Keebler Co. v. Rovira Biscuit Corp., s. 79-1483

• Citation: 624 F.2d 366,207 U.S.P.Q. 465
• Decision Date: 19 June 1980
• Docket Number: 79-1484,Nos. 79-1483,s. 79-1483
• Parties: KEEBLER COMPANY, Plaintiff, Appellee, v. ROVIRA BISCUIT CORPORATION, Defendant, Appellant. KEEBLER COMPANY, Plaintiff, Appellant, v. ROVIRA BISCUIT CORPORATION, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 366

624 F.2d 366

207 U.S.P.Q. 465

KEEBLER COMPANY, Plaintiff, Appellee, v. ROVIRA BISCUIT CORPORATION, Defendant, Appellant.

KEEBLER COMPANY, Plaintiff, Appellant, v. ROVIRA BISCUIT CORPORATION, Defendant, Appellee.

Nos. 79-1483, 79-1484.

United States Court of Appeals First Circuit.

Argued March 10, 1980.

Decided June 19, 1980.

A. Santiago Villalonga, Hato Rey, P. R., with whom Hartzell, Ydrach, Mellado, Santiago & Perez, Hato Rey, P. R., was on brief, for Rovira Biscuit Corp.

Herman W. Colberg, San Juan, P. R., with whom Reichard & Colberg, San Juan, P. R., was on brief, for Keebler Co.

Before COFFIN, Chief Judge, CAMPBELL, Circuit Judge, WYZANSKI, Senior District Judge. ^*

COFFIN, Chief Judge.

These cross-appeals arise out of a dispute between Keebler Company, a Delaware corporation having its principal place of business in Illinois, and Rovira Biscuit Corporation, a Puerto Rico corporation, over Rovira's use of the name "Export Sodas" to identify the soda crackers it sells in competition with Keebler.

Background of the Case

Sometime between the beginning of this century and the First World War, various companies in the United States began exporting a type of flat, square soda cracker to Puerto Rico. During the 1920's, at least one of these companies, National Biscuit, identified its product with a label bearing the term "Export Sodas". During this period, a Puerto Rican bakery was also manufacturing this type of cracker and advertising it under the name "Sport Sodas". Around 1929, one Mr. Rovira, father of the current chairman of the board of Rovira Biscuit, began manufacturing and selling soda crackers in Puerto Rico in a package with a label imitating a Catalonian coat-of-arms. On top of the container was a sticker containing the words "export sodas". Rovira continued to use this labeling until 1947 or 1948.

In 1934 or 1935, Keebler introduced a soda cracker into the Puerto Rican market under the name "Export Soda". These crackers were packaged in a green cylindrical can, which Keebler has used continuously since the mid-1930's in merchandising its crackers. Since 1951, Keebler has also sold its "Export Sodas", similarly packaged, in New York and other United States markets with large Puerto Rican populations. Because the other companies selling soda crackers in Puerto Rico had ceased using the term "export sodas" to label their products by the late-1940's, Keebler apparently made exclusive use of the term as an element of its package design and label from that time until 1974, when Rovira began selling its own brand of soda crackers labeled "Export Sodas" in the Puerto Rican and New York markets.

In February of 1975, Keebler filed an application with the United States Patent Office to register the term "Export Sodas" as a trademark. The patent office examiner refused registration, however, on the ground that the mark was "merely descriptive" and therefore not registrable under section 2(e) of the Lanham Act, 15 U.S.C. § 1052(e). Keebler amended its application, supplemented it with an affidavit stating that the mark had become distinctive through continuous and exclusive use for five years prior to the application, and resubmitted it to the patent office. The patent office granted Keebler registration of the term "Export Sodas" as its trademark on April 20, 1976.

After obtaining registration of "Export Sodas" as its trademark, Keebler filed an amended complaint ¹ in the United States District Court charging Rovira with infringement of its trademark rights, seeking both damages and a permanent injunction against future use of the mark "Export Sodas" by Rovira. Keebler's amended complaint also charged that Rovira's use of a cylindrical lithographed can to package its product constituted unfair competition and requested a permanent injunction against Rovira's use of any "colorable imitation" of Keebler's packaging. Rovira, in addition to answering Keebler's complaint, filed a counterclaim alleging that Keebler's registration of the trademark "Export Sodas" was invalid because the mark is a generic term, a common descriptive phrase for soda crackers in the Puerto Rican market. Rovira requested cancellation of Keebler's trademark registration and an award of damages resulting from Keebler's "unlawful" appropriation of the term.

The district court found that before Keebler had begun using "Export Sodas" as a trademark, the terms "export sodas" and "sport sodas" had come to mean in the minds of Puerto Rican consumers soda crackers of this particular type. The court concluded, as a matter of law, that "export soda" was a generic term, not entitled to appropriation as a trademark, and therefore ordered cancellation of Keebler's registration. Although it concluded that Keebler had no right to the exclusive use of the term "export sodas" as a trademark, the court did find that Keebler had established a period of exclusive use of a cylindrical lithographed container and that Rovira's use of a container of identical size and shape gave rise to consumer confusion. The court thus concluded that Keebler had a protectible interest in this form of packaging and enjoined Rovira from using containers of such size and shape to package its "Export Soda" crackers.

