Churchill Downs Dis. Co. v. Churchill Downs, Inc.

• Decision Date: 11 February 1936
• Citation: 262 Ky. 567
• Parties: Churchill Downs Distilling Co. v. Churchill Downs, Inc.
• Court: United States State Supreme Court — District of Kentucky

262 Ky. 567

Churchill Downs Distilling Co. v. Churchill Downs, Inc.

Court of Appeals of Kentucky. Chancery Branch, First Division.

Decided February 11, 1936.

1. Trade-Marks and Trade-Names and Unfair Competition. — While

term "unfair competition" presupposes competition of some kind, term is not confined to cases of actual market competition.

2. Trade-Marks and Trade-Names and Unfair Competition. — Where one passes off his goods, services, or business as the goods, services, or business of another person, equity will interfere to protect good will and business reputation of such other person, notwithstanding that such other person is not making or selling like goods, rendering like services or engaged in like business.

3. Trade-Marks and Trade-Names and Unfair Competition. — In suit to restrain unfair competition by use of similar name, it was unnecessary to show that any one had been actually misled by similarity in names, or that defendant had fraudulent intent, where public was deceived by defendant's use of name.

4. Trade-Marks and Trade-Names and Unfair Competition. — "Churchill Downs," Inc., which maintained racing plant, had qualified property right to exclusive use of name "Churchill Downs," and was entitled to restrain distilling company's use of such name on its whisky labels and as part of its corporate name, without proof of special damage, notwithstanding that such name had been used by others, where distilling company's use of name deceived public.

Appeal from Jefferson Circuit Court.

LAWRENCE S. GRAUMAN for appellant.

CARROLL & McELWAIN for appellee.

OPINION OF THE COURT BY JUDGE RICHARDSON.

Affirming.

In 1933, B.J. Frentz and his associates, decided to engage in the whisky business. To do so, they organized under the law of this commonwealth a corporation and named it Churchill Downs Distilling Company. No one interested in, or connected with, the corporation was of the name of Churchill or Downs. The corporation's plant was located in Nelson county, Ky., about thirty miles from the place of business of Churchill Downs, Inc., Louisville, Ky. Thereat, it beban to purchase, bottle, label, and market whisky, and endeavored especially to market it in Louisville. Its output in bottles was labeled "Churchill Downs Brand, Straight Kentucky Bourbon Whiskey, Bottled by Churchill Downs Distilling Company, Incorporated, Louisville, Kentucky." On this label the name "Churchill Downs" was printed in bold letters, with a facsimile of a grandstand easily identified as the grandstand located at the racing plant of Churchill Downs, Inc.; in front of the grandstand, on the label, was a race track with horses and jockeys engaged in a race thereon.

It is agreed that Churchill Downs Distilling Company and Churchill Downs, Inc., are engaged in entirely different lines of business — they are not competing corporations — and there is no relation whatever in the products manufactured and sold by the former with the character of business conducted by the latter.

This action was brought by Churchill Downs, Inc., against the Churchill Downs Distilling Company for injunctive relief.

The trial court enjoined it from further bottling whisky under the label carrying the word "Downs," in conjunction with the name "Churchill," excepting whisky bottled, labeled, and on hand ready for sale and distribution, and after July 1, 1936, to cease to use the word "Downs" with the name "Churchill" as a part of its corporate name.

The Churchill Downs Distilling Company is before us insisting that injunctive relief should be denied Churchill Downs Inc. Its insistence, accurately and succinctly stated, is:

"There is no actual market competition of the products of the corporations; there must be competition of some sort in order to make out a case of unfair competition and in the absence of competition, the doctrine sought by Churchill Downs, Inc., cannot be invoked."

To sustain this statement of principles, it cites to us Regent Shoe Mfg. Co. v. Haaker, 75 Neb. 426, 106 N. W. 595, 4 L.R.A. (N.S.) 447; National Grocery Co. v. National Stores Corp, 95 N.J. Eq. 588; 123 A. 740; Nims on Unfair Competition and Trademarks (2 Ed.) 1917, sec. 374, page 658; Raladam Co. v. Federal Trade Comm., 42 F. (2d) 430 (C.C.A. 6th Circuit); Federal Trade Comm. v. Klesner, 280 U.S. 19, 50 S. Ct. 1, 74 L. Ed. 138, 68 A.L.R. 838; Blue Goose Auto Service v. Blue Goose Super Service Station, 110 N.J. Eq. 438, 160 A. 836; Beech-Nut Packing Co. v. P. Lorrilard Co. (C.C.A.) 7 F. (2d) 967, affirming (D.C.) 299 F. 834; Bortwith v. Evening Post, 37 Ch. D. 449; Carroll et al. v. Duluth Superior Milling Co., 232 F. 675 (C.C. A. 8th Circuit); Pittsburgh Brewing Co. v. Ruben, 55 App. D.C. 171, 3 F. (2d) 342; Ely Norris Safe Co. v. Mosler Safe Co. (C.C.A.) 62 F. (2d) 524; Charles Broadway Rouss, Inc. v. Winchester Co. (C.C.A.) 300 F. 706, certiorari denied 266 U.S. 607, 45 S. Ct. 92, 69 L. Ed. 465; Carney Hospital v. McDonald, 227 Mass. 231, 116 N.E. 414. The above cases recognize and apply to the facts therein, the principles for which the distilling company now contends.

