Landstrom v. Thorpe

• Decision Date: 04 May 1951
• Docket Number: No. 14224.,14224.
• Citation: 189 F.2d 46
• Parties: LANDSTROM et al. v. THORPE et al.
• Court: U.S. Court of Appeals — Eighth Circuit

189 F.2d 46 (1951)

LANDSTROM et al. v. THORPE et al.

No. 14224.

United States Court of Appeals Eighth Circuit.

May 4, 1951.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Julius Skaug, Mobridge, S. D. (H. F. Fellows, Rapid City, S. D., and Pat Morrison, Mobridge, S. D., were with him on the brief) for appellants.

R. E. Driscoll, Jr., Rapid City, S. D., and Holton Davenport, Sioux Falls, S. D., for appellees.

Before GARDNER, Chief Judge, and THOMAS and RIDDICK, Circuit Judges.

THOMAS, Circuit Judge.

This is an appeal by the defendants from a judgment for the plaintiffs entered upon the verdict of a jury for $15,000 actual damage and $10,000 exemplary damage. The complaint was in one count. Damages were demanded for wrongful registration of the trade-mark "Black Hills Gold", and for unfair competition. Defendants' motion for a directed verdict was overruled.

The plaintiffs are doing business as a partnership under the firm name of F. L. Thorpe & Co. The defendants are also a partnership under the name Black Hills Jewelry Co. All the parties were and are citizens of the state of South Dakota.

For several years prior to this litigation and until the present time the parties hereto and others in the Black Hills region of South Dakota have manufactured and sold in interstate commerce and locally jewelry made of gold produced in the Black Hills and elsewhere under trade names such as Black Hills Gold, Black Hills Native Gold, Black Hills Jewelry, Black Hills Gold Jewelry, and others.

On March 4, 1947, the defendant Ivan E. Landstrom procured the registration of the trade-mark "Black Hills Gold", having on February 13, 1946, executed and filed in the Department of Commerce, United States Patent Office, a "Declaration" reading:

"Ivan E. Landstrom, being duly sworn, deposes and says that he is the applicant named in the foregoing statement; that he believes said statement is true; that he believes himself to be the owner of the trademark sought to be registered; that no other person, firm, corporation, or association, to the best of his knowledge and belief, has the right to use said trade-mark in the United States, either in the identical form or in any such near resemblance thereto as might be calculated to deceive; that said trademark is used by him in commerce among the several states of the United States: * * *."

On September 9, 1947, defendants sent a letter to 438 of their customers, 109 of whom were also customers of the plaintiffs, reading in essential part:

"Gentlemen:

"It is with a great deal of pleasure that we inform you at this time that the name `Black Hills Gold' is now a registered trade mark bearing number 428039 in the United States Patent Office.

"From now on every piece of jewelry manufactured by our firm will bear the trade-mark `Black Hills Gold' and will be easily identifiable by you. * * * Although there are several firms making merchandise similar to ours, we are the only rightful users of the name `Black Hills Gold', and any other dealer marking his product with this trade-mark will be punishable according to law."

Thereafter, in October, 1947, the plaintiffs made application for the cancellation of the registration of the trade-mark on the ground that plaintiffs had used the trademark in their business since 1919; that plaintiffs had used it in interstate commerce since 1932; that their business had been affected by defendants' use of the trademark. The Commissioner of Patents ordered the cancellation of the registration on April 4, 1949, on the ground that the Declaration, supra, filed by Ivan E. Landstrom was false and fraudulent. This suit followed.

Jurisdiction is predicated upon 15 U.S.C. A. §§ 1120-1121, and 28 U.S.C.A. § 1338(b).

In their amended complaint the plaintiffs, after setting out in detail the foregoing facts, alleged that such facts were all a part of a wrongful scheme by fraudulent methods to disrupt the business of the plaintiffs and thereby wrongfully to acquire their business; that the first step in such scheme was the wrongful and fraudulent securing of the registration of the trade-mark "Black Hills Gold" in the Patent Office; that the second step was the extensive advertising campaign of the defendants including the letter of September 9, 1947, supra; and that the third step consisted of the circulation throughout the jewelry trade of propaganda similar to the letter of September 9th.

Damages were demanded (1) in the sum of $5,000 for expenses incurred in procuring the cancellation of the registration of defendants' trade-mark in the United States Patent Office; (2) $100,000 for injury to the plaintiffs' business and reputation in the jewelry business and the burden of their efforts to counteract defendants' wrongful propaganda; and (3) for $50,000 exemplary damages.

