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GLAXOSMITHKLINE CONSUMER HEALTHCARE v. MERIX PHARMACEUTICAL

September 13, 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

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 herpes.

  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 outbreaks".
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 website.

  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 ...


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