Elastic Stop Nut Corporation v. Greer, 43-C-435.

• Decision Date: 01 May 1945
• Docket Number: No. 43-C-435.,43-C-435.
• Citation: 62 F. Supp. 363
• Parties: ELASTIC STOP NUT CORPORATION OF AMERICA v. GREER.
• Court: U.S. District Court — Northern District of Illinois

62 F. Supp. 363

ELASTIC STOP NUT CORPORATION OF AMERICA v. GREER.

No. 43-C-435.

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

May 1, 1945.

Harold W. Norman (of Zimmerman and Norman), William T. Woodson (of Rogers, Woodson & Rogers), and Curtis F. Prangley (of Moore, Olson & Trexler), all of Chicago, Ill., and Hamilton Hicks, of New York City, for plaintiff.

Henry Blech (of Blech and Herson) and Enright & Enright, all of Chicago, Ill., for defendant.

CAMPBELL, District Judge.

This is an action brought by the Elastic Stop Nut Corporation of America, a New Jersey corporation, against Fredric Greer, a citizen of Illinois, doing business as Fredric Greer Company.

Both parties are engaged in the manufacture of self-locking nuts. The plaintiff has been so engaged since 1934 and the defendant since 1942. The plaintiff designates its self-locking nuts as "Elastic Stop Nuts" and as "Stop Nuts." The products of both parties are practically identical in shape, form and appearance and contain a fibre insert which is the means by which the nut is locked onto the bolt. The natural color of the fibre is gray.

To provide a visual identification for the nuts of its manufacture, plaintiff uses a red fibre for the insert and has extensively advertised its self-locking nuts with illustrations prominently displaying the red ring or collar of the nut, and in such advertisements refers to such identification as "nuts with the red collar." The color is nonfunctional.

The defendant uses in the manufacture of its self-locking nuts a red-colored fibre insert identical in color to the red insert used by plaintiff in its self-locking nuts. Defendant uses illustrations of a self-locking nut prominently displaying the red collar of the nut in his advertising and on his letterhead and asserts to the trade that his product can be "identified by the red center." Defendant in advertising his product also uses the terms "Elastic Stop Nuts" and "Stop Nuts."

The plaintiff charges defendant with unfair competition and seeks to enjoin the defendant from using the terms "Elastic Stop Nuts" and "Stop Nuts" and from displaying a self-locking nut with a red collar in connection with the advertising and sale of his products and from using a red fibre insert in his self-locking nuts. Plaintiff alleges that the defendant deliberately copied its product in an attempt to confuse the trade and to put out a product so similar, so identical to its product that a purchaser would be confused as to which product he was buying, and that the product of the defendant would be mistaken for the product of the plaintiff.

Defendant answers that he manufactures in accordance with the teachings of an expired patent of the plaintiff and that he went into the production of this particular item largely at the request of the United States Army Air Force due to the fact that plaintiff's stock being more than twenty-five per cent foreign owned made it impossible for the plaintiff to conduct business with the United States Government.

The defendant also filed a counter-claim based upon a patent for an attachable nut issued to Andrew Sande on May 28, 1929, No. 1,714,520, which was assigned to the defendant on February 1, 1945, and which defendant claims is being infringed by plaintiff in some of the nuts of its manufacture.

The plaintiff has proved, in my opinion, an attempt on the part of defendant to procure a license from the plaintiff prior to the expiration of the Rennerfelt patent which the defendant contends is the controlling patent in plaintiff's manufacture. The evidence shows that the defendant's efforts in this regard included threatening public disclosure of the fact that plaintiff's patent would soon expire and that if this became known to the trade that great competition would result.

There is also some evidence of the desire on the part of the defendant to enter into a price-control arrangement with the plaintiff if the plaintiff would license the defendant.

The proof further shows that plaintiff refused to license the defendant and that thereupon defendant commenced to manufacture a product which in style, appearance, dress and function was an exact copy of the product of the plaintiff.

The evidence is further clear that the defendant used the identical color for the fibre insert that the plaintiff was using and referred to its product as "Stop Nuts" and "Elastic Stop Nuts".

The evidence further clearly shows that the trade generally was confused thereby, thinking that the product of the defendant was the product of the plaintiff.

Defendant failed to prove his contention on the foreign ownership of the plaintiff and subsequently abandoned it during the trial.

