Merry Hull & Company v. Hi-Line Co.
| Citation | 243 F. Supp. 45 |
| Parties | MERRY HULL & COMPANY, Plaintiff, v. HI-LINE CO., Inc., Gay Sprites, Inc., Charles H. Sheldon, David I. Tuckerman, Chester Weinreb, Fred Dallmayer and Phyllis Berens, Defendants. MERRY HULL & COMPANY, Plaintiff, v. MERRY MITES, INC., Defendant. |
| Decision Date | 02 July 1965 |
| Court | United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Brumbaugh, Free, Graves & Donohue, New York City, for plaintiff; John F. Neary, Jr., Richard A. Lochner, Daniel H. Brown, New York City, of counsel.
Watson, Leavenworth, Kelton & Taggart, New York City, for defendants Hi-Line Co., Inc., Charles H. Sheldon, David I. Tuckerman, Chester Weinreb and Phyllis Berens; Leslie D. Taggart, Herbert Blecker, Nicholas John Stathis, Albert Robin, New York City, of counsel.
Irving Seidman, New York City, for defendant Gay Sprites, Inc.
These two consolidated suits were filed by plaintiff charging all the defendants with infringement of the registered trademarks "Merry Mites", and "Tall Trousers", and with infringement of a patent on the overall "Tall Trousers", unfair competition in the use of the names Gay Sprites and High Pants and in the appropriation of plaintiff's designs and styles, and conspiracy among all defendants to engage in these acts. Plaintiff seeks an injunction as well as an accounting.
Several defenses have been pleaded: the purchase by Merry Mites, Inc. of the corporate and trade name "Merry Mites", abandonment and relinquishment of it by plaintiff, constant use of it by defendant Merry Mites, Inc., with plaintiff's acquiescence, constituting an estoppel against plaintiff, and counterclaims seeking a declaration that plaintiff's trademark registrations and patent are invalid, their cancellation and damages and counsels' fees.1
Plaintiff is a partnership composed of Gladys and Robert Geissmann, husband and wife. Mrs. Geissmann was in 1947 a designer of children's clothes, including mittens, under the professional name of Merry Hull. Defendants Merry Mites, Inc. and Gay Sprites, Inc., are New York corporations engaged in the manufacture and sale of boys' and girls' wear respectively, including overalls; four of the individual defendants are officers of both corporations and defendant Berens is an employee.
The essential facts are not in dispute; their legal significance is. In 1947, plaintiff through Gladys Geissmann (Merry Hull) designed a line of infants' and young children's wear called "Merry Mites by Merry Hull" which was received with great enthusiasm by fashion editors and department store representatives and buyers. In order to sell its designs plaintiff leased and began operation of two factories in Pennsylvania to manufacture these garments. To secure capital and finance this enterprise a corporation was formed on February 3, 1948 under the name of Merry Hull, Inc., which acquired all the assets of the plaintiff's Infants' Wear Division, the division which had been set up for the Merry Mites wardrode, excepting the glove division. In need of additional capital after almost a year of manufacturing and selling Merry Hull, Inc., in November, 1948 was merged into a newly formed Ohio corporation, Merry Mites, Inc., which continued the business of its predecessor. Plagued by financial difficulties in the spring of 1950, Merry Mites, Inc. (Ohio) filed a Chapter X proceeding in Ohio and later, on July 14, 1950 was adjudged a bankrupt, and the reorganization trustee became the bankruptcy trustee. By order of a Referee in Bankruptcy, all the assets of the bankrupt were sold to one Rudolph, an auctioneer, and on November 30, 1950 at a public auction in New York defendant Hi-Line purchased from the auctioneer the bankrupt's name Merry Mites, Inc., as well as some of its assets. Defendant Merry Mites, Inc., was organized in New York on December 27, 1950 to take title to these assets and the name; it did so and commenced the manufacture and sale of boyswear under that name in the spring of 1951, which it continued for the next six years and was engaged in at the time this suit was instituted. Defendants' claim of right to the use of the mark "Merry Mites" flows from the purchase by Hi-Line from the auctioneer.
