National Distillers Products Corp. v. K. TAYLOR D. CO.

• Decision Date: 24 February 1940
• Docket Number: No. 1197.,1197.
• Citation: 31 F. Supp. 611
• Parties: NATIONAL DISTILLERS PRODUCTS CORPORATION et al. v. K. TAYLOR DISTILLING CO., Inc.
• Court: U.S. District Court — Eastern District of Kentucky

31 F. Supp. 611

NATIONAL DISTILLERS PRODUCTS CORPORATION et al. v. K. TAYLOR DISTILLING CO., Inc.

No. 1197.

District Court, E. D. Kentucky.

February 24, 1940.

D. L. Hazelrigg and Louis Cox, both of Frankfort, Ky., and Breed, Abbott & Morgan, Edward S. Rogers, and Gerald J. Craugh, of New York City, for plaintiffs.

Leslie W. Morris and Marion Rider, both of Frankfort, Ky., S. S. Yantis, of Lexington, Ky., and Sanford H. Cohen, of New York City, for defendant.

FORD, District Judge.

The parties to this litigation are corporations engaged in the business of making and selling whiskey. Their respective places of business are located in Kentucky. The plaintiff, National Distillers Products Corporation, was organized in 1924 under the laws of Virginia and the Old Taylor Distillery Company, Incorporated, a Maryland corporation, is its wholly owned subsidiary. The defendant, the K. Taylor Distilling Company, Incorporated, was organized under the laws of the State of Delaware in August 1933.

The plaintiffs seek an injunction to restrain the defendant from using as a part of its corporate name or in connection with its business the names "K. Taylor", "Kenner Taylor", "The K. Taylor Distilling Company" or any other name of which the word "Taylor" forms a part, on the ground that such use of those names or either of them constitutes unfair competition with the plaintiffs and infringement of plaintiffs' trade marks "Old Taylor" and "E. H. Taylor, Jr. & Sons". The plaintiffs also seek from the defendant an accounting for the profits realized from its alleged wrongful conduct and for the damages sustained by plaintiffs thereby.

For more than fifty years before his death in 1923, E. H. Taylor, Jr., was engaged in the distillation and sale of straight Kentucky Bourbon whiskey. His distilleries were located in Franklin County, Kentucky, and the adjacent county of Woodford. In 1887 he formed a partnership with his two sons, J. S. Taylor and Kenner Taylor, under the firm name of E. H. Taylor, Jr. & Sons. By that time his fame as a distiller of fine Bourbon whiskey had become widespread, and the whiskey produced by his firm and sold under the trade name of "Taylor" and "Old Taylor" gained rapidly in popularity.

In the panic of 1893, the firm encountered financial difficulties and the partnership, as well as the individual partners, made general assignments for the benefit of their creditors.

In 1894, E. H. Taylor, Jr., and his sons, J. S. and Kenner, organized a corporation under the name of "E. H. Taylor, Jr. & Sons". Soon thereafter their corporation acquired the distillery plant and all other assets of their former partnership and resumed the manufacture and sale of whiskey under the brands "Taylor" and "Old Taylor". It appears that after 1910 the single word "Taylor" was seldom, if ever, used as the brand name, but thereafter the words "Old Taylor" and the script signature of the corporation "E. H. Taylor, Jr. & Sons" appeared conspicuously upon all labels and in all the advertising matter of the corporation.

For many years and at great expense the corporation extensively advertised its product under its brand name "Old Taylor" especially in the principal business centers of the United States. The result was that "Old Taylor" whiskey became celebrated on the American market as a Bourbon whiskey of superior quality. It is estimated by the witness, Edmund W. Taylor, a younger son of E. H. Taylor, Jr., who came into the business some years after the organization of the corporation, that up to 1923, approximately fifty million bottles of "Old Taylor" whiskey were produced and sold by the corporation. The word "Taylor" came into such general use by a large part of the trade and the purchasing public, in referring to the whiskey produced by E. H. Taylor, Jr. & Sons, that it acquired a "secondary meaning" descriptive of and identifying that particular product. G. & C. Merriam Co. v. Saalfield, 6 Cir., 198 F. 369. That at some time in the past, to the insignificant extent shown in this record, a few small producers of whiskey for a limited time used the name "Taylor" in connection with their products, does not negative the fact that a secondary meaning ultimately became definitely attached to the name, denoting the whiskey produced by E. H. Taylor, Jr. & Sons. Clark Thread Co. v. Armitage, C.C., 67 F. 896. Recognition of this secondary meaning which thus became attached to the name "Taylor" and an effort to exploit it to defendant's advantage is found in a brochure which defendant had published and circulated in 1935 entitled "Taylor-Made Whiskies". In this advertisement, the defendant prominently displayed the pictures of E. H. Taylor, Jr., and two of his sons who were associated with him in his business, accompanied with the inscription "The True Significance of the Name Taylor", followed by the statement, "The name of Taylor has long been the symbol of the finest Kentucky Bourbon that money can buy."

