Flavor Corporation of America v. Kemin Industries, Inc., Civ. No. 11-409-C-1.

• Decision Date: 12 March 1973
• Docket Number: Civ. No. 11-409-C-1.
• Parties: FLAVOR CORPORATION OF AMERICA, Plaintiff, v. KEMIN INDUSTRIES, INC., and Rolland W. Nelson, Defendants.
• Court: U.S. District Court — Southern District of Iowa

358 F. Supp. 1114

177 USPQ 658

FLAVOR CORPORATION OF AMERICA, Plaintiff, v. KEMIN INDUSTRIES, INC., and Rolland W. Nelson, Defendants.

Civ. No. 11-409-C-1.

United States District Court, S. D. Iowa, Central D.

March 12, 1973.

COPYRIGHT MATERIAL OMITTED

Malcolm McCaleb, Sr., Malcolm McCaleb, Jr., William E. Lucas, Chicago, Ill., Donald A. Wine, Des Moines, Iowa, for plaintiff.

Donald H. Zarley, Michael G. Voorhees, Des Moines, Iowa, for defendants.

MEMORANDUM OPINION

STUART, District Judge.

This is a trademark infringement and unfair competition action brought by Flavor Corporation of America (FCA) against Kemin Industries, Inc. (Kemin) and its president, Rolland W. Nelson. The two companies make, among other things, flavor additives for certain animal feeds and rodenticides. Defendants deny any infringement and have, by counter-claim, asserted plaintiff maliciously damaged defendants' business through various libelous acts of unfair competition. The parties seek both injunctive relief and monetary damages, but issues relating to monetary damages have been separated and are to be tried subsequent to this trial on the issues of trademark infringement and unfair competition.

Jurisdiction of this court arises under the trademark laws, 15 U.S.C. § 1121, and diversity of citizenship, 28 U.S.C. § 1332.

FCA was organized in 1946. From its inception its principal products have been various flavorings for animal feeds designed to appeal to a particular species. In 1956 it added to its product line a flavoring additive for rodenticides and roent baits. It immediately adopted a trademark, "PESTLUR", to identify the product. In 1961 a second product, "Rodentlur", designed to attract rodent pets to feed as well as for use in rodenticides, was added. "Fishlur", a flavor additive for fish feeds and baits, was first advertised in 1961 and first sold in 1962.

From August, 1958, to December, 1961, defendant R. W. Nelson was employed by plaintiff as a regional sales manager. The last 6 weeks of his employment he was acting sales manager of the company.

Early in 1962 Nelson formed his own company, Chemical Industries, Inc. The name was later changed to Kemin. This company became a direct competitor to FCA selling the same type of products to the same classes of customers. Shortly thereafter Nelson began promoting and selling his products under trademarks such as "PIG LURE", "CATTLE LURE", "CALF LURE", "CAT LURE", "STOCK LURE", "DOG LURE", "HORSE AND PONY LURE", "TURKEY LURE", "CHICK LURE", and "RAT LURE". It should be pointed out that the main area of competition between the parties is in flavorings for animal feeds in which plaintiff's trademark is "NECTAR". Rodenticide flavorings are a very small part of the business of either company.

"PESTLUR" was registered on the Principal Register of the United States Patent Office on September 22, 1964. Plaintiff sent formal notice of infringement to defendants in October, 1964.

In 1966 defendant Kemin's predecessor, Chemical Industries, Inc., was issued a registration on the Supplemental Register for its mark "LURE", flavoring for animal feeds. FCA immediately petitioned for cancellation of said "LURE" trademark, which petition was granted by the Patent Office Trademark Trial and Appeal Board (Board) relying on the trademark registration of "PESTLUR" and previous usage of "FISHLUR" and "RODENTLUR". On May 13, 1971, the United States Court of Customs and Patent Appeals (CCPA) sustained the Board on the basis of "PESTLUR" but did not consider the propriety of the Board's reliance on "FISHLUR" and "RODENTLUR". Kemin Industries, Inc. v. Flavor Corporation of America, 440 F. 2d 1375. Less than one month later this action was commenced in the Northern District of Illinois.

RES JUDICATA OR COLLATERAL ESTOPPEL

Before consideration of the issues on the merits, the Court must decide the threshold issue of the legal effect of previous action of the Board and the decision of the CCPA.

The parties now seem to agree this trademark infringement suit involves a different cause of action than the previous cancellation proceeding and that the question is therefore one of collateral estoppel rather than res judicata. This means that the only issues precluded are those which were actually tried by the Board and affirmed by the CCPA.

