A federal district court judge has decided some major legal issues within Johnson and Johnson's lawsuit against the American Red Cross (see previous DOTmed story at DM 4652). U.S. District Judge Jed Rakoff's opinion and order just filed this May resolved motions for summary judgment brought by parties on both sides in late 2007.

In 2005, the American Red Cross (ARC) entered into licensing agreements with the four co-defendant licensees in this case (FAO, Water-Jel, Magla and Learning Curve) to manufacture and sell products with the red cross symbol and words. FAO and Water-Jel had previously agreed with J&J not to use the red cross symbol. In 2007, Johnson and Johnson (J&J) filed an amended complaint in federal court with eight causes of action against the ARC and its four licensees. The basis of the law suit is J&J's claims that it has exclusive commercial rights to the famous red cross symbol, and that ARC has no ability to engage in commercial activities in competition with companies such as J&J. In response, ARC filed counterclaims that J&J's trademark exceeded its rights. J&J says ARC's licensing agreements violated 18 U.S.C. Section 706 of the federal criminal code, which prohibits the wearing or displaying of the red cross emblem for fraud or inducement of belief that the wearer is a member or agent of ARC.

J&J began using the red cross emblem as a trademark beginning in 1887. The ARC had been created six years prior to J&J's usage, but received a congressional charter regarding the cross' usage in 1900. J&J is excluded from the commercial prohibitions in the charter under a "grandfather" proviso.

J&J alleged in its motion that ARC and its co-defendants acted illegally by authorizing third parties to sell products with the red cross through commercial outlets. J&J said the products violated both Section 706 of the Federal Criminal Code and the Geneva Convention, which provides how ARC may use the emblem. Judge Rakoff stated in his decision that section 706 did not prohibit or limit ARC from making any use of the red cross emblem, only prohibited other persons from doing so. Therefore, ARC's licensing agreement with the four co-defendants did not contravene 706.

Judge Rakoff found a more pressing matter in the words of the Geneva Convention. The commentary to the prohibitions set forth in the Geneva convention stated that "The emblem must retain its high significance and prestige in all circumstances, and any practice likely to lower it in the eyes of the public must be scrupulously avoided..." Rakoff nonetheless found that while using the emblem for fundraising is discouraged, and might be frowned upon by those who drafted the Convention's prohibitions, the Convention still does not outright prohibit such activities. Even if the Convention was interpreted more strictly, Judge Rakoff said, a violation of the Convention would still not constitute either a crime or tort under the law of New York.

J&J had further accused ARC of trademark dilution. In order to prove that cause of action, J&J would need to show that the red cross is distinctive as a marker of J&J's goods. Judge Rakoff noted that ARC has used the red cross as an emblem for more than 100 years. ARC historically used the emblem to identify workers, shelters and first aid supplies, and other products, including on buildings to denote places for blood drives. ARC's right to use the emblem was granted by congress. J&J's right to use the emblem is part of the "grandfather" proviso, and Judge Rakoff said the law was clear that a "grandfathered" user cannot use dilution law to trump the use for an emblem granted by congress to the ARC. In addition, there is no evidence that users of ARC products confuse them with J&J's products.

ARC's counterclaims under consideration include J&J itself violating Section 706 by impermissibly exceeding its grandfathered rights--saying J&J was not using the emblem for the same purpose and class of goods as before 1905. The court said no violation had occurred; prior to 1905 J&J's emblem was used on medicine, pharmaceutical preparations, dental, medicinal, and surgical appliances, and cosmetics. Judge Rakoff said that J&J's current uses were legally equivalent to its uses in 1905 and were in fact the same class of goods, even if those goods were updated to reflect current technologies. All three of ARC's counterclaims were dismissed.

What is the result of these legal rulings? First, the ruling establishes that ARC has the right to license the famous red cross symbol for commercial purposes and not be in violation of federal law or the Geneva Convention. In addition, now that most of the causes of action and counterclaims have been dismissed, the issues in the case are focused to J&J's three remaining claims and the two counterclaims of the other codefendants. J&J's claim against ARC is limited to one: tortious interference with contracts, referring to J&J's former agreement with FAO and Water-Jel not to use the red cross emblem. J&J's other claims to be decided at trial are breach of contract by FAO, and breach of contract by Water-Jel due to their licensing agreement with ARC. Trial should be scheduled on those issues shortly.