Coca Cola Co. v. Gay-Ola Co.

Citation200 F. 720
Decision Date07 November 1912
Docket Number2,235.
PartiesCOCA COLA CO. v. GAY-OLA CO.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

[Copyrighted Material Omitted]

Candler Thomson & Hirsch, of Atlanta, Ga., and Lehman, Gates &amp Martin, of Memphis, Tenn., for appellant.

Brown & Anderson, of Memphis, Tenn., for appellee.

Before WARRINGTON, KNAPPEN and DENISON, Circuit Judges.

DENISON Circuit Judge (after stating the facts as above).

An answer under oath was not waived. The answer filed is verified by one of the defendant's corporate officers, and sets up, by way of affirmative defense, that complainant comes with unclean hands and cannot be heard, because its product is misbranded, and because the name 'Coca Cola' is deceptive (California Fig Syrup Co. v. Stearns (C.C.A. 6) 73 F. 812, 816, 20 C.C.A. 22, 33 L.R.A. 56); but defendant took no proofs. A corporation cannot answer under oath, and even if its answer, when verified by an officer, is evidence under the equity rule, it is not available to prove an affirmative defense. Seitz v. Mitchell, 94 U.S. 580, 582, 24 L.Ed. 179; Ritterbusch v. Atchison, etc., Ry. (C.C.A. 8) 198 F. 46, 50. These matters must, therefore, be dismissed from consideration. And see U.S. v. 40 Barrels, etc. (D.C.) 191 F. 431.

The substantial question seems to be whether complainant has a remedy against defendant, or whether the remedy is confined to proceedings against that retail trade which is the immediate agent in deceiving the ultimate purchaser. That the defendant has planned and expected a benefit by the fraud so to be practiced, and that it has deliberately furnished to the dealers the material for practicing the fraud, with the expectation and desire that the material be so used, are perfectly plain-- indeed, are hardly denied. The ultimate wrong here contemplated is clearly to be classified as unfair competition, within the definitions adopted by the Supreme Court and by this court (Elgin, etc., Co. v. Illinois Watch Co., 179 U.S. 665, 674, 21 Sup.Ct. 270, 45 L.Ed. 365; Merriam Co. v. Saalfield, 198 F. 369; Everett Piano Co. v. Maus, 200 F. 718, opinion this day filed); and complainant is entitled to such relief as a court of equity can give, unless merit can be found in the defense that the Gay-Ola Company had the right to make and sell the article which it did sell, and that it is not responsible for the fraud of its vendees.

The interposition of equity in this class of cases rests upon the inadequacy of the remedy at law; and this inadequacy consists in the resulting multiplicity of suits, impossibility of computing indirect damages and probable irresponsibility of many wrongdoers. If these reasons lead to the issuing of an injunction against one of a large number of those who commit the final tort, even more do they indicate the necessity of an injunction against one who is conspiring or co-operating to cause a large number of such torts. Accordingly, we find it recognized by this court that, in a suit for unfair competition, it is not necessary to show that the immediate purchasers were deceived as to the origin of the goods; but even if they thoroughly understand that they are buying the counterfeit, and not the genuine, the manufacturer of the counterfeit will be enjoined from selling it to dealers with the purpose and expectation that it shall be used by the dealers to deceive the consumer. Garrett v. Garrett (C.C.A. 6) 78 F. 472, 476, 24 C.C.A. 173; Royal Co. v. Royal, 122 F. 337, 345, 58 C.C.A. 499. And see cases cited in Cyc. vol. 38, p. 778, notes 25 and 26; also Kalem v. Harper, 222 U.S. 55, 63, 32 Sup.Ct. 20, 56 L.Ed. 92. Under the principles on which these cases were decided, we are satisfied that an injunction must go against the defendant. There is no room for it to shift the blame to 'tricky retailers,' as in Rathbone Co. v. Champion Co., 189 F. (C.C.A. 6) 26, 33, 110 C.C.A. 596, 37 L.R.A. (N.S.) 258; defendant is an accomplice, if not the principal, in the trick. With this conclusion established, it is obvious that the injunction should forbid all attempts directly or indirectly to encourage or induce the dealer to make the fraudulent substitution; but complainant also asks that the injunction extend to the use of barrels or kegs painted of the same color as complainant's, and to coloring the product itself with the same color, and to using any packages not plainly marked Gay-Ola. Whether the injunction should have this scope must be considered.

It is first to be observed that defendant is at the best on a narrow ground of legality. The name which it has adopted does not negative an intent to confuse. The product is identical, both in appearance and taste; and the form of script used in printing the 'trade-mark' names is the same. Even if the use of each of these items of similarity was lawful, when accompanied by good faith and no intent to deceive, they put the product near that dividing line where good or bad faith is the criterion, and their presence puts upon the user a burden of care to see that deception does not naturally result. Conversely, when we find, as a fact, from the other conduct of the defendant, that the underlying intent is to perpetrate a fraud upon the consumer, this intent must color the accompanying acts, and some which otherwise might be innocent become guilty. So here. The red color used by complainant on its barrels and kegs is not a color which it discovered, or to which it had any abstract monopoly; but this color has long been used by complainant in a way that was exclusive in this trade. No other manufacturer of analogous or competing drinks uses that color of package, and its adoption by defendant is one of the constituent parts of defendant's scheme of fraud. So, too, with defendant's failure to mark its packages with anything to indicate the place of manufacture. Ordinarily a man may mark his goods, or not, as he pleases; but when he has his marks and labels, which he uses on occasions, and can have no motive for sending out unmarked packages except to aid in a fraudulent substitution, the act, otherwise permissible, becomes forbidden.

The question remains whether the injunction should go to the extent of forbidding defendant to sell Gay-Ola with the identical color it now has; that is, to forbid its sale unless colored so as to distinguish it from Coca Cola. Defendant contends that such a prohibition is inconsistent with its legal right to make and sell an article which is in fact exactly like Coca Cola. This contention seems unpersuasive in view of defendant's pleading. In its answer it has abandoned the claim of its advertising literature that Gay-Ola is made exactly according to the Coca Cola formula, and urges that its product is a different and better compound. It says that it has improved upon the formula of Coca Cola, while eliminating one of the elements, and that its product is 'greatly superior' to Coca Cola. It thus destroys a considerable part of the foundation upon which rests its claimed right to adopt a color which will be deceptive; but we pass by this consideration.

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