Court Opinion

ID: 767394
Source: CourtListenerOpinion
Date Created: 2012-04-18 08:33:03+00
Date Added: 2024-06-11T17:55:28.027362
License: Public Domain

201 F.3d 883 (7th Cir. 2000)
Mead Johnson & Company,    Plaintiff-Appellee,v.Abbott Laboratories,    Defendant-Appellant.
No. 99-2215
In the  United States Court of Appeals  For the Seventh Circuit
Argued November 9, 1999Decided January 5, 2000

Appeal from the United States District Court  for the Southern District of Indiana, Evansville Division.  No. EV 98-131-C H/H--David F. Hamilton, Judge.
Before Bauer, Easterbrook, and Kanne, Circuit Judges.
Easterbrook, Circuit Judge.

1
"1st Choice of  Doctors", in a blue ribbon on a product's  packaging, conveys the message that more  physicians prefer this product than any of its  rivals. Does (must?) this phrase mean something  more--for example, that a majority of all  physicians prefer the product, or that the  preference is strong or based on particular  grounds? The phrase appears on the packaging of  Similac, an infant formula made by the Ross  Pediatrics division of Abbott Laboratories. More  than a score of surveys show that pediatricians  prefer Similac over Enfamil, the second-place  formula (made by Mead Johnson), with all othercompetitors far behind. Many of these surveys  show that Similac attracts majority support; most  show that two physicians prefer Similac for every  one who chooses Enfamil. But the district court  nonetheless held that "1st Choice of Doctors"  violates sec.43(a)(1) of the Lanham Act, 15  U.S.C. sec.1125(a)(1), because it implies to  consumers that a majority of physicians strongly  prefer the product for strictly professional  reasons. 41 F. Supp. 2d 879 (S.D. Ind. 1999). All  of the surveys that show majority support are  inadequate, the judge concluded, because they  were designed to elicit either weak preferences  or those based on grounds other than medical  judgment about quality. Other surveys, designed  to eliminate slight or non-medical preferences,  show that Similac enjoys only plurality support  among physicians. A regular 2-to-1 margin is not  enough to permit Abbott to make the "1st Choice"  claim, the court held, and issued a preliminary  injunction. In politics this would be a  landslide: Bill Clinton was the "1st Choice of  Voters" at the 1992 and 1996 Presidential  elections even though he received less than half  of the popular vote (43% in 1992, 49% in 1996).  But in marketing, according to the district  court, a product must have majority support to be  "first."

2
In English, "first" is ordinal. It denotes rank  in a series. A runner who crosses the finish line  ahead of all others is "first" even if the race  is slow and ends in a photo finish. A TV series  ranks first in its time slot if it has a larger  audience than any other series, even though there  are so many networks, independent stations, and  cable channels that no sitcom or drama attracts  an absolute majority of viewers. A political  candidate who receives more votes than the next-  most-popular candidate finishes first, and for  most offices a first-place finish is enough for  election. Similac therefore is the "1st Choice of  Doctors" according to ordinary usage. Perhaps a  truthful claim of this kind could be misleading,  and therefore actionable under sec.43(a)(1), if  both absolute and relative levels of preference  were small. Suppose 1.1% of pediatricians  preferred Similac, 1% preferred Enfamil, 0.9%  preferred some other formula, and 97% thought  that all of the infant formulas were functionally  identical. But absolute and relative preferences  for Similac are substantial. Even if, like the  district court, we throw out the surveys finding  that a majority of medical professionals  recommend Similac, the remaining surveys find  that between 25% and 48% of those questioned rank  Similac first, while Enfamil is the preference of  between 10% and 40% of the respondents and never  beats Similac. Surveys designed to elicit weaker  preferences show that Similac receives between  51% and 64% support and Enfamil from 29% to 37%,  so the roughly two-to-one ratio is not sensitive  to methodology. Pediatricians may believe (as  Abbott contends) that Similac is better tolerated  by infants (i.e., less likely to induce  unpleasant side effects such as gas, fussiness,  and loose stools) and therefore is better in  practice, even though clinical tests do not find  nutritional differences and experts agree that  both products are of high quality. No matter.  When the absolute level of preference for the  leading product is high, and the difference in  support from the medical profession substantial,  it is all but impossible to call the claim of  "first choice" misleading.