The Applicable Law

The threshold issue facing us in this appeal, one addressed by neither the parties nor the district court, is the law applicable to Keebler's generalized complaint against Rovira. Keebler's amended complaint alleged merely the infringement of its trademark rights and appropriation of its goodwill through use of similar packaging. Although the Lanham Act, 15 U.S.C. §§ 1051-1127, provides a specific grant of federal jurisdiction for claims of infringement of federally registered trademarks, 15 U.S.C. § 1121, Keebler invoked the jurisdiction of the district court solely on the basis of diversity of citizenship.

The law to be applied in the federal courts, whether jurisdiction is premised on the presence of a federal question or on diversity, is that law that is the source of the right sued upon. ² See First Southern Federal Savings & Loan Ass'n v. First Southern Savings & Loan Ass'n., 614 F.2d 71 (5th Cir. 1980); Maternally Yours, Inc. v. Your Maternity Shop, Inc., 234 F.2d 538, 540-41 n. 1 (2d Cir. 1956). The doctrine of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1939), is inapplicable to claims created and governed by federal law, even though jurisdiction rests on diversity of citizenship. See Sola Electric Co. v. Jefferson Electric Co., 317 U.S 173, 176, 63 S.Ct. 172, 173, 87 L.Ed. 165 (1942); Hart & Wechsler's The Federal Courts and the Federal System 766-67 (1973). Keebler has sued for infringement of its federally registered trademark, and section 32 of the Lanham Act, 15 U.S.C. § 1114, specifically grants a right to protect, by means of a suit for injunctive and monetary relief, a registrant's proprietary interest in such a mark. Thus, to the extent Keebler has a valid registered trademark, federal law determines its rights therein. Dwinell-Wright Co. v. National Fruit Product Co., 140 F.2d 618, 620 (1st Cir. 1944); see Mendes v. New England Duplicating Co., 94 F.Supp. 558, 560 (D.Mass.1950). But see Campbell Soup Co. v. Armour & Co., 175 F.2d 795, 796-97 (3d Cir.), cert. denied, 338 U.S. 847, 70 S.Ct. 88, 94 L.Ed. 518 (1949).

Determining the validity and scope of Keebler's federal registration does not end the matter, however, for registration does not create the underlying right in a trademark. That right, which accrues from the use of a particular name or symbol, is essentially a common law property right, Campbell Soup Co. v. Armour & Co., supra, 175 F.2d at 797, and cancellation cannot extinguish a right that federal registration did not confer. ³ Thus, Keebler's complaint, liberally construed, also stated a cause of action under the head of common law unfair competition, the broad class of business torts of which trademark infringement is one species. There has been considerable debate over whether a federal court faced with such an issue should apply relevant state common law or the specialized federal common law of trademarks and unfair competition developed prior to the Supreme Court's decision in Erie. ⁴ We need not resolve that question in this case, however, since the trademark and unfair competition law of both Puerto Rico and New York is congruous with the common law principles developed by the federal courts. See Maternally Yours, Inc. v. Your Maternity Shop, Inc., supra, 234 F.2d at 545 (Clark, C. J., concurring) (no difference in result reached by deciding cases under New York or federal law); Cooperativa de Cafeteros v. Colon Colon, 91 P.R.R. 361 (1964) (incorporating principles enunciated by federal cases).

Finally, section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), creates a federal law of unfair competition by providing a statutory remedy to a party aggrieved by a competitor's "false designation of origin" of his product, even though he does not have a federally registered trademark. See, e. g., Deyerle v. Wright Manufacturing Co., 496 F.2d 45 (6th Cir. 1974). This provision has been broadly construed to encompass instances of one competitor "palming off" his goods as those of another by means of confusing packaging or labeling of his product. See, e. g., Boston Professional Hockey Ass'n v. Dallas Cap & Emblem Manufacturing Co., 510 F.2d 1004 (5th Cir.), cert. denied, 423 U.S. 868, 96 S.Ct. 132, 46 L.Ed.2d 98 (1975); Federal Mogul Bower Bearings, Inc. v. Azoff, 313 F.2d 405 (6th Cir. 1963); L'Aiglon Apparel, Inc. v. Lana Lobell, Inc., 214 F.2d 649 (3rd Cir. 1954). The protection afforded by section 43(a) was designed to expand the rights of a "purely commercial class" against the unscrupulous practices of their business competitors. Alfred Dunhill, Ltd. v. Interstate Cigar Corp., 499 F.2d 232, 236-37 (2d Cir. 1974). It is cumulative of, and does not preempt,...