General Elec. Co. v. Speicher

• Decision Date: 12 October 1989
• Docket Number: No. 88-1730,88-1730
• Citation: 877 F.2d 531
• Parties: , 11 U.S.P.Q.2d 1125 GENERAL ELECTRIC COMPANY and Carboloy, Inc., Plaintiffs-Appellants, v. Robert SPEICHER and Speicher, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 531

877 F.2d 531

58 USLW 2044, 11 U.S.P.Q.2d 1125

GENERAL ELECTRIC COMPANY and Carboloy, Inc., Plaintiffs-Appellants, v. Robert SPEICHER and Speicher, Inc., Defendants-Appellees.

No. 88-1730.

United States Court of Appeals Seventh Circuit.

Argued Nov. 9, 1988.

Decided June 8, 1989.

As Amended June 29, 1989.

Rehearing and Rehearing En Banc Denied Oct. 12, 1989.

Eric C. Cohen (argued), Donald L. Welsh, Robert B. Breisblatt, Laurie A. Haynie, Welsh, Katz, Ltd., Chicago, Ill., for plaintiffs-appellants.

Albert L. Jeffers, Jeffers Hoffman & Niewyk, Fort Wayne, Ind., for defendants-appellees.

Before BAUER, Chief Judge, POSNER, Circuit Judge, and WILL, Senior District Judge. ^*

POSNER, Circuit Judge.

This is an appeal by a disappointed plaintiff, General Electric, in a suit for trademark infringement. After a two-day bench trial Judge Sharp awarded General Electric an injunction, but no damages; instead he awarded damages of $1,100 to the defendant, Robert Speicher, on Speicher's counterclaim for wrongful seizure. 676 F.Supp. 1421, motion to reconsider denied, 681 F.Supp. 1337 (N.D.Ind.1988). Actually, there is another plaintiff (the company to which General Electric sold the division that made the trademarked product), and another defendant (Speicher's corporation), but we ignore them to streamline the opinion.

Speicher, an Indianan, is engaged in the business of fabricating inserts for industrial cutting tools; the insert is the cutting edge of the tool. Inserts are made from preformed carbide substrates, which Speicher grinds to the customer's specifications. Speicher's is a modest business, with annual sales of only about $1 million. General Electric is, of course, a giant corporation. Among its many manufactures is a high-quality insert known as the "Carboloy 570," or "570"; these terms are conceded to be valid, although not registered, trademarks. The substrate used to make the insert is called an "866"; when coated in accordance with a secret formula of General Electric, it becomes a finished insert, the GE 570.

Late in 1984 the Chrysler transmission factory in Kokomo, Indiana, invited Tools and Abrasives, Inc. (T & A), an industrial distributor, to quote it a price for supplying GE 570 inserts to Chrysler. T & A obtained a price quotation from General Electric which it passed on to Chrysler, but Chrysler rejected this price as too high. When early in 1985 Chrysler again requested such a quotation, T & A turned to Speicher, who quoted a price less than one-quarter of General Electric's. T & A passed the quotation on to Chrysler without indicating its source, and Chrysler accepted the bid. Although T & A had requested Speicher to bid on GE 570 inserts--a trademarked General Electric product--and although T & A had sent Speicher a Chrysler purchase order that specified "Grade 570" and added "NO OTHER EQUIVALENT," Speicher neither supplied 570 inserts nor tried to make them out of 866 substrates. He used a different substrate, and had it coated by a coating company that did not have access to GE's secret formula. T & A supplied Speicher with empty GE boxes, as it was able to do because it was an authorized GE distributor. Speicher put the inserts into the GE boxes and shipped them to T & A, which in turn shipped them to Chrysler. After a while T & A even asked Speicher to etch "570" on each insert, which he dutifully did. He also stamped "570" on the boxes. We emphasize that the evidence that T & A inspired or even connived in the infringement of GE's trademarks comes entirely from Speicher. GE did not name T & A as a defendant.

After some months Chrysler began to smell a rat. The Speicher 570s were wearing out too fast. Metallurgical testing confirmed that they were phony. Graham, the Chrysler engineer who had placed the order with T & A, complained to T & A, which informed him that the inserts had come from Speicher. Graham was surprised. He thought the inserts had come from General Electric because he knew that fabricators did not have access to General Electric's proprietary insert. He called Speicher, who told him (falsely) that the inserts were genuine 570s. By this time Speicher had shipped some 6,000 inserts to Chrysler and had been paid the full purchase price--some $25,000. It is uncontested that until Chrysler received its metallurgist's report in February 1987, it had no idea that the Speicher inserts were other than genuine GE 570s.

