Pagliero v. Wallace China Co.

Citation198 F.2d 339
Decision Date29 July 1952
Docket NumberNo. 13094.,13094.
PartiesPAGLIERO et al. v. WALLACE CHINA CO., Limited.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Henry Gifford Hardy, Hauerken, St. Clair & Viadro, San Francisco, Cal., for appellant.

C. A. Miketta, Los Angeles, Cal., Naylor & Lassagne, Jas. M. Naylor, San Francisco, Cal., for appellee.

Before DENMAN, Chief Judge, and STEPHENS and ORR, Circuit Judges.

ORR, Circuit Judge.

Appellee sought relief in the District Court by way of application for a preliminary and permanent injunction and, for damages because of an alleged commission by appellants of acts of unfair competition and trade-mark infringement. The trial court granted a preliminary injunction and it is an appeal from that order which brings the case here.

Appellee Wallace China Company, hereinafter called Wallace, has manufactured and sold vitrified hotel china for many years. Purchase of hotel china is induced, in part, by virtue of its attractive appearance. Wallace, in common with many other manufacturers of china, has employed artists to create suitable designs for use in its manufacturing business. Wallace claims to have developed the application of overall patterns to china, that is, a pattern which in an unbroken fashion covers the entire upper surface of the plate. Four distinctive designs are alleged to have been first employed by Wallace; and, similarly, Wallace alleges that it was first in the field to use the words "Tweed", "Hibiscus", "Shadowleaf", and "Magnolia" to denominate these particular patterns. Wallace claims to have created a substantial market for its products bearing these designs by virtue of extensive advertising, carried on in part by Wallace and in part by its dealers, wherein the designs and names adopted to designate them have been popularized by their use in catalogues, price lists and other literature distributed by Wallace and its dealers.

At the hearing on the application for the temporary injunction affidavits were introduced in evidence purporting to show that Wallace has acquired a reputation in the trade, not merely for the excellence and attractiveness of its designs but, in addition, because of the allegedly superior quality of its product. The affidavits suggest that the source of china is of importance to the purchasing public. Through the years both the designs and their names are alleged to have become associated in the minds of the trade and the consumer as indicating a Wallace product; hence, it is thus attempted to establish a secondary meaning for the designs and for the words used to designate them. Appellants Pagliero Brothers, doing business as Technical Porcelain and Chinaware Company, hereinafter called Tepco, have been competitors of Wallace for some time. Tepco manufactures and sells vitrified hotel china to the same dealers and middlemen as does Wallace. Tepco uses the four designs allegedly originated by Wallace and applies the designs to china of substantially identical physical dimensions as that of Wallace. In addition, Tepco has denominated these designs, as applied to its china, by the same words chosen by Wallace for this purpose. Tepco has used said words for such purpose on its shipping carton and price lists, although the carton and price lists have Tepco's name as manufacturer displayed prominently. Wallace further claims that Tepco's china is of inferior quality.

The acts of unfair competition alleged are: (1) Simple use of the designs by Tepco; (2) use of the designs in view of the secondary meaning sought to be established for them and consequent deception of the purchasing public; (3) a conspiracy by Tepco with the engraver who prepared engraving rolls for Wallace in which the engraver copied the rollers and designs for Tepco; (4) the copying of the color, marking and arrangement of Wallace's shipping cartons by Tepco.

The act of trade-mark infringement alleged is the use by Tepco of the words "Hibiscus", "Magnolia", "Shadowleaf", and "Tweed", to designate its imitations of Wallace designs, such use exemplified by the price lists and shipping cartons. Wallace does not contend that the words have been registered as trade-marks, or that the designs have been patented or copyrighted. The trial court expressly found that they were not.

Tepco maintains that, in accordance with the custom of trade, all pieces of china manufactured by it, including those impressed with imitations of Wallace designs, bear on the underside of the china Tepco's name as manufacturer. Tepco alleged that the designs were not original with Wallace, that it had in fact used one of the designs, "Tweed", long before Wallace, and that its china was not of inferior quality.

