Pachmayr Gun Works, Inc. v. Olin Mathieson Chemical Corp., Winchester Western Div.

Decision Date12 July 1974
Docket Number71-2812,Nos. 71-2075,s. 71-2075
Citation502 F.2d 802,183 U.S.P.Q. 5
PartiesPACHMAYR GUN WORKS, INC., a corporation, and Firearm Accessories, Inc., a corporation d/b/a the Mershon Co., Inc., Plaintiffs-Appellants, v. OLIN MATHIESON CHEMICAL CORP. WINCHESTER WESTERN DIVISION, a corporation, Defendant-Appellee. PACHMAYR GUN WORKS, INC., a corporation, and Firearm Accessories, Inc., a corporation d/b/a the Mershon Co., Inc., Plaintiffs-Appellees, v. OLIN MATHIESON CHEMICAL CORP., WINCHESTER WESTERN DIVISION, a corporation, Defendant-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Robert E. Lyon (argued), Lyon & Lyon, Los Angeles, Cal., for plaintiffs-appellants.

W. Brown Morton, Jr. (argued), Washington, D.C., Harlan P. Huebner, Huebner & Worrel, Los Angeles, Cal., N. Dale Sayre, McLean, Morton & Boustead, New York City, for defendant-appellee.

Before BROWNING and ELY, Circuit Judges, and GORDON THOMPSON, Jr., District Judge. *

OPINION

GORDON THOMPSON, Jr., District Judge:

These appeals arise from an action for injunctive relief and damages based on trademark infringement and unfair competition. Jurisdiction was properly laid in the District Court by virtue of the Lanham Act (15 U.S.C. 1051 et seq.) and 28 U.S.C. 1338(a), (b). Jurisdiction here is under 28 U.S.C. 1291 and 15 U.S.C. 1121.

Plaintiffs appeal from the judgment below holding their two trademarks invalid and request an accounting with respect to the damages awarded on their claim for unfair competition based on misappropriation of confidential information. They also appeal the decisions of the trial court rejecting their claim of palming off and their request for attorneys' fees. The defendant cross appeals the judgment below awarding compensatory and exemplary damages for unfair competition, and likewise requests an accounting of plaintiffs' actual damages connected therewith. We affirm in part, reverse in part, and remand.

The plaintiffs Pachmayr Gun Works, Inc. (Pachmayr) and Firearm Accessories, Inc. (Firearm), doing business as The Mershon Co., Inc. (Mershon), are related companies engaged in the manufacture, distribution and sale of various firearm accessories. They are probably best known, however, for their firearm recoil pads. These pads are made primarily of rubber and, when fitted to the butt end of a rifle or shotgun, are designed to absorb or redistribute some of the shock that would othewise be transferred directy to the shoulder of the person firing the weapon. The defendant Olin Mathieson Chemical Corporation (Olin), through its Winchester-Western Division (Winchester) is a large and well known manufacturer of firearms and a former customer for plaintiffs' recoil pads.

Plaintiff Firearm and its predecessors in interest claim use from February 1937 of United States Registered Trademark No. 665,587, for 'Gun Recoil Pads and Gun Butt Plates in Class IX.' The mark evidenced by this registration is comprised of the words 'White Line' and a white line extending around the periphery of the recoil pad. Registration No. 665,587 was originally issued to Mershon Co., Inc., a predecessor to plaintiffs, on August 12, 1958 and later reissued to plaintiff Firearm on June 16, 1959. Plaintiff Pachmayr is licensed to use the trademark 'White Line' by virtue of an agreement between it and Firearm, dated November 17, 1958.

The 'White Line' trademark was previously the subject of United States Trademark Registration No. 438,519, issued to Mershon Co., Inc., on April 27, 1948. Frank A. Pachmayr, founder of plaintiff Pachmayr Gun Works, and Mershon Co., Inc., locked horns over the validity of Trademark No. 438,519 in the case of Mershon Co., Inc. v. Pachmayr, 220 F.2d 879 (9th Cir. 1955), and upon suffering an adverse decision upholding the trademark's validity, Mr. Pachmayr subsequently purchased the Mershon Company, including all of its assets, good will and trademarks. When the 'White Line' trademark was canceled by the Patent Office in September 1955, due to a failure to file an affidavit of continuous use as required by 15 U.S.C. 1508, Mershon Co., Inc. secured a new registration of the trademark, this time under Registration No. 665,587, the trademark under litigation here.

Plaintiff Pachmayr was issued United States Trademark Registration No. 817,631 on November 1, 1966, claiming use thereof from 1932. This mark consists of a particular 'multiple-X' pattern on the lateral edges of the plaintiffs' recoil pad. Trademark No. 817,631 is currently unrevoked and uncanceled, although its history of continuous use by plaintiff Pachmayr since 1932 is far from clear.

