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McNEIL PROJECTS TYLENOL PM FIRST-YEAR SALES PARITY WITH EXCEDRIN PM

Executive Summary

McNEIL PROJECTS TYLENOL PM FIRST-YEAR SALES PARITY WITH EXCEDRIN PM -- at about $50 mil. -- in court documents from an on-going trade dress infringement suit in Uniondale, N.Y. federal court. The suit was filed by Excedrin PM marketer Bristol-Myers Squibb against Johnson & Johnson subsidiary McNeil. Court documents state that BMS claims "sales of Excedrin PM have exceeded $300 mil., with $44 mil. in 1990 alone." The documents show that McNeil characterized Excedrin PM's sales as "trivial for a national brand," and that the company has "informed the trade of its projection for $50 mil. in sales of Tylenol PM during its first year." McNeil launched Tylenol PM in mid-1991. Excedrin PM has been marketed for more than 20 years and was the top OTC analgesic/sleep-aid on the market, Federal Court Judge Arthur Spatt noted in a Feb. 20 court ruling. Bristol-Myers Squibb says it has spent more than $81 mil. to advertise and promote the product with $10 mil. spent in each of the last three years, according to the ruling. McNeil's Tylenol PM launch book states that the company expects 18% of sales to be "sourced from Excedrin," the judge pointed out. McNeil can continue marketing Tylenol PM pending a formal appeal of a Feb. 20 preliminary injunction issued by Spatt. The injunction would have halted marketing, but a New York federal appeals court delayed the effect of the injunction in a Feb. 25 ruling. A hearing date has not been set for the formal appeal; McNeil says it will probably take place in April. McNeil agreed to post a $1 mil. bond in conjunction with the lifting of the injunction order. In his Feb. 20 decision, Spatt ruled that BMS had met its burden of establishing "by clear and convincing evidence, both (a) irreparable harm [if the injunction is not granted], and (b) a likelihood of success on the merits" if the case comes to trial. His order prohibited McNeil from "using, selling, offering for sale, and distributing...Tylenol PM in both tablet and caplet form" and ordered a recall of all advertising materials depicting Tylenol PM in its current trade dress ("The Pink Sheet" Feb. 24, In Brief). Bristol-Myers Squibb filed the suit against McNeil on May 21, 1991, charging McNeil with trademark and trade dress infringement. BMS said it is "confident" that Spatt's ruling "will be upheld" on appeal. Spatt's ruling hinged on the similarity of packaging of two almost identical products. Excedrin PM contains 500 mg acetaminophen and 38 mg diphenhydramine citrate. Tylenol PM contains 500 mg acetaminophen and 25 mg diphenhydramine HCL. Both products are sold in blue cartons for the caplets and green cartons for the tablets. Excedrin PM has a top line reading "Aspirin Free" with a large "EXCEDRIN PM" below. A third line reads "For pain with accompanying sleeplessness," and the tablets/caplets are depicted in the lower right hand corner. Tylenol PM packaging has a top line reading "Extra-Strength" with "TYLENOL PM" immediately below. A third line reads "For pain with sleeplessness," and the caplets/tablets also are depicted in the lower right hand corner. Spatt ruled that, while Bristol-Myers Squibb had not shown evidence of actual confusion caused by the packaging, there was evidence suggesting that McNeil intended to create such confusion. "The court questions the lack of McNeil documents related to the packaging and design decisions in the creation of Tylenol PM.... This lack of a so-called 'paper trail' initially could lead to an inference of bad faith." McNeil "sought to overcome this inference of bad faith by pressing its persistent claim that the overall image of the Tylenol PM trade dress was a natural extension of the adult Tylenol analgesic line," Spatt wrote. He noted that McNeil evaluated several possible package designs and "every choice it made brought it closer to the Excedrin PM trade dress." BMS also proved that "McNeil had a blue Excedrin PM box in their conference room when discussing Tylenol PM's trade dress," the ruling states. The judge also cited evidence that McNeil's own sales reps asked whether the similarity of the two products was intentional. Bristol and McNeil have tangled over the two before. A New York federal court ruled in December 1990 that a BMS campaign promoting Excedrin as "work[ing] better" than Tylenol had to be halted because the data supporting the claim were "unpersuasive." McNeil filed that suit in September 1990 ("The Pink Sheet" Sept. 10, 1990, T&G-12).
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