3
Unless the meaning of language is itself a  question of fact, to be determined by survey  evidence. And this is what the district court  concluded after a three-day hearing on the  request for interlocutory relief. Mead Johnson  commissioned a survey, which was administered at  malls in 16 cities across the United States to  women who either had recently purchased infant  formula or contemplated doing so during the next  year. The district court's opinion describes this  survey in detail, 41 F. Supp. 2d at 887-92, so we  summarize. Interviewers asked two sequences of  questions. The first was open-ended. After  identifying "1st Choice of Doctors" as the  subject, interviewers asked consumers "what you  understand this part of the labelto communicate  to you." Most of the answers were treated as  variations on "higher quality," if not medical  superiority. The second sequence opened with the  query: "in order for [the "1st Choice"] statement  to be true, what percent of those doctors would  have had to say that this product was their first  choice?" More than 80% of the participants  replied that at least a majority would have to  prefer the product. The district court concluded  from this survey that the claim "1st Choice of  Doctors" conveyed to consumers the message that  at least a majority of physicians prefer Similac  on grounds of qualitative superiority. Then the  judge scrutinized the surveys of physicians to  see whether Abbott's claim, thus understood, had  been substantiated. The judge found not, because  surveys finding that a majority of surveyed  physicians prefer Similac were not designed to  ensure that the preference was based on Similac's  superiority, while surveys that limited the  grounds of preference did not show majority  support for Similac.

4
Abbott insists that because it has been  applying the phrase "1st Choice of Doctors" (or  a variant) to Similac for a decade, Mead  Johnson's suit is barred by laches. Yet because  a product's promotion must be true and non-  misleading at the time of sale, the packaging's  history cannot preclude a challenge. Suppose that  when Abbott adopted the phrase physicians  preferred Similac, but by the time suit was filed  a decade later Enfamil had gained the lead in  surveys of the medical profession. Similac then  could not be labeled as physicians' first choice.  Laches would supply a defense if nothing had  changed over time (and if the other elements of  that defense, such as prejudice, obtained).  Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187,  191-94 (2d Cir. 1996). Moreover, long use of a  phrase justifies placing on the challenger a  burden to establish that something has changed,  so that what was once true is now false (or at  least misleading). The district court did not  find that critical numbers have changed in the  last decade, so perhaps Abbott has a sound laches  defense, but we need not say given the weakness  of Mead Johnson's position on the record  assembled so far. If on remand Mead Johnson  decides to press forward with more evidence in  pursuit of permanent relief, then the district  judge will have to decide whether it has  demonstrated a change in the truthfulness of  Abbott's promotion.

5
Everything in the district court's analysis  depends on the survey of consumers about their  understanding of the phrase "1st Choice of  Doctors." It is a problematic exercise, for the  survey assumes that "first" is a cardinal number-  -that is, a count such as "246" or "55" or a  ratio of two such numbers, rather than a place in  a series. Only if "first" is a ratio of cardinal  numbers does it make sense to ask whether its  meaning is 90% or 51% or a plurality. Respondents  in survey research are suggestible; the form of  a question implies an answer, or at least the  range of proper answers, and this survey ensured  that the answers would be numbers rather than  places in a series. Having told the respondents  to treat "first" as cardinal, the survey was  bound to produce a misleading if not meaningless  answer. "First" does not mean 51%, or 90%, or any  other ratio, so it is not surprising that the  responses were all over the lot. The survey's  opening set of questions is less troublesome, but  it is hard to get from there to a conclusion that  surveys of physicians must attempt to limit the  grounds of choice. Many a medical choice depends  on ease of use rather than therapeutic effect;  think of the enduring debate between champions of  oral versus injected polio vaccine. If consumers  took away from "1st Choice of Doctors" the  implication that Similac is a high-quality  product, as the author of the survey concluded,  then they were not deceived (this Mead Johnson  concedes); we doubt that it is proper to draw  more from this survey.