In October, 1950, plaintiff commenced to make a few sales of children's garments and continued to do so sporadically through the next six years. Plaintiff's claim of right to the use of the mark derives from these sales, although it is not disputed that during these years 1950-57 it was not listed in the New York City Telephone Directory, that it made no attempt to sell and did not sell any of the large department stores, that it had no facilities to fill orders, and that its income tax returns during these years showed no gross or net income from the sale of children's garments, or from any business.
The trademark issues raised by these contentions are:
1. Did defendant acquire title through the bankruptcy sale to the trademark "Merry Mites"?
Obviously, if it did then any use by plaintiff was unlawful and plaintiff acquired no rights to the mark.
2. If defendant did not acquire title through the sale, did it acquire title to the mark by its subsequent appropriation and use?
3. The answer to "2" presents for determination the question whether plaintiff's prior use was sufficient to bar defendant's appropriation; and assuming it was does the name Gay Sprites infringe plaintiff's right.
4. Is plaintiff barred in any event from equitable relief by reason of laches?
5. Does plaintiff have valid title to the mark "Tall Trousers" and have defendants infringed on it?
6. If defendant Merry Mites, Inc., is found to be the owner of the mark "Merry Mites" are defendants entitled to recover damages and counsel fees?
Plaintiff makes no claim to the corporate name as a corporate name and does not dispute that the Trustee in Bankruptcy had title to it, and could under the law of Ohio dispose of it by sale to another (Sec. 110, sub. a(2), 11 U.S.C.A.; Title 17, Ohio Revised Code Sec. 1701.05). Under Sec. 110, sub. a(2), the trustee, also had title to the trademark "Merry Mites", if the bankrupt had title to it and this is where plaintiff's first attack on the trustee's title comes into play.
It is plaintiff's contention that under the employment agreement entered into between the bankrupt Merry Mites, Inc. (Ohio) and Mrs. Geissmann upon the cessation of business by the bankrupt, title to the mark reverted to plaintiff. This being so, plaintiff continues, its resumption of the mark in October, 1950 was perfectly lawful and its use thereafter sufficient to bar defendant from any claim of title through subsequent use, and sufficient also to bar defendant from use of the corporate name as constituting unfair competition.
This very same argument was made by plaintiff (through Mrs. Geissmann) to the Bankruptcy Court at the hearing relating to the sale of all the assets including the name and goodwill of the bankrupt, and rejected by the Referee at that time. It also formed the basis for two petitions brought by the Geissmanns in the Bankruptcy Court to reclaim the trademark which were never prosecuted by plaintiff nor directly acted upon by the Referee, but were necessarily denied by him when he ordered the sale by the trustee of the corporate name and the goodwill of Merry Mites, Inc. (Ohio) and when in a subsequent opinion he held that Mrs. Geissmann was entitled to reclaim the name Merry Hull only from the bankrupt.
Although not binding on this Court, the Referee's decision in a subsequent opinion holding that plaintiff was entitled to the name "Merry Hull" was received in evidence on this trial. I have read this opinion and agree with the Referee on his interpretation of the documents through which plaintiff passed title to the name "Merry Mites" to the bankrupt.
There were three documents: the first was a Bill of Sale of February 3, 1948 from plaintiff's Infants' Wear Division to the newly formed corporation Merry Hull, Inc., in exchange for a majority of the stock issued to the plaintiff, transferring:
These assets consisted among others, of children's clothing bearing the labels "Merry Mites by Merry Hull" which the new corporation took over in order to engage for the next ten months in the manufacture and sale of children's wear under this name.
The second document was the merger agreement of December 15, 1948 between Merry Hull, Inc. and Merry Mites, Inc. (Ohio) under which the latter took over all the assets, property and liabilities of the former. Gladys Geissmann was an officer of both corporations; both Geissmanns were majority stockholders and directors, and they took an active part in the merger.
The third document was an employment agreement of the same date entered into between the new corporation and Gladys Geissmann individually, in which she expressly recognized that Merry Mites, Inc. (Ohio) had acquired from Merry Hull, Inc., all its assets. After providing that all designs created by Gladys Geissmann for Merry Mites were to become and remain the exclusive property of the new corporation, the agreement went on to provide:
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