BULOVA WATCH COMPANY v. Allerton Company, Civ. A. No. 56 C 1049.

• Citation: 216 F. Supp. 875
• Decision Date: 14 March 1963
• Docket Number: Civ. A. No. 56 C 1049.
• Parties: The BULOVA WATCH COMPANY, Inc., a corporation, Plaintiff, v. The ALLERTON COMPANY, Inc., a corporation, and A. Hirsch Co., Defendants.
• Court: United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)

216 F. Supp. 875

The BULOVA WATCH COMPANY, Inc., a corporation, Plaintiff, v. The ALLERTON COMPANY, Inc., a corporation, and A. Hirsch Co., Defendants.

Civ. A. No. 56 C 1049.

United States District Court N. D. Illinois, E. D.

March 14, 1963.

Arvey, Hodes & Mantynband, Chicago, Ill., for plaintiff.

Melvin L. Goldman, Richard James Stevens, Askow, Stevens & Hardy, Chicago, Ill., N. A. Giambalvo, Nelson, Boodell, Foster, Sugrue & Crowley, Chicago, Ill., for defendants.

ROBSON, District Judge.

This is a trade-mark, unfair competition, and injunction suit¹ involving plaintiff's trade-marks covering "Bulova"² and some auxiliary words in respect to watches. The gist of the charge is defendants' removal of the plaintiff's Bulova watch movements from the cases in which Bulova had placed them in the process of manufacture, and recasing said movements in defendants' diamond cases with different crowns,³ and selling the resultant product to the public⁴ through catalogs. The name "Bulova" remains unchanged on the face of the movement. The catalog presentation described the placing of the Bulova (or Elgin or Hamilton movements) into a "Treasure Mates" case⁵ and makes a guarantee over the name of defendant The Allerton Company, Inc.⁶

By order of October 16, 1961, the issue of damages was reserved until the determination of the issue of liability.

Outline of Contentions: Plaintiff's legal contentions are:

(1) The defendants' watch is a "new construction" composed of a watch case manufactured by persons other than the plaintiff and a watch movement obtained from disassembling plaintiff's watch. The sale of such newly constructed product under plaintiff's trade-mark per se constitutes trade-mark infringement and unfair competition.⁷

(2) The sale of the defendants' watches bearing plaintiff's trade-mark constitutes trade-mark infringement and unfair competition because the defendants fail to disclose to the public fully and truthfully the manner in which they have utilized plaintiff's original trademarked watch to produce defendants' watch.⁸

(3) The instances of actual confusion appearing in the record confirm the legal conclusion that the defendants are guilty of trade-mark infringement and unfair competition.⁹

Defendants on the other hand argue:

(1) They have the right to incorporate a trade-marked article, to-wit, a watch movement bearing Bulova's trade-mark, in a diamond decorated watch case not of Bulova's manufacture; and to sell the completed product upon fairly and reasonably advising the purchaser of the nature of the complete product, to the end that the purchaser may not reasonably be confused.¹⁰

(2) Defendants' catalog page, being the sole presentation by defendants of their product to the public, does fairly, reasonably and properly apprise each purchaser of the nature of his purchase, and no purchaser will reasonably be confused. The printed guarantee accompanying each of the defendants' products likewise fairly and reasonably apprises each purchaser of the nature of his purchase, and no purchaser will reasonably be confused thereby.¹¹

(3) Plaintiff by its conduct has tacitly admitted that defendants' sale of such Treasure Mates watches has been conducted candidly, honestly and fairly.¹²

Conclusion: The Court concludes there has been an infringement of plaintiff's trade-mark in the recasing of its movement in defendants' case, retaining plaintiff's trade-mark on the face of the watch. The Court further concludes that the page in defendants' catalog is of such a misleading character as to constitute unfair competition.

Facts Stipulated: The parties have stipulated to many of the material facts of this case. This stipulation reveals that plaintiff, The Bulova Watch Company, Inc.,¹³ a New York corporation, was preceded by the Bulova Watch Company. That company was founded by Joseph Bulova in 1875, incorporated on June 6, 1911, with change in name in 1923. The defendants, Illinois corporations, are The Allerton Company, Inc., a wholly owned subsidiary¹⁴ of defendant A. Hirsch Co.¹⁵ The latter succeeded a partnership established by Adolph Hirsch in 1878, which incorporated in Illinois in 1918, and has always been conducted by immediate members of the Hirsch family.

Plaintiff is engaged primarily in the business of manufacturing, distributing and selling watches,¹⁶ and the name "Bulova" is widely and generally known to the public as identifying its watches. It is stipulated that both plaintiff and defendant Hirsch have enjoyed excellent reputations, both in the trade and financially.