Soon after the death of E. H. Taylor, Jr., all of the stock owned by the members of his family in the corporation, "E. H. Taylor, Jr. & Sons", was sold. Through a series of transactions, the details of which are immaterial here, the ownership of the assets and business of the Taylor corporation, including its trade names, trade marks and good will, passed to and became the property of the plaintiff, National Distillers Products Corporation, the present owner thereof. The other plaintiff, the Old Taylor Distillery Company, owns none of these assets and has disclosed no interest in or right to any of the relief herein sought. It is really nothing more than a name under which the National Distillers Products Corporation produces and distributes its Old Taylor whiskey. All references hereinafter made to the plaintiff relate solely to National Distillers Products Corporation.

Among the assets purchased from E. H. Taylor, Jr. & Sons was a large quantity of "Old Taylor" whiskey in storage. Notwithstanding the sale and distribution of such whiskey was for a time limited by National Prohibition to medicinal purposes, the sales of "Old Taylor" whiskey by plaintiff and its predecessors, in the period from December 1, 1927, to the repeal of National Prohibition in 1933, aggregated more than $2,000,000. Since the repeal of National Prohibition, the plaintiff and its predecessors have expended large sums in advertising "Old Taylor" whiskey, and the aggregate sales from 1933 to May 31, 1937, amounted to more than $3,000,000.

The brand name "Old Taylor" was never abandoned by the plaintiff or its predecessors, as is contended by the defendant, but its whiskey has been continuously on the market under that name to the present time.

In 1933, several months before the repeal of National Prohibition, S. S. Yantis, of Lexington, Ky., and several associates including his relative, F. S. Yantis, of New York, a member of the firm of F. S. Yantis & Company, Investment Brokers, became interested in a former distillery site located near Forks of Elkhorn in Franklin County, Ky., and it was purchased by them with the view of promoting an enterprise for the manufacture of whiskey in the event of the repeal of National Prohibition, which seemed impending. On August 23, 1933, they organized the defendant corporation under the corporate name of "Franklin County Distilling Company" and the corporation took over the title to the property. At that time, Mr. Kenner Taylor, who had been actively associated with his father and brothers in the manufacture and sale of "Old Taylor" whiskey for approximately thirty years, was living in Frankfort, Ky. He was about seventy years of age. Since the sale of his interest in the corporate assets of E. H. Taylor, Jr. and Sons in 1923, he had engaged in no active business pursuits, but had recently expressed to several friends, in view of the prospect of the repeal of National Prohibition, his desire and purpose to again engage in his former business. His intimate knowledge of the business derived from long experience as the superintendent of the Old Taylor Distillery was a valuable asset and he was well and favorably known in that field of industry. S. S. and F. S. Yantis, being entirely without previous experience in the distillery business, were seeking the services of a man with such experience and qualifications to head their new enterprise. After failing in their efforts to interest two other prominent former distillers, they got in touch with Mr. Taylor. They had several conferences, as the result of which they reached an agreement which was reduced to writing on September 27, 1933. By the terms of the contract, Mr. Taylor agreed to at once accept the presidency of the new corporation and to perform all the duties of its chief executive officer in the direction and conduct of its affairs for a period of five years at a salary of $5,000 per annum. His salary was to begin when the distillery was put in operation. There was the further provision that he was to receive such additional compensation "as may be justified by the earnings and such as shall be determined and declared by the board of directors." The contract gave Mr. Taylor the option to purchase, at any time within five years, ten thousand (10,000) shares of the common capital stock of the corporation or any part thereof at the price of $2.50 per share and the corporation obligated itself to hold that amount of its stock available for him and subject to his call. The corporation was to equip, furnish and maintain an office in the city of Frankfort for his use and occupancy in the performance of his duties as its president and to provide such subordinate officers and employees as might be necessary for the conduct and operation of the corporate business under his direction. As a part of the consideration of the contract, Mr. Taylor agreed that at its election the corporation might use his personal name in its corporate name and, subject to his approval as...