Coca-Cola Company v. Foods, Inc.

• Citation: 220 F. Supp. 101
• Decision Date: 01 August 1963
• Docket Number: 1350.,Civ. No. 1349
• Parties: The COCA-COLA COMPANY, a corporation, Plaintiff, v. FOODS, INC., a corporation, trading as The Plains Lounge, Defendant. The COCA-COLA COMPANY, a corporation, Plaintiff, v. Sam SERBICK and Mrs. Sam (Cleota) Serbick, individually and as co-partners trading as Sammy's Steak House, Defendants.
• Court: U.S. District Court — District of South Dakota

220 F. Supp. 101

The COCA-COLA COMPANY, a corporation, Plaintiff, v. FOODS, INC., a corporation, trading as The Plains Lounge, Defendant.

The COCA-COLA COMPANY, a corporation, Plaintiff, v. Sam SERBICK and Mrs. Sam (Cleota) Serbick, individually and as co-partners trading as Sammy's Steak House, Defendants.

Civ. Nos. 1349, 1350.

United States District Court D. South Dakota, S. D.

August 1, 1963.

M. T. Woods, of Woods, Fuller, Shultz & Smith, Sioux Falls, S. D., and Julius R. Lunsford, Jr., Atlanta, Ga., for plaintiff.

Ellsworth E. Evans, of Davenport, Evans, Hurwitz & Smith, Sioux Falls, S. D., and John P. Sauer, of Churchill, Sauer & Manolis, Huron, S. D., for defendants.

MICKELSON, Chief Judge.

These actions are brought by The Coca-Cola Company, a corporation, incorporated under the laws of the State of Delaware and having its principal place of business in either New York, New York, or Atlanta, Georgia, against Foods, Inc., a corporation trading as The Plains Lounge, a South Dakota corporation and citizen of said state, operating its place of business at Huron, South Dakota, hereinafter referred to as The Plains, in the one case; and in the companion case, against Sam Serbick and Mrs. Sam (Cleota) Serbick, individually and as copartners trading as Sammy's Steak House, citizens of the State of South Dakota and operating a place of business also in the City of Huron, South Dakota, hereinafter referred to as Serbicks. In plaintiff's complaints in both cases, it is alleged that the jurisdiction of this court rests upon the following grounds: (a) that it is a civil action under the trademark laws of the United States, viz., The Trade-Mark Act of July 5, 1946; 60 Stat. 427; 15 U.S.C.A. § 1051 ff.; and 28 U.S.C.A. § 1338. It is averred that the defendants have substituted and passed off, and are now substituting and passing off, a product other than plaintiff's when plaintiff's product had been ordered; that these acts constitute trademark infringement and unfair competition and result in irreparable injury and damage to the plaintiff; (b) plaintiff and defendants are citizens of different states, and the matter in controversy exceeds the sum or value of $10,000.00, exclusive of interest and costs. The prayer for relief asks for a permanent injunction, and for profits and damages, costs and general relief. Prior to the trial of each of these cases, plaintiff withdrew from its claim for relief everything except for a permanent injunction.

Plaintiff manufactures and sells throughout the United States, including the State of South Dakota, and in foreign countries, a soft drink syrup and beverage made therefrom, under its trademarks "Coca-Cola" and "Coke", which trademarks are registered in the United States Patent Office and in the State of South Dakota.

The answers in both cases ask that the complaints be dismissed on the grounds that they fail to state a claim upon which relief can be granted, and that this court lacks jurisdiction, and further, defendants deny that they substituted and passed off, and are now substituting and passing off, a product other than plaintiff's when plaintiff's product had been ordered, and deny any trademark infringement and unfair competition.

The evidence shows that from October 12, 1960, through December 10, 1962, the defendant, The Plains, substituted another beverage in response to orders for plaintiff's registered trademark product, "Coke" or "Coca-Cola", 25 times without informing the purchaser of such substitutions. Defendants, Serbicks, substituted 25 times in a similar manner from March 28, 1960, through December 11, 1962. The employees taking the orders confirmed an order by responding "Coke" at The Plains on October 12th and 13th, 1960, and July 17, 1962, and at Serbicks on December 6th, 7th, 8th and 11th, 1962. Defendants were warned that these actions were infringing on plaintiff's registered trademark and were unfair competition, by personal calls made by the representatives of the trade research department of Coca-Cola and registered letters which followed said visits. The substitutions were continued after said notices.

Plaintiff has shown that the total shipments of Coca-Cola into South Dakota from 1923 through 1962 were in excess of five million gallons of syrup. Plaintiff has shown that the total advertising expense for Coca-Cola for the year 1960 was over $49,000,000, 1961 over $50,000,000, and 1962 over $57,000,000. Plaintiff has also shown that its trade research department has an annual budget of about $250,000; said department's function being to protect the registered trademarks and the goodwill of the plaintiff from infringement and unfair competition. Defendants had signs posted behind their bars or serving counters that read to the effect that "Coke" and "Coca-Cola" were not sold or served. The employees of The Plains and Serbicks had been instructed to tell customers who asked for "Coke" or "Coca-Cola" that they did not serve same, but served "Royal Crown Cola".

