reflect not
only upon RELEEV and Merix, it could reflect adversely upon the
reputation of Glaxo, the other seller of a high-priced cold sore
remedy. Irreparable injury under the Lanham Act results from
"loss of control of reputation, loss of trade, and loss of
goodwill." Pappan Enterprises, Inc. v. Hardee's Food Sys.,
Inc., 143 F.3d 800, 805 (3d Cir. 1998). Glaxo has suffered these
kinds of injuries in this case.
Noting that a plaintiff must demonstrate diligence to prevail
on a motion for a preliminary injunction, Pharmacia Corp. v.
Alcon Laboratories, 201 F. Supp. 2d 335, 383-84 (D.N.J. 2002),
Merix argues that Glaxo's failure to timely bring this
preliminary injunction application demonstrates that it is not
suffering irreparable harm. Merix notes that Glaxo first learned
of Merix's product seven years ago when Ms. Squires sought to
determine if Glaxo would be interested in licensing her cold sore
remedy. From 1998-2002 Ms. Squires sold her product over the
internet, making many of the claims for it that the court has
found to be false, all without objection from Glaxo.
However, the critical date is the date when RELEEV entered into
competition with ABREVA and when thereafter Glaxo concluded that
RELEEV's false claims were causing it injury. Prior to that Glaxo
would not have a viable cause of action against Merix.
Glaxo first learned that RELEEV was entering into direct
competition with its ABREVA when in June 2003 a national retail
chain began carrying RELEEV. Thereafter it began monitoring the
effect RELEEV was having on the market for over-the-counter cold
sore remedies and by April 2004 concluded that the competitive
effect was real, having the consequences described above.
Electing to pursue a voluntary false advertising claim before
turning to litigation, Glaxo filed a challenge with the NAD on
July 2, 2004. On December 12, 2004 the NAD issued its decision
finding in favor of Glaxo on all contested issues. It was only
after Merix filed an appeal on each ruling against it that on
February 16, 2005 Glaxo filed this law suit.
This conduct, which entailed an initial resort to a consensual
resolution of the controversy did not constitute unreasonable
delay. Millenium Import Co. v. Sidney Frank Importing Co., 2004
WL 1447915 (D. Minn. June 11, 2004).
C. Injury to Merix: Merix contends that granting the
injunctive relief Glaxo seeks would destroy the life work of Ms.
Squires, a person who had worked her way through high school,
attended community college at night, studying biology, all the
while single-handedly raising three daughters. A cold sore
sufferer herself, in about 1988 she discovered that benzalkonium
chloride combined with Echinacea provided her with relief. She
determine that the mixture also provided relief to friends,
family members and colleagues. Thereafter Ms. Squires obtained two patents for her creation
and registered the name she gave to it, VIRACEA, with the United
States Patent and Trademark Office. In April 1998 Ms. Squires
began advertising and selling her product through a website
(under its present name, RELEEV) and in June 2003, as noted
above, introduced RELEEV into the retail drug store chain market.
It undoubtedly required unusual efforts, salesmanship and
creativity on the part of Ms. Squires and two of her daughters to
develop packaging and promotional material for this new product
and to enter so successfully into the market for cold sore
remedies. None of these factors, however, can justify the sale
and advertising of RELEEV by means of claims that are not true.
It is evident that Merix, through the efforts of its principal,
has established itself in major United States drug chains and
that RELEEV has become a popular cold sore remedy. Merix's gross
profit on the sale of RELEEV is considerable. Its cost is $.80
per bottle. It is sold to retailers for $12 per bottle, with a
recommended retail price of $15-$20 per tube a price comparable
to that of Glaxo's ABREVA. Merix's sales were $3.4 million in
2004. With estimated sales of 400,000 units in 2005, Merix's
gross profits for that year could exceed $4 million. Merix has
recently voluntarily withdrawn its principal representations
suggesting curative and preventive qualities for RELEEV,
apparently without fear that sales would be adversely affected.
An injunction would ensure that these unfounded claims would not
reappear in future packaging and promotional material and would
prevent use of those remaining claims that serve to perpetuate
the substance of the abandoned claims.
In light of RELEEV's existing market penetration and in light
of its substantial profit margin, the court does not find that a
preliminary injunction will destroy Ms. Squires's life work. Whatever adverse effect it may have is a price that must be paid
for failing to take curative action voluntarily for such a long
period of time.
D. Public Interest: There is an obvious public interest in
preventing misleading advertisements, an interest that "is
particularly strong where over-the-counter drugs are concerned."
Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck
Consumer Pharmaceuticals Co., 290 F.3d 578, 597 (3d Cir. 2002).
That interest is served by the issuance of a preliminary
injunction in this case.
There is also a public interest in encouraging the creation of
new and useful products and the furthering of competition.
Merix's RELEEV will still be able to compete in the cold sore
market. It will be given a reasonable period of time to remove
from its newest packaging the remaining claims that suggest
falsely that RELEEV cures colds sores. That is, it must remove
the statement "1 Day Cold Sore Treatment" and it must remove
the "Before" and "After" photographs. The court has rejected
Glaxo's demand that Merix refrain from claiming that RELEEV
provides relief of symptoms within 24-hours.
The issuance of a preliminary injunction serves the public
Glaxo has established that, applying the applicable criteria,
it is entitled to the issuance of a preliminary injunction. The
court will issue an appropriate injunction order. Glaxo shall
post a bond of $500,000.
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