LP Larson, Jr., Co. v. William Wrigley, Jr., Co.

• Decision Date: 30 August 1927
• Docket Number: 3728.,No. 3727,3727
• Parties: L. P. LARSON, JR., CO. v. WILLIAM WRIGLEY, JR., CO. WILLIAM WRIGLEY, JR., CO. v. L. P. LARSON, JR., CO.
• Court: U.S. Court of Appeals — Seventh Circuit

20 F.2d 830 (1927)

L. P. LARSON, JR., CO. v. WILLIAM WRIGLEY, JR., CO.

WILLIAM WRIGLEY, JR., CO. v. L. P. LARSON, JR., CO.

Nos. 3727, 3728.

Circuit Court of Appeals, Seventh Circuit.

April 2, 1927.

Rehearing Denied August 30, 1927.

Chas. H. Aldrich and Geo. I. Haight, both of Chicago, Ill., for L. P. Larson, Jr., Co.

Wallace R. Lane and Isaac H. Mayer, both of Chicago, Ill., for William Wrigley, Jr., Co.

Before ALSCHULER, EVANS, and PAGE, Circuit Judges.

ALSCHULER, Circuit Judge.

Both parties appeal from a decree which awarded L. P. Larson, Jr., Company (herein called Larson) $1,384,649.12, as net profits on sales by Wm. Wrigley, Jr., Company (herein called Wrigley) of the latter's brand of "Doublemint" gum sold in package dress held by this court to have infringed Larson's "Wintermint" gum package. The decree for the accounting was awarded pursuant to the direction of this court as made in Larson, Jr., Co. v. Wrigley, Jr., Co. (C. C. A.) 253 F. 914. During the accounting certain questions arose, which were brought to, and considered and determined by, this court. In re Larson, Jr., Co. (C. C. A.) 275 F. 535. The facts leading to these adjudications, together with quotations from those opinions here applicable, and the propositions there and here in controversy, are clearly and sufficiently set forth in Judge Wilkerson's opinion disposing of exceptions by Wrigley to the master's report. Wrigley, Jr., Co. v. Larson, Jr., Co. (D. C.) 5 F.(2d) 731. The thousands of pages of evidence taken before the master, the near 1,500 pages of briefs submitted here, with indexed citations (including duplications) of over 800 cases, have imposed on us a task of no mean proportions, in considering the various more or less complicated questions.

At the threshold we are met with the question of the scope of the accounting under the decree — whether Wrigley must account for all sales of "Doublemint" in the infringing dress, or only such as were made in territory wherein Larson competed with Wrigley, and incidentally whether Wrigley was entitled to show that "Doublemint," however in the infringing dress, was sold with knowledge on the part of purchasers that it was Wrigley's product, or whether the sales were made because of the superiority of the Wrigley product, and faith in the Wrigley name, and to no extent because of Larson's standing or reputation in the trade.

We are in accord with Judge Wilkerson's reasoning and conclusion that the decisions of this court determined the law of the case thereon, and that the accounting was to be for profits arising from all the sales — meaning, of course, the net profits. The consolidated causes involved in the first appeals had been fully heard upon their merits, and, pursuant to the reversing and remanding order for decree on Larson's counterclaim, the District Court entered its decree for an accounting for all the profits, and, if there remained any question as to the law of the case in this regard, it was settled by this court upon the subsequent appeal and mandamus proceedings here. (C. C. A.) 275 F. 535.

But, apart from the proposition of the law of the case, we are satisfied that under the very exceptional circumstances here appearing Wrigley is in no position to claim that Larson did not compete, and was an unknown factor in much of the territory wherein "Doublemint" was sold. The forestalling and oppressive tactics employed by Wrigley, for the purpose of eliminating Larson as an actual or potential competitor, cry out against Wrigley's urging in defense the success of these very tactics. Wrigley may not thus lawlessly clip Larson's wings, and escape liability for the profits of its appropriation of Larson's package dress on the plea that Larson could not fly.

