The opinion of the court was delivered by: SHIRLEY WOHL KRAM
SHIRLEY WOHL KRAM, U.S.D.J.
In this patent infringement action, plaintiff The Upjohn Company ("Upjohn") moves for an order holding defendants in contempt of the preliminary and permanent injunctions issued by this Court on October 12, 1990 and November 17, 1992, respectively. For the reasons set forth below, Upjohn's motion is granted.
In 1979, Upjohn, a pharmaceutical corporation, received United States Patent No. 4,139,619 for minoxidil, a chemical composition intended for use as a topical treatment for male pattern baldness. Subsequently, in 1986, the United States Patent and Trademark Office issued United States Patent No. 4,596,812
to Upjohn to reflect a change in inventors. In 1988, Upjohn received approval from the Food and Drug Administration (the "FDA") to sell minoxidil under the brand name "Rogaine." Rogaine continues to be the only FDA-approved topical minoxidil solution on the market.
While awaiting FDA approval for Rogaine, Upjohn learned that defendant Medtron Laboratories, Inc. ("Medtron") and its principles, defendants Anthony Imbriolo ("Imbriolo") and Dominick J. Carlisi ("Carlisi"), were infringing Upjohn's patents by manufacturing and selling their own topical minoxidil product under the brand name "Minoxidil Plus." As a result, on August 10, 1987, Upjohn commenced the current action to enjoin defendants from continued infringement of the patents.
Defendants conceded that Minoxidil Plus infringed Upjohn's patents, but challenged their validity and enforceability. On October 19, 1990, in Upjohn I, the Court rejected defendants' arguments, holding that they failed to rebut the presumption of patent validity. Finding that Upjohn had established the elements necessary to obtain a preliminary injunction, the Court enjoined defendants from "manufacturing, selling or otherwise distributing the infringing product, MINOXIDIL PLUS, during the pendency of [the] litigation." Upjohn I, 751 F. Supp. at 431. Subsequently, on September 1, 1992, in Upjohn II, the Court granted Upjohn's motion for summary judgment on its patent infringement claim for substantially the same reasons set forth in Upjohn I. By Amended Final Judgment dated November 10, 1992, the Court permanently enjoined defendants "from the continued infringement, including the manufacturing, sale, distribution, advertisement, and promotion, of [Upjohn's patents]." See Amended Final Judgment, annexed to Pl.'s Mem. of Law in Supp. of its Mot. for an Order of Contempt as Exh. "1," at 2.
In October 1990, shortly after the Court entered the preliminary injunction, Imbriolo called Upjohn sales representative Nora Hennigan ("Hennigan") on behalf of his hair clinic, New York Hair Laboratories ("NYHL"),
and notified her that he was interested in purchasing Rogaine. See Affidavit of Nora Hennigan, sworn to on 11/1/90 (the "Hennigan Aff."), annexed to the Declaration of Andrea H. Scheidt, executed on 1/12/93 (the "Scheidt Decl."), as Exh. "B," at PP 3, 5. Hennigan provided Imbriolo with an account application and Imbriolo immediately placed an order for 118 bottles of Rogaine at a total price of $ 5,000. Id. at P 6. This order was later cancelled by Upjohn, however, when it learned that the order was not signed by a physician as required by law.
In the meantime, NYHL continued to advertise Minoxidil Plus in local newspapers. One such advertisement stated that NYHL "utilizes the medication Minoxidil and special cleansing agents which increase the effectiveness and results of our hair growth program." See NYHL Advertisement, annexed to the Scheidt Decl. as Exh. "C." Believing that defendants were violating the preliminary injunction by continuing to sell Minoxidil Plus as advertised in the NYHL advertisements, Upjohn hired a private investigator who, on October 18, 1990, purchased a bottle of Minoxidil Plus at NYHL for subsequent analysis (the "1990 Sample"). See Scheidt Decl. at P 4.
