Smith v. Chanel, Inc.

• Decision Date: 15 November 1968
• Docket Number: No. 21522.,21522.
• Parties: R. G. SMITH, doing business under the name and style of Ta'Ron, Inc., and International Fragrances, Inc., Appellants, v. CHANEL, INC., and Chanel Industries, Inc., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

402 F.2d 562 (1968)

R. G. SMITH, doing business under the name and style of Ta'Ron, Inc., and International Fragrances, Inc., Appellants, v. CHANEL, INC., and Chanel Industries, Inc., Appellees.

No. 21522.

United States Court of Appeals Ninth Circuit.

October 21, 1968.

Rehearing Denied November 15, 1968.

Carl Hoppe (argued) and Ernest M. Anderson, of Eckhoff & Hoppe, San Francisco, Cal., for appellants.

Dirks B. Foster, (argued) of Boyken, Mohler, Foster & Schlemmer, Robert E. Zang and Brian Fogarty, San Francisco, Cal., Landels, Ripley, Gregory & Diamond (A. C.), San Francisco, Cal., Alfred T. Lee, New York City, (argued) (A.C.), for appellees.

Before HAMLIN, BROWNING and DUNIWAY, Circuit Judges.

BROWNING, Circuit Judge:

Appellant R. G. Smith, doing business as Ta'Ron, Inc., advertised a fragrance called "Second Chance" as a duplicate of appellees' "Chanel No. 5," at a fraction of the latter's price.¹ Appellees were granted a preliminary injunction prohibiting any reference to Chanel No. 5 in the promotion or sale of appellants' product.² This appeal followed.

The action rests upon a single advertisement published in "Specialty Salesmen," a trade journal directed to wholesale purchasers. The advertisement offered "The Ta'Ron Line of Perfumes" for sale. It gave the seller's address as "Ta'Ron Inc., 26 Harbor Cove, Mill Valley, Calif." It stated that the Ta'Ron perfumes "duplicate 100% perfect the exact scent of the world's finest and most expensive perfumes and colognes at prices that will zoom sales to volumes you have never before experienced!" It repeated the claim of exact duplication in a variety of forms.

The advertisement suggested that a "Blindfold Test" be used "on skeptical prospects," challenging them to detect any difference between a well known fragrance and the Ta'Ron "duplicate." One suggested challenge was, "We dare you to try to detect any difference between Chanel #5 (25.00) and Ta'Ron's 2nd Chance. $7.00."

In an order blank printed as part of the advertisement each Ta'Ron fragrance was listed with the name of the well known fragrance which it purportedly duplicated immediately beneath. Below "Second Chance" appeared "*(Chanel #5)." The asterisk referred to a statement at the bottom of the form reading "Registered Trade Name of Original Fragrance House."

Appellees conceded below and concede here that appellants "have the right to copy, if they can, the unpatented formula of appellees' products."³ Moreover, for the purposes of these proceedings, appellees assume that "the products manufactured and advertised by appellants are in fact equivalents of those products manufactured by appellees." (Emphasis in original.) Finally, appellees disclaim any contention that the packaging or labeling of appellants' "Second Chance" is misleading or confusing.⁴

I

The principal question presented on this record is whether one who has copied an unpatented product sold under a trademark may use the trademark in his advertising to identify the product he has copied. We hold that he may, and that such advertising may not be enjoined under either the Lanham Act, 15 U.S.C. § 1125(a) (1964), or the common law of unfair competition, so long as it does not contain misrepresentations or create a reasonable likelihood that purchasers will be confused as to the source, identity, or sponsorship of the advertiser's product.

This conclusion is supported by direct holdings in Saxlehner v. Wagner, 216 U.S. 375, 30 S.Ct. 298, 54 L.Ed. 525 (1910); Viavi Co. v. Vimedia Co., 245 F. 289 (8th Cir. 1917), and Societe Comptoir de L'Industrie Cotonniere Etablissements Boussac v. Alexander's Dept. Stores, Inc., 299 F.2d 33, 1 A.L.R.3d 752 (2d Cir. 1962).

In Saxlehner the copied product was a "bitter water" drawn from certain privately owned natural springs. The plaintiff sold the natural water under the name "Hunyadi Janos," a valid trademark.⁵ The defendant was enjoined from using plaintiff's trademark to designate defendant's "artificial" water, but was permitted to use it to identify plaintiff's natural water as the product which defendant was copying.

