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Merck & Co., Inc., et al. v. Mediplan Health Consulting, Inc., d/b/a RxNorth.com

Purchase Of Keyword Advertisements  Not Use In Commerce Sufficient To Sustain Trademark Infringement Claim

In six related lawsuits arising out of the sale by online Canadian-based pharmacies of both branded and generic versions of plaintiff's popular anticholesterol medication "Zocor," the Court granted motions to dismiss trademark infringement claims challenging defendants' purchase of the keyword "Zocor" from search engines to trigger the display of "sponsored links" to defendants' websites.  Such purchases do not constitute the requisite 'use in commerce' of plaintiff's mark necessary to sustain such claims.  The Court also granted defendant CrossBorder's motion to dismiss trademark infringement claims arising out of its use of plaintiff's trademark "Zocor" on its website, at which CrossBorder sold both plaintiff's own product, as well as a generic version described as "generic simvastatin."  "Simvastatin" is the active ingredient in "Zocor."  Because it sold branded Zocor at its website, this was a permitted fair use of plaintiff's mark.

The Court declined at this early stage of the proceedings to dismiss the trademark infringement and dilution claims advanced against the remaining defendants.  Defendants link the "Zocor" mark to web pages at which they sold both branded Zocor and generic products described alternatively as "generic Zocor," "Zocor generic" or "Zocor-generic."  The Court was unwilling on this motion to determine whether such uses were likely to confuse consumers as to the source and sponsorship of these generic products, and hence unwilling to declare them permitted fair uses of plaintiff's trademarks.

Finally, the Court granted the motion to dismiss for want of personal jurisdiction of defendant CanadaDrug's CEO.  This individual, a Canadian resident, was neither alleged to have personally undertaken any actions in the United States in furtherance of the infringing activities at issue, nor been a "primary actor" therein.

Online Pharmacies Use Plaintiff's Zocor Mark On Their Websites And Purchase Keyword Advertisements Triggered By Zocor Searches

Plaintiff Merck & Co. Inc. ("Merck"), one of the world's leading pharmaceutical companies, owns federally registered trademarks for word and design marks containing the term "Zocor."  "Zocor" is a popular anticholesterol drug for which Merck holds a U.S. patent.

Defendants are Canadian entities that control and operate online pharmacies that sell medication to U.S. residents.  Defendants operate their respective websites at the domains rxnorth.com, CanadaPharmacy.com, CanadaDrugs.com, CrossBorderPharmacy.com and MedCenterCanada.com.

Defendants use plaintiff's trademark "Zocor" on their sites in support of their sale of both branded and generic versions of "Zocor."  Universal Drugstore's site contains a link from plaintiff's Zocor design mark to a web page that offers both "Zocor (Simvastatin)" and "Simvastatin (Zocor generic)."  On the North Pharmacy site, a link from plaintiff's Zocor design mark takes the user to a web page that offers choices between "Generic" and "Brand" products, including references to "brand Zocor" and "generic Zocor."  CrossBorder links the word mark "Zocor" to a web page that offers "Zocor" and "Generic Simvastatin."

Three of the defendants - Canada Pharmacy, MedCenter and Universal - also pay the search engines Google and Yahoo to display "sponsored links" to their websites when a user enters the search term "Zocor."

Merck commenced these lawsuits, charging that defendants' conduct infringed and diluted Merck's trademarks in violation of both Federal and State law.  Defendants were also charged with false advertising, as well as with patent infringement.

Defendants moved to dismiss various counts of the complaint and for judgment on the pleadings.  No motion was made with respect to plaintiff's patent infringement claims.  As explained below, defendants' motions were granted in part, and denied in part.

