Mulhens & Kropff v. Ferd Muelhens, Inc.

• Decision Date: 09 October 1929
• Citation: 38 F.2d 287
• Parties: MULHENS & KROPFF, Inc., v. FERD MUELHENS, Inc.
• Court: U.S. District Court — Southern District of New York

38 F.2d 287 (1929)

MULHENS & KROPFF, Inc., v. FERD MUELHENS, Inc.

District Court, S. D. New York.

October 9, 1929.

COPYRIGHT MATERIAL OMITTED

Manvel Whittemore, of New York City (Lucius E. Varney and Manvel Whittemore, both of New York City, of counsel), for plaintiff.

Katz & Sommerich, of New York City (Maxwell C. Katz, Otto C. Sommerich, Edwin M. Borchard, and Raymond T. Heilpern, all of New York City, of counsel), for defendant.

MACK, Circuit Judge.

Action for a permanent injunction to restrain defendant from selling eau de cologne and other articles bearing the registered trade-mark "4711" and/or publishing statements that it is selling the only genuine "4711" eau de cologne and cologne products, or otherwise directly or indirectly interfering with the sale of plaintiff's "4711" eau de cologne and other toilet articles. Jurisdiction is based on Federal registration of the trademark. The record establishes in my judgment the following facts:

Since 1792 the Muelhens family has been engaged in manufacturing eau de cologne at 4711 Glockengasse, Cologne, Germany, from essential oils dissolved in the proper amount of alcohol and water, pursuant to a recipe transmitted from father to son and kept secret at all times. The fact that the recipe is kept secret is stated on all labels, the product has been extensively advertised, and the business has become world-wide under the mark "4711."

William Kropff, through whom plaintiff claims title to the trade-mark, came to the United States about 1878 for the purpose of establishing, in partnership with Julius Muelhens of Germany, a distributing agency for the sale of the products of the House of Muelhens. By way of preparation, Kropff worked for a short time in the factory at Cologne and became familiar with the bottling and compounding of the various products, that is, with the mixing of the prepared essences with alcohol and water, filtering, etc.; but he did not acquire a knowledge of the secret recipe. Because of the high tariff on the finished product, the American agency began in 1879 to manufacture "4711" products by mixing the prepared essences, sent from Cologne, with water and alcohol procured in America, and this product was bottled and marketed under a white and gold label as distinguished from the blue and gold label on the German product. The first two shipments of essences were in the form of eight essential oils; plaintiff's witness Kropff testified that they were distinctly marked as to character and weight and therefore indicative of the secret recipe. All subsequent shipments, however, were of the mixed essences under the shipping name of "Cedrat." The selling arrangement was confirmed by a contract entered into in 1881 between the House of Muelhens and the firm of Muelhens & Kropff, whereby the American firm was given authority to use all labels and trademarks, and "to have them registered, without prejudice, however, to the continued sole proprietorship of Ferdinand Muelhens. * * *" Muelhens also reserved the right to withdraw this authority and cancel the registration. Under this agreement, the mark "4711" was registered in 1882.

In 1889 a partnership was formed between William Kropff of New York and Ferdinand Muelhens of Germany, Julius Muelhens having retired, by the terms of which agreement the secret recipe remained in Muelhens and Kropff obtained no right to learn it; Muelhens reserved the right to take over the business in the event of dissolution. While this agreement was in force, the mark "4711" was re-registered in 1905, and it is on this registration that jurisdiction is based.

The business of the American partnership expanded rapidly until the advent of the European War made it very difficult to procure the mixed essences from Germany. This difficulty increased between 1915 and 1917, and Kropff in America repeatedly asked that he be intrusted with the secret recipe; but Muelhens refused to send it. Shortly after the United States entered the war, Kropff, acting on the theory that the declaration of war effected a dissolution of the partnership, filed with the clerk of New York county a certificate stating that he was doing business under the name of Mulhens & Kropff "as successor in interest," and thereafter continued the business until the assignment to plaintiff.