Another insistence is that it is not selling any goods of related character to the business conducted by Churchill Downs, Inc., and there not being any actual market competition between its products and the business of Churchill Downs, Inc., "there is not any unfair competition." In support of this statement it especially relies on Borden Ice Cream Co. et al. v. Borden's Condensed Milk Co., 201 F. 510, 121 C.C.A. 200.

In the cases cited and relied on by Churchill Downs Distilling Company, the rule is stated:

"There must be a real, present, or prospective competition; that is, an endeavor to get the same trade from the same people at the same time, and that endeavor must on the defendant's part be unfair."

From this premise it argues the proof shows there will be no further use of the label complained of by reason of the fact that Churchill Downs Distilling Company is now confining its business to the manufacture of whisky and selling the same in barrels.

It is true that the term "unfair competition" presupposes competition of some kind. And, "the doctrine is usually invoked when there is an actual market competition between the analogous products of a plaintiff and a defendant and so it has been natural enough to speak of it as the doctrine of unfair competition." 63 C.J. sec. 100, p. 389; Colorado Nat. Co. v. Colorado Nat. Bank of Denver, 95 Colo. 386, 36 P. (2d) 454, 455. See cases, supra, cited by the distilling company.

Also, in the past, courts in other jurisdictions have frequently refused to enjoin the use of a similar corporate name because there was no market competition, in the absence of proof of special damages. See Annotation 66 A.L.R. 964, and Corning Glass Works v. Corning Cut Glass Co., 197 N.Y. 173, 90 N.E. 449; Borden Ice Cream Co. v. Borden's Condensed Milk Co., 201 F. 510, 121 C.C.A. 200, reversing (D.C.) 194 F. 554, and other cases above cited by Churchill Downs Distilling Company.

But the tendency of the courts has been and is to widen the scope of protection in unfair competition, and to hold that it is not confined to actual market competition. This turn of the decisions is exemplified by the cases of Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of California (C.C.A.) 56 F. (2d) 973, 977; Colorado Nat. Co. v. Colorado Nat. Bank of Denver, supra; Wisconsin Elec. Co. v. Dumore Co. (C.C. A.) 35 F. (2d) 555.

The court, in Colorado Nat. Co. v. Colorado Nat. Bank of Denver, quoting from Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of California, admirably stated the present trend of the courts, in these words

"There was a time in the history of the law of unfair competition when it was a debatable question whether a merchant's good-will indicated by his trade name or trade mark extended beyond such goods as he sold (Yale Elec. Corp. v. Robertson [C.C.A. 2] 26 F. [2d] 972, 973), but it is now well settled that the law of unfair competition is not confined to cases of actual market competition. If one fraudulently sells his goods or his services or his securities as those of another, injury may re-result to the latter although he is not engaged in the manufacture or sale of like goods. Where one passes off his goods, his services, or his business as the goods, services, or business of another, equity will intervene to protect the good-will and business reputation of the latter from any injury liable to be caused thereby. See cases note 1. Indeed, the right to protection against the unlawful or unfair use of a corporate name extends to all corporations of whatever nature, including corporations not organized for pecuniary profit."

Vogue Co. v. Thompson-Hudson Co., 300 F. 509, 512 (C.C.A. 6); Kellogg Toasted Corn Flake Co. v. Quaker Oats Co. (C.C.A.) 235 F. 657, 664; Wall v. Rolls-Royce of America (C.C.A.) 4, F. (2d) 333, 334.

The testimony of Frentz, itself, brings this case within the ambit of this principle. His testimony upon which the distilling company mostly relies, establishes that its organizers and incorporators used the words "Churchill Downs," "because it was a name that was known in Kentucky," and they "hoped that the use of this name would help extend its sales." The beginning of the use of the name "Churchill Downs" in that of the corporation was without the knowledge and consent of Churchill Downs, Inc. There was no connection whatsoever between the two corporations or those interested therein. The label on its bottles containing a facsimile of the grandstand of Churchill Downs, Inc., a race track with horses and jockeys engaged in racing thereon, and newspaper advertisements, corroborate the testimony of Frentz in which he substantially admits that the words "Churchill Downs" was used in the name of his corporation with the intent and purpose of his corporation deriving a profit in the sale of its products, from the...