New England Tel. & Tel. Co. v. National Merchandising Corp.

• Decision Date: 05 April 1957
• Citation: 141 N.E.2d 702,335 Mass. 658,63 A.L.R.2d 1085
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: , 63 A.L.R.2d 1085, 18 P.U.R.3d 343 NEW ENGLAND TEL. & TEL. CO. v. NATIONAL MERCHANDISING CORP. et al.

Page 702

141 N.E.2d 702

335 Mass. 658, 63 A.L.R.2d 1085, 18

P.U.R.3d 343

NEW ENGLAND TEL. & TEL. CO. v. NATIONAL MERCHANDISING CORP. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Dec. 4, 1956.

Decided April 5, 1957.

Charles C. Cabot, Boston, John M. Gepson and C. Duane Aldrich, Boston, for plaintiff.

Francis T. Leahy, Boston, for defendant.

Before WILKINS, C. J., and WILLIAMS, COUNIHAN and CUTTER, JJ.

CUTTER, Justice.

The plaintiff (hereinafter called the telephone company) provides telephone service in several New England States. It furnishes, without special charge, to its subscribers telephone directories, which, in addition to an alphabetical listing of subscribers, contain (except in Boston ¹) classified advertising of business subscribers in what are usually known as the 'yellow pages.' In 1955, from its classified advertising the telephone company received net revenue (after deducting expenses) of $5,583,388.88. Such revenue is taken into account by regulatory commissions in fixing rates.

The defendant National Merchandising Corp. (hereinafter called National) is engaged in the business of distribution of plastic articles for the retail trade. Since June, 1955, National has distributed light weight, crimson colored, opaque plastic covers designed to fit closely over telephone directories of varying sizes. On the outside of these covers in white letters and figures are listed certain 'emergency numbers' (for example, of police and fire departments) and the names, addresses, and telephone numbers of ten to twelve local business concerns, classified by occupation, as for example 'autos sales and service,' 'florist,' 'fuel oils,' 'hardware,' 'radio & television.' On the back cover appears a three year calendar. A telephone directory is easily inserted in one of these covers or removed from it.

National sells to tradesmen the privilege of being listed on these covers and distributes them by mail gratuitously to telephone subscribers. A printed white slip placed inside the cover reads, 'This sturdy, attractive cover will provide a ready reference for emergency and business numbers. It is presented to you with the compliments of the following companies.' Then follow the names of the companies listed on the cover. Other slightly different slips have been used in some cases. It requires no great imagination for the recipient to discover that the cover will fit his telephone directory, giving it a cheerful appearance in place of its normal drab color, as well as preventing its card cover from getting soiled and torn. The inside flaps of the covers are transparent.

Covers of various types, bearing advertising, are distributed by competitors of National. The telephone company and other concerns sell covers without advertising. Some of them are more cumbersome and less attractive than National's covers.

The telephone company formerly used the back cover of its telephone directories for paid advertising, but has ceased to do so, now either leaving it blank or there inviting attention to its 'yellow pages' or its own services. The front covers of its directories direct attention to the 'yellow pages' and to the front pages of the directory containing service information, rates, and instructions. Occasionally instructions about service changes appear on front covers. No public authority regulates the telephone company's advertising business and it does not appear to be a part of the regulated telephone monopoly. See McTighe v. New England Telephone & Telegraph Co., 2 Cir., 216 F.2d 26, 27, 30. See also Solomon v. Public Service Commission, 286 App.Div. 636, 639-640, 146 N.Y.S.2d 439. Compare Baird v. Chesapeake & Potomac Telephone Co. of Baltimore City, 208 Md. 245, 257-258, 117 A.2d 873.

Nothing in the record indicates that use of the covers physically harms the directory, causes it to wear out more rapidly, or destroys its scrap paper value. The probability is that use of the cover tends to preserve the directory, keep it clean and make it more useful and attractive in appearance.