There is some evidence, although I think it is far from conclusive, that the United States Army Air Force at least participated in the defendant's deliberations prior to his entry into the business of the manufacture of what we know in this lawsuit as "Stop Nuts".

The evidence establishes that practically all of this product produced by the defendant was used by the United States Army Air Force.

I will first consider the unfair competition part of this case. Counsel for defendant contends that in this matter the law of Illinois governs. With that I agree.

Counsel further contends, however, that in order to prove a case of unfair competition, under the law of Illinois there must be evidence of actual palming off of the goods of the accused as the goods of the accuser. That, I think, may formerly have been the law. I do not think it is the law in Illinois today in view of the decision of Mr. Justice O'Connor in the case of Lady Esther, Ltd., v. Lady Esther Corset Shoppe, Inc., 317 Ill.App. 451, 46 N.E.2d 165, 167, 148 A.L.R. 6, and in view of the general broadening of the theory of unfair competition in this State following the weight of authority throughout the United States.

The proof in this case does not establish a palming off of the goods of the defendant as the goods of the plaintiff. However, I find that such actual palming off, even in the case of competitors, is no longer required by the Illinois law to establish a case of unfair competition. It is sufficient to warrant injunctive relief if there is likelihood of confusion in the trade.

As stated by Justice O'Connor in the Lady Esther case, supra:

"Counsel for defendant contends that `Illinois adheres to the "palming off" rule in case of unfair competition. Where there is no competition, there can be no "palming off." Since defendant was not in competition with the plaintiff, in any manner whatsoever, plaintiff was not entitled to the injunction prayed for in its complaint.'"

Referring to four Illinois cases, Stevens-Davis Company v. Mather & Co., 230 Ill. App. 45; DeLong Hook & Eye Co. v. Hump Hairpin Mfg. Co., 297 Ill. 359, 130 N.E. 765; Johnson Manufacturing Company v. Alfred Johnson Skate Company, 313 Ill. 106, 144 N.E. 787; and Ambassador Hotel Corporation v. Hotel Sherman Company, 226 Ill.App. 247, cited by the defendant in that case, the court continues:

"Without stopping to analyze the four cases, we think it sufficient to say that an examination of them discloses the fact that in each there was direct competition between the parties in the business each was conducting — plaintiff and defendant being engaged in the same line of business — and therefore the `palming off' rule was applicable. The holding in those cases, that where there was direct competition between plaintiff and defendant there must be a `palming off' to warrant relief, is far from saying that courts will not grant injunctive relief where the defendant's conduct is likely to cause confusion of the traders so that the public believes or is likely to believe that the goods of the defendant are the goods of the plaintiff, or that the plaintiff is in some way connected with or is a sponsor of the defendant."

In my opinion the foregoing constitutes a departure from what was previously regarded as the law in Illinois. I doubt that what was previously regarded as the law in Illinois, the requiring of proof of "palming off" as between competitors for granting of injunctive relief was ever actually the law. It was instead an erroneous interpretation of the four cases above referred to which unfortunately was generally accepted by the Courts and Bar of Illinois. In the Lady Esther case these four previous cases are for the first time clearly analyzed and explained by Justice O'Connor who correctly reasons from the opinions of these four cases, that where in a given case it can be shown that such confusion exists among the public or the traders in a product that they are likely to believe that the goods of the defendant are the goods of the plaintiff, or that the plaintiff is in some way connected with or is a sponsor of the defendant a sufficient basis has been established for the issuance of injunctive relief by a court of equity in a suit for unfair competition.

Counsel for defendant in the case at bar has also argued the absence of proof of fraud as formerly associated with cases of unfair competition. In disposing of this contention adversely to defendant I adopt and quote a further paragraph from the opinion of Justice O'Connor in the Lady Esther case, wherein he cites the case of Vogue Company v. Thompson-Hudson Company, 6 Cir., 300 F. 509, as follows:

"Another change that has come with the realization of this broad basis for `unfair competition' is the elimination of the requirement of `fraud'. Although the law of unfair competition has evolved through the application of principles of fraud, with the result that, in this country at least, there will be no relief where the defendant has acted in good faith toward both the plaintiff and the public, yet a realization that the true basis of equity's interference in such cases is not fraud but the protection of good-will has caused many courts to question the propriety of inquiry into the defendant's mental...