The preliminary injunction granted by the District Court restrained Tepco from "* * * disposing of china bearing patterns deceptively similar to those originated by plaintiff * * * and from using plaintiff's trade names or trade-marks `Shadowleaf', `Tweed', `Hibiscus', and `Magnolia', in the identification of hotel chinaware manufactured and sold by the defendants." There is no finding, relative to the alleged conspiracy or imitation of shipping cartons and the court's order makes no reference to those matters.

I. Jurisdiction.

While the complaint is denominated "Complaint for Unfair Competition and Trade-Mark Infringement," it is apparent that there is no registered trade-mark infringement involved. The words used to designate the designs were never registered under any law. The designs were neither patented, nor copyrighted. Hence, it is clear no jurisdiction exists in a federal court under 28 U.S.C.A. § 1338(b) because there is no "related claim" disclosed in the complaint. Diversity of citizenship is not present since Wallace and Tepco are residents of California. There is, however, an independent ground for federal jurisdiction in a case such as this involving, as it does, a "naked" claim of unfair competition. In Stauffer v. Exley, 9 Cir., 184 F.2d 962, we held that where there is present the requisite effect on interstate commerce, the Lanham Act created substantive rights and remedies available to United States citizens and neither diversity of citizenship nor jurisdictional amount need be present.1 15 U.S.C.A. § 1121. The scope of the rights created by the Lanham Act, 15 U.S.C.A. §§ 1125, 1126(b), 1126(g), 1126(h), 1126(i), has not as yet been subjected to full judicial scrutiny; but the test in this situation is no different from that of other tests for federal jurisdiction. If the complaint raises a substantial claim of federal right under the Lanham Act the District Courts have jurisdiction of the case notwithstanding it may ultimately be found that the alleged right was not created by the Act. Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939.

II. The Injunction.
A. Appropriation of the Designs.

We first consider whether Wallace has an exclusive right to the designs on the assumption they have not acquired a secondary meaning. Wallace's complaint is that Tepco copies and imitates its (Wallace's) designs to the latter's competitive detriment. The theory of the wrong is apparently that Tepco has benefited from the fruits of Wallace's business activities and efforts. Authority for granting relief under such circumstances must be found to exist, if at all, in the Lanham Act. Our conclusion is that said Act grants no such relief.

There has been much discussion as to the meaning of the term "unfair competition" as used in § 44(h) of the Act and the scope of the protection afforded under the International Conventions mentioned in § 44(b) (1) and (2).2 The general consensus of the commentators is that, at the least, the area of federal rights extends considerably beyond that of simple non-technical trademark infringement. Indeed, in view of the seemingly broad language of the conventions, such a construction is justified, at least so far as the rights created by international conventions are made available to United States citizens by § 44(b) and § 44(i) of the Act.

We do not attempt here to lay down definitive limits to the rights created in the Lanham Act by adoption from the conventions. See 53 Stat. 1748. (Paris Convention as modified); 46 Stat. 2907 (Inter-American Convention). So far as the conventions declare specific acts and practices unlawful a more or less definite area has been established, but so far as interpretation of designedly broad terms is concerned, words uttered in a different context over thirty years ago by Justice Brandeis are still relevant: "* * * an enumeration, however comprehensive of existing methods of unfair competition must necessarily soon prove incomplete, as with new conditions constantly arising novel unfair methods would be devised and developed." Federal Trade Commission v. Gratz, 1920, 253 U.S. 421, 437, 40 S.Ct. 572, 578, 64 L.Ed. 993.

The wrong alleged is Tepco's use of designs virtually identical to those used by Wallace. Wallace's right to exclusive use of these designs does not and cannot (since the trial court found the time for patent or copyright applications has long expired) depend upon statutory authorization. Wallace asks to be protected in its market, and the enjoyment of a monopoly, because it has worked hard and spent money to develop this market and because it was the first to use and successfully exploit the allegedly "distinctive" designs in question. We find nothing in the conventions that requires this result. See Ladas, International protection of Industrial Property, §§ 483-487, §§ 563-565. The specific acts and practices condemned by the conventions, Article 10½ of the Paris Convention, and Article 21 of the Inter-American Convention, do not include the acts charged against Tepco here. Competition by imitation where secondary meaning is not involved apparently was not considered sufficiently important to merit particularization as an unlawful act. Insofar as those specific...

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