The telephone company of March 5, 1956, brought a bill in equity against National and one Barford, its president and a large stockholder, to enjoin further distribution of the covers, alleging that their distribution 'constitutes an attempt to appropriate the * * * [telephone company's] property in the furtherance of * * * [National's] advertising business' and that the covers cause 'obscuring of the * * * [telephone company's] promotional and advertising material and a dilution of the value of the classified advertising appearing in the yellow pages' constituting unfair competition. The bill alleges further that some of the covers, by the printing of erroneous numbers and otherwise, have caused interference with the telephone company's service and that their use 'constitutes a trespass upon the * * * [telephone company's] property.'

After hearing on the merits, the trial judge made a report of material facts, which, in addition to finding certain of the facts already summarized, included the following miscellaneous findings, all justified by the evidence. The telephone company in its tariffs filed with the department of public utilities provides (Art. III, subpar. A) 'equipment, instruments and lines furnished by the * * * Company on the premises of a customer * * * are the property of the * * * Company,' and (Art. III, subpar. D) 'Customers shall not use or permit to be used, in connection with the equipment or facilities furnished by the * * * Company any electrical or mechanical apparatus or device, other than that furnished or approved by the * * * Company, nor permit the attachment of any advertising devices.' The judge concluded that Article III, subparagraph A, did not refer to directories and that the directory was not 'equipment or a facility to which any electrical or mechanical * * * device can be affixed.' There was in the tariffs no other significant reference to directories. National 'does nothing to palm off its product as that of the' telephone company 'and, in fact, is particular to state to those whom it solicits' for advertising that it has no connection with the telephone company. National plans for the future that its covers will be transparent (although in the light of the conclusion we reach this does not seem of importance) and will obliterate no advertising matter of the telephone company. National makes no attempt to distribute its covers in an exchange area in which a change to dial operation is contemplated in the near future. Apart from one instance where a subscriber decided to cancel his 'yellow page' advertising, there is no evidence of either damage or benefit to the telephone company 'upon which any definite finding can be made.'

The trial judge concluded that 'the directories are the property of the subscribers, and * * * there is no attempt' by National 'to appropriate the property of' the telephone company 'in promoting its advertising business, as it involves no obscuring of' the telephone company's 'own promotion and advertising material, and if it results in a dilution of the classified advertising appearing in the 'yellow pages' it does not constitute unfair competition.' A final decree was entered dismissing the bill with costs. The telephone company appeals. The evidence is reported.

1. The telephone company states two basic objections to National's activities: (a) that, since the parties are in competition in the field of classified telephone directories, the distribution of covers constitutes unlawful appropriation of the telephone directories by National for its business purposes; and (b) that the telephone company, responsible for its service, is entitled to enjoin 'a trespass on its property which will adversely affect telephone service.'

2. The evidence does not justify a finding that interference with the company's service to the public will be caused by the use of the covers. The directory is not connected with the telephone company's mechanical and electrical system. There thus is no chance of mechanical difficulty of the type considered possible in Southwestern Bell Telephone Co. v. Dialite Dial Co., D.C.W.D.Okl., 102 F.Supp. 872, 873, appeal dismissed by stipulation, sub nom ine Dialite Dial Co. v. Southwestern Bell Telephone Co., 10 Cir., 197 F.2d 523, the authority of which, in any event, is very much weakened by Hush-A-Phone Corp. v. United States, 99 U.S.App.D.C. 190, 238 F.2d 266, 268-269.

The evidence, closest to having relevance on this issue, is proof of three errors only (each on a separate cover among the numerous covers distributed by National) in numbers listed on National's covers, one caused by a telephone number change after the cover was published, one caused by clerical error, and one based on a mistake in transcription. These errors appear to have been corrected with promptness and energy, and there is no evidence that they caused any difficulty. It was conceded that inevitably there are errors in the telephone company's directories also. Any interference with service from this type of error is too trivial to warrant injunctive relief.

It is suggested that important service instructions are concealed by the cover. Once read, such instructions rapidly become understood and of no importance. There is no basis in the evidence for concluding that any noticeable interference with service occurs from concealing these instructions, even by an opaque cover.

3. It is unimportant that the telephone company retains title to the telephone directories, if it does. The subscriber is certainly given by the telephone company a license to use the directories on his own premises. He has sole possession of a directory while he remains a subscriber. The telephone company will replace worn out directories. At most, it reserves the right (a) to have the directory returned if telephone service is terminated and (b) to pick up old directories...