Defendants' substituting of another product in response to a request for plaintiff's trademarked product, "Coke" or "Coca-Cola", without notice to the purchaser that the product served was not in fact that of the plaintiff and on occasion repeating the order, is called "palming off" or "passing off." Such acts are an infringement of plaintiff's lawfully registered trademark and are unfair competition. The Coca-Cola Co. v. Armbruster, 136 U.S.P.Q. 263 (1963); The Upjohn Co. v. Katz, 116 U.S.P.Q. 578 (1958); DuPont Cellophane Co. v. Waxed Products Co., 6 F.Supp. 859 (E.D. N.Y.), decree modified on other grounds 85 F.2d 75 (2 Cir.), cert. den. 299 U.S. 601, 57 S.Ct. 194, 81 L.Ed. 443 (1936); Winthrop Chemical Co. v. Weinberg, 60 F.2d 461 (3 Cir. 1932); N. K. Fairbanks Co. v. Dunn, 126 F. 227 (N.D.N.Y.1903); American Fibre Chamois Co. v. De Lee, 67 F. 329 (N.D.Ill.1895); Enoch Morgan's Sons Co. v. Wendover, 43 F. 420, 10 L.R.A. 283 (N.J.1890); Restatement, Torts sec. 727, comment b.

Plaintiff alleges jurisdiction in these actions under the provisions of 15 U.S.C. §§ 1051-1127 (Lanham Act of 1946); 28 U.S.C. 1338(b); and 28 U.S. C. § 1332. The defendants have challenged this court's jurisdiction.

15 U.S.C. § 1121 provides:

"The district and territorial courts of the United States shall have original jurisdiction and the courts of appeal of the United States shall have appellate jurisdiction, of all actions arising under this chapter, without regard to the amount in controversy or to diversity or lack of diversity of the citizenship of the parties."

Defendants contend that plaintiff abandoned the cause of action for trademark infringement when plaintiff withdrew its demand for damages and loss of profits and prayed only for injunctive relief, thereby leaving only the cause of action for unfair competition, and removed the cause of action from the provisions of the Lanham Act, where diversity and amount in controversy are not required. This contention is not valid. As stated previously, the acts of the defendants constitute both trademark infringement and unfair competition. The withdrawal of the demand for damages and loss of profits is immaterial to a cause of action for injunctive relief under the Lanham Act, 15 U.S.C. § 1116, "* * * to prevent the violation of any right of the registrant of a mark registered in the Patent Office."

Defendants further contend that the acts in question did not occur in "commerce" as required by 15 U.S.C. § 1114 and as defined by 15 U.S.C. § 1127: "The word `commerce' means all commerce which may lawfully be regulated by Congress. * * *" Although there is contra authority in other circuits, our circuit has held in Iowa Farmers Union v. Farmer's Educational and Cooperative Union, 150 F.Supp. 422 (S.D.Iowa), 247 F.2d 809 (8 Cir. 1957); and Time Inc. v. Life Television Corp., 123 F.Supp. 470 (Minn.1954), that if the intrastate character of defendant's business affects the interstate business of the plaintiff, the court has jurisdiction under the Lanham Act. On this point, the case of Maternally Yours, Inc., v. Your Maternity Shop, Inc., 234 F.2d 538 (2 Cir. 1956), is of particular significance. In that case, both plaintiff and defendant were engaged in the business of maternity shops in New York City. Plaintiff had applied for a registered trademark in 1945 and received same in 1949 for "Maternally Yours". The only evidence of use of such trademark in interstate commerce prior to application was one sale to a resident of New Jersey delivered through the U.S. mail. This, coupled with an intent to continue such use, was held sufficient to satisfy the requirements of interstate commerce in relation to the registration of a trademark. By 1954, plaintiff had ten shops in the Metropolitan New York area, and defendant had four shops in the same area and one in Philadelphia, Pennsylvania. The only connection with interstate commerce was the plaintiff's statement contained in its application for registration. The acts complained of occurred wholly in intrastate commerce, as was virtually the whole of plaintiff's business. The court granted injunctive relief, holding that there was an infringement and unfair competition. With such a tenuous showing of commerce in Maternally Yours held sufficient under the Lanham Act, it would be incongruous for this court to find no connection with commerce in the cases at bar, where the plaintiff annually does millions of dollars worth of business in interstate commerce.

28 U.S.C. § 1338(b) provides:

"The district courts shall have original jurisdiction of any civil action asserting a claim of unfair competition when joined with a substantial and related claim under the copyright, patent or trademark laws."

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