Defendant Hirsch had held franchises from Elgin Watch Company,¹⁷ Hamilton Watch Company¹⁸ and Waltham Watch Company¹⁹ for the national distribution of their products, but these companies began successively in 1946 to distribute their products by direct sales to the retailers and terminated the Hirsch franchises.

In the watch industry the following are considered separate and distinct articles of commerce: complete watches, watch movements, watch cases, watch bands, and other components and parts of watches. While some manufacturers sell watch movements and cases separately from completed watches, plaintiff has never done so. It does, however, sell watch components and parts, other than watch movements and cases as separate and distinct articles of commerce.

It is stipulated that for more than forty years various wholesale and retail watch dealers in the United States have transferred watch movements from the original cases into other cases,²⁰ usually diamond-decorated, not made by the manufacturer of the watch movement, but the number of movements so transferred is but a small percentage of the total number of complete watches sold in the United States. Catalog houses have for many years listed watches with movements of nationally advertised manufacturers in watch cases not made by the manufacturer of the watch movement.²¹

Since 1946 defendant Hirsch has imported approximately a million Swiss movements from Switzerland and cased them in its own shop into American-made cases.

Plaintiff guarantees only watches that have been manufactured and assembled by it and its guaranty does not extend to defendants' products.

The stipulation further states that plaintiff's watch cases are manufactured to accommodate plaintiff's watch movements, including the 6¾ × 8²² ligne²³ 17 jewel ladies' watch movements. The watch cases²⁴ and watch movements are manufactured principally, but not entirely, in plaintiff's factories in Providence, Rhode Island, and Switzerland. Plaintiff's assembly of movements and cases is done only in its own factory.²⁵

It is stipulated that during the years 1953 to date the defendants have purchased Bulova watches from various dealers, but in no instance directly from plaintiff, and have transferred the movements, including the dials containing the name "Bulova", from their original Bulova cases into diamond-decorated cases not manufactured by plaintiff but for defendants Hirsch and Allerton by Major Watch Case Company. During those years defendants have sold the recased watches to some sixty-one "catalog houses." Defendants have sold similarly recased Hamilton movements to the same houses since 1958. They have done the same with respect to Elgin watches since 1952.²⁶

It is further stipulated that:

"The catalog houses * * * sell their merchandise (including watches purchased from the defendants, Hirsch and Allerton) to the general public through catalogs which they issue. * * * The defendants, Hirsch and Allerton, have prepared, printed and distributed to such catalog houses color pages or insert sheets for insertion in these catalogs. * * *"

Many hundreds of thousands, sometimes over a million and a half,²⁷ of these "insert sheets" were furnished the catalog houses in the years 1952 to 1960.

Plaintiff's average annual sales for the years 1953 to 1956 exceeded 1,750,000 watches for the sum of over $45,000,000, and from 1957 to 1959, an average of 1,500,000 watches for over $40,000,000. Ninety-six per cent of the dollar value of the sales from 1953 to 1960 were to some 17,000 retail dealers for resale to the public, and but four per cent to catalog houses, trading stamp companies and others. Plaintiff had expended over $40,000,000 in advertising its trade name "Bulova" in the eight year period²⁸ commencing April 1, 1953, and ending March 31, 1961, $35,000,000 of which was devoted to advertising Bulova's watches.

The defendants sold a total of some 8,025 watches containing Bulova movements to catalog houses for about $326,200 during the eight years from 1953 to 1960.²⁹

Bulova annually receives about 50,000 watches for servicing at its factory, and when Bulova movements are not housed in Bulova cases, it returns them unrepaired to the sender with an explanatory letter. This letter states that only when a movement is housed in a Bulova case is it considered genuine because "each component plays a vital role in the continued functioning of the watch. * * * We cannot assume responsibility for Bulova movements housed in cases not specifically manufactured by Bulova to fit the movement. * * *"

Among the other facts stipulated to are: Discoloration of watch cases may be caused by acid perspiration of the wearer notwithstanding the manufacturer has used good quality material or improper methods used in soldering an end piece or other attachment to the watch case. Both Bulova and defendants maintain repair departments to cover their guarantees, which is free of charge except in case of clear abuse of the watch. Between December 16, 1953, when plaintiff learned defendants were recasing Bulova movements, and June 1956, when suit was begun, plaintiff did not advise the defendants it objected to the practice or wished its discontinuance.

Bennett Brothers, Inc., a customer of Bulova, since 1951, operates both a catalog house and several retail establishments. It purchased some $25,835 of men's and women's...