No Use In Commerce

The Court dismissed the trademark infringement claims Merck advanced as a result of defendants' purchase of keyword advertising on the search engines Google and Yahoo.  To prevail on a trademark infringement claim under the Lanham Act, a plaintiff must establish "that it owns a valid mark entitled to protection under the statute that the defendant used in commerce, without plaintiff's consent and in connection with the sale or advertising of goods and services."  The Court held that purchasing keyword advertising triggered by a user's search for "Zocor" does not constitute the requisite "use in commerce" of plaintiff's mark necessary to sustain such a claim.  In reaching this result, the Court relied on the Second Circuit's decision in 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005).  Said the Court:

Here, in the search engine context, defendants do not "place" the ZOCOR marks on any goods or containers or displays or associated documents, nor do they use them in any way to indicate source or sponsorship.  Rather, the ZOCOR mark is "used" only in the sense that a computer user's search of the keyword "Zocor" will trigger the display of sponsored links to defendants' websites.  This internal use of the mark "Zocor" as a key word to trigger the display of sponsored links is not use of the mark in a trademark sense.

The Court found further support for its decision in the fact that:

defendants actually sell Zocor (manufactured by Merck's Canadian affiliates) on their websites.  Under these circumstances, there is nothing improper with defendants' purchase of sponsored links to their websites from searches of the keyword "Zocor."

Use Of Plaintiff's Zocor Mark At Website At Which Zocor And Generic Simvastatin Sold Is A Permitted Fair Use

The Court also granted defendant CrossBorder's motion to dismiss the trademark infringement claims arising out of its use of plaintiff's "Zocor" mark on its website.  CrossBorder links this mark to a web page at which it sells both plaintiff's own product, labeled "Zocor 80 mg tablet" as well as a generic alternative, described as "Generic Simvastatin 80 mg tablet."  The Court held that this was a fair use of plaintiff's mark that was not likely to confuse consumers as to the source of defendant's generic product, because its description, unlike those of the remaining defendants, did not include the word "Zocor."

Although the mark ZOCOR appears on the site, CrossBorder sells Zocor (manufactured by Merck's Canadian affiliates), and thus there is nothing improper about its use of the ZOCOR mark for that purpose.  Nor is there anything improper (or confusing) about its offering, along side the brand product, its generic alternative, which is described as "generic simvastatin."

Trademark Infringement Claims Arising Out Of Description Of Generic Versions Of Plaintiff's Medicine As Generic Zocor Go Forward

At this early stage in the proceedings, the Court denied the remaining defendants' motions to dismiss the trademark infringement and dilution claims arising out of their use of the phrase "generic Zocor," or variations thereof, to describe the generic products they offered for sale on their websites.  Defendants claimed that consumers who purchased a generic drug must know that its source is someone other than the manufacturer of the branded product and that the branded product is being replicated by the generic, and hence cannot be confused as to its source.  The Court was not prepared, at this time, to accept this contention, or conclude:

that the ZOCOR mark, adjacent to or in close proximity to the word "generic" on defendants' websites, cannot give rise to consumer confusion as to the origin or sponsorship of the product.

As such, the Court did not accept defendants' assertion that their use of the 'Zocor' mark in this fashion constituted a nominative fair use - a use of plaintiff's mark to describe an attribute of defendants' products.  Such a fair use claim requires that "the user … do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the mark holder."  At this time, the Court was not willing to conclude that an affiliation with Merck was not suggested by the use of its mark Zocor to describe defendants' generic products.

No Personal Jurisdiction Over Thorkelson

Finally, the Court dismissed for want of personal jurisdiction claims Merck brought against Mr. Thorkelson, the CEO of defendant CanadaDrugs, and a resident of Canada.  Merck had alleged that Thorkelson, as CEO, "should be presumed to be intimately involved in directing the infringing activities" at issue.

The Court held such allegations insufficient to permit it to assert personal jurisdiction over Thorkelson.  Plaintiff had not alleged that Thorkelson individually transacted any business in New York.

Nor were Merck's allegations sufficient to permit the contacts of CanadaDrug with New York to be imputed to Thorkelson, on an agency theory, for the purpose of finding him present here for jurisdiction purposes.  To impute CanadaDrug's activities to Thorkelson, the Court must find that he is the "primary actor in the transaction in New York 'that gives rise to the litigation, and not merely 'some corporate employee … who played no part in it."  Because plaintiff did not allege that Thorkelson was such a 'primary actor', the Court granted Thorkelson's motion to dismiss.  Said the Court:

Plaintiffs have not alleged that Thorkelson was a "primary actor" in the matters in question; control cannot be shown based merely upon a defendant's title or position.