John T. Lloyd Laboratories, Inc. v. Lloyd Bros. Pharm.

• Decision Date: 30 November 1942
• Docket Number: No. 9151.,9151.
• Citation: 131 F.2d 703
• Parties: JOHN T. LLOYD LABORATORIES, Inc., et al. v. LLOYD BROTHERS PHARMACISTS, Inc., et al.
• Court: U.S. Court of Appeals — Sixth Circuit

131 F.2d 703 (1942)

JOHN T. LLOYD LABORATORIES, Inc., et al. v. LLOYD BROTHERS PHARMACISTS, Inc., et al.

No. 9151.

Circuit Court of Appeals, Sixth Circuit.

November 30, 1942.

Francis A. Hoover and Oliver G. Bailey, both of Cincinnati, Ohio, for appellants.

Truman A. Herron, of Cincinnati, Ohio, (Edward B. Evans, Wood, Arey, Herron & Evans and John N. Gatch, all of Cincinnati, Ohio, on the brief), for appellees.

Before SIMONS, HAMILTON, and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

John Uri Lloyd, author, teacher and pharmacist, was a distinguished exponent of the eclectic school of medical thought. In collaboration with a celebrated teacher of materia medica, he originated and developed a long list of pharmaceutical preparations of plant derivation, which acquired widespread usage by prescription of eclectic physicians. These physicians, of whom there are some four thousand, are primarily herbalists.

The principal achievement of John Uri Lloyd was his contribution to the solution of the problem of extracting the medicinal properties of plants in such manner as to preserve maximum therapeutic values. He invented distilling and percolating equipment to that end, and developed numerous special "menstruums," or solvents, for extracting particular products from various drugs. The ingredients of these "menstruums" were usually a simple mixture of alcohol and water, but other components were also used. The formulae of these "menstruums" were carefully secreted and their disclosure guarded.

In partnership with his brothers, John Uri Lloyd organized a pharmaceutical business, later incorporated under the laws of Ohio as Lloyd Brothers Pharmacists, Inc., for the purpose of manufacturing and distributing medicines generally prescribed by eclectic physicians and, to some extent, by non-eclectics.

After the Lloyd family pharmaceutical business had been conducted successfully for many years, John T. Lloyd, at the request of his father, John Uri Lloyd, left his position on the staff of Cornell University, from which he had been graduated as a Ph.D. in Biology, and became associated with his father's company. The son started in to learn how the Lloyd preparations were made, attended lectures on pharmacy and medicine at the Cincinnati College of Pharmacy, the University of Cincinnati, and the Eclectic School of Medicine in that city. He worked under his father in the research department and, when the latter's health failed, assumed charge of the laboratories.

After his son had been associated with him in his life work for many years, John Uri Lloyd died in 1936, owning the entire capital stock of Lloyd Brothers Pharmacists, Inc., except a few shares held by his son and his two daughters. His will directed that three named trustees should hold his stock in the corporation and dispose of it in solido. The will provided that the proceeds from the sale of the stock should be divided among the testator's two daughters and his son, John T. Lloyd.

Over the litigated opposition of the son, the testamentary trustees sold the stock of the testator in Lloyd Brothers Pharmacists, Inc., to S. B. Penick & Company, a Delaware corporation. At the instance of its new controlling stockholder, Lloyd Brothers Pharmacists, Inc., on May 11, 1938, executed a bill of sale to S. B. Penick & Company of all its formulae, processes, inventions, personal property and assets, excepting only a specified sum of money and expressly "including its good will and the right to use its name." On August 1, 1938, its trade-marks and the good will connected therewith were assigned to S. B. Penick & Company.

John T. Lloyd did not resign his salaried position as vice-president of Lloyd Brothers Pharmacists, Inc., until a few days after he had been finally thwarted by the Supreme Court of Ohio in his effort to prevent consummation of the sale of his father's stock in that company. The share which the son received from the sale of his father's stock to S. B. Penick & Company aggregated more than $100,000.

In the latter part of 1938, John T. Lloyd obtained under the laws of Ohio a corporate charter for "John T. Lloyd Laboratories, Inc.," which was organized for the purpose of competing directly, in the sale of pharmaceutical preparations, with S. B. Penick & Company, doing business as Lloyd Brothers Pharmacists, Inc. His new corporation adopted and used in its business the trade-mark "Lloydson."

