Fruit Industries v. Bisceglia Bros. Corporation

• Decision Date: 08 February 1939
• Docket Number: No. 6611.,6611.
• Parties: FRUIT INDUSTRIES, Limited, v. BISCEGLIA BROS. CORPORATION.
• Court: U.S. Court of Appeals — Third Circuit

101 F.2d 752 (1939)

FRUIT INDUSTRIES, Limited, v. BISCEGLIA BROS. CORPORATION.

No. 6611.

Circuit Court of Appeals, Third Circuit.

February 8, 1939.

Mabel Walker Willebrandt, of Washington, D. C. (Wm. Montgomery Smith and Garfield O. Anderson, both of Washington, D. C., of counsel), for appellant.

Joseph W. Henderson and Lester Lichtenstein, both of Philadelphia, Pa., for appellee.

Before DAVIS and THOMPSON, Circuit Judges, and JOHNSON, District Judge.

JOHNSON, District Judge.

This is an equity suit brought in the United States District Court for the Eastern District of Pennsylvania, by appellee, a Pennsylvania corporation, against the appellant, a California corporation, to restrain the appellant from interfering with the sale by the appellee in Pennsylvania of wine under the trade-mark "Greystone" on the ground that such interference constitutes unfair competition.

The District Court found that the interference amounted to unfair competition, and granted an injunction against the appellant, Fruit Industries, Ltd., restraining it from any further interference with appellee's sale of "Greystone" wine in Pennsylvania.

The injunction was based upon a finding that appellee had in good faith built up a substantial business under this trademark in Pennsylvania, a territory which had been unoccupied for a long time by appellant, and that appellant had delayed an unreasonable time in asserting its rights, and was consequently barred from interfering with the appellee's use of the name in that state. Appellant has appealed, alleging in substance that this finding is erroneous.

The essential facts are as follows: the trade-mark "Greystone" was used by the California Wine Association as early as 1895, and was registered by it in the Patent Office in 1911. Prior to Prohibition the Association bottled and sold a light hock wine under the name "Greystone", and also used the name in connection with certain wine sold in bulk. The Association sold some "Greystone" wine in Pennsylvania prior to Prohibition.

The appellant, Fruit Industries, Ltd., is a non-profit co-operative, agricultural association, organized in 1929, by merging several wine-making concerns, one of which was the California Wine Association. In this merger, the association turned over to appellant all its property, including its trade-mark, brands, and labels. Appellant renewed the association's registration of the name "Greystone" in the U. S. Patent Office on May 9, 1931.

In 1925, California Wine Association sold an old winery, known as Greystone Winery, to Bisceglia Brothers, a partnership of San Jose, California. The purchaser used this winery for storage purposes until 1933, and since that time has used it in the manufacture of wine.

On September 19, 1933, the California firm of Bisceglia Brothers also registered the name "Greystone" in the U. S. Patent Office.

On the repeal of Prohibition, Edward Black, of Philadelphia, purchased wine in bulk from Bisceglia Brothers of California, bottled and resold it to the Pennsylvania Liquor Control Board, the only agency through which wine could be legally distributed in Pennsylvania. Black traded under the name of Bisceglia Brothers, and was registered thus under the Pennsylvania Fictitious Name Act. Subsequently Black died, and his estate continued to sell "Greystone" wine to the Board until May 3, 1934, when the business was transferred to the appellee corporation.

There was no evidence to show any relationship of agency between Bisceglia Brothers of California and Bisceglia Brothers Corporation of Pennsylvania, the appellee corporation, or its predecessors. So far as the record discloses, they have always been entirely distinct and separate organizations.

On July 6, 1934, Fruit Industries, Ltd., instituted proceedings against Bisceglia Brothers of California to cancel the latter's registration of the trade-mark "Greystone" in the U. S. Patent Office. On December 17, 1934, the California Partnership permitted a decree pro confesso to be entered cancelling this registration.

Throughout all 1934, and most of 1935, all the California Wine Association brands, including "Greystone" were involved in litigation between the appellant, Fruit Industries Ltd., and the California Wine Association. The right to use these marks, as against the Association, was secured by appellant in a consent decree.