At the same time, Upjohn requested a conference before the Court to discuss defendants' possible violations of the preliminary injunction. At a conference held on October 19, 1990, defendants defended the advertisements on the ground that the preliminary injunction applied to Medtron and Imbriolo but did not cover activities by Carlisi or NYHL. See Tr. of 10/19/90 Conference, annexed to the Scheidt Decl. as Exh. "E," at 2-4. At a conference held on November 2, 1990, however, the Court rejected defendants' contention and ruled that the preliminary injunction applied equally to Carlisi and his activities at NYHL. See Tr. of 11/2/90 Conference, annexed to the Scheidt Decl. as Exh. "G," at 5-6, 8. As a result of the Court's ruling, defendants entered into a stipulation with Upjohn (the "Stipulation"), in which defendants admitted that they were violating the preliminary injunction by continuing to sell Minoxidil Plus.
See Stipulation, dated 12/6/90, annexed to the Scheidt Decl. as Exh. "H." In light of defendants' admission, Upjohn filed a contempt motion for defendants' violations of the preliminary injunction.
In the Stipulation, defendants stated that Carlisi intended "to continue to distribute and sell Minoxidil Plus by acquiring a supply of ROGAINE Topical Solution and adding special enhancers and additional minoxidil to make Minoxidil Plus." Id. at P 11. Accordingly, in December 1990, NYHL opened an account with Upjohn and ordered 117 bottles of Rogaine. See Declaration of Lawrence T. Welch, executed on 1/19/93 (the "Welch Decl."), at P 8; NYHL Account Application, annexed to the Welch Decl. as Exh. "O." After NYHL failed to place any additional orders through the first three months of 1991, however, Upjohn determined that NYHL was continuing to sell its infringing Minoxidil Plus. At a conference held on April 19, 1991, defendants explained that they had stopped placing orders with Upjohn because they were able to buy Rogaine "from various outlets of Upjohn's." See Tr. of 4/19/91 Conference, annexed to the Scheidt Decl. as Exh. "A," at 4. The Court thus ordered defendants to disclose to Upjohn the names of the suppliers as well as the date and amounts of all Rogaine purchases. Id. at 5-6.
In compliance with the Court's order, defendants informed Upjohn that the only other source from which defendants purchased Rogaine was Spencer Meade Medical Supply Company ("Spencer Meade"). See letter from Lewis H. Eslinger to Thomas L. Creel of 4/29/91, annexed to the Scheidt Decl. as Exh. "K;" letter from Lewis H. Eslinger to Thomas L. Creel of 6/5/91, annexed to the Scheidt Decl. as Exh. "M." Defendants stated further that they purchased a total of 200 bottles from Spencer Meade between November 1990 and April 1991. See letter from Lewis H. Eslinger to Thomas L. Creel of 6/5/91, annexed to the Scheidt Decl. as Exh. "M." Additionally, defendants claimed that on May 2, 1991, NYHL bought 100 bottles of Rogaine directly from Upjohn. See Welch Decl. at P 9. Defendants explained that only a small quantity of Rogaine was needed to create Minoxidil Plus because they diluted Rogaine from a two percent to a one percent solution to create Minoxidil Plus, and they distributed their product to patients in smaller bottles. Id. The result, according to defendants, was that 2.4 bottles of Minoxidil Plus were created from each bottle of Rogaine. Id. Based on this explanation and defendants' assurances that Minoxidil Plus was made only from Rogaine and not from any non-Rogaine topical solution, Upjohn withdrew its pending contempt motion.
