International Order of Job's Daughters v. Lindeburg and Co.

Decision Date11 February 1981
Docket NumberNo. 78-1674,78-1674
Citation633 F.2d 912,208 USPQ 718
PartiesINTERNATIONAL ORDER OF JOB'S DAUGHTERS, Plaintiff-Appellee, v. LINDEBURG AND COMPANY, Defendant-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Charles E. Townsend, Jr., San Francisco, Cal., argued, for defendant-appellant; George M. Schwab, Townsend & Townsend, San Francisco, Cal., on brief.

Dennis L. Thomte, Omaha, Neb., argued, for plaintiff-appellee; Zarley, McKee, Thomte, Voorhees & Sease, Omaha, Neb., on brief.

Appeal from the United States District Court for the Northern District of California.

Before TRASK and FLETCHER, Circuit Judges, and BLUMENFELD, * District Judge.

FLETCHER, Circuit Judge:

Appellee, the International Order of the Daughters of Job (Job's Daughters), sued appellant Lindeburg and Co. (Lindeburg), for trademark infringement arising out of Lindeburg's manufacture and sale of jewelry bearing the Job's Daughters insignia. The district judge granted judgment for Job's Daughters. Lindeburg appeals, invoking appellate jurisdiction under 28 U.S.C. § 1291. We reverse and remand.

Job's Daughters is a young women's fraternal organization. Since its establishment in 1921 it has used its name and emblem 1 as collective marks. 2 Since its inception Job's Daughters has licensed at least one jeweler to produce jewelry for it. Job's Daughters sells some of the licensed jewelry directly to its members. Jewelry bearing the name or emblem is also sold by approximately 31,000 retailers across the nation. Most of these retailers presumably have no connection with the Job's Daughters organization. Some sell jewelry manufactured by Job's Daughters' licensees; others sell jewelry manufactured by jewelers not licensed by the organization.

Lindeburg makes and sells fraternal jewelry. In 1954 it began selling jewelry and related items bearing the Job's Daughters insignia. In 1957 Lindeburg asked the Job's Daughters trademark committee to designate it an "official jeweler." The committee refused and in 1964 and 1966 asked Lindeburg to stop manufacturing and selling unlicensed jewelry. Lindeburg did not comply with this request. In 1973 Lindeburg again sought permission to act as an official jeweler for Job's Daughters. Permission was granted for one year and then withdrawn.

In 1975 Job's Daughters brought this suit against Lindeburg, alleging that he had infringed their "common law trademark" rights. The district court granted judgment for Job's Daughters after an extensive trial and enjoined Lindeburg from further use of the name or emblem. The court held, however, that Job's Daughters' long acquiescence in Lindeburg's infringement barred the award of damages.

I JURISDICTION 3

In its complaint Job's Daughters did not invoke any particular jurisdictional statute, but did recite the factors establishing diversity jurisdiction under 28 U.S.C. § 1332: diverse citizenship and a sufficient amount in controversy. Lindeburg did not contest this implicit jurisdictional assertion, and the district court expressly held that diversity jurisdiction was present. The parties, however, relied exclusively on cases decided under federal trademark statutes and never referred to state law. Because the assertion of diversity jurisdiction would ordinarily be appropriate where the right asserted is grounded in state law, the invocation of cases decided under federal law creates confusion about the applicable law and sparks our inquiry.

The source of the right sued upon, not the ground on which federal jurisdiction is invoked, determines whether federal or state law applies. Maternally Yours, Inc. v. Your Maternity Shop, Inc., 234 F.2d 538, 540-41, n.1 (2d Cir. 1956). We must, therefore, determine the source of the right upon which this lawsuit is based.

The parties have apparently assumed the existence of a general common law governing all trademark infringement cases brought in federal court. 4 This assumption is incorrect. Save as an outgrowth of federal statutory or constitutional law, there is no federal common law. Compare Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938) ("Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the state.... There is no federal general common law."), with Hinderlider v. La Plata River & Cherry Creek Ditch Co., 304 U.S. 92, 110, 58 S.Ct. 803, 810, 82 L.Ed. 1202 (1938) (applying "federal common law" to resolve a controversy regarding an interstate stream). See generally, P. Bator, P. Mishkin, D. Shapiro, & H. Wechsler, The Federal Courts & The Federal System, 756-832 (2d ed. 1973). Accordingly, to succeed, Job's Daughters must assert rights found either in state law or federal statutory law.