Plaintiff argues that since the enactment of 28 U.S.C. § 211 in 1958, the CCPA has been a Constitutional Court under Article III of the Constitution and its decisions are entitled to the same effect as any other Constitutional Court, citing Brenner v. Manson (1966), 383 U. S. 519, 86 S.Ct. 1033, 16 L.Ed.2d 69. It is plaintiff's position that the issues of confusing similarity of marks and the same channels of trade were decided favorably to plaintiff by the Board and affirmed by the CCPA and these findings are conclusive in this action. Judge Levin so held in a similar action. Libbey-Owens-Ford Glass Co. v. Shatterproof Glass Corp. (E.D.Mich., 1970), 165 USPQ 335, 336.

Defendants urge several reasons why the doctrine of collateral estoppel should not be applied:

(1) The overwhelming weight of judicial authority precludes invoking a CCPA decision in a cancellation proceeding as collateral estoppel in a subsequent trade-mark infringement suit.

(2) The issue of likelihood of confusion in an infringement suit is guided by different legal principles than the issue of likelihood of confusion in a cancellation proceeding.

(3) The cancellation proceeding was tried by an administrative board with limited jurisdiction, not a true court.

(4) The marks and goods involved in the present suit are different than the marks and goods involved in the cancellation proceeding.

(5) There has been a change in circumstances.

(6) The decision was influenced by plaintiff's fraud.

(7) The two findings urged by plaintiff as binding on this Court are only mediate data from which likelihood of confusion, the ultimate fact, may be inferred.

They will be discussed in order.

(1)

Defendants contend the overwhelming weight of judicial authority holds a CCPA decision in a cancellation proceeding does not apply as a collateral estoppel in a subsequent trademark infringement suit. I cannot agree.

In Postum Cereal Co. v. California Fig Nut Co. (1927), 272 U.S. 693, 47 S. Ct. 284, 71 L.Ed. 478, the Supreme Court held the opinion of the Court of Patent Appeals was an administrative decision of the patent office, rather than a judicial judgment. As a result of this decision, it was held in John Morrell & Co. v. Doyle (7th Cir., 1938), 97 F.2d 232, 235, that a decision of the CCPA on the issue of likelihood of confusion in an application for registration of a trademark was not a final determination of the same issue in an infringement action.

However, in Brenner v. Manson (1965), 383 U.S. 519, 86 S.Ct. 1033, 16 L. Ed.2d 69, involving the Supreme Court's right to review a CCPA decision by certiorari, the Court held the 1948 amendment to 28 U.S.C. § 1256 gave the CCPA the status of an Article III Constitutional Court, saying: "Thus the decision sought to be reviewed is that of an Article III Court. It is `judicial' in character. It is not merely an instruction to the Commissioner or part of the `administrative machinery' of the Patent Office. It is final and binding in the usual sense."

Defendants seek some comfort from a footnote to the above statement in which the Court states: "This is not to say that a CCPA determination that an applicant is entitled to a patent precludes a contrary result in a subsequent infringement suit, any more than issuance of a patent by the Patent Office or the decision in an earlier infringement action against a different `infringer' has that effect."

However, the situations referred to in the footnote were either ex parte or third party proceedings in which the litigants did not have their day in court. In the instant case the issues were fully explored in an administrative hearing between these same parties and the decision was affirmed on appeal by an Article III Court. I do not believe the footnote applies to the proceedings in the instant case.

Defendants rely heavily on John Morrell & Co. v. Doyle, supra, and cite several cases which have allegedly followed it. In Sam S. Goldstein Industries, Inc. v. Botany Industries, Inc. (S.D.N.Y., 1969), 301 F.Supp. 728, 731, the Court, in deciding whether to stay proceedings pending determination of a patent office proceeding, commented that the findings would not be res judicata. This comment was based on a party's right under 15 U.S.C. § 1071(b) to bring a civil action in the District Court rather than appeal to the CCPA under § 1071(a). Here appeal was taken to the CCPA by defendants who thereby waived their rights under § 1071(b). Statements made in that opinion do not apply to these facts.

The statements in Tuvache, Inc. v. Emilio Pucci Perfumes International (S. D.N.Y., 1967), 263 F.Supp. 104, are also based on the availability of § 1071 (b) and have no application here.

The decision in Syncromatic Corporation v. Eureka Williams Corp. (7th Cir., 1949), 174 F.2d 649, relied on the Morrell case and preceded the Supreme Court decision in Brenner v. Manson. So did the decision in Lucien LeLong, Inc. v. Dana Perfumes (N.D.Ill., 1955), 138 F. Supp. 575. In addition, the LeLong case did not proceed to final judgment. A suit brought in the United States District Court to review the Cancellation Order of the Commissioner of Patents was dismissed voluntarily.

Defendants also rely on certain excerpts from SweeTarts v. Sunline, Inc. (8th Cir., 1967), 380 F.2d 923, 925, in which the Court said:

"A trademark search was made in the United States Patent Office, and the search turned up the name `Sweetheart' for candy products, `Sweetart' for cranberries, and plaintiff's `SweeTarts' for dried prunes. Smith decided to take a `businessman's risk' and use the mark `SweeTarts'."

Footnote 1 stated: "Defendant corporation...