Beer Nuts, Inc. v. King Nut Company

• Decision Date: 02 May 1973
• Docket Number: No. 72-1807.,72-1807.
• Citation: 477 F.2d 326
• Parties: BEER NUTS, INC., Plaintiff-Appellee, v. KING NUT COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

477 F.2d 326 (1973)

BEER NUTS, INC., Plaintiff-Appellee, v. KING NUT COMPANY, Defendant-Appellant.

No. 72-1807.

United States Court of Appeals, Sixth Circuit.

Argued January 29, 1973.

Decided May 2, 1973.

Bruce B. Krost, Cleveland, Ohio, for defendant-appellant; Charles R. Rust, Woodling, Krost, Granger & Rust, Cleveland, Ohio, on brief.

James R. McKnight, Chicago, Ill., for plaintiff-appellee; Teare, Teare & Sammon, Cleveland, Ohio, of counsel.

Before PHILLIPS, Chief Judge, and CELEBREZZE and McCREE, Circuit Judges.

PHILLIPS, Chief Judge.

This is an appeal by King Nut Company from the granting of summary judgment in a trademark infringement action brought under § 32 of the Lanham Act, 15 U.S.C. § 1114. The District Court held that King had infringed the trademark "BEER NUTS"¹ owned by appellee, Beer Nuts, Inc., a permanent injunction and an accounting were ordered. We affirm.

Appellee's predecessor, Brewster Food Service,² registered the trademark in 1955 for its brand of shelled, cooked and salted peanuts, which are sold in the tavern market. Beer Nuts, Inc. has used the mark continuously since its registration.

Over the years, King has employed several names to market its brand of similar peanuts. In 1958 the name "KING'S BREW NUTS" was used. Upon discovery of this Brewster contacted King, contending that such a name was an infringement on its trademark. The parties were able to settle this difficulty by entering an agreement on September 15, 1958. That agreement released King from all liability in exchange for King's promise to refrain from using the name "BREW NUTS" and King's recognition of Brewster's ownership and the validity of the trademark "BEER NUTS". The agreement was concluded by a stipulation that the contract would be perpetual and binding on the parties and their assigns.

In 1968 King began to market its peanuts under the name "KING'S BEER NUTS." Each package also included a picture of an overflowing stein of beer. Beer Nuts, Inc. objected and King agreed to discontinue its use. Then King began marketing its product under the title "KING'S SNACK NUTS", continuing the use of the picture. Thereupon Beer Nuts, Inc. brought this suit contending that the words "BEER NUTS" and the continued use of a picture of an overflowing stein of beer on the front of King's packages constituted infringements. The principal defense asserted was that "BEER NUTS" had evolved into a descriptive term causing the trademark to lose its validity.

On April 11, 1972, District Judge Don J. Young held that King was estopped by virtue of the 1958 agreement from contesting the mark's validity. The effect of this holding was to deny King the opportunity to present its defense that "BEER NUTS" was a descriptive term not available for appropriation as a trademark. The court further held that the use of the picture and the name "KING'S BEER NUTS" constituted infringements. Judge Young concluded:

"Thus, the only remaining issue before the Court is whether plaintiff is the assignee of Brewster Food Service to the trademark "BEER NUTS." If plaintiff is, summary judgment will be entered on its behalf . . . ."

On June 12, 1972, Judge Young ruled that the plaintiff had demonstrated that it was the assignee of Brewster Food Service and entered summary judgment.

King first contends that the 1958 agreement does not preclude the assertion of the defense that the trademark was merely descriptive. We find this argument to be without merit. An assertion that a name is merely descriptive is an attack upon the validity of the trademark. A descriptive mark in appropriate situations will not be recognized as a valid trademark. 3 Callmann, The Law of Unfair Competition Trademarks and Monopolies (3d ed.) §§ 74, 74.2.