6
There is a deeper problem: the use of a survey  in the first place. Surveys areaccepted ways to  probe for things such as confusion about the  source of goods, for confusion depends on the  effect of a phrase or trade dress on the  consumer. E.g., Reed-Union Corp. v. Turtle Wax,  Inc., 77 F.3d 909, 912 (7th Cir. 1996);  Indianapolis Colts, Inc. v. Metropolitan  Baltimore Football Club L.P., 34 F.3d 410, 415-16  (7th Cir. 1994). So far as we can tell, however,  never before has survey research been used to  determine the meaning of words, or to set the  standard to which objectively verifiable claims  must be held. Dictionaries themselves are a form  of survey; lexicographers determine how words  have been used in both scholarly and popular  texts. But philologists and others who contribute  to dictionaries devote their lives to discovering  usage and interpreting nuance. It would be a bad  idea to replace the work of these professionals  with the first impressions of people on the  street, especially because consumers' sketchy  understanding of science means that survey  results are apt to present firms with unrealistic  demands for verification.

7
Suppose a tube of toothpaste bears this phrase  in large type: "Sodium Fluoride Anticavity  Toothpaste" immediately above a box with the  words "ADA Accepted". These claims could be  verified by showing that the American Dental  Association had authorized the use of its name  and that the dentifrice had "anticavity" effects.  To a dentist, the word "anticavity" means that  the toothpaste reduces the number of cavities  compared with some benchmark (perhaps toothpaste  without fluoride, perhaps no toothpaste at all)  by a statistically significant amount. Perhaps a  group of 1,000 persons using the toothpaste with  fluoride for two years had 1,000 cavities, while  a control group suffered 1,200 cavities. If the  difference satisfies normal tests of  significance--meaning that the difference is  replicable, rather than the effect of chance--  then the claim is true and properly may be made  to distinguish this toothpaste from others that  are less effective at controlling cavities. It is  valuable information to consumers. Imagine,  however, a survey administered to shoppers in the  toothpaste aisles of drugstores. First the  questioner asks consumers "what you understand  'ADA Accepted' to communicate to you." Many are  likely to respond that this means that the  toothpaste is the best on the market, solves (or  at least addresses) all dental problems, or some  variation--even though the ADA's rules permit  multiple products in the same classification to  be "Accepted" if each is medically useful, and  the phrase "ADA Accepted" may be applied to a  toothpaste that does not have any therapeutic  effect against gum disease. See American Dental  Association Acceptance Program Guidelines for  Fluoride-Containing Dentifrices (May 1998).  Perhaps the survey would continue with a question  about what "anticavity" means to the shoppers:  does it prevent, say, 90% of all cavities?, a  majority of cavities?, and so on. Suppose most of  those surveyed thought that "anticavity" means  that its use will cut cavities in half. Combining  that survey result with the district court's  approach to verification would mean that the  product could not carry the words "anticavity" or  "ADA Accepted" even though these representations  help shoppers distinguish toothpaste according to  effects that they value. Consumers can't be made  better off by removing these words from the  product, because then buyers who understand their  significance will be deprived of information. The  market share of the toothpastes that are most  effective in reducing cavities will fall, and the  number of cavities will rise.

8
Section 43(a)(1) forbids misleading as well as  false claims, but interpreting "misleading" to  include factual propositions that are susceptible  to misunderstanding would make consumers as a  whole worse off by suppressing truthful  statements that will help many of them find  superior products. A "misunderstood" statement is  not the same as one designed to mislead. Reducing  ads and packaging to meaningless puffery can't be  the objective of the Lanham Act--though it is a  logical (and likely)outcome of Mead Johnson's  approach, given the normal level of confusion and  misunderstanding reflected in consumer surveys.  Asked at oral argument whether a seller of  aspirin could label that drug as an anti-  inflammatory useful for arthritis (a medically  established property of aspirin) if a survey  showed that consumers confused palliation of  symptoms with a cure for the disease, counsel for  Mead Johnson replied that the claim of anti-  inflammatory properties would be misleading for  the same reason "1st Choice of Doctors" is  misleading. This consequence of Mead Johnson's  view is so counterproductive that the basic  position cannot be accepted. We are not comforted  by Mead Johnson's assurance that a seller could  overcome consumer misunderstanding and make the  claim about anti-inflammatory (or anticavity)  benefits if it delivered additional details about  the nature and extent of these effects.  Requirements along the lines of a package insert  with medical details are the province of  regulations issued by the Food and Drug  Administration, not of litigation under the  Lanham Act. What is more, adding details could be  so costly and burdensome that sellers might  choose to omit all of the information. See  Morales v. Trans World Airlines, Inc., 504 U.S. 374, 389-90 (1992); cf. Todd v. Societe BIC,  S.A., 9 F.3d 1216, 1218-19 (7th Cir. 1993) (en  banc) (observing that compendious advice is not  always more useful to consumers). Anyway, if  consumers did not read (or understand) the  medical details they would be none the wiser, and  on Mead Johnson's view the claim should be  enjoined anyway.

