Lawrence-Williams Co. v. Societe Enfants Gombault et Cie

• Decision Date: 08 October 1931
• Docket Number: No. 5669,5670.,5669
• Citation: 52 F.2d 774
• Parties: LAWRENCE-WILLIAMS CO. v. SOCIETE ENFANTS GOMBAULT ET CIE.
• Court: U.S. Court of Appeals — Sixth Circuit

52 F.2d 774 (1931)

LAWRENCE-WILLIAMS CO. v. SOCIETE ENFANTS GOMBAULT ET CIE.

Nos. 5669, 5670.

Circuit Court of Appeals, Sixth Circuit.

October 8, 1931.

A. A. Stearns, of Cleveland, Ohio (Stearns, Chamberlain & Royon, of Cleveland, Ohio, on the brief), for Lawrence-Williams Co.

Lanier McKee, of New York City (Hervey, Barber & McKee, of New York City, Garfield, Cross, MacGregor, Daoust & Baldwin, of Cleveland, Ohio, Arthur Wm. Barber, of New York City, and James R. Garfield and Arthur D. Baldwin, both of Cleveland, Ohio, on the brief), for Sociète Enfants, etc.

Before DENISON, MOORMAN, and HICKS, Circuit Judges.

DENISON, Circuit Judge.

We herein designate as plaintiff the Gombault Company, plaintiff below, and as defendant the Lawrence-Williams Company, defendant below. Upon a former appeal, reported in 22 F.(2d) 512, we held that the trade-mark rights involved belonged to plaintiff, and affirmed an interlocutory decree for injunction and accounting. Thereafter the master ascertained and reported the profits which defendant had made, the report was confirmed, and a decree entered for the recovery of the profits so found. This appeal follows.

Upon this record there appears an important fact which was not shown by the former record. The contract relations between plaintiff and defendant terminated February 18, 1925. On May 26, 1925, plaintiff entered into a new contract with Schnabel, by which the latter received and assumed practically the same status and rights which defendant had held under the old contract; that is, Schnabel became the exclusive representative of plaintiff in the United States and Canada, and was the exclusive distributor of the trademarked product. Plaintiff manufactured this product in France under a secret formula and furnished it to Schnabel at a stated price. Plaintiff could sell to no one else and Schnabel could procure it from no one else. The entire business of selling in the United States and Canada belonged to Schnabel, and was under his exclusive control. He had the exclusive right to use the trade-mark in question, and not even plaintiff could have made a sale or used its trade-mark in this country, excepting as the business was done through Schnabel. By analogy to patent contracts, Schnabel became exclusive licensee to use and sell, while plaintiff retained the exclusive right to make. There was therefore a period of only about three months within which plaintiff had the unincumbered title to the trade-mark, and had whatever rights flowed therefrom under these circumstances. It also became a part of the situation that, before this suit was commenced (September, 1925), plaintiff had conveyed to Schnabel certain interests in the trade-mark rights. Schnabel was not a party to this suit and is not a resident of the district. After our former decision was announced, defendant filed a petition for rehearing, setting up the fact of the conveyance to Schnabel and his interest, making some excuse for not earlier raising the question, and asking that our opinion be withdrawn and the bill ordered to be dismissed because Schnabel was a necessary party. We treated this as merely a belated raising of the question of parties and, for that reason, denied it. Shortly thereafter, defendant applied to the master to discontinue the accounting proceedings for profits, upon the ground that Schnabel was the only one entitled to recover these profits. The master held that it was not within his province to pass upon such question, but that it was his duty to make full report and leave any such question for the court. One of the defendant's exceptions to the master's report was that "the profits of the defendant under the circumstances of this case are not recoverable." Passing upon the master's report, the District Judge did not specifically consider the effect of the outstanding Schnabel interest, but thought that the general liability for all profits was established by the former decrees.

Plaintiff now makes two objections to the present consideration of the question whether defendant was generally liable to plaintiff for profits. The first is that the court below, in the order of reference which directed the accounting, did not reserve until the coming in of the master's report the consideration of whether a general liability for profits existed. Upon this point counsel differ in their construction of the language of the trial judge in his opinion and order thereon; but we do not see that their difference is material. The order of reference was interlocutory; the right to consider or reconsider all questions upon the coming in of the master's report, was necessarily reserved to the court; it makes no difference whether the reservation was express.

The next point is that, the defendant's liability for profits having been adjudicated by this court on the former appeal, it is not open for review on the present appeal. Since the decision in Messinger v. Anderson, 225 U. S. 436, 444, 32 S. Ct. 739, 56 L. Ed. 1152, we have frequently had occasion to say that we have the power, upon a second appeal, to review and revise a conclusion reached upon the first appeal, and that, although the first opinion becomes the law of the case for the court below, it does not in the strictest sense have that character in this court — although such review and change of opinion will occur only in very exceptional cases. See Chesapeake & O. R. Co. v. McKell (C. C. A.) 209 F. 514.

We have no particular occasion here to apply this principle, because we do not regard our former opinion as intended to decide, or as effective to decide, the question now made. It is true that the decree below had, in customary formula, directed an accounting of profits and damages, and that we affirmed this decree; but we find no adjudication that any particular money or class of money received by defendant did constitute recoverable profits. We interpret the decree as intended to mean that there should be an accounting of profits which the defendant had received and that there should be recovery of whatever profits, whether the whole or part of those received by defendant, which, under the applicable rules of equity, ought to be treated as having been earned for and as belonging to the plaintiff. Plainly this might or might not reach all or any of the actual profits which defendant had received in the general subject-matter, when and after their character was ascertained, and the necessary basis for awarding judgment was seen.

Though the assignments of error complained generally of the order to account for profits and damages, the contention that defendant's actual profits were of the character which they now turn out to be and were therefore not recoverable, was not presented in brief or oral argument, or considered in our opinion. It is not foreclosed against our present examination.

These two objections being insufficient, we come to the controlling question, whether these particular profits are recoverable by the plaintiff. Plaintiff relies upon the principles which in patent cases support the rule that the profits derived from selling a patented article equitably belong to the owner of the patent. Some decisions indicate just as broad a rule as to technical trademarks. The analogy does not seem complete. A patent monopoly is property in itself. It is in gross. It is not appurtenant to anything. A trade-mark, on the other hand, has no existence in gross. It is collateral and appurtenant to the carrying on of a particular business. It endures without time limitation so long as the business does; it disappears upon the discontinuance of the business. These trade-mark principles are elementary, but in late years they have been extended and emphatically applied by the Supreme Court in the Hanover Milling Company Case, 240 U. S. 403, 36 S. Ct. 357, 60 L. Ed. 713, and the Rectanus Case, 248 U. S. 90, 39 S. Ct. 48, 63 L. Ed. 141. These cases hold that although a plaintiff has duly adopted a proper trade-mark and is carrying on (interstate) business under it, yet if ...