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The J&J / Red Cross Tiff – Principle, or Pragmatism?

The recent legal spat between the American Red Cross (ARC) and Johnson and Johnson (J&J) (back story here, with more reportage and comment here, here, and here) brings to the surface a very important issue. While many have focused on the public relations aspect of this messy situation, and some see it as just another opportunity to jump on Big Pharma, what it really comes down to is this: will principle, or pragmatism, carry the day?

At the core, this is a legal dispute, having to do with intellectual property, copyright laws, and interpretation of agreements. J&J believes that there is an important legal precedent at stake here, and I have no doubt that they knew, going in, that a P.R. nightmare was going to be the cost of moving forward on principle. I respect that. Justice requires that there are no favorites – the small as well as the great are held to the same standard. Legal behavior and respect for property are bedrock principles of the rule of law, and we see multiplying examples around us of smaller, poorer nations casting aside such inconveniences as patent law in order to steal pharmaceutical formulations. Pharmaceutical companies, like any other companies, have every right to defend their property; intellectual, tangible, and whatever else.

When you compare the press releases of the 2 parties in this battle, you see a very clear differentiation. The Red Cross is claiming victim status, using the “big company is bullying us” argument, the pragmatic “we’re only trying to do good” argument, and the “they’re only doing it for the money” argument (note: the same type of arguments used by developing nations that break patents on drugs). In no instance do they actually seem to address the core legal principles. Here is their press release:

WASHINGTON, Wednesday, August 08, 2007Today, Johnson & Johnson (J&J) filed a lawsuit against the American Red Cross and four of its licensing partners for “unlawful conduct” related to the nonprofit’s use of the Red Cross emblem.

Specifically, J&J demands that the Red Cross:

“For a multi-billion dollar drug company to claim that the Red Cross violated a criminal statute that was created to protect the humanitarian mission of the Red Cross—simply so that J&J can make more money—is obscene,” said Mark W. Everson, President and CEO of the American Red Cross.

Research has found that only seven percent of Americans have taken the necessary steps to be prepared—and that more people would get prepared if preparedness products were more available, including at retail locations. Since 2004, the Red Cross has worked with several licensing partners to create first aid, preparedness and related products that bear the Red Cross emblem.

All money the Red Cross receives from the sale of these products to consumers is reinvested in its humanitarian programs and services.

“The Red Cross products that J&J wants to take away from consumers and have destroyed are those that help Americans get prepared for life’s emergencies,” said Everson. “I hope that the courts and Congress will not allow Johnson & Johnson to bully the American Red Cross.”

Translation: J&J is big, greedy, and bad; we’re victims just trying to do good here; and they want to hurt Americans. OK – nice job with the ad hominem attack…now, can we have your legal reasoning, please??

On the other hand, J&J appears to be focusing on the legal issues, with a concern for the long-term principles and the precedents that are at stake. Their press release:

Johnson & Johnson Statement on Civil Complaint Against The American National Red Cross and Commercial Licensees

Skillman, NJ (August 9, 2007) – Johnson & Johnson has great respect for the relief work of the American Red Cross (ARC) and over the decades has consistently supported the organization through cash donations, product donations and employee volunteering. The Company remains committed to supporting their mission through its philanthropic efforts.

Both Johnson &Johnson and the American Red Cross have long-held separate and distinct rights to the use of the Red Cross Design trademark.

Johnson & Johnson began using the Red Cross design and “Red Cross” word trademarks in 1887, predating the formation of the American Red Cross. The Company has had exclusive rights to use the Red Cross trademark on commercial products within its longstanding product categories for over 100 years. Since its creation, the American Red Cross has at all times possessed only the rights to use the Red Cross trademark in connection with its non-profit relief services.

After more than a century of strong cooperation in the use of the Red Cross trademark, with both organizations respecting the legal boundaries for each others’ unique legal rights, we were very disappointed to find that the American Red Cross started a campaign to license the trademark to several businesses for commercial purposes on all types of products being sold in many different retail and other commercial outlets. These products include baby mitts, nail clippers, combs, toothbrushes and humidifiers. This action is in direct violation of a Federal statute protecting the mark as well as in violation of our longstanding trademark rights.

For the past several months, Johnson & Johnson has attempted to resolve this issue through cooperation and discussion with the ARC, and recently offered mediation, to no avail. The Company was left with no choice but to seek protection of our trademark rights through the courts.

On Wednesday, August 8th, 2007, a civil complaint was filed in the United States District Court, Southern District of New York by JOHNSON & JOHNSON and JOHNSON & JOHNSON CONSUMER COMPANIES, INC against THE AMERICAN NATIONAL RED CROSS and its commercial licensees, LEARNING CURVE INTERNATIONAL, INC., MAGLA PRODUCTS, LLC, WATER-JEL TECHNOLOGIES, INC., and FIRST AID ONLY, INC.

The goal of this civil complaint is to restore the long-held legal boundaries surrounding the use of the Red Cross trademark.

I don’t know who will win this battle in the courts. If J&J is right, I hope that ARC’s case is crushed, and that they retreat with their tail between their legs – a very important legal precedent having been reinforced. After which, I hope J&J then turns around and makes a sizable donation to some tangible Red Cross humanitarian work (though perhaps not to their legal fund!). And, if J&J is in the wrong, then let’s hope they get a legal spanking, and volunteer to cover all costs for the proceedings.

But at least in this initial skirmish, I have to say that I think J&J’s reasons for going to battle are sound. They tried to resolve it behind the scenes. The stakes are high – matters of legal principle are in dispute, which have long-term consequences. They have the right to see it resolved in the courts. And I’d sure like, at some point, to see the Red Cross come out with a well-reasoned defense of their actions rather than this bald appeal to victim status.

Pragmatism will tend to justify the means by the end. Those driven by principle tend to be willing to pay a short-term price for the sake of seeing what is right triumph, for the long-term benefit of all. Count me among the latter.

Full disclosure: I have no financial relationship with J&J by way of investment or current contract work, nor do I have any financial relationship with ARC.

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