Justice Holmes wrote:

We see no reason for disturbing the finding of the courts below that there was no unfair competition and no fraud. The real intent of the plaintiff\'s bill, it seems to us, is to extend the monopoly of such trademark or tradename as she may have to a monopoly of her type of bitter water, by preventing manufacturers from telling the public in a way that will be understood, what they are copying and trying to sell. But the plaintiff has no patent for the water, and the defendants have a right to reproduce it as nearly as they can. They have a right to tell the public what they are doing, and to get whatever share they can in the popularity of the water by advertising that they are trying to make the same article, and think that they succeed. If they do not convey, but, on the contrary, exclude, the notion that they are selling the plaintiff\'s goods, it is a strong proposition that when the article has a well-known name they have not the right to explain by that name what they imitate. By doing so, they are not trying to get the good will of the name, but the good will of the goods. 216 U.S. at 380-381, 30 S.Ct. at 298, 299 (citations omitted) (emphasis added.)⁶

In Viavi Co. v. Vimedia Co., plaintiff sold unpatented proprietary medicinal preparations under the registered trademark "Viavi," and local sellers of defendant's medicinal preparations represented to prospective purchasers that Vimedia products "were the same or as good as Viavi" preparations. The court held, "in the absence of such a monopoly as a patent confers, any persons may reproduce the articles, if they can, and may sell them under the representation that they are the same article, if they exclude the notion that they are the plaintiff's goods." 245 F. at 292.⁷

In Societe Comptoir de L'Industrie Cotonniere Etablissements Boussac v. Alexander's Dept. Stores, Inc., the defendant used plaintiff's registered trademarks "Dior" and "Christian Dior" in defendant's advertising in identifying plaintiff's dresses as the original creations from which defendant's dresses were copied.⁸ The district court refused to grant a preliminary injunction.

The appellate court considered plaintiff's rights under both the Lanham Act and common law.⁹ Noting that the representation that defendant's dresses were copies of "Dior" originals was apparently truthful and that there was no evidence of deception or confusion as to the origin or sponsorship of defendant's garments (299 F.2d at 35), the court disposed of the claim of right under the Lanham Act as follows:

In any proceeding under the Lanham Act the gist of the proceeding is a "false description or representation," 15 U.S.C.A. § 1125(a), or a use of the mark which "is likely to cause confusion or mistake or to deceive purchasers as to the source of origin of such goods or services," 15 U.S.C.A. § 1114 (1). * * * Registration bestows upon the owner of the mark the limited right to protect his good will from possible harm by those uses of another as may engender a belief in the mind of the public that the product identified by the infringing mark is made or sponsored by the owner of the mark. * * * The Lanham Act does not prohibit a commercial rival\'s truthfully denominating his goods a copy of a design in the public domain, though he uses the name of the designer to do so. Indeed it is difficult to see any other means that might be employed to inform the consuming public of the true origin of the design. 299 F.2d at 36 (citations omitted) (emphasis added).

The court also rejected the claim of right under common law principles of unfair competition, stating:

Common law unfair competition must be grounded in either deception or appropriation of the exclusive property of the plaintiff. * * *

In the case at bar it is conceded that the "pirating" of the design is lawful and proper. * * * The only property right alleged to have been invaded is the good will embodied in the trademark. But the right of the complainant in his mark is limited to dilution which is brought about by confusion as to source or affiliation. 299 F.2d at 36 (citations omitted).

The court weighed the underlying interests in this language:

Involved in the instant case is a conflict of values which necessarily arises in an economy characterized by competition and private property. The courts have come to recognize the true nature of the considerations often involved in efforts to extend protection of common law trade names so as to create a shield against competition. * * * The interest of the consumer here in competitive prices of garments using Dior designs without deception as to origin, is at least as great as the interest of plaintiffs in monopolizing the same. 299 F.2d at 37 (citations omitted).¹⁰

We have found no holdings by federal or California appellate courts contrary to the rule of these three cases. Moreover, the principle for which they stand — that use of another's trademark to identify the trademark owner's product in comparative advertising is not prohibited by either statutory or common law, absent misrepresentation regarding the products or confusion as to their source or sponsorship — is also generally approved by secondary authorities.¹¹

The rule rests upon the traditionally accepted premise that the only legally relevant function of a trademark is to impart information as to the source or sponsorship of the product.¹² Appellees argue that protection should also be extended to the trademark's commercially more important function of embodying consumer good will created through extensive, skillful, and costly advertising. The courts, however, have generally confined legal protection to the trademark's source identification function for reasons grounded in the public policy favoring a free, competitive economy.

Preservation of the trademark as a means of...