General Electric brought this suit in April 1987. Six days after it was filed, the district judge issued an ex parte order pursuant to 15 U.S.C. Sec. 1116(d)(1)(A), which provides that "with respect to a violation [of federal trademark law] that consists of using a counterfeit mark in connection with the sale, offering for sale, or distribution of goods or services, the court may, upon ex parte application, grant an order ... providing for the seizure of goods and counterfeit marks involved in such violation and the means of making such marks, and records documenting the manufacture, sale, or receipt of things involved in such violation." The order authorized the seizure of, among other things, "all simulations, reproductions, counterfeits, copies or colorable imitations of General Electric's trademarks, including any and all cutting inserts bearing reproductions of any of General Electric's trademarks including the designation 570," plus "all books, records or documents of any kind in defendants' possession, custody or control which relate to said simulations [etc.] ... or which relate to [the defendants'] sale, offering for sale, [etc.] ... of any product bearing any General Electric trademark, or any customer and supplier lists."

By representing that the inserts he shipped to T & A for reshipment to Chrysler were GE 570 inserts, Speicher infringed General Electric's registered "GE" trademark and unregistered "570" trademark, in violation of 15 U.S.C. Sec. 1125(a), which so far as relevant to this case forbids any person to "use in connection with any goods ... any false description or representation." This much is conceded, and requires no further discussion. The district judge found, however, that Speicher had not violated another provision of the trademark statute, 15 U.S.C. Sec. 1114(1)(a), which forbids the use of any "reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale ... of any goods [where] such use is likely to cause confusion ... or to deceive." Since the 570 is unregistered, section 1114(1)(a) was violated only if Speicher's act of placing non-General Electric inserts in boxes that General Electric had stamped with its registered "GE" trademark qualifies as a "reproduction, counterfeiting [the parties' preferred word], copy, or colorable imitation" of that mark. Since the mark had been placed on the boxes by General Electric, it was not a counterfeit in the literal sense, although Speicher was not authorized to use it in connection with inserts not manufactured by General Electric. The district judge concluded that it was not a "counterfeit" within the meaning of section 1114(1)(a), either.

We disagree. The literal sense might be the correct one if section 1114(1)(a) were aimed just at "counterfeiting." But as the words "reproduction," "copy," and "colorable imitation" suggest more clearly than "counterfeiting," the aim is broader: to prohibit the use of your trademark on someone else's product without your authorization. The usual violator of this prohibition copies, reproduces, imitates--or if you will "counterfeits"--the trademark. See, e.g., Louis Vuitton S.A. v. Pun Yang Lee, 875 F.2d 584 (7th Cir. 1989). He doesn't have the genuine trademark; if he did he wouldn't be an infringer--ordinarily. Sometimes, however, he has the genuine trademark but is an infringer for using it. The most common cases involve distributors. A distributor licensed to sell a trademarked product may decide to sell another product in the trademarked containers in which he received the trademarked product from his supplier. (This has long been a problem in the retail gasoline business. See, e.g., Prest-O-Lite Co. v. Avery Lighting Co., 161 F. 648 (C.C.N.D.N.Y.1908); Lippo v. Mobil Oil Corp., 776 F.2d 706 (7th Cir.1985).) Or the distributor's trademark license may have expired, and rather than ceasing to use the trademark or returning the trademarked items to his supplier or otherwise complying with the terms of the license, the ex-licensee may continue to use the trademark. Two circuits have held that such trademark abuses (which are very old, see, e.g., Evans v. Von Laer, 32 F. 153 (C.C.D.Mass.1887)) violate section 1114(1)(a). See Burger-King Corp. v. Mason, 710 F.2d 1480, 1492 (11th Cir.1983); El Greco Leather Products Co. v. Shoe World, Inc., 806 F.2d 392, 396 (2d Cir.1986); Franchised Stores of New York, Inc. v. Winter, 394 F.2d 664, 668 (2d Cir.1968). District courts in other circuits have reached the same conclusion. See, e.g., Mobil Oil Corp. v. Auto-Brite Car Wash, Inc., 615 F.Supp. 628, 631 (D.Mass.1984); Pacific & Southern Co. v. Satellite Broadcast Networks, Inc., 694 F.Supp. 1565, 1573-75 (N.D.Ga.1988).

These decisions are sensible, and their application to this case clear. Speicher used GE's registered trademark, stamped on boxes supplied to him by T & A, in connection with goods that were not GE goods. We can see no difference, so far as the objectives of section 1114(1)(a) are concerned, between doing this and making a reproduction of GE's trademark. The happenstance of having trademarks made by the owner in one's possession, so that one doesn't have to copy them, has no relevance to the purposes of the statute. Indeed, the danger of confusion is even greater because the "imitation" is not merely colorable, but perfect. The more fundamental point is that the purpose of trademark law is not to guarantee genuine trademarks but to guarantee that every item sold under a trademark is the...