Huber Baking Company v. Stroehmann Brothers Company

• Court: U.S. Court of Appeals — Second Circuit
• Writing for the Court: MEDINA, HINCKS and WATERMAN, Circuit
• Citation: Huber Baking Company v. Stroehmann Brothers Company, 252 F.2d 945 (2nd Cir. 1958)
• Decision Date: 24 February 1958
• Docket Number: Docket 24466.,No. 37,37
• Parties: HUBER BAKING COMPANY, Plaintiff-Appellant, v. STROEHMANN BROTHERS COMPANY and Quality Bakers of America Cooperative, Inc., Defendants-Appellees.

252 F.2d 945 (1958)

HUBER BAKING COMPANY, Plaintiff-Appellant, v. STROEHMANN BROTHERS COMPANY and Quality Bakers of America Cooperative, Inc., Defendants-Appellees.

No. 37, Docket 24466.

United States Court of Appeals Second Circuit.

Argued October 15, 16, 1957.

Decided February 24, 1958.

COPYRIGHT MATERIAL OMITTED

Appell, Austin & Gay, New York City (Cyrus Austin, Rogers, Hoge & Hills and Lenore B. Stoughton, New York City, of counsel), for plaintiff-appellant.

Nims, Martin, Halliday, Whitman & Williamson, New York City (John Dashiell Myers and Henry Temin, Philadelphia, Pa., and Carl B. Shelley, Harrisburg, Pa., of counsel), for defendant-appellee Stroehmann Bros. Co. Greenwald, Kovner & Goldsmith, New York City (Harold Greenwald and Harry Litwin, New York City, of counsel), for defendant-appellee Quality Bakers of America Co-op., Inc.

Before MEDINA, HINCKS and WATERMAN, Circuit Judges.

MEDINA, Circuit Judge.

This is an appeal from the trial court's dismissal of plaintiff Huber Baking Company's complaint. Huber sought an injunction against defendant Stroehmann Brothers Company's alleged trademark infringement and unfair competition, and against the licensing of certain trademarks by Quality Bakers of America Cooperative, Inc. for use in an area allegedly reserved for Huber's exclusive use. Huber also sought an accounting and damages.

The facts, none of which are in serious dispute, are as follows:

QBA, the successor of a similar association founded in 1924, is a non-profit cooperative organized under the laws of New York to help promote the business of its baker-members located throughout the United States. QBA itself does not bake, sell or distribute any baked goods, but it does gather information, furnish advice, and to some extent supervise the baking, sale and local distribution of the products of its members. In connection with its merchandising services QBA, during the 1920's and 1930's had attempted to promote a cohesive marketing program involving the use by its several members of a common wrapper design, with minor variations in the design as each member desired. The advantages of such a program were twofold: the pooling of members' advertising budgets made possible the economies inherent in the mass purchasing and printing of materials; and the establishment of a "national brand" of bread, resulting from the local advertising of individual members and the use of radio, billboards and magazines throughout the United States, would inure to the benefit of each member. Prior to 1940 four different wrappers had been designed by QBA and used by its members, but without any marked success. In 1938 QBA began research to design still another wrapper. It was decided that the picture of a child would possess the characteristics necessary for a sufficiently distinctive and attractive mark, and the designing efforts thereafter were centered mainly on the selection of an appropriate picture or drawing.

In 1941, while the preparatory work for the new trademark was still in progress, QBA's advertising manager communicated with Huber's president with a view to inducing Huber to join QBA. At this time, and at all times since, Huber, a Delaware corporation founded in 1913, baked and marketed various types of bread and rolls and had its only factory in Wilmington, Delaware. Huber distributed its baked goods throughout Delaware and in parts of Maryland, New Jersey and Pennsylvania.

In 1913 Huber had begun using the words "Sun Beam," printed on a small label against a background of black and yellow squares, as a mark on some of its bread. The label as a whole was registered in the United States Patent Office in 1913, but was used for only a few years. Thereafter, however, Huber continuously sold at least one of its types or varieties of loaves of bread with the mark "Huber's Sunbeam Bread" until 1942, while during this same period, on its several other loaves, it repeatedly experimented with different names and marks, none of which proved to be so successful as to warrant its use continuously. Since the Huber management felt their advertising expenditures were not being used to maximum advantage because of the failure to concentrate on a single brand name with an accompanying mark, they were considerably interested in the advertising program being developed by QBA when the QBA officers invited them to join the cooperative.

