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In a trademark dispute over similar-sounding brand names for cholesterol drugs, a federal appeals court has rejected the novel argument that an injunction was needed to prevent the “serious health risk” of a patient’s receiving the wrong prescription but has nonetheless ordered the lower court to grant an injunction due to the “right of the public not to be deceived or confused.” In its 39-page decision in Kos Pharmaceuticals Inc. v. Andrx Corp., a unanimous three-judge panel of the 3rd U.S. Circuit Court of Appeals concluded that while the lower court had properly rejected the plaintiff’s public-interest-based argument that an injunction under the Lanham Act was necessary to “save lives,” both the court and the lawyers had erred by focusing too much on that novel argument — to the point of ignoring the ordinary arguments. “These are not your usual Lanham Act public interest arguments. Indeed, neither the district court nor the parties even mentions the most basic public interest at stake in all Lanham Act cases: the interest in prevention of confusion, particularly as it affects the public interest in truth and accuracy,” visiting Senior U.S. District Judge Louis F. Oberdorfer of the District of Columbia wrote in an opinion joined by 3rd Circuit Judges Dolores K. Sloviter and Richard L. Nygaard. The panel concluded that the trial judge erred by failing to apply the so-called “ Lapp factors” — named for the 3rd Circuit’s 1983 decision in Interpace Corp. v. Lapp — that are used to evaluate a claim of likelihood of confusion. “The district court failed to employ all the relevant Lapp factors and weigh each factor to determine whether in the totality of the circumstances marketplace confusion is likely,” Oberdorfer wrote. “Despite recognizing that each factor must be weighed and balanced, the court did not perform the requisite weighing and balancing on the record.” Although the Lapp test is “not a mechanistic one,” Oberdorfer said, “if a district court finds certain of the Lapp factors are inapplicable or unhelpful in a particular case, that court should explain its choice not to employ those factors.” But Oberdorfer found that the lower court “analyzed only two of the 10 Lapp factors” — both of which it found favored the plaintiff — but went on to reject its request for an injunction on the basis of a “conclusory statement that ‘the remaining Lapp factors do not weigh in petitioner’s favor.’” Although appellate courts often remand cases for the trial court to weigh the Lapp factors, Oberdorfer said the 3rd Circuit took on the task itself and concluded that the plaintiff was clearly entitled to an injunction. “Any reasonable factfinder weighing the Lapp factors in accordance with the correct legal standards would hold that Kos is likely to succeed on the merits. Because the record could not support a contrary holding, a remand for reweighing would waste judicial resources and unnecessarily delay the proceedings further,” Oberdorfer wrote. In the suit, Kos claimed that it adopted the name “Advicor” for a new drug that combines lovastatin (which lowers LDL, or “bad” cholesterol) with varying strengths of an extended-release formulation of niacin (which increases HDL, or “good” cholesterol). But soon after Kos began marketing Advicor, it claims it learned that Andrx planned to use the trademark “Altocor” for its own new anti-cholesterol medication, which would contain only a single active ingredient, an extended-release form of lovastatin, in varying strengths. Kos says it warned Andrx in a series of letters that it should refrain from using the Altocor name because it would lead to confusion among doctors and pharmacists. Before going to court, the two companies waged battles over the name before the U.S. Food and Drug Administration and before the U.S. Patent and Trademark Office. But the FDA’s Division of Medication Errors preliminarily approved Andrx’s use of the name in November 2001, concluding that there was little risk of error among pharmacists due to the difference in the prescribed strengths of the drugs. The PTO opened a case when Kos filed an opposition to Andrx’s application to register the mark Altocor, but the case was suspended when the federal litigation began. Both drugs proved successful in the marketplace. By August 2003, Kos had spent more than $40 million on promotion and advertising, and Advicor had been prescribed more than 350,000 times, grossing approximately $70 million in sales. Andrx spent more than $21 million on promotion and advertising, and Altocor, which has been sold since July 2002, had been prescribed more than 300,000 times, grossing more than $27 million. PRESCRIPTION CONFUSION? At an injunction hearing before U.S. District Judge Dennis M. Cavanaugh of the District of New Jersey, lawyers for Kos argued that there was already ample proof of “actual confusion,” citing 60 alleged instances of patients being given the wrong drug. But Andrx’s lawyers disputed that evidence, saying their own monitoring of the situation revealed no confusion, and that Kos’ evidence was inadmissible since it conceded that it had learned of the alleged incidents primarily through voice-mail or e-mail. In September 2003, Cavanaugh denied Kos’ injunction request, finding it was not likely to succeed on the merits. Cavanaugh held that two of the Lapp factors — strength of the owner’s mark, and the extent to which the parties’ sales efforts are the same — favored Kos, but that “the remaining Lapp factors do not.” He also concluded that Kos “failed to convince the court that the selective consumers in this case, physicians and pharmacists, will suffer from a likelihood of confusion.” Now the 3rd Circuit has ruled that Cavanaugh’s view of the law was mistaken. “Here, two fundamental errors of law taint the district court opinion: (1) the court used an overly narrow definition of confusion, in effect evaluating the likelihood of misdispensing rather than confusion; (2) the court did not properly analyze or weigh the Lapp factors,” Oberdorfer wrote. Oberdorfer found that Cavanaugh’s “likelihood of confusion” analysis “rested substantially, if not entirely, on misdispensing as the confusion at issue. This is not the law. It is clear error to treat misdispensing as the only relevant Lanham Act confusion.” Under the Lanham Act, Oberdorfer said, likelihood of confusion “is not limited to confusion of products, as in misdispensing. Confusion as to source is also actionable.” Performing the Lapp factor test himself, Oberdorfer concluded that nearly all the factors weighed in Kos’ favor. “The most important factor — mark similarity — favors Kos. Advicor and Altocor are similar in sound and appearance, and neither has any meaning that could distinguish between them or lead customers to associate them with distinct products,” he wrote. “The Advicor mark is entitled to broad protection because it is a coined term and because it is a strong mark, both conceptually and commercially. The products in question are closely related and are marketed and sold to practically identical audiences in practically identical ways.” Oberdorfer also found the two drugs “are products customers could easily expect to be manufactured by a single source.” Also in Kos’ favor, he said, “is Andrx’s deliberate decision to use a name dangerously close to that of a competing drug, with no apparent reason for choosing an arbitrary mark so similar to its competitor’s and despite being warned of the confusing similarity.” Oberdorfer also found that Cavanaugh and the lawyers had erred by thinking of medical professionals, such as doctors and pharmacists, as “the relevant consumers.” “Neither the parties nor the court below addressed the possible confusion of ultimate consumers. While doctors and pharmacists play a gate-keeping role between patients and prescription drugs, they are not the ultimate consumers. Patients are,” Oberdorfer wrote. Oberdorfer also rejected Andrx’s claim that it would suffer more harm from an injunction than Kos would suffer without it. “Andrx’s broad claims that it would have to ‘suspend’ sales and ‘deprive’ patients of Altocor ignore the fact that it is only the Altocor mark and not the drug itself that an injunction should address,” he wrote. “Andrx has provided no evidence to show that temporarily ceasing use of the Altocor mark would cause ‘an interruption in the supply’ of its extended-release lovastatin product.”

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