For several years prior to August 1959 the plaintiffs conducted what can fairly be characterized as a successful business, based mainly on the marketing and sale of their recoil pads. They used the 'White Line' and multiple-X trademarks in manufacturing and advertising these products and from time to time notified unauthorized users to desist from using these marks under threat of suit. The trial court found that:

'23. A substantial segment of the gun-oriented public recognized in 1963 that a recoil pad having a white spacer or lamina is a pad made by the plaintiffs.' (Clerk's Record 1972).

A similar finding of secondary meaning was made by the court with respect to the multiple-X mark found on Pachmayr's Deluxe Model 325 recoil pad.

Sometime in August 1959 plaintiff Pachmayr proposed to defendant Winchester the idea of selling the defendant's firearms with plaintiffs' recoil pad attached, and after some deliberation, Winchester placed its first order for plaintiffs' Deluxe Model 325 recoil pads in October 1960. Subsequently Winchester continued its orders of plaintiffs' pads so that between 1960 and 1964 it had purchased over 70,000 units.

As early as August of 1962, defendant Winchester began to actively seek an alternate source for recoil pads. After receiving price quotations from other companies, officials at Winchester determined that a considerable cost savings could be realized and by October 2, 1962, they had made the decision to drop Pachmayr as a supplier at the earliest practicable opportunity. First, however, in an effort to save countless man hours of research, it was decided to obtain a breakdown of the physical properties and characteristics as well as the exact rubber composition of the Pachmayr pad. Mr. Rigby, the defendant's Chief Buyer, was assigned to the task of acquiring this information from Pachmayr. The district court made the following findings relative to this transaction:

'48. When Winchester began purchasing pads from the plaintiffs, it submitted no specifications in connection with such purchase as it knew what the Pachmayr pad was as far as quality was concerned, and it knew that this was what it wanted. When Winchester requested the statistical information from Pachmayr, it did not do so for the purpose of determining whether the plaintiffs could comply with Winchester's requirements, since it already knew that the plaintiffs' pads were entirely satisfactory and had been used by Winchester without customer complaint for several years.

49. Winchester wanted to know what the Pachmayr pads consisted of insofar as the qualities of rubber were concerned so that Winchester could copy the pad and set up Winchester's purchase specifications so as to acquire such pads elsewhere.

50. Pursuant to Mr. Kuenzel's request, Mr. Rigby requested the information from Pachmayr on October 4, 1962. Mr. Rigby knew at that time that the purpose of the requested information was to make it possible for Winchester to secure its pads elsewhere and thus discontinue purchasing from the plaintiffs.

51. In making the request for information, Mr. Rigby did not divulge to Mr. Pachmayr that the reason for seeking such information was to permit Winchester to copy the plaintiffs' pads.' (C.R. 1678-1679).

With this confidential information, Winchester was able to finalize its tenative purchase specifications for recoil pads to replace those supplied by plaintiffs. And in late 1963 the defendant submitted such purchase specifications to the B. F. Goodrich and Firestone rubber companies for the purpose of obtaining production quantities of such pads.

Still later in 1963, defendant Winchester began purchasing recoil pads from manufacturers other than plaintiffs for attachment to its firearms, and in 1964 marketed such weapons with the pads installed. The trial court found that these pads were 'of the same overall appearance as the Deluxe Model pads sold by Pachmayr to Winchester including the white lamina and the multiple 'X' pattern.' (Finding No. 18, C.R.1671). This suit for infringement and unfair competition was instituted December 24, 1964.

1. Validity of the White Line Trademark.

The trial court precluded a finding of infringement of the 'White Line' trademark Registration No. 665,587 by holding that the mark was decorative and functional and, therefore, not a proper subject of trademark protection. See Pagliero v. Wallace China Company, Ltd., 198 F.2d 339 (9th Cir. 1952); In re Application of Deister Concentrator Co., 289 F.2d 496, 48 CCPA 952 (1961). In doing so, the Court necessarily disregarded the earlier ruling of this Court in Mershon Co., Inc. v. Pachmayr, supra, which had held the same 'White Line' trademark valid.

It is conceded that the earlier Mershon case is not res adjudicata relative to this litigation, since the defendant was not a party to that suit. 1B Moore's Federal Practice, P0.405(1). Nonetheless, where faced with a prior ruling of this Court holding a substantially identical trademark valid, it was error to disregard the stare decisis effect of that ruling absent a strong showing that it was 'palpably erroneous' in fact or law. Cold Metal Process Co. v. Republic Steel, 233 F.2d 828, 837 (6th Cir. 1956), cert. denied, 352 U.S. 891, 77 S.Ct. 323, 1 L.Ed.2d 245; Cold Metal Process Co. v. E. W. Bliss Co., 285 F.2d 231, 236 (6th Cir. 1960)...

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