Purolator, Inc. v. EFRA Distributors, Inc.

• Decision Date: 08 September 1982
• Docket Number: No. 81-1871,81-1871
• Citation: 687 F.2d 554
• Parties: PUROLATOR, INC., Plaintiff-Appellee, v. EFRA DISTRIBUTORS, INC., Enrique Franceschini and Enrique Franceschini, Jr., Defendants-Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 554

687 F.2d 554

216 U.S.P.Q. 457

PUROLATOR, INC., Plaintiff-Appellee, v. EFRA DISTRIBUTORS, INC., Enrique Franceschini and Enrique Franceschini, Jr., Defendants-Appellants.

No. 81-1871.

United States Court of Appeals First Circuit.

Argued May 6, 1982.

Decided Sept. 8, 1982.

Luis N. Blanco Matos, Hato Rey, P. R., for defendants-appellants.

Allen I. Rubenstein, with whom Charles B. Spencer, William T. Boland, Jr., Kenyon & Kenyon, New York City, Patrick J. Wilson, and O'Neill & Borges, Hato Rey, P. R., were on brief, for plaintiff-appellee.

Before PHILLIPS, ^* Senior Circuit Judge, BOWNES and BREYER, Circuit Judges.

PHILLIPS, Senior Circuit Judge.

This appeal arises out of the issuance by the district court of a permanent injunction against the defendant-appellant, EFRA Distributors, Inc. and its two principal owners, Enrique Franceschini and Enrique Franceschini, Jr. (herein collectively referred to as "EFRA"). The district court found that the defendants' use of a trademark infringed the trademark of plaintiff and otherwise violated the rights of the plaintiff under the Lanham Act, 15 U.S.C. §§ 1051-1127, and the common law. We affirm.

I

We discuss here only those facts necessary to a resolution of the issues raised on appeal. Reference is made to the comprehensive opinion of District Judge Carmen Consuelo Cerezo, published as Purolator, Inc. v. EFRA Distributors, Inc., 524 F.Supp. 471 (D.P.R.1981), for a more detailed recitation of the pertinent facts and conclusions of law underlying the district court's determination.

Plaintiff-appellee Purolator, Inc., a Delaware Corporation, has sold and distributed automobile filters and related products in Puerto Rico for approximately 30 years. The Purolator name has been used as a federally registered trademark since 1926. It is undisputed that the particular design of Purolator's trademark, which was found to have been infringed, has been used in commerce since at least as early as March of 1973. See 524 F.Supp. at 473. Purolator sold approximately.$1.2 million worth of filters and other products to its exclusive distributor in Puerto Rico in 1980.

Defendant-appellant EFRA is a Puerto Rico corporation controlled by the codefendants Enrique Franceschini and Enrique Franceschini, Jr. EFRA was first established in 1965 by the elder Franceschini and since then has done business as a manufacturers' representative and distributor of auto accessories such as tires, batteries and filters. The company's average annual sales are approximately $6,000,000.

In 1980, EFRA began to sell its own brand of oil and air auto filters under the name "Puro Filter," selling some $16,000 worth of the filters between September 1980 and February 1981. These filters were manufactured in Illinois by Rex Manufacturing Co. and then shipped to EFRA in Puerto Rico. The packaging, the red, white and blue color scheme, the lettering style, and the use of two parallel bars in the design of the appellant's filters were all similar to those employed by Purolator. The degree of similarity was a source of dispute between the parties, with EFRA pointing out that the likeness was not exact in any case. Appellee Purolator contended, however, that the similarities were enough to create a likelihood of confusion, and the district court agreed. See 524 F.Supp. at 474-75, 476-77.

The similarities between the products were not Purolator's only concern. EFRA's filters sold at 10-25 percent less than Purolator's. Comparative tests on the two products under standardized industry procedures indicated that EFRA's Puro Filters were decidedly inferior in quality to Purolator's filters. These tests showed that, due to defects in workmanship and materials, Puro Filters were actually more likely to cause damage to an engine than to filter its oil satisfactorily.

The plaintiff-appellee first became aware of EFRA's product in September 1980, at a Gasoline Retailers' Association trade show where EFRA first unveiled its new filters. EFRA's Puro Filters were displayed at a booth directly across from Purolator's booth. The district court credited testimony that employees of EFRA asserted that the filters were manufactured by Purolator. See 524 F.Supp. at 475. Nowhere on the Puro Filter or its package was there an indication of the true manufacturer, Rex Manufacturing. The packaging contained a standard chart indicating which model filters of other manufacturers could be interchanged with the Puro Filter; on these charts, as was common with the charts of other manufacturers and with standard industry usage, Purolator was abbreviated as "Puro."