9
By using Mead Johnson's survey to define the  meaning of the phrase "1st Choice of Doctors" and  then insisting that verification meet the  standards thus established, the district court  committed a legal error. That is reason enough to  reverse the preliminary injunction, so we need  not address most of the other subjects on which  the parties have locked horns. But we cannot  close without expressing concern about the level  of the bond, which the district judge set at $1  million under Fed. R. Civ. P. 65(c):

10
No restraining order or preliminary  injunction shall issue except upon the  giving of security by the applicant, in  such sum as the court deems proper, for  the payment of such costs and damages as  may be incurred or suffered by any party  who is found to have been wrongfully  enjoined or restrained.

11
The district court calculated Abbott's "costs and  damages" solely by reference to the costs of  printing new labels and promotional literature.  But this suit is not about out-of-pocket costs  (which Abbott estimates at $5.8 million); Mead  Johnson and Abbott care about the issue  principally because it affects the sales of their  products. Mead Johnson conceded in the district  court that the loss of even 1% of market share as  a result of the injunction would cost Abbott  about $10 million. (Abbott's estimate is $16  million per point of market share.) The principal  reason the district judge gave for ignoring this  effect (and for disregarding most of the out-of-  pocket costs) was that Abbott should have  quantified its losses earlier, and the only  earlier opportunity was at the preliminary  injunction hearing. Nothing in the record  suggests, however, that the district judge  alerted Abbott to this requirement in advance of  the hearing. A litigant naturally would suppose  (in the absence of notice) that a hearing on a  request for a preliminary injunction will be  devoted to the merits of that request, rather  than to fixing the amount of bond. The judge also  called Abbott's estimate "soft"--which it was,  given the need to come up with some number  quickly. That might have justified using Mead  Johnson's smaller estimate; it did not justify  ignoring a cost that was sure to be large, even  if the total was hard to determine on short  notice. We trust that in the future the district  court will notify the parties of the ground rules  and endeavor to set bonds at levels reflecting  full consequences.

12
When setting the amount of security, district  courts should err on the high side. If the  district judge had set the bond at $50 million,  as Abbott requested, this would not have entitled  Abbott to that sum; Abbott still would have had  to prove its loss, converting the "soft" numbers  to hard ones. An error in setting the bond too  high thus is not serious. (The fee for a solvent  firm such as Mead Johnson or its parent Bristol-  Myers Squibb Co. to post a bond, a standby letter  of credit, or equivalent security is a very small  fraction of the sum involved.) See generally  Note, Recovery for Wrongful Interlocutory  Injunctions Under Rule 65(c), 99 Harv. L. Rev.  828 (1986). Unfortunately, an error in the other  direction produces irreparable injury, because  the damages for an erroneous preliminary  injunction cannot exceed the amount of the bond.  W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757,  770 n.14 (1983); Russell v. Farley, 105 U.S. 433,  437-38 (1882); Coyne-Delany Co. v. Capital  Development Board, 717 F.2d 385, 393-94 (7th Cir.  1983). Abbott now must swallow substantial losses  as a result of the district court's decision.

13
Trademark suits, like much other commercial  litigation, often are characterized by firms'  desire to heap costs on their rivals, imposing  marketplace losses out of proportion to the legal  merits. That's why bonds must reflect full costs.  Shifting back to the plaintiff the complete  injury occasioned by the errors that sometimes  occur when preliminary relief is issued after an  abridged judicial inquiry will hold in check the  incentive business rivals have to pursue relief  that gives them a competitive edge even if, as in  this case, they lose in the end.

Reversed