conventional pharmacy achieves limited relief against marijuana dispensary

White Hall Pharmacy LLC v. Doctor’s Orders RX Inc, No.
19-cv-00366-KGB, 2019 WL 3939357 (E.D. Ark. Aug. 20, 2019)
In this cannabis case, the court granted a preliminary
injunction against a dispensary.  White
Hall operates two pharmacies under the trade names “Doctor’s Orders” or
“Doctor’s Orders Pharmacy” in the Pine Bluff area; the first has existed since
2009. It uses a red font, a red logo, and a white backsplash.  Its principal testified to efforts to become
known in Arkansas. It website has “over 40,000 hits, 45,000 plus hits on one
single ad that went out” and it has approximately 12,000 total patients It has
sent prescriptions to “[a] little over 130 cities total” and that “[a]bout 12
of those are out-of-state cities.” “Not many” customers who live in Little Rock
drive down to Pine Bluff to use the pharmacy, and “about 20 to 30” customers reside
in the Hot Springs, Arkansas, area, while approximately 150 customers have
second homes in the Hot Springs area.

plaintiff’s logo

Defendants run a medical marijuana dispensary in Garland
County, Arkansas, using the name “Doctors Orders,” “Doctor’s Orders Pharmacy,”
and “Doctors Orders RX,” “roughly one hour away” from White Hall’s
pharmacies.  White Hall’s principal
testified to “seeing posts on Facebook asking … kind of are we involved in
it, asking for directions to the store.” He denied affiliation Facebook around
“20 or 30 times” during the first day. He also said they’d received around 60
phone calls “[i]n the first few days” and that the pharmacies have received
“probably closer to a hundred phone calls … since then,” while they normally
receive “about a hundred phone calls per pharmacy” a day for the prescription
business. An affidavit from an employee also said they received 8-9 calls/day
about marijuana “for a while” after the dispensary opened. An employee also
asked him if he was in the medical marijuana business, as did employees at the
local hospital, a city councilman, a reporter, local news stations, multiple
physicians, his banker, and people at his country club. Three or four people
showed up at the pharmacies trying to buy marijuana, and one job seeker looking
for a job selling marijuana contacted White Hall.

defendant’s sign
He testified that he hadn’t seen an immediate change in
revenues, though he notes that revenue in the pharmacy business is “delayed 60
to 90 days ….” He also stated that “[n]o one said they were going to no
longer use my pharmacy once I clarified the issue they wanted to know.”
Defendants’ operation allegedly used signs and advertising
that contain red letters and a white backsplash similar in appearance to White
Hall Pharmacy’s signs and advertising. 
On defendant’s website, there was a logo in the shape of the state of
Arkansas in white, with the following script: “DOCTOR’S ORDERS.” The background
was dark green (though it looked blue to me when I checked).

