Drugs Consolidated, Inc. v. Drug Inc.

• Decision Date: 12 January 1929
• Citation: 144 A. 656,16 Del.Ch. 240
• Court: Court of Chancery of Delaware
• Parties: DRUGS CONSOLIDATED, INC., a corporation of the State of Delaware, v. DRUG INCORPORATED, a corporation of the State of Delaware

144 A. 656

16 Del.Ch. 240

DRUGS CONSOLIDATED, INC., a corporation of the State of Delaware, v. DRUG INCORPORATED, a corporation of the State of Delaware

Court of Chancery of Delaware, New Castle

January 12, 1929

Preliminary injunction denied.

Harry K. Hoch and George E. Edelin, of Washington, D. C., for complainant.

William G. Mahaffy and Edward S. Rogers, of Chicago, Ill., for defendant.

OPINION

THE CHANCELLOR.

The defendant makes the contention that a corporation is not entitled to be protected in its corporate name unless the name has been actually used in business so as to have acquired such a meaning that its appropriation by another will result in a diversion of trade or credit. In support of this contention the case is cited of Blackwell's Durham Tobacco Co. v. American Tobacco Co., 145 N.C 367, 59 S.E. 123. That case was decided on demurrer. The plaintiff in its complaint failed to show that it was in the exercise of its corporate rights or was engaged in the business for which it was incorporated at the time the defendant committed the alleged wrong of engaging in the same business under the same corporate name as the complainant's. The two corporations were creatures of different states in that case and there appears to have been no statute involved similar to the Delaware statute relied on in this case, hereinafter referred to. The North Carolina case, therefore, was decided in the light of those general principles of equity which the court conceived to govern in trade-name cases.

If an existing corporation is in fact engaged in the business for the conducting of which it was incorporated, it seems to be settled as a general proposition that it is entitled to be protected, even in the absence of statute, in the enjoyment of its corporate name against an unfair use or simulation thereof by another corporation if such use or simulation is misleading and calculated to injure the former's business. Armington and Sims v. Palmer, 21 R.I. 109, 42 A. 308, 43 L. R. A 95, 79 Am. St. Rep. 786; Glucose Sugar Refining Co. v. American Glucose Sugar Refining Co., (N. J. Ch.) 56 A. 861; Nesne, et al., v. Sundet, et al,. 93 Minn. 299, 101 N.W. 490, 106 Am. St. Rep. 439, 3 Ann. Cas. 30. This principle was given substantial recognition by this court in Liberty Life Assurance Society v. Heralds of Liberty of Delaware, Inc., 15 Del.Ch. 369, 138 A. 634, where the defendant was denied the right to use for its corporate designation the name under which the complainant was formerly incorporated and by which it had since continued to be known.

The defendant contends however that inasmuch as the complainant has not as yet actually engaged in the business for which it was incorporated and therefore has no trade susceptible of being injured, the relief sought should be denied. It is unnecessary to enter upon a discussion of this contention, for the reason that the general act under which the complainant and defendant were created in terms provides that a corporation in the selection of its name shall choose one that "shall be such as to distinguish it from any other corporation engaged in the same business, or promoting or carrying on the same objects or purposes in this State." Revised Code 1915, § 1919. The affidavits show that the complainant, which is the senior corporation, though not as yet actually engaged in the business of manufacturing and marketing drugs, has nevertheless been engaged in promoting the objects and purposes of its incorporation, objects and purposes which the defendant is at least authorized by its charter to promote and carry on. It certainly cannot be the intention of the act to require a corporation created under it to become engaged in its corporate business in a material and physical sense, as a prerequisite to the undisturbed enjoyment of the protection of its corporate name which the statute affords. It would seem rather to be more consonant with rational and practical interpretation to say that as soon as the corporate existence is brought into being and as long as it continues, the right assured by the statute to have the corporate name distinguished from other corporations of like kind subsequently created is free from encroachment. The statute thus removes the necessity of showing actual use in business of the name, a use which many cases dealing with the general law of unfair competition require as a prerequisite to relief in trade-name and trade-mark controversies.

We are, therefore, to look upon the statutory provision as one that is more extensive in its application than is the general law which deals with trade-marks and trade-names. Diamond Drill Contracting Co. v. International Diamond Drill Contracting Co., 106 Wash. 72. 179 P. 120.

Under the law of trade-marks and trade-names, it is true that no one may acquire the exclusive right to use a name which has been in use by others before him; neither can he appropriate to himself the exclusive use of a name commonly descriptive of a business or a commodity. It is also the law that geographical terms cannot generally be appropriated in trade as the peculiar property of an individual. These are well established propositions, but they are subject of course to an exception in favor of those particular cases where the attribution of a secondary meaning to the name has been considered as creating a special equity in favor of its protection. Many cases are cited by the defendant to the effect that if a name is such that the general law applicable to unfair competition will not recognize it as the subject of exclusive proprietorship, it cannot be made to acquire the quality of exclusiveness by merely embodying it in a corporate title. Among such cases, citing only a few are the following: Title & Mortgage Guarantee Co. v. Louisiana Abstract & Title Guarantee Co., 143 La. 894, 79 So. 529; Hygeia Water Ice Co. v. N. Y. Hygeia Ice Co., Ltd., 140 N.Y. 94, 35 N.E. 417; Driverless Car Co. v. Glessner-Thornberry Driverless Car Co., 83 Colo. 262, 264 P. 653; Elgin Butter Co. v. Elgin Creamery Co., 155 Ill. 127, 40 N.E. 616; Eastern Construction Co., Inc., v. Eastern Engineering Corp., 246 N.Y. 459, 159 N.E. 397. That the rule expressed by these cases is the law cannot be doubted. The particular application of it to the instant case denies to the complainant any exclusive right to use the name "drug" in its corporate title. While, however, the defendant as well as others may use a corporate name with impunity which includes the word "drug" as descriptive of the nature of its business, it cannot do so, in view of our statute, unless something else appears in...