President Suspender Co. v. Macwilliam

• Decision Date: 14 November 1916
• Docket Number: 37.
• Citation: 238 F. 159
• Parties: PRESIDENT SUSPENDER CO. v. MACWILLIAM.
• Court: U.S. Court of Appeals — Second Circuit

238 F. 159

PRESIDENT SUSPENDER CO. v. MACWILLIAM.

No. 37.

United States Court of Appeals, Second Circuit.

November 14, 1916

W. P Preble, of New York City, for appellant.

Rogers Kennedy & Campbell, of New York City, and Roberts, Roberts &amp Cushman, of Boston, Mass. (Robert Cushman and Charles D Woodberry, both of Boston, Mass., of counsel), for appellee.

The defendant, prior to October 1, 1898, was manufacturing and selling at St. Paul, Minn., a certain suspender which he had devised and to which he had affixed the word 'President' as a trade-mark, together with a red, white, and blue banner emblem. On August 16, 1898, the defendant took out a patent on the suspender, being patent No. 609,286. The plaintiff at that time was known as the 'C. A. Edgarton Manufacturing Company,' and was also engaged in manufacturing and selling suspenders and the like. It maintained its factory at Shirley, Mass. The name 'C. A. Edgarton Manufacturing Company' was changed in August, 1914, to 'President Suspender Company.' The business was an old and established one, and its product was known throughout the United States and in foreign countries.

On October 1, 1898, the defendant granted to the plaintiff, on a royalty basis, an exclusive license to manufacture and sell throughout the United States a suspender containing the improved feature covered by the patent. By the same instrument he transferred to the plaintiff the good will of the business. The clause reads as follows: 'Said party of the first part agrees to and he does hereby turn over and transfer to the party of the second part the good will of his present business of manufacturing and selling said suspender within the United States, and all orders he now has or may hereafter take within the United States for the said suspender. ' The defendant also sold to plaintiff, as part of the same transaction, all the machinery, tools, and stock, finished and unfinished, and all other assets used by him in the business of manufacturing and selling suspenders under said mark and name 'President' and under said banner device. The transfer carried the defendant's entire business and good will, and he at once went out of the suspender business; and the plaintiff at once began to manufacture and sell suspenders bearing the mark 'President,' and has continued the manufacture and sale to this day.

The plaintiff states that it has made and sold between 30,000,000 and 40,000,000 pairs of suspenders bearing the mark 'President,' and that the boxes accompanying the goods have always borne its name alone. It also claims to have expended about $750,000 in advertising the name 'President,' and it has paid the defendant royalties to the amount of about $500,000. In addition to the name 'President,' there has always been affixed with it a label or ticket having an emblem or banner comprising a blue escutcheon with red and white stripes, across which the mark 'President' is printed.

The patent license expired on August 16, 1915, and thereupon defendant resumed the manufacture of 'President' suspenders. He at the same time resumed the use of the trade-mark 'President,' and has affixed thereto a red, white, and blue banner practically identical in visual appearance with the banner used upon plaintiff's goods. Within two months thereafter the plaintiff brought this suit.

Before COXE, WARD, and ROGERS, Circuit Judges.

ROGERS Circuit Judge (after stating the facts as above).

The plaintiff claims to be the owner of the trade-mark 'President' in connection with the business of manufacturing and selling suspenders. It seeks an injunction restraining the defendant from an infringement of its trade-mark. The injunction was granted by the court below, and the defendant has brought the case here on appeal.

The defendant applied for the registration of the trade-mark 'President' on January 10, 1899. This was issued to him in his own name on May 16, 1899. After the decision of this case in the court below, the Commissioner of Patents ordered the cancellation of its registration; and an appeal from that order is now pending in the Court of Appeals for the District of Columbia. With that we are not in any way concerned.

The contract of October, 1898, granted to the plaintiff an exclusive license to make and sell to the end of the term of the patent the patented suspender, subject, however, to certain conditions which it is not necessary now to consider. It also transferred the good will of the business, as well as all the machinery, stock, tools, and other assets used by the defendant in the suspender business, and the latter wholly withdrew from the business of manufacturing and selling suspenders. The only real question in the case is whether the trade-mark 'President' and the red, white, and blue escutcheon used with it passed from defendant to the plaintiff by virtue of the contract. The defendant answers the question in the negative. He says the trade-mark is not mentioned in the contract and has not passed.

A trade-mark right cannot exist independently of some business in which it is used. The sole function of a trade-mark being to indicate the origin or ownership of the goods, it cannot exist apart from the business to which its use is incident. There is no such right known to the law as an exclusive ownership in a trade-mark apart from the right to use it in a business. It cannot exist as a right in gross. Thomas G. Carroll, etc., Co. v. McIlvaine (C.C.) 171 F. 125; Weener v. Brayton, 152 Mass. 101, 25 N.E. 46, 8 L.R.A. 640; Charles S. Higgins Co. v. Higgins Soap Co., 144 N.Y. 462, 39 N.E. 490, 27 L.R.A. 42, 43 Am.St.Rep. 769.

The defendant agreed in the contract of October 1, 1898, to transfer the good will of the business to the plaintiff. The 'party of the first part (the defendant) agrees to and he does hereby turn over and transfer to the party of the second part the good will of his present business of manufacturing and selling said suspender,' etc. The good will of an established business is incorporeal property which the law permits to be sold in connection with a sale of the business on which it depends and of which it is an incident. Lewis v. Seabury, 74 N.Y. 409, 30 Am.Rep. 311; Cruess v. Fessler, 39 Cal. 336.

A sale of a business and of its good will carries with it the sale of the trade-mark used in connection with the business, although not expressly mentioned in the instrument of sale. Kidd v. Johnson, 100 U.S. 617, 25 L.Ed. 769; Nelson v. Winchell, 203 Mass. 75, 89 N.E. 180, 23 L.R.A. (N.S.) 1150; Merry v. Hoopes, 111 N.Y. 415, 18 N.E. 714; Corbett Bros. Co. v. Reinhardt-Meding Co., 77 N.J.Eq. 7, 76 A. 243; Myers v. Kalamazoo Buggy Co., 54 Mich. 215, 19 N.W. 961, 20 N.W. 545, 52 Am.Rep. 811; Allegretti v. Allegretti Chocolate Cream Co., 177 Ill. 129, 52 N.E. 487. The principle is as well established as any in the whole law of trade-marks. The right to the use of a trade-mark passes to any one who takes the right to make or sell the particular article to which the trade-mark has been attached. Filkins v. Blackman, Fed. Cas. No. 4,786; Leather Cloth Co. v. American Leather Cloth Co., 11 H.L.Cas. 523.

The defendant, however, says that the...