The defendants admitted that they constituted a partnership doing business under the name Black Hills Jewelry Mfg. Co.; alleged that the complaint fails to state a claim upon which relief can be granted; and denied all other allegations of the complaint.

On appeal the defendants contend (1) that the court did not have jurisdiction, (2) that the court erred in certain instructions to the jury, (3) in the admission of evidence, (4) in denying defendants' motion to strike plaintiffs' claim for attorney fees, and (5) in denying defendants' motions for a directed verdict.

This is a non-diversity case, and the defendants contend that the district court did not have jurisdiction in such a case "because the complaint alleges upon two separate unrelated claims, (1) for damages for wrongful registration of a trade-mark based upon 15 U.S.C.A. § 1120, and (2) a claim for damages for unfair competition based upon disparagement of title, a common law tort not actionable under federal law, * * *" except in diversity cases.

The statutes involved are:

15 U.S.C.A. § 1120: "Any person who shall procure registration in the Patent Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof."

15 U.S.C.A. § 1121: "The district and territorial courts of the United States shall have original jurisdiction, the circuit courts of appeal of the United States and the United States Court of Appeals for the District of Columbia shall have appellate jurisdiction, of all actions arising under this chapter, without regard to the amount in controversy or to diversity or lack of diversity of the citizenship of the parties."

28 U.S.C.A. § 1338(b): "The district courts shall have original jurisdiction of any civil action asserting a claim of unfair competition when joined with a substantial and related claim under the copyright, patent or trade-mark laws."

Defendants concede that the complaint sets out a cause of action for damages "sustained in consequence" of the wrongful registration of the trade-mark "Black Hills Gold" under § 1120, supra, and that the proof is substantially as alleged in so far as such proof may affect jurisdiction, but that the claims for damages to plaintiffs' business and reputation and for exemplary damages constitute a claim for unfair competition wholly unrelated to the claim for wrongful registration; in short, that such alleged damages were not "sustained in consequence" of the wrongful registration, but that the proof is directed to the effect of the letter of September 9, 1947, sent by the defendants to their customers including 109 of plaintiffs' customers.

The merit of this contention depends upon the proper construction and application of §§ 1120 and 1338(b), supra.

We think that § 1120 means that any person who procures registration of a trade-mark by a false declaration is liable in a civil action in the federal court to any person injured by the trade-mark "for any damages sustained in consequence thereof", that is, resulting from the use of the "mark" while falsely registered, and not an injury resulting from the false declaration solely. Webster's New International Dictionary defines "consequence" as "That which follows something on which it depends; * * Chain of causes and effects; * * * relation of an effect to a cause." In 15 C.J.S., Consequence, page 982, it is said: "When an event is followed in natural sequence by a result which it is adapted to produce, or aid in producing, that result is a consequence of the event." See, also, Orient Mutual Ins. Co. v. Adams, 123 U.S. 67, 74, 8 S.Ct. 68, 31 L.Ed. 63; Zalkind v. Scheinman, 2 Cir., 139 F.2d 895; Kaplan v. Helenhart Novelty Corporation, 2 Cir., 182 F.2d 311, 312. The false declaration induced a fraudulent registration and the defendants were liable in a civil action for any damages resulting therefrom.

The claim for damages for unfair competition could be asserted in the same action, however, under § 1338(b), supra, provided it were "joined with a substantial and related claim under the * * * trade-mark laws." This is true because the claim for damages for unfair competition is a common law cause of action and not a federal cause. For such a claim to be "related" to a case arising under the trade-mark law within the meaning of the statute "it must appear that both federal and non-federal causes of action rest upon substantially identical facts." French Renovating Co. v. Ray Renovating Co., 6 Cir., 170 F.2d 945, 947; Hurn v. Oursler, 289 U. S. 238, 248, 53 S.Ct. 586, 77 L.Ed. 1148; Armstrong Paint & Varnish Works v. Nu-Enamel Corp., 305 U.S. 315, 325, 59 S.Ct. 191, 83 L.Ed. 195; Kaplan v. Helenhart Novelty Corporation, 2 Cir., 182 F.2d 311; Hanson v. Triangle Publications, Inc., 8 Cir., 163 F.2d 74, certiorari denied, 332 U.S. 855, 68 S.Ct. 387, 92 L.Ed. 424.

Damages resulting from the wrongful registration of the trade-mark and for unfair competition must necessarily be proven by the same evidence. It follows that the district court had...