If the rule contended for by Wrigley were here to prevail, it is apparent that little or no proof could be made of substantial profits, or damages either. It would be manifestly impossible, even if the infringement were of the "Chinese copy" variety, to show that, but for the sale of Wrigley's "Doublemint" in the infringing dress, the individual users would have purchased Larson's "Wintermint." Even if in a few instances this might be done, it would be humanly impossible, even though the effort and expense were not prohibitive, to have sought out and produced the evidence from any considerable number of users. Neither could it be known into what territory Larson would have pushed its trade, but for Wrigley's oppressive and forestalling practices. The entrant into a field of endeavor might, thus early in his business career, be throttled and eliminated from competition, and his distinctive trade dress seized and used by a powerful opponent, with no measure for affording adequate relief. The more flagrant, and therefore the more effective, the invasion of another's rights, the more certain and complete would be the invader's immunity. Injunctive relief may be sufficient for the future, but the invasion, during the years of litigation to secure it, must be otherwise dealt with.

Under all the circumstances, we do not see how, in this case, a measure of recovery less than award of the entire net profits from the use of the infringing package would afford due measure of reparation. That an award on this basis might permit recovery of a larger sum than would likely have been the net profits of the injured party, if left undisturbed, is an incident of the invasion of which this invader is not in position to complain. The account which Wrigley filed with the master showed for the accounting period (July 28, 1914, to December 2, 1918) total sales of all brands of gum (except in Canada and Australia) of nearly $57,000,000, of which the total of "Doublemint" in the infringing dress was almost $9,000,000, and the gross profits attributable to "Doublemint" $5,152,689.32. As to these figures there is no controversy.

The contested issues on the accounting arise over allowance or rejection of various items claimed by Wrigley in reduction of this gross "Doublemint" profit. The first Wrigley account filed showed items which indicate for the entire accounting period some loss on "Doublemint." A supplemental account, later filed on its behalf, introduced additional items in reduction, which show much greater loss for the period.

Advertising.

The item of most importance, and perhaps most sharply controverted, is that of advertising. For years prior to putting out the "Doublemint" brand Wrigley was an extremely heavy advertiser, and before placing "Doublemint" on the market had established a large trade in gum — "Spearmint" being its specially advertised brand. On putting out the "Doublemint" brand, a very heavy and extensive advertising program was inaugurated, and for a considerable time "Doublemint" was greatly stressed. The previously heavily advertised "Spearmint" continued also to be much advertised, and later the policy seemed to be to put special stress on the name "Wrigley," but including both "Doublemint" and "Spearmint" in the advertising matter. Still later in the period Wrigley brought out the "Juicy Fruit" brand, and advertised it with the rest, though not so extensively as "Doublemint." The total expended during the accounting period for advertising, such as newspaper, magazine, bill board, street car advertising, electric signs, and the like, was $6,798,662.73.

Intricate computations of the advertising items were made, each on a different basis, for allocating to "Doublemint" its proper proportion of these items. Wrigley's accountant assigned to "Doublemint" $2,872,844.43, while Larson's accountant fixed it at $1,017,183.59. The master worked out a complicated system whereby a very considerable portion of the advertising was charged up as "institutional," to be amortized in four years; that is, one-fourth of the cost to be charged off for each year as the expense for that year of such advertising. In this way alone much of the advertising expense for the last three years of the period was projected forward; for example, for an "institutional" advertisement for the last year of the accounting period only one-fourth would be charged against the gross profits for that period, and three-fourths projected beyond that period, upon the theory that the advertisement, though contracted and paid for in the first year, will be effective as an advertisement for four years, and that such future benefit will accrue to Wrigley as an institution. We cannot accept as practically probable the proposition that an advertisement is as potent throughout a four-year period as during the year of its publication. And this applies, in large measure, as well to much of the more permanent forms of advertising, such as billboards and electric signs. In time even these become obsolete and stale, and from time to time are renewed or changed, to say nothing of the cost of upkeep. Besides, all of that part of the advertising cost attributable wholly to the infringing "Doublemint," which remained unearned at the close of the accounting period, became lost to Wrigley through the injunction. Nevertheless, the expense for this advertising had been contracted and paid for in good faith, and however it may have been wholly or partly unearned at the close of the accounting period, it was none the less an expense which should be deducted in fixing the net profits on "Doublemint." Where the injured party seeks the profits of an infringer, he takes the chance of their reduction, or even extinguishment, through expenses and losses actually incurred, however unwisely or even improvidently, so long only as they were incurred in good faith.

Our investigation of the record and consideration of the briefs convinces us that far too large a part of the advertising expense was, by the master's report, accredited to the future, and not sufficient to the accounting period, and that much too small a part of the entire advertising costs was attributed to "Doublemint....