Premier Dental Products Co. v. Darby Dental Supply Co., Inc., 85-1468

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Writing for the Court: Before HIGGINBOTHAM and STAPLETON, Circuit Judges, and TEITELBAUM; STAPLETON
• Citation: 794 F.2d 850
• Parties: , 55 USLW 2068, 230 U.S.P.Q. 233 PREMIER DENTAL PRODUCTS COMPANY v. DARBY DENTAL SUPPLY COMPANY, INC., Dental Wholesalers, Inc., Spencer Meade Dental, Inc. Appeal of DARBY DENTAL SUPPLY COMPANY, INC., Dental Wholesalers, Inc. and Spencer Meade Dental, Inc., Appellants.
• Docket Number: No. 85-1468,85-1468
• Decision Date: 24 June 1986

Page 850

794 F.2d 850 7 ITRD 2617, 55 USLW 2068, 230 U.S.P.Q. 233 PREMIER DENTAL PRODUCTS COMPANY
v.
DARBY DENTAL SUPPLY COMPANY, INC., Dental Wholesalers, Inc.,
Spencer Meade Dental, Inc.
Appeal of DARBY DENTAL SUPPLY COMPANY, INC., Dental
Wholesalers, Inc. and Spencer Meade Dental, Inc.,
Appellants. No. 85-1468. United States Court of Appeals,
Third Circuit. Argued Feb. 12, 1986.
Decided June 24, 1986.

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Arnold I. Kalman (argued), Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for appellee.

Joel Salon (argued), Robert V. Marrow, Salon, Marrow & Dyckman, New York City, for appellants.

Robert Ullman, Steven R. Trost, Bass & Ullman, New York City, for amicus curiae American Free Trade Ass'n.

Before HIGGINBOTHAM and STAPLETON, Circuit Judges, and TEITELBAUM, District Judge. ^*

OPINION OF THE COURT

STAPLETON, Circuit Judge:

I

Appellee Premier Dental Products Company ("Premier") is a wholesale distributor of dental products. Premier includes in its inventory a denture impression material produced by a West German manufacturer, ESPE Fabrik Pharmazeutischer Praparate, GmbH ("ESPE"), and distributed in this country under the registered trademark "IMPREGUM." Premier and ESPE are independent firms. IMPREGUM is a patented material used to make impressions for dentures, removable prostheses and full crowns.

In 1974, ESPE granted Premier the exclusive right to market and distribute IMPREGUM in the United States. ESPE reserved the right to cancel this distributorship should Premier's sales volume of IMPREGUM for any two-year period fall below the maximum sales volume achieved by Premier in any single year.

Appellants Darby Dental Supply Company, Inc., Dental Wholesalers, Inc., and Spencer Meade Dental, Inc. ("Darby") are mail-order purveyors of dental products. Darby sells dental impression materials, including IMPREGUM, to both dentists and dental supply companies. Until 1982, Darby purchased its stock of IMPREGUM from Premier. Thereafter, Darby obtained access to the European-marketed version of IMPREGUM and began to sell it in the United States at a lower price than offered by Premier. ¹

On June 20, 1984, ESPE assigned to Premier all its "right, title and interest" in the United States trademark "IMPREGUM." This assignment was recorded in the Patent and Trademark Office and with the Customs Service. The principal provisions of the assignment are as follows:

WHEREAS, Premier wishes to obtain title to the registration for "IMPREGUM", including the right to file suit for infringement thereof, and ESPE is willing to assign said registration to Premier for that limited purpose, ...

IT IS MUTUALLY AGREED AS FOLLOWS:

1. Subject to the terms and conditions of this agreement, ESPE hereby agrees to assign to Premier all right, title and interest in and to the trademark "IMPREGUM" and the registration therefor (hereinafter the "Trademark"), together with the goodwill of the business connected with the use of and symbolized by said Trademark, as well as the right to sue for infringement of the Trademark or injury to said goodwill....

2. Subject to the faithful performance of the terms of this agreement, Premier grants back to ESPE the sole and exclusive right to manufacture products to be sold under the Trademark "IMPREGUM" for sale in the United States.

3. Premier and ESPE recognize that it is necessary to maintain the quality of

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the goods sold under the Trademark and ESPE shall maintain the same quality of goods it has manufactured heretofore.

4. The purpose of this Agreement is to permit Premier to act against infringers and unauthorized importers of IMPREGUM trademarked products into the United States ...

5. Premier shall take no action with respect to the Trademark and/or said registration which shall in any way dilute or damage the goodwill associated therewith.

6. ... Premier further agrees and warrants that it shall not assign the Trademark or the title vested in it to any other party ... In the event that ESPE desires to have the trademark as well as the goodwill and all rights and title to the registration reassigned to it, it shall give Premier thirty (30) days notice and Premier shall execute a reassignment to ESPE ...

7. Premier ... agrees that it shall not reassign, or take any action with respect to the Trademark "IMPREGUM" and said registration unless it shall have given to registrant [ESPE] ninety (90) days written notice of the action it intends to take....

