Inwood Labs., Inc. v. Ives Labs., Inc.
456 U.S. 844 (1982)
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Rule of Law:
A manufacturer is liable for contributory trademark infringement if it intentionally induces another to infringe a trademark or continues to supply its product to a party it knows or has reason to know is engaging in infringement. Liability cannot be imposed merely because a manufacturer could reasonably anticipate that some infringement would occur.
Facts:
- Ives Laboratories, Inc. (Ives) held a patent for the drug cyclandelate, which it marketed under the registered trademark CYCLOSPASMOL.
- Ives sold the drug in arbitrarily selected, distinctively colored capsules: solid blue for the 200mg dosage and blue-red for the 400mg dosage.
- After Ives' patent expired in 1972, several generic drug manufacturers, including Inwood Laboratories, Inc. and Premo Pharmaceutical Laboratories, Inc., began marketing cyclandelate.
- These generic manufacturers intentionally copied the colors and shapes of Ives' CYCLOSPASMOL capsules for their own generic versions.
- The generic manufacturers marketed their products through catalogs to wholesalers and pharmacies, truthfully describing the drugs as 'equivalent' or 'comparable' to CYCLOSPASMOL.
- Some pharmacists dispensed the generic look-alike drugs to consumers but mislabeled the prescription bottle with Ives' trademark, CYCLOSPASMOL.
Procedural Posture:
- Ives Laboratories, Inc. sued Inwood Laboratories, Inc. and other generic manufacturers in the U.S. District Court for the Eastern District of New York for trademark infringement.
- The District Court denied Ives' motion for a preliminary injunction.
- On appeal, the U.S. Court of Appeals for the Second Circuit affirmed the denial of the injunction but outlined the legal standard for contributory infringement to be used at trial.
- After a bench trial, the District Court entered judgment for the generic manufacturers, finding no evidence they had induced infringement.
- Ives, as appellant, appealed to the U.S. Court of Appeals for the Second Circuit, and the generic manufacturers, as appellees, defended the trial court's judgment.
- The Court of Appeals reversed the District Court, holding that the generic manufacturers were liable for contributory infringement under § 32 of the Lanham Act.
- The generic manufacturers petitioned the U.S. Supreme Court for a writ of certiorari, which was granted.
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Issue:
Does a manufacturer of a generic drug that intentionally copies the appearance of a trademarked drug capsule become contributorily liable for trademark infringement under § 32 of the Lanham Act when pharmacists mislabel the generic product as the trademarked one?
Opinions:
Majority - Justice O’Connor
No. A manufacturer's liability for contributory trademark infringement requires more than simply creating a look-alike product that pharmacists could use to infringe. To be held liable, a manufacturer must be shown to have either intentionally induced the pharmacists to mislabel the drugs or continued to supply the drugs to pharmacists whom it knew or had reason to know were mislabeling them. The Court of Appeals erred by substituting its own factual conclusions for those of the District Court. The District Court's findings that the petitioners had not intentionally induced infringement and that instances of mislabeling were infrequent and resulted from confusion over state law were not clearly erroneous and should not have been set aside under Federal Rule of Civil Procedure 52(a).
Concurring - Justice White
No. The Court of Appeals applied an incorrect and impermissibly 'watered down' legal standard for contributory infringement. The proper test requires proof of intent to induce illegal substitution or continued sales to known infringers, not merely that a manufacturer could 'reasonably anticipate' misconduct by some pharmacists. Furthermore, the District Court's finding that the capsule colors were functional provides a complete affirmative defense to a contributory infringement claim based solely on copying that functional attribute, as copying a functional feature is legitimate competitive activity after a patent expires.
Concurring - Justice Rehnquist
No. The Court of Appeals erred by setting aside the District Court's factual findings without holding them to be 'clearly erroneous' as required by Rule 52(a). However, the Supreme Court should not have conducted its own review of the District Court's findings to determine if they were clearly erroneous. Instead, it should have simply reversed the Court of Appeals on procedural grounds and remanded for that court to apply the correct standard of review.
Analysis:
This decision reinforces the high bar for establishing contributory trademark infringement, rejecting a more lenient 'foreseeability' standard in favor of a stricter test requiring evidence of intent or knowing assistance. The case is also a landmark ruling on the power of appellate courts, strongly affirming that under FRCP 52(a), an appellate court cannot re-weigh evidence or substitute its own factual conclusions for a trial court's unless the trial court's findings are 'clearly erroneous.' This precedent protects generic manufacturers from liability based solely on copying unpatented, functional product features and solidifies the trial court's role as the primary finder of fact.
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