## Facts

- Sterling Drug, Inc., a U.S. pharmaceutical company, owned and used the “Bayer” trademark in the United States for aspirin and related products after acquiring U.S. rights in 1918.
- Bayer AG, a German multinational, retained “Bayer” trademark rights outside the United States and operated globally through U.S. affiliates.
- The parties’ disputes led to agreements in 1964, 1970, and 1986 that allocated rights and generally restricted Bayer AG’s U.S.-facing use of “Bayer,” while permitting limited corporate or non-confusing uses.
- Sterling alleged Bayer AG and its U.S. affiliates used “Bayer” in advertising and corporate communications in ways likely to reach U.S. audiences, causing confusion and violating the agreements.
- The Southern District of New York found trademark infringement and breach of contract and entered a broad injunction barring Bayer AG from using “Bayer” in any materials reasonably likely to be disseminated in the United States, including certain foreign materials with U.S. spillover.

## Issues

1. Whether Bayer AG’s challenged uses of “Bayer” created a likelihood of confusion and infringed Sterling’s U.S. trademark rights under the Lanham Act.
2. Whether Bayer AG’s conduct breached the parties’ agreements restricting use of “Bayer” in U.S.-connected contexts.
3. Whether the district court’s injunction was impermissibly broad, including in its regulation of foreign advertising and communications with potential U.S. dissemination.

## Decision

- The Second Circuit held Sterling was entitled to prevail on the merits of its trademark infringement and contract claims.
- The court applied the Polaroid likelihood-of-confusion framework and agreed the identical mark and marketplace overlap supported a finding of likely consumer confusion in the United States.
- The court affirmed the finding that Bayer AG’s conduct exceeded permitted uses under the parties’ agreements and therefore breached contractual restrictions.
- The court concluded the injunction was overly broad, vacated it, and remanded for entry of a more narrowly tailored injunction.
- The court directed that any extraterritorial relief must be limited to what is necessary to protect U.S. trademark rights and prevent U.S. confusion, while avoiding unnecessary interference with Bayer AG’s foreign trademark rights.

## Legal Principles

- Likelihood of confusion under the Lanham Act is evaluated using the Polaroid factors, including mark strength, similarity, proximity of products/markets, and evidence of actual or likely confusion.
- Contractual allocations restricting trademark use can be enforced alongside Lanham Act claims when challenged conduct falls outside agreed limits.
- U.S. courts may restrain foreign conduct to protect U.S. trademark rights when the conduct sufficiently affects U.S. commerce and U.S. consumer confusion.
- Injunctions regulating foreign uses of a mark must be narrowly drawn and sensitive to comity; broad prohibitions that unnecessarily restrict lawful foreign trademark use are improper.

## Conclusion

The Second Circuit upheld Sterling’s infringement and breach findings but vacated an injunction that swept too broadly, holding that any restriction on Bayer AG’s foreign “Bayer” uses must be carefully limited to preventing confusion and protecting trademark interests within U.S. commerce.


Sterling Drug, Inc. v. Bayer AG, 14 F.3d 733 (2d Cir. 1994)