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Hi-Tech Pharmacal Co, Inc. v. Hi-Tech Pharmaceuticals

July 5, 2007

HI-TECH PHARMACAL CO, INC., PLAINTIFF,
v.
HI-TECH PHARMACEUTICALS, INC., DEFENDANT.



The opinion of the court was delivered by: Gold, S., United States Magistrate Judge

MEMORANDUM and ORDER

I. Introduction

Plaintiff, Hi-Tech Pharmacal, a manufacturer of generic and branded drugs and dietary supplements, brings this action for trademark infringement, unfair competition, and false designation of origin under Section 43(a) of the Lanham Act, codified at 15 U.S.C. §1125(a). Compl. ¶ 13. Plaintiff alleges that defendant, a manufacturer primarily of dietary supplements, infringes its trademark. Plaintiff contends that defendant's mark, "Hi-Tech Pharmaceuticals," is so similar to plaintiff's mark that it causes confusion and mistake, and leads customers to believe that plaintiff is the source of defendant's products. Plaintiff also brings various claims under New York State law.

Plaintiff and defendant now cross-move for summary judgment on the federal claim, and defendant moves for summary judgment on plaintiff's state law claims. By stipulation dated November 14, 2006, the parties consented to have me decide their respective motions. Docket Entry 32. I held oral argument on May 10, 2007. For the following reasons, the parties' cross-motions for summary judgment on plaintiff's Lanham Act claim are denied; defendant's motion for summary judgment on plaintiff's state law claim for dilution is denied; and defendant's motion for summary judgment on plaintiff's claims for unfair competition, misappropriation, and unfair and deceptive trade practices is granted.

II. Facts

A. Hi-Tech Pharmacal

Hi-Tech Pharmacal ("Hi-Tech") makes and sells prescription pharmaceuticals, over-the- counter health and medical products, and vitamins and mineral supplements. Declaration of David Seltzer ("D. Seltzer Decl.") ¶ 2. Vitamins and minerals are defined as dietary supplements by the Food and Drug Administration ("FDA"). Declaration of Michael F. Sarney ("Sarney Decl."), Ex. 1. Hi-Tech's products include both generic and branded dietary supplements and prescription and over-the-counter drugs, as well as contract and private label products. Deposition of David Seltzer ("D. Seltzer Dep.") at 46; D. Seltzer Decl. ¶¶ 2-3, Exs. 2-3.

Hi-Tech's generic products make the most prominent use of the company's trade name. The packaging for Hi-Tech's generic products, which include eye drops, vitamin drops, and cough syrup, features the "Hi-Tech Pharmacal" company logo but no drug-specific "brand" name. D. Seltzer Decl., Ex. 7. The branded products, which include products such as a sugar-free cough syrup marketed under the name Diabetic Tussin and a prescription analgesic sold under the name Naprelan, do not have the "Hi-Tech Pharmacal" logo on their label. Rather, these products are marketed under a name specific to each item, but the packaging does indicate that they are made and distributed by Hi-Tech. D. Seltzer Decl. ¶ 10.

Hi-Tech has employed the"Hi-Tech Pharmacal" mark since 1983. Id. ¶ 2. It has marketed over-the-counter health products, vitamins, and minerals under that name since 1983, and pharmaceutical products under it since 1984. Id. In addition to its inclusion on product packaging and labels, the name "Hi-Tech Pharmacal" also appears on product catalogs, order forms, price lists, invoices, annual reports, and advertisements.*fn1 Id. ¶¶ 10-22 and accompanying exhibits. The typical display of the name seems to be the word "Hi-Tech" in large white lettering in a rectangle against a teal colored background, with the word "Pharmacal" appearing in smaller, more simple black lettering below. See http://www.hitechpharm.com/prod.htm (last visited June 13, 2007). This mark appears in the upper left-hand corner of many of plaintiff's generic products. Id. Although plaintiff has registered other names, it has not registered the "HiTech Pharmacal" mark with the United States Patent and Trademark Office ("PTO"). D. Seltzer Decl. ¶ 4.

In 2005, Hi-Tech's net sales were approximately $68 million. Id. ¶ 6. This amount constitutes less than 1% of industry revenues. Def.'s 56.1 Statement at 10, Def.'s Resp. 14. HiTech's generic product business accounted, very roughly, for 80-85% of this figure, including some contract manufacturing products. D. Seltzer Dep. at 49, ll. 3-19. Hi-Tech does not sell its generic products directly to end users or consumers, but only to major distributors, wholesalers, and chains throughout the United States, such as Rite Aid, CVS, Wal-Mart, Walgreen's, Eckerd, Safeway, and Albertsons. Deposition of Edwin A. Berrios ("Berrios Dep.") at 45, ll. 20-22; Declaration of Edwin A. Berrios ("Berrios Decl.") ¶¶ 2, 4-5; Def.'s 56.1 Statement at 10, Def.'s Resp. 12; Pl.'s 56.1 Statement ¶ 12.