The appellant also brought an equity suit in California against Bisceglia Brothers of California, which resulted in an agreement whereby appellant was granted all the partnership's rights to the use of the trade-mark. Prior to this agreement, however, Bisceglia Brothers of California had a controversy with the appellee with reference to the latter's use of the trade-mark in Pennsylvania. This resulted in an abandonment by the California firm to the appellee of all its rights to the trade-mark in this state.

Appellee's sales of various types of "Greystone" wine to the Pennsylvania Liquor Control Board amounted to $338,620.45 in 1934, to $378,406 in 1935, and to $630,229.32 in 1936. During these three years appellee expended $117,669.28 in advertising and promoting the sale of various types of "Greystone" wines. Ninety percent of appellee's business is based on sales to the Pennsylvania Liquor Control Board, and it is estimated that about thirty percent of all wine sold through the Pennsylvania liquor stores is appellee's "Greystone" brand. The trade-mark has been in uninterrupted use by the appellee in Pennsylvania since the repeal of Prohibition, and was registered by appellee under the state law on February 6, 1936. The appellant stipulated, as part of the record in the court below, that it knew early in 1934, that the Pennsylvania State Liquor Stores were selling various types of wine under the name "Greystone" which were not the product of the appellant.

On January 25, 1937, the appellant notified the Liquor Control Board that it was the owner of the trade-mark "Greystone" and that the appellee was unlawfully using the same. To avoid any liability from selling and distributing appellee's product, the Board discontinued further purchases from appellee until March, 1937, when appellee arranged to give a bond to indemnify the Board from any liability, whereupon the Board resumed purchasing from the appellee.

The question presented is whether under these circumstances the appellant has the exclusive right to use the trade-mark "Greystone" in Pennsylvania.

From the record, the following conclusions are justified: Prior to Prohibition the California Wine Association had a valid right to the exclusive use of the trade-mark "Greystone" in Pennsylvania. During Prohibition, this right was transferred to appellant. However, the trade-mark did not enjoy any extensive reputation in Pennsylvania, and at the time of Repeal, its goodwill was negligible. When Prohibition was repealed, appellee innocently adopted and used this trade-mark in Pennsylvania. Early in 1934, the appellant learned that this trade-mark was being used in Pennsylvania, but took no action to interfere with this use until January, 1937. During this period the appellant did not offer its "Greystone" wine to the Pennsylvania Liquor Control Board, and appellee built up a large and profitable business and spent large sums of money in advertising and promoting the sale of wine under this name.

Under these facts and circumstances, the decree of the lower court is fair and equitable.

The senior user of a trade-mark is barred from interfering with a junior user of the same mark when (1) the junior user, in good faith and without notice of its use by the senior user, expends money and effort in building up a substantial business in a territory which has been unoccupied for a long time by the senior user's business; and when (2) the senior user, with notice of the infringement delays for an unreasonable time in asserting his rights. Hanover Star Milling Company v. Metcalf, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713; United Drug Co. v. Rectanus Co., 248 U.S. 90, 39 S.Ct. 48, 63 L.Ed. 141.

The District Court held that under the above rule the appellant was barred from interfering with appellee's use of the trademark "Greystone". Appellant contends, however, that in the present case the time which elapsed between its first knowledge of the sale of "Greystone" wine in Pennsylvania, and its first action toward preventing such sale in that state, a period of approximately three years, is too short a time to warrant the application of this rule.

The rule is based upon the principle that equity will not aid a litigant who has been guilty of unreasonable delay in asserting his rights. No arbitrary rule can be stated with reference to the time which will constitute an unreasonable delay. This depends in each case upon the extent to which the junior user, who has built up his business in good faith, will be injured by enforcement of the senior user's rights.

Because of the rapid growth of the wine and liquor industry which took place following the repeal of Prohibition, appellee has been able to build a large and profitable business in Pennsylvania in a short time. These circumstances required prompt action on the part of appellant because it knew, or should have known, that the wine business was growing rapidly, and that delay in enforcing its rights would result in serious injury to appellee.

Appellant contends that its failure to use its "Greystone" brand in Pennsylvania was due to the fact that it was awaiting the outcome of its litigation with California Wine Association and Bisceglia Brothers of California. It further contends that because appellee's labels stated that its "Greystone" wine was manufactured by Bisceglia Brothers of California, it proceeded to protest to that firm under the impression that it was responsible for the sale of this brand in Pennsylvania. Appellant also contends that the court below should have found that appellee and its...