The European-marketed IMPREGUM is identical in substance to Premier's version. However, there are differences in the products' packaging. The American packaging is written only in English while the European version is written in English and German. ESPE's name appears alone on the European version of IMPREGUM. The American version, which until the 1984 assignment referred to Premier only on the cartons containing IMPREGUM, now displays the Premier trade name on most of the IMPREGUM tubes and bottles. Also, after the assignment, the American packaging was changed to make the ESPE name more prominent and to indicate that Premier is the distributor. Premier composed the instructions for the American version, which are in English. The instructions for the European version were not written by Premier and are printed in German, French, Italian, and Spanish as well as in English. However, both sets of instructions are substantially the same.

After Darby failed to accede to Premier's requests that it desist from importing and selling the European-marketed IMPREGUM, Premier brought this suit in district court and moved for a preliminary injunction. Premier alleged that Darby's importation of IMPREGUM violates Section 526 of the Tariff Act of 1930, 19 U.S.C. Sec. 1526, and Sections 32, 42 and 43 of the Lanham Act, 15 U.S.C. Secs. 1114, 1124, and 1125. The district court granted Premier's request for a preliminary injunction on the grounds that Premier, as the owner of the American trademark "IMPREGUM," was entitled to assert Section 526 of the Tariff Act of 1930 against Darby. Darby appealed to this court.

II THE STANDARD OF REVIEW

Before a district court may issue a preliminary injunction it must consider whether the movant has shown that it is likely to prevail on the merits, whether the movant has shown irreparable harm in the absence of such relief, whether such relief will substantially harm other parties, and where the public interest lies. See Commonwealth of Pennsylvania v. United States, 469 F.2d 1387 (3d Cir.1972).

On appeal, the standard of review of a preliminary injunction issued by a district court is narrow. Unless an abuse of discretion is "clearly established, or an obvious error has ocurred in the application of the law, or a serious and important mistake has been made in the consideration of the proof, the judgment of the trial court must be taken as presumptively correct." Stokes v. Williams, 226 F. 148, 156 (3d Cir.1915); see S.I. Handling Systems v. Heisley, 753 F.2d 1244, 1248 (3d 1985); Tustin v. Heckler, 749 F.2d 1055, 1060 (3d Cir.1984); A.O. Smith v. FTC, 530 F.2d 515, 525 (3d Cir.1976).

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III

A. THE ASSIGNMENT TO PREMIER

Section 526(a) of the Tariff Act of 1930, with limited exceptions not applicable here, proscribes the importation of any foreign-manufactured merchandise that "bears a trademark owned by a citizen of the United States." This section must, therefore, be read in conjunction with the trademark law doctrines that determine trademark ownership. ² See Vivitar Corp. v. United States, 761 F.2d 1552 (Fed.Cir.1985), cert. denied --- U.S. ----, 106 S.Ct. 791, 88 L.Ed.2d 769 (1986); Model Rectifier Corp. v. Takachiho International, Inc., 709 F.2d 1517, 221 U.S.P.Q. 502 (9th Cir.1983); Bell & Howell; Mamiya Co. v. Masel Supply Co., 548 F.Supp. 1063 (E.D.N.Y.1982), vacated on other grounds, 719 F.2d 42 (2d Cir.1983).

A trademark symbolizes the public's confidence or "goodwill" ³ in a particular product. However, it is no more than that, and is insignificant if separated from that confidence. Therefore, a trademark "is not the subject of property except in connection with an existing business." United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97, 39 S.Ct. 48, 50, 63 L.Ed.2d 141 (1918); Family Circle v. Family Circle Assoc., 332 F.2d 534 (3d Cir.1964).

A trademark serves several purposes. It allows buyers to identify the goods to which it is affixed as from a particular source and distinguishes those goods from similar merchandise of others. Also, the mark often signifies that all goods bearing that mark are of like quality. Finally, the mark is valuable in the advertising and sale of the trademarked goods. See generally, 1 J. McCarthy, Trademarks and Unfair Competition Sec. 3.1. (2d ed. 1984).

Because a trademark is symbolic, it may be transferred or assigned only to represent the transfer of goodwill connected with a particular business, Dresser Industries v. Heraeus Engelhard Vacuum, Inc., 395 F.2d 457, 464 (3d Cir.) cert. denied 393 U.S. 934, 89 S.Ct. 293, 21 L.Ed.2d 270 (1968), and cannot be transferred separately from the goodwill of the business. United Drug, 248 U.S. at 97, 39 S.Ct. at 50; Dresser Industries, 395 F.2d at 464; Family Circle, 332 F.2d 534; 15 U.S.C. Sec. 1060; ⁴ see Marshak v. Green, 746 F.2d 927 (2d Cir.1984); Haymaker Sports, Inc. v. Turian, 581 F.2d 257, 260-61 (C.C.P.A.1978); Pepsico, Inc. v. Grapette Co., 416 F.2d 285, 287 (8th Cir.1969); 1 McCarthy, supra, at Sec. 18.1. However, following a proper assignment, the assignee steps into the shoes of the assignor.

It is well established that a distributor may own the trademark in goods it does not manufacture. See, e.g., Menendez v. Holt, 128 U.S. 514, 520, 9 S.Ct. 143, 144, 32 L.Ed. 526 (1888); Energy Jet, Inc. v. Forex Corp., 589 F.Supp. 1110 (E.D.Mich.1984); Wrist-Rocket Manufacturing Co. v. Saunders, 379 F.Supp. 902 (D.Neb.1974), rev'd in part 516 F.2d 846 (8th Cir.), cert denied

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