Numerous meetings and conversations ensued, with the result that Huber agreed to join QBA and use the mark which was ultimately developed by QBA. This consisted essentially of a picture of a young girl with golden curls eating a slice of bread. In the course of the discussions, Huber's president had suggested that the name "Sunbeam" be used in addition to the picture and QBA accepted this suggestion. As the promotion campaign developed the little girl was eventually called "Miss Sunbeam," and the bread was advertised nationally as "Sunbeam Bread" with both "Sunbeam" and the girl's picture appearing on every bread wrapper. On the local level each QBA member put his own name on the wrapper in addition to the Sunbeam name and mark; thus Huber's labels and wrappers read "Huber's Sunbeam Bread."

On November 6, 1941 Huber signed a probationary membership agreement with QBA, and on September 14, 1942 "broke" the "Sunbeam campaign" by using the Sunbeam name and mark as described above on all of its bread and rolls. Shortly after Huber's "breaking" this campaign QBA licensed its other members, at the time of trial numbering approximately 100, to use the material in specific areas. These licenses essentially provided that: the member licensee had "a non-assignable and non-exclusive right to employ the trademark and tradename entitled `Sunbeam,' * * * within the limits * * * of the trading area hereinafter specified"; the Sunbeam trademark used by the member was not to be altered "in any manner, whatever, except with the consent of (QBA)"; all material used by the member which related to the Sunbeam advertising was to be purchased from QBA "exclusively"; all rights to the use of the Sunbeam material would terminate upon the licensee's ceasing to be a member of QBA; the member warranted that, at the time of the licensing, he actually served the entire area in which he was licensed to use the Sunbeam material, and the failure to distribute throughout this entire area would operate as a waiver of the member's Sunbeam rights in the portion not served.

On April 27, 1943, QBA registered the picture of the little girl as a collective trademark in the United States Patent Office, and during 1946 and 1947 also registered a composite of the picture and the word "Sunbeam" in 46 states, including every state in which Huber does business. As further protection for the benefit of all its members, QBA, in 1948, formed corporations under the name "Sunbeam Bakers, Inc." in most of the states of the United States, and in addition, beginning in 1942 QBA obtained copyright registration for several of its wrappers and labels as a whole and for its advertising material.

From a time shortly before Huber began using the "Sunbeam campaign" until the date of trial, Huber had made full use of the services and facilities which QBA offered member-bakers. Thus Huber periodically submitted sample loaves of its bread to the QBA laboratory to be checked and "scored" against the loaves of other members; it sent periodic sales records to the QBA offices; QBA sanitarians regularly inspected the Huber bakery and helped it maintain certain minimum sanitary conditions; and Huber had the mills from which it bought flour submit samples to the QBA laboratory so that its technicians might check whether the grade of flour was what it was represented to be, and also to inform Huber of the baking method that would achieve the best results with the flour in each shipment.

Prior to December 26, 1944, however, Huber and QBA had not entered into a formal written agreement specifying Huber's rights to the use of the Sunbeam campaign. Huber wanted an exclusive right, assignable to any purchaser of its business, to sell Sunbeam bread and rolls within an area over and beyond that which it was then serving, and it was willing to assign to QBA all its rights to the word "Sunbeam" outside of this area. In April, 1944, QBA submitted the standard form Sunbeam license to Huber, which Huber would not sign because it was therein provided that Huber's rights to the Sunbeam material were "non-assignable and non-exclusive." QBA attorneys thereafter drafted several other contracts, along with a form for the assignment by Huber to QBA, before producing one which met with Huber's approval. Both the contract and assignment, prepared by QBA counsel, were signed by Huber on December 26, 1944.

The assignment, although containing the recital that it was an agreement entered into between Huber and QBA, was signed only by Huber and provided that for a valuable consideration Huber did "sell, assign, transfer and set over unto Quality Bakers of America Cooperative, Inc., the entire right, title and interest in and to the label" entitled "Huber's Sunbeam Bread" and "each and every part thereof, * * * reserving unto itself, however, the full and unrestricted right to the use of the same within the limits of the trading area hereinafter specified: The entire State of Delaware, together with such portions of the States of Maryland, Pennsylvania and New Jersey" as were indicated on an attached map, "including the City of Philadelphia, * * * even though some of the said territory is not at present served by the Huber Baking Company."

The contract, signed by both Huber and QBA, differed from the standard form of license already in use by QBA with its other members for approximately two years in the following respects: Huber was given "the right to assign the use of said work of art, trade-mark, label and package, `Sunbeam' campaign, and all and each of the same to any...