This seemingly simple proposition is rendered difficult by the complex relationship between state and federal trademark law. In general, the common law has been understood as protecting against the broad business tort of "unfair competition." Trademark infringement is a species of this generic concept. See New West Corp. v. NYM Co. of California, 595 F.2d 1194, 1201 (9th Cir. 1979). The Lanham Act created a federal protection against two types of unfair competition, infringement of registered trademarks, 15 U.S.C. § 1114, and the related tort of false designation of the origin of goods, 15 U.S.C. § 1125(a). 5 Federal courts have jurisdiction to hear suits invoking these protections. In addition, many states by statute or judge-made law protect against trademark infringement and other types of unfair competition, such as misappropriation of the fruits of another's labor, see Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562, 97 S.Ct. 2849, 53 L.Ed.2d 965 (1977); theft of trade secrets, see Pachmayr Gunworks, Inc. v. Olin Mathieson Chemical Corp., 502 F.2d 802, 807-08 (9th Cir. 1974); and trade disparagement, see Kemart Corp. v. Printing Arts Research Laboratory, Inc., 269 F.2d 375, 388-94 (9th Cir.), cert. denied, 361 U.S. 893, 80 S.Ct. 197, 4 L.Ed.2d 151 (1959). These protections need not track those provided by the Lanham Act. See Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 232, 84 S.Ct. 784, 789, 11 L.Ed.2d 661 (1964); John Wright, Inc. v. Casper Corp., 419 F.Supp. 292, 317 (E.D.Pa.1976), modified sub nom. Donsco, Inc. v. Casper Corp., 587 F.2d 602 (3rd Cir. 1978); Markel v. Scovill Mfg. Co., 471 F.Supp. 1244, 1249 (W.D.N.Y.), aff'd, 610 F.2d 807 (2d Cir. 1979). If diversity factors exist, federal courts of course have jurisdiction to hear suits asserting these state law protections. 6 Thus, a plaintiff complaining of trademark infringement in federal court may invoke either federal or state protections, or both. 7

Confusion as to the source of the substantive law is understandable because federal and state laws regarding trademarks and related claims of unfair competition are substantially congruent. See K-S-H Plastics, Inc. v. Carolite, Inc., 408 F.2d 54, 59 n.2 (9th Cir.), cert. denied, 396 U.S. 825, 90 S.Ct. 69, 24 L.Ed.2d 76 (1969); Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366, 372 (1st Cir. 1980); Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368, 382 n.14 (5th Cir. 1977); La Societe Anonyme des Parfums le Galion v. Jean Patou, Inc., 495 F.2d 1265, 1270 n.5 (2d Cir. 1974); Maternally Yours, Inc. v. Your Maternity Shop, Inc., 234 F.2d 538, 540 n.1 (2d Cir. 1958). Therefore the choice of federal or state law frequently has no impact on the outcome, leading courts to avoid the issue. See, e. g., K-S-H Plastics, Inc. v. Carolite, Inc., 408 F.2d 54, 59 n.2 (9th Cir. 1969); Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366, 372 (1st Cir. 1980). This does not, however, alter the fact that there are distinct federal and state rights.

Neither of the litigants before us has distinguished between state and federal law. Job's Daughters has brought what might best be characterized as a hybrid action by relying on federal substantive law but apparently invoking the district court's diversity jurisdiction. Our examination of the pleadings, trial transcript, and briefs persuades us that, despite the invocation of diversity jurisdiction, Job's Daughters intended to assert its federal rights under 15 U.S.C. § 1125. 8 Therefore, we shall treat this case as within the jurisdiction of the district court pursuant to 28 U.S.C. § 1338. See Vukonich v. Civil Service Comm'n, 589 F.2d 494, 496 n.1 (10th Cir. 1978).

II INFRINGEMENT

This court held in New West Corp. v. NYM Co. of California, 595 F.2d 1194 (9th Cir. 1979), that section 43 of the Lanham Act, 15 U.S.C. § 1125(a), created a federal remedy against the deceptive use of unregistered trademarks to designate falsely the origin of goods ("passing off"). 595 F.2d at 1198, 1201. New West also held that the test for false designation of origin was similar to that for infringement of a registered trademark under 15 U.S.C. § 1114. Both statutes preclude the use of another's trademark in a manner likely to confuse the public about the origin of goods. 595 F.2d at 1201. Thus, we must decide whether Lindeburg is likely to confuse the public about the origin of its jewelry by inscribing the Job's Daughters name and emblem on it.

Resolution of this issue turns on a close analysis of the way in which Lindeburg is using the Job's Daughters insignia. In general, trademark law is concerned only with identification of the maker, sponsor, or endorser of the product so as to avoid confusing consumers. Trademark law does not prevent a person from copying so-called "functional" features of a product which constitute the actual benefit that the consumer wishes to purchase, as distinguished from an assurance that a particular entity made, sponsored, or endorsed a product.

The distinction between trademarks and functional features is illustrated in Pagliero v. Wallace...

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