III. Upjohn's Investigation
As Upjohn continued to monitor defendants' activities, however, it noted that only 114 bottles were purchased between May 1991 and September 1992. Upjohn thus hired two investigators, Joseph McCabe ("McCabe") and George Hotter ("Hotter"), to visit NYHL and determine whether it was abiding by the Court's injunctions. NYHL office manager Cleopatra Panagiosoulis ("Panagiosoulis") informed McCabe that Minoxidil Plus is "'an alcohol and water solution' that 'contains Minoxidil and other penetrating agents,'" but does not contain Rogaine. See Declaration of Joseph McCabe, executed on 1/13/93 (the "McCabe Decl."), annexed to the Welch Decl. as Exh. "O," at P 4. On a subsequent visit to NYHL, a physician employed by the company confirmed to McCabe that Minoxidil Plus was not made from Rogaine. Id. at P 6. Another NYHL doctor similarly informed Hotter on his visit to the clinic that Minoxidil Plus was not made from Rogaine but rather was a solution composed of minoxidil and other ingredients. See Declaration of George Hotter, executed on 1/12/93 (the "Hotter Decl."), annexed to the Welch Decl. as Exh. "O," at P 3. The investigators purchased a total of three bottles of Minoxidil Plus and provided them to Upjohn for analysis (the "1992 Samples"). See McCabe Decl. at PP 2-3; Hotter Decl. at PP 4-7.
Upjohn research scientist Tore Ramstad ("Ramstad") analyzed the 1992 Samples, compared them to the 1990 Sample acquired in the earlier investigation, and compared all three samples to Rogaine. According to Ramstad, Rogaine is a two percent minoxidil solution containing sixty percent ethyl alcohol, twenty percent propylene glycol and water. See Declaration of Tore Ramstad, executed on 1/19/93, annexed to the Welch Decl. as Exh. "O," at P 4 Ramstad determined that the concentration of minoxidil in the 1992 Samples was 1.8 percent and that the concentration in the 1990 Sample was 2.04 percent. Id. at PP 6, 11, 14. He found further that all three contained isopropyl alcohol rather than ethyl alcohol. Id. at PP 7, 12, 15. Based on the consistent absence of ethyl alcohol and the similar minoxidil concentrations, Ramstad concluded that the 1992 Samples were "essentially identical" to the admittedly infringing 1990 Sample, and that none of the samples could have been made from Rogaine. Id. at PP 9, 12, 15. On January 22, 1993, based on this new information, Upjohn reinstituted its contempt motion.
IV. The Reformulation Defense
In response, defendants asserted that Minoxidil Plus was made directly from Rogaine and that Ramstad's findings support this conclusion. According to defendants, relying on the advice of Henry S. Edelson ("Edelson"), a part-time NYHL physician, NYHL utilized isopropyl alcohol rather than ethyl alcohol in Minoxidil Plus because it penetrates the skin without causing irritation and other side effects. According to defendants, after the injunctions went into effect, NYHL sought to continue to use isopropyl alcohol as a minoxidil carrier in order to continue its safe and effective results.
Imbriolo thus claims that he developed a process of extracting minoxidil from Rogaine and introducing it into his own carrier solution. See Declaration of Anthony Imbriolo, executed on 3/2/93, at P 5. Specifically, according to Imbriolo, "I extract minoxidil from Rogaine solution by boiling off the ethyl alcohol carrier solution and water, leaving a residue primarily of pure minoxidil. I then add to the minoxidil residue the carrier solution containing isopropyl alcohol, [lauryl alcohol-4] and glycerine-7." Id. at P 6. Edelson confirmed that Imbriolo expressed an interest in reformulating Rogaine into the original carrier solution of Minoxidil Plus, but asserted that Edelson had never performed the reformulation himself. See Declaration of Henry S. Edelson, executed on 3/8/93, at P 4. At his deposition, Imbriolo described the reformulation process with greater precision:
I empty the Rogaine into a 2,000 ml beaker to the amount of 1800 mls, then apply heat to reduce the amount, to burn off the amount of alcohol present and most of the water. We used a temperature of about 300 degrees, which reduces it down. . . . The alcohol burns off at approximately 187 degrees. The water burns off at 220 degrees, which leaves you with propylene glycol and the minoxidil. . . . Once that has been reduced down, we then add back an isopropyl alcohol and that reduces us down to 720 milliliters. We then add back in the propylene alcohol in order to make the Minoxidil Plus formulation, LA-4 and GL-7, water and color, stir, and it is made.