Some may say that suing the Red Cross does little for a firm’s image but Johnson & Johnson’s lawsuit against the latter has not stopped investors from flocking to buy into the healthcare giant.
The demand to buy into J&J was such that its $1.5 billion debt offering was boosted to $2.6 billion. The proceeds from the sale are expected to be used for capital expenditure, stock buybacks (the firm recently announced the initiation of a $10 billion share repurchase programme), debt repayment and other general corporate uses.
The move comes at a time when the world’s debt markets have stalled in the wake of last week’s credit crisis when funds were being frozen due to big losses related to US mortgage securities. The cash seemed to have dried up but not in the case of J&J and at times of uncertainty, investors head for the solid, dependable firms, and the company is one of just eight companies in the USA to have AAA credit ratings.
Rationale behind lawsuit against Red Cross
However, many people were stunned by J&J’s decision to sue the American Red Cross over its logo. The firm noted that it began using the Red Cross design and ‘Red Cross’ word trademarks in 1887, before the ARC was formed and the latter could only use the logo “in connection with its non-profit relief services”. However, the company said that “after more than a century of strong cooperation” in the use of the trademark, “we were very disappointed to find that the ARC started a campaign to license the trademark to several businesses for commercial purposes”.
Products including baby mitts, nail clippers and toothbrushes and humidifiers have been sold and J&J says that for the past several months, it has attempted to resolve this issue through discussion with the ARC, and recently offered mediation, but to no avail. The company was “left with no choice but to seek protection of our trademark rights through the courts” and a civil complaint was filed in a New York court.
The ARC has responded by saying that it received only $2 million in revenue from the sale of its products in 2006, while the healthcare firm received $53.3 billion. “We hope that J&J will act as a good corporate citizen and recognise the right of the ARC to our own emblem to carry out our mission, not stand in the way,” said its chief executive Mark Everson.
“Our legal argument is based on solid substantiated facts,” he added, noting that “J&J has taken a criminal statute intended by Congress to protect the ARC and is now using it to distort history and the law.”