King next argues that even if the agreement precludes an attack upon the mark's validity, that agreement should not be enforced. We recognize that to give effect to such agreements would impede the efficacy of the defense that the words are merely descriptive. It long has been recognized that a mark which is valid and enforceable at one point in time may subsequently evolve into an invalid mark. DuPont Cellophane Co., Inc. v. Waxed Products Co., Inc., 85 F.2d 75 (2d Cir.), cert. denied, 299 U.S. 601, 57 S.Ct. 194, 81 L.Ed. 443 (1936); American Thermos Products Co. v. Aladdin Industries, Inc., 207 F. Supp. 9 (D.Conn.1962), aff'd, 321 F.2d 577 (2d Cir. 1963); Bayer Co., Inc. v. United Drug Co., 272 F. 505 (S.D.N.Y. 1921). In the present case, however, we must weigh the public benefit in considering trademark principles in connection with the policy of upholding the law of contracts.

In Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), the Supreme Court was faced with the task of balancing conflicting contract and patent law policies. The Court held that a patent licensee was not estopped by virtue of having negotiated a license agreement from asserting that the patent was invalid. On its face Lear might appear to be applicable to trademarks, but we believe a closer analysis mandates a contrary result.

Generally, courts uphold the contract principle that a contracting party may not repudiate his promises solely because he later becomes dissatisfied with his bargain. In Lear this policy was found to conflict with the patent policy that ideas in general circulation should be available for the public good unless protected by a valid patent. 395 U.S. at 688, 89 S.Ct. 1902.

Our patent system awards an inventor exclusive use of his discovery for a limited period of time in return for his granting to the public full disclosure and, at the expiration of his monopoly, the free use of his discovery. This results not only in stimulating inventiveness but also benefits the consuming public when the discovery becomes available at competitive prices. See, Scott Paper Co. v. Marcalus Mfg. Co., Inc., 326 U.S. 249, 66 S.Ct. 101, 90 L.Ed. 47 (1945). Where a monopolist is permitted to operate under color of a patent, which is in fact invalid, ". . . the public may continually be required to pay tribute to would-be monopolists without need or justification." Lear, 395 U.S. at 670, 89 S.Ct. at 1911. This overriding consideration of the public interest led the Lear Court to conclude that patent law must control.

The principles underlying the law of trademarks are distinguishable. Trademark protection guards the public from being deceived into purchasing an infringing unwanted product. It further protects the owner's investment in advertising and quality control which is often considerable. Stahly, Inc. v. M. H. Jacobs Co., 183 F.2d 914 (7th Cir.), cert. denied, 340 U.S. 896, 71 S.Ct. 239, 95 L. Ed. 650 (1950). The premise for the defense of descriptiveness was set forth by Judge Hastie in Telechron v. Telicon Corp., 198 F.2d 903, 906 (3rd Cir. 1952):

"The basic reason for refusing to allow the exclusive appropriation of descriptive words in trademarks is the danger of depleting the general vocabulary available to all for description and denomination of articles of commerce. It is unwise to risk the development of a situation in which those attempting to market their goods will find that they can not use apt normal words or phrases in depicting or characterizing articles because of language preemptions by others. So the legal protection of trademarks is restricted in manner calculated to keep such descriptive words free for all." Accord, Proxite Products, Inc. v. Bonnie Brite Products Corp., 206 F.Supp. 511, 515 (S.D.N.Y.1962).

The defense of descriptiveness also has been upheld on the basis of the public's right to have a product properly described. Caron Corp. v. Maison Jeurelle-Seventeen, Inc., 26 F.Supp. 560, 562-563 (S.D.N.Y.1938).

When the balancing test is employed in the instant situation, we conclude that the public interest in guarding against the depletion of the general vocabulary available for the description of articles in commerce is not so great that it should take precedence over the rule of the law of contracts that a person should be held to his undertakings. Such a decision is far from unique. In E. F. Prichard Co. v. Consumers Brewing Co., 136 F.2d 512, 522 (6th Cir. 1943), cert. denied, 321 U.S. 763, 64 S. Ct. 486, 88 L.Ed. 1060 (1944), this court held that a contract declaring one party to be the owner of a trademark would estop the other party from later contesting the mark's title. In Peyrat v. L. N. Renault & Sons, Inc., 247 F.Supp. 1009 (S.D.N.Y.1965), it was held that a contract...