Since their debut at the trade show, Puro Filters have been sold throughout Puerto Rico to over one thousand retailers, including gas stations, auto parts and mass merchandise stores. 524 F.Supp. at 473. Plaintiff-appellee filed this action December 31, 1980, alleging that the use by defendant of the "Puro Filter" trademark constituted an infringement of Purolator's trademark, under 15 U.S.C. §§ 1114-18, a violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125, a violation of the common law of unfair competition, and an infringement of trademark under the common law of Puerto Rico. In the meantime, EFRA had successfully obtained, over the challenge of Purolator, a trademark in the name "Puro" from the Department of State Trademark Office of the Commonwealth of Puerto Rico, on March 2, 1981. A hearing was held on the preliminary injunction. Both sides presented testimony and depositions. The parties filed a stipulation agreeing to consolidate the preliminary injunction hearing with the permanent injunction and waived any further rights to a hearing. On September 29, 1981, the district court issued a memorandum opinion and order upholding the claims of plaintiff and enjoining any further use by the defendant of the term "Puro" in connection with any automotive accessory products. From this decision, EFRA appeals, challenging the district court's assertion of jurisdiction, several of the underlying findings of fact of the court, and its legal conclusions on the issues of infringement, unfair competition and false designation of origin.

II

Appellant alleges that the district court lacked jurisdiction over the subject matter of this dispute because goods were sold by appellant only in Puerto Rico and not in interstate commerce. Appellant does not contend that the district court did not have diversity jurisdiction over this controversy, under 28 U.S.C. § 1332. We construe the argument of appellant to be a challenge to the applicability of the federal trademark laws to this action. Under 28 U.S.C. § 1338, the federal district courts have original jurisdiction of civil actions arising under the trademark laws and of related state law claims of unfair competition. The Lanham Act provides that any person who shall "use in commerce" a reproduction or a colorable imitation of a registered trademark shall be liable to the registrant of the mark in a civil action for infringement. 15 U.S.C. § 1114. The Act also provides a remedy for those damaged by another's false designation of origin of a good in commerce. 15 U.S.C. § 1125. In addition, it is clear that the Act extends to the full reach of Congress under the Commerce Clause, Article I, § 8, clause 3 of the Constitution. The Act provides that "(t)he word 'commerce' means all commerce which may lawfully be regulated by Congress." 15 U.S.C. § 1127.

EFRA contends that, although its filters are manufactured in Illinois and shipped to Puerto Rico, its mark is not used in interstate commerce, because its sales are entirely within Puerto Rico and the mark is not displayed externally at any time during the shipment from Illinois. This court has held that interstate shipment, even without a sale, is a "use in commerce" within the meaning of the Lanham Act. New England Duplicating Co. v. Mendes, 190 F.2d 415, 417 (1st Cir. 1951) (shipment of plaintiff's machine with trademark affixed was sufficient use in commerce to entitle him to registration of the mark under the Lanham Act). EFRA places great weight on the fact that the mark was not visible during the interstate shipment, since the filters were shipped in cartons bearing the logo of the shipping company and not the Puro Filter mark. The language of the statute does not appear to admit of any such distinction. It provides that "a mark shall be deemed to be used in commerce ... on goods when it is placed in any manner on the goods or their containers ... and the goods are sold or transported in commerce." 15 U.S.C. § 1127. ¹

We conclude that the distinction advocated by EFRA is without merit. It is well established that "jurisdiction exists to grant relief under the Lanham Act if a defendant's activities although wholly intrastate tend to have a damaging effect on plaintiff's federally protected interstate business." Tiffany & Co. v. Boston Club, Inc., 231 F.Supp. 836, 841 (D.Mass.1964). Appellant relies on several cases in which district courts in this Circuit have found that a defendant's wholly intrastate sales were not in commerce and did not have a substantial effect on interstate commerce, notwithstanding that the goods were shipped interstate. See Peter Pan Restaurants, Inc. v. Peter Pan Diner, Inc., 150 F.Supp. 534, 536 (D.R.I.1957); Libby, McNeil & Libby v. Libby, 103 F.Supp. 968, 969 (D.Mass.1952); R. P. Hazzard Co. v. Emerson's Shoes, Inc., 89 F.Supp. 211, 216 (D.Mass.1950); Samson Crane Co. v. Union National Sales, 87 F.Supp. 218, 221 (D.Mass.1949), aff'd, 180 F.2d 896 (1st Cir. 1950). However, an adverse effect on the sales or goodwill of one whose trademark is used in interstate commerce is a sufficiently substantial effect on interstate commerce to entitle the registrant to invoke the protection of the Lanham Act, even if the sales of defendant are wholly intrastate. See, e.g., Coca-Cola v. Stewart, 621 F.2d 287, 290-91 (8th Cir. 1980); World Carpets, Inc. v....