In leaving Lloyd Brothers Pharmacists, Inc., John T. Lloyd took with him a copy of the company's mailing list, embracing the names and addresses of its thousands of customers and prospective customers. This list was utilized by Lloyd's newly-organized company in the solicitation of sales for its pharmaceutical preparations, which were similar to those manufactured by the old company. Moreover, he took over with him to his new corporation the factory superintendent and the laboratory technician of Lloyd Brothers Pharmacists, Inc., both of whom had been long employed by that company and had possessed free access to its formulae and trade secrets.

The appellees, Lloyd Brothers Pharmacists, Inc., and S. B. Penick & Company, licensed to do business under the former's name, brought, under the trade-mark statutes of the United States, 15 U.S.C.A. § 81 et seq., the instant civil action in the District Court for Southern Ohio, praying damages and injunctive relief against appellants John T. Lloyd Laboratories, Inc., John T. Lloyd, individually, and Albert N. Brown, the laboratory technician who after thirty-one years of service had left the employ of Lloyd Brothers Pharmacists, Inc., to work for the appellant company.

Upon the evidence received at the trial, the district court found that purchasers and prospective purchasers of pharmaceutical preparations have been confused by the similarity between the corporate name of the appellee, "Lloyd Brothers Pharmacists, Inc.," and that of the appellant, "John T. Lloyd Laboratories, Inc.;" and that there has been like confusion between the names "Lloydson" and "John T. Lloyd" used by appellant John T. Lloyd Laboratories, Inc., and the names "Lloyd" and "Lloyd's," trade-marks owned and used by appellee, S. B. Penick & Company.

Accordingly, the district court enjoined the use by appellant corporation of the corporate name, "John T. Lloyd Laboratories, Inc." The use of the trade-mark "Lloydson" was also enjoined; but it was decreed that the appellant corporation was privileged to continue to use the trade-marks "Ferroloid," "Phytoloid," and "Echaloid."

Finding that the appellant corporation had published advertisements and issued circulars creating confusion and doubt as to whether the appellee corporation, S. B. Penick & Company, or the appellant corporation, John T. Lloyd Laboratories, Inc., is the successor to the good will of the business established by John Uri Lloyd, and as to whether John Uri Lloyd is now or was ever connected with the appellant corporation, the district court enjoined appellants "from representing that the business of John T. Lloyd Laboratories, Inc., is connected with, or is the outgrowth of, or in some way represents some extension of, or is the successor to, or constitutes in whole or in part, the business established by the late John Uri Lloyd and still being conducted by the plaintiff, S. B. Penick & Company, under the name of Lloyd Brothers Pharmacists, Inc."

The district court enjoined the appellant corporation from the manufacture and sale of medicinal preparations from formulae, secret processes, or technique imparted by John T. Lloyd or Albert N. Brown which had been obtained by them while they were employed in a confidential capacity by appellee, Lloyd Brothers Pharmacists, Inc.; and the individual appellants, Lloyd and Brown, were restrained from further disclosure to the corporate appellant of any such information so acquired by them. There was excepted from the operation of the injunction the use of what was termed the "mixing clear" process.

Utilization by the appellants, in whole or in part, directly or indirectly, of any mailing list obtained from appellees was also enjoined.

The decree below allowed the recovery by appellee, S. B. Penick & Company, from the appellant corporation, of profits and damages accruing from the infringement of its trade-marks, from the use of appellant's corporate name, "John T. Lloyd Laboratories, Inc.," from the use of appellee's mailing list, and the utilization of its trade secrets disclosed by the individual appellants John T. Lloyd and Albert N. Brown, and from "other acts of unfair competition." The appointment of a Special Master to ascertain such profits and damages was deferred, pending the determination of the issues on appeal.

Accepting, in conformity with Civil Procedure Rule 52(a), 28 U.S.C.A. following section 723c, the district court's findings of fact, all of which are supported by substantial evidence and are not "clearly erroneous," it is obvious that appellants have been guilty of unfair competition and trade-mark infringement against which appropriate relief should be granted. In some respects, the relief decreed in the district court is approved; but approval cannot be given in full measure to the decree entered.

1. The injunction against the use by appellants of the trade-mark "Lloydson" should remain in effect. The mere fact that its use was discontinued by them before the commencement of this action is...