Hi-Tech advertises its products in trade journals, such as the US Pharmacist and Drug Store News, promotes its products at various trade shows, and solicits business by direct customer contact, such as phone calls or emails. Berrios Decl. ¶ 6; Berrios Dep. at 112, ll. 7-12. Between 1997 and 2006, Hi-Tech spent $5-6 million to promote its branded products and approximately $3 million to promote its generic products. D. Seltzer Decl. ¶ 9.

B. Hi-Tech Pharmaceuticals

Defendant Hi-Tech Pharmaceuticals ("HTP") makes and sells vitamins and other dietary supplements. Declaration of Jeffrey A. Jones ("Jones Decl.") ¶¶ 3-6, Ex. 3. Ninety percent of HTP's products are sexual stimulants and body building and weight loss products; its vitamin sales account for less than 1% of its business. Id. ¶¶ 9-10. HTP's products are sold primarily in tablet form, id. ¶ 6, whereas many of Hi-Tech's products, including its dietary supplements, are sold in liquid form. D. Seltzer Dep.at 36, ll. 3-23, 38-39, ll. 24-5.

HTP has been using the name "Hi-Tech Pharmaceuticals" or "HTP" and its accompanying logo on products and in advertising since 1990 or 1991. Jones Decl. ¶ 3. At least in recent years, HTP's usual logo has included the words "Hi-Tech Pharmaceutical" and "its initials 'HTP' imprinted on a circle with a stylized helical design running diagonally through the diameter of the circle."*fn2 Id. ¶ 18.

HTP sells its products directly to consumers over the Internet and, like Hi-Tech, in major stores such as Wal-Mart, CVS, and Rite-Aid. Def.'s 56.1 Statement at 12, Def.'s Resp. 19; Pl.'s 56.1 Statement ¶ 19. HTP promotes its products by sponsoring car races and beauty pageants, advertising on television, radio and in print, producing its own magazine, and participating at trade shows. Sarney Decl.¶¶ 17-25. Over the past five years, HTP has spent approximately $15 million on advertising, and its annual sales have grown from $4.8 million to $33.8 million. Jones Decl. ¶ 16-17.

HTP has been the subject of a number of regulatory actions and is named as a defendant in a pending criminal prosecution. In 2003, the Food and Drug Administration ("FDA") began investigating whether certain representations made in HTP's labels and marketing material suggested that its products were drugs rather than dietary supplements. Declaration of Edmund J. Novotny ("Novotny Decl.") ¶ 8. The FDA also investigated whether defendant's products contained the chemical compound Taldalafil, which was not approved for sale in the United States at the time. Id. ¶ 9. The investigation led to a lawsuit filed by the United States against HTP. Sarney Decl., Ex. 12. In response, HTP voluntarily recalled the products in issue and agreed to enter into a consent decree. Novothy Decl.¶¶ 10-11. HTP's products have remained in commerce continuously, however, and the FDA has not sought judicial enforcement of the decree. Id. ¶¶ 11-13.

On or about January 13, 2004, the FDA issued a letter advising HTP that, because Taldalafil was "again found" in four of its products, those products "may not be legally marketed in the United States." Sarney Decl., Ex. 14. In addition, on November 10, 2004, the Federal Trade Commission ("FTC") filed charges against HTP and other companies, alleging that HTP had misrepresented facts regarding a weight loss product known as Lipodrene. Novothy Decl. ¶ 16. That litigation is still pending. Id. Defendant asserts that it did not manufacture Lipodrene at the time of the allegations giving rise to the FTC's complaint. Id.

In April of 2004, the FDA quarantined some of the defendant's dietary supplements containing ephedrine alkaloids. Id. ¶ 17. The status of the FDA rule banning ephedrine alkaloids is presently in litigation. Id. ¶ 18.

Finally, in or about September of 2006, the Department of Justice filed an indictment against HTP and its officers, alleging that they conspired to import pharmaceutical drugs from Belize illegally. Id. ¶ 20. In a statement reported in the press, the prosecutor on the case contended that:

The indictment's allegations are disturbing because customers thought they were getting legitimate and safe prescription drugs over the Internet from Canada at cheaper prices, when in reality they received adulterated fakes that were crudely made in an unsanitary house in Belize.

Berrios Decl., Ex. 9. Defendant asserts that the government has confused HTP with a Belizean entity of the same name. Novothy Decl.¶ 20. The criminal charges are pending. Id.

C. This Litigation

Hi-Tech first became aware of HTP in or about 2001, when it began receiving phone calls asking about HTP's products. Declaration of Anne Siebert ("Siebert Decl.") ¶ 3. In 2002, one of plaintiff's customers mistakenly forwarded to plaintiff a warning letter issued by the FDA regarding HTP. D. Seltzer Decl. ¶ 23. The customer apparently believed that plaintiff was the subject of the letter. Subsequently, in April of 2002, Hi-Tech issued two cease and desist letters to HTP, demanding that it refrain from using Hi-Tech's name. Id. ¶ 24, Ex. 20. Plaintiff sent another such letter in March of 2003. Id. It is unclear what response -- if any -- HTP made to these letters, but it clearly did not stop using the "Hi-Tech Pharmaceuticals" name. Transcript of Oral Argument ("Tr.") at 5, ll. 12-15. The record is also unclear as ...


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