my screenshot of defendant’s site
Defendant’s owner submitted an affidavit that, at the time
he filed his incorporation papers in 2017, he had “never heard of Doctor’s
Orders Pharmacy” and didn’t know about Doctor’s Orders Pharmacy before he got a
cease and desist letter on May 14, 2019.
White Hall presented the affidavit of Jeremy Lambert, a
customer who learned that a medical marijuana dispensary named “Doctor’s
Orders” was open in Hot Springs. At a hearing, he testified that learned about
the dispensary from a customer who was in his office, and he also explained
that he told the customer he “would assume it’s incorrect” that the dispensary
was affiliated with White Hall, then confirmed that was the case. However, his
affidavit averred that he was confused about the medical marijuana dispensary’s
affiliation with White Hall. He testified that he was asked about the medical
marijuana dispensary by three customers and “two to three employees” who worked
with him, as well as other business owners and customers in Pine Bluff. He
“truly believe[s] this has damaged the reputation of [ ] Doctor’s Orders
Pharmacy.” Another Pine Bluff resident submitted an affidavit from a
noncustomer who knew the pharmacy and who was confused, stating that “[i]t was
a common belief in Pine Bluff that this dispensary was somehow affiliated with
White[ ]Hall Pharmacy or [owner] Lelan Stice ….” There was other testimony in
the same vein.
Highlighting the different evolution of false advertising
and trademark doctrine, the court found no likelihood of success on the merits
on the false advertising claim because of lack of evidence of harm.  The theory was misleadingness; though a
full-blown consumer survey isn’t required at this stage of the proceedings,
some sort of extrinsic evidence of deception was. And the deception must be
shown to be likely to influence consumers’ purchasing decisions. There was
record evidence of confusion, but not sufficient evidence of effect on
purchase.  The parties don’t compete in
what they sell—one sells only medical marijuana and the other legally can’t—and
even if there was overlap, there was still no evidence of harm.  The argument that White Hall’s customers
might abandon it because of a perceived association with defendants wasn’t
supported by the record; discovery might be able to show such an impact, but it
wasn’t yet apparent.  And even if
marijuana is controversial, a majority of Arkansas voters voted to allow
medical marijuana, so the net association might even be positive.
Also, the false advertising claim was really a false
association trademark claim, to which the court turned.  White Hall relied on common-law rights, which
are limited by the territory in which a trademark claimant has operated. Under Tea
, “the first user of a common law trademark may not oust a
later user’s good faith use of an infringing mark in a market where the first
user’s products or services are not sold.” There was no evidence of bad faith
Doctor’s Orders/Doctor’s Orders Pharmacy was
descriptive.  White Hall presented
evidence of continuous use since 2009 as well as of actual consumer confusion:
“multiple individuals immediately thought of White Hall Pharmacy when they
heard the name of defendants’ dispensary.” “Although this record evidence is
not overwhelming, … White Hall Pharmacy has a fair chance to prevail on its
argument that, due to its efforts and exclusive use, the phrases ‘Doctor’s
Orders,’ ‘Doctor’s Orders Pharmacy,’ and ‘Rx’ when used in conjunction with
“Doctor’s Orders” acquired secondary meaning by May 2019, at least for certain
customers in certain markets.”
Geographic scope: White Hall argued that its market “includes
the entire State of Arkansas and then some.” The record gave White Hall a fair
chance of showing some competition, even though the competition wasn’t for the
same goods. “[B]oth parties ostensibly offer medicinal services and products to
the public.”  [How that bears on
geographical scope is not super clear to me.] 
White Hall didn’t show rights outside of the Pine Bluff area on this
record. The court relied on the principle that, “[w]here the first user’s
activities in a remote area are ‘so small, sporadic, and inconsequential’ that
its market penetration is de minimis, the first user is not entitled to
protection against a later user’s good faith adoption of the mark in that
area.” About 20 to 30 patients living in Hot Springs (only five lived in Hot
Springs at the time they were White Hall customers), and 150 with second homes
there, out of 12,000 total wasn’t good enough, nor was having advertising and a
website and belonging to some statewide organizations (as well as some in Pine
Bluff, but not in Hot Springs).  There
wasn’t sufficient market penetration outside Pine Bluff; the “possibility of potential
sales” wasn’t enough on its own to establish rights. However, given that
defendants’ dispensary was one of only two in the state, and given the evidence
of confusion, it seemed likely that both parties served customers in the Pine
Bluff area.
LOC: White Hall’s mark was somewhat distinctive; the marks
were similar; the services were related enough to favor confusion; there was no
evidence of intent to pass off; and the evidence of actual confusion favored
White Hall. The amount of actual confusion has to be weighed against the number
of opportunities for confusion. There was evidence of a lot of inquiries,
though much of this evidence was “hearsay of a particularly unreliable nature
given the lack of an opportunity for cross-examination of the caller or sender
regarding the reason for the ‘confusion.’ ” The only evidence of marijuana
seekers actually showing up at White Hall was hearsay—someone saying they’d
heard of it happening.
Moreover, “many of the alleged incidents of actual confusion
may be interpreted as proof that consumers note a distinction between White
Hall Pharmacy and defendants’ dispensary”—the fact that the consumers knew they
needed to ask, because they didn’t have enough information to be sure, can
indicate lack of confusion rather than confusion. Some of the incidents
reported clearly had that character, such as the customer who “assume[d]” that
it was incorrect to associate the parties.
Still, there were “unambiguous incidents of actual confusion
documented in the record,” such as the message from the job seeker and an
instance in which someone “tagged” White Hall Pharmacy in a Facebook post
related to defendants’ dispensary. 
Considered in toto, actual confusion weighed in favor of White Hall.
Degree of care: it’s hard to buy medical marijuana in
Arkansas; it requires a registry identification card. Medical marijuana is also
not cheap. These aren’t impulse purchases, weighing against confusion.
Though it was a “difficult determination,” the court found
that the test favored White Hall at this stage.
White Hall failed to show it was likely to succeed on its
tortious interference claims.  The
C&D letter wasn’t enough to show that defendants knew about any particular
business expectancy of White Hall or that they intentionally sought to
interfere with it. Nor was there record evidence of any loss of sales, revenue,
or customers. Likewise, as to unjust enrichment claims, there was no record
evidence that defendants have benefitted from White Hall Pharmacy’s advertising
or customer goodwill.
Because it’s a trademark case, it’s not that surprising that
the court then found irreparable harm despite what it said about the absence of
harm above.  “Loss of intangible assets
such as reputation and goodwill can constitute irreparable injury.” And because
the Eighth Circuit hasn’t clearly abandoned the presumption of irreparable harm
in trademark cases post-eBay, the court applied that presumption here.
Without that presumption, the court noted, the case would be more difficult,
given the absence of record evidence of competition and the differences in the
parties’ geographic footprints. There was no record evidence of harm to
reputation or goodwill.
Scope of relief: 
White Hall was granted a preliminary injunction only in the Pine Bluff
area (Jefferson County). Defendants were enjoined from holding themselves out using
any combination of words that included “Doctor’s Orders” to the public within
Jefferson County, including any signage and “any advertising that can be viewed
by consumers within Jefferson County, Arkansas.” [Does this mean that they
can’t advertise online unless they can geoblock? That seems … extreme. The
court says the injunction shouldn’t interfere with other regulations on
defendants’ advertising, but that doesn’t really answer the “can they have a
website that doesn’t target Jefferson County but can be accessed from Jefferson
County” question.]

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