Pursuant to the Trading with the Enemy Act in force October 6, 1917 (50 USCA Appendix § 1 et seq.), William Kropff on December 3, 1917, filed with the Alien Property Custodian a report in which he claimed that under the partnership agreement of 1889 he had the right for the duration of the war to continue the business for his sole individual benefit, subject to the payment of interest on the capital contributed by his German partner. On May 6, 1918, the Alien Property Custodian demanded that the entire interest of Ferdinand Muelhens in the firm of Mulhens & Kropff be turned over to him. In order to enable him to liquidate Muelhens' interest, Kropff, an American citizen resident in New York, was licensed June 13, 1918, to continue the business for this purpose. While this license was in effect, demand was served on Kropff, on September 21, 1918, and a supplementary demand on November 11, 1918, that all the rights of Ferdinand Muelhens under the partnership agreement be conveyed to the Custodian; on May 8, 1919, a final demand specifically enumerated the trade-marks including "4711" and purported to seize Ferdinand Muelhens' interest in them subject to the rights, if any, of Kropff.

On September 15, 1919, William Kropff, who in the meantime had been continuing the business on his own account, entered into an agreement with the Alien Property Custodian whereby, in consideration of $70,125 paid by Kropff, the Custodian on February 3, 1920, conveyed to him the entire seized interest of Ferdinand Muelhens in the partnership of Mulhens & Kropff, together with all rights to the trade-marks. Inasmuch as this was a private sale and the act (50 USCA appendix § 12) required a public sale "unless the President stating the reasons therefor, in the public interest shall otherwise determine," a presidential order was obtained two years later on March 29, 1922, which order gave authority "to sell at private sale," for the reasons as therein stated: (1) To more effectually secure to and vest title in Kropff; (2) the proposed sale to Kropff is in the public interest. Pursuant to this authority, the then Custodian made a formal conveyance on August 29, 1923, of the above-mentioned interests, which conveyance recited the former sale, the defect, and the executive order. All of these demands and conveyances were properly recorded in the Patent Office.

Subsequently William Kropff assigned the trade-marks and good will to plaintiff corporation; it continued to market its products under the "4711" label with the statement thereon that they were prepared in accordance with the original recipe. Prior to 1927, the House of Muelhens established defendant, a New York corporation, as its American selling agent, for the sale of its "4711" products.

In denying a motion for a preliminary injunction to enjoin sales of "4711" products by defendant, I held, on the evidence then before me, that William Kropff had never acquired knowledge of the secret recipe; further, that if he had such knowledge, he had acquired it in his capacity as agent with full knowledge that his German principal intended to preserve its secrecy; that in any event he had not transferred it to the Alien Property Custodian; that Ferdinand Muelhens had not by virtue of the forced sale of the trade-marks come under any implied obligation to disclose the recipe; and that while the products of the respective parties were very similar, they were not identical. The conclusion was that plaintiff was palming off a substitute article under what then appeared to be a false claim that it was identical with the original and was doing so under the false allegation implying knowledge of the secret.

Plaintiff now contends: (1) That it has proved prima facie ownership of the trade-mark by showing the seizure by the Alien Property Custodian, the conveyance to Kropff, and the latter's assignment to it; (2) that it is not barred by the defense of unclean hands, because (a) after the denial of the preliminary injunction, it ceased advertising that it manufactured its products in accordance with the original recipe, (b) the evidence of its chemical expert together with that of William Kropff proves that it has knowledge of the secret recipe, and (c) the burden of showing unclean hands, which it asserts is on the defendant, has not been sustained; and (3) that since infringement is clear, its prima facie ownership of the registered trade-mark entitles it to injunctive relief.

Defendant maintains: (1) That plaintiff has no title to the trade-mark because (a) there never was a valid seizure of the interest of Ferdinand Muelhens in the partnership of Muelhens & Kropff, (b) that the absence of any presidential order made the original sale invalid, (c) that the subsequent presidential order was invalid, in that it stated no reasons in the public interest for a private sale, and in any event it could not validate a sale theretofore made; (2) that if a third party would have obtained good title through the sale, nevertheless Kropff as a liquidating partner could not purchase free of the rights of Ferdinand Muelhens; (3) that the secret recipe was never seized by the Alien Property Custodian, and thus Kropff did not acquire it by a conveyance from the former; (4) that as a matter of law, a trade-mark used on a product manufactured according to a secret recipe cannot be assigned to one ignorant of such recipe; (5) that William Kropff never had the secret recipe, and that plaintiff is guilty of a fraud upon the public in representing that its product is manufactured in accordance with it; (6) that even if William Kropff acquired the secret recipe, he...