Schwartz v. Slenderella Systems of Cal.

• Decision Date: 25 June 1954
• Citation: 43 Cal.2d 107,271 P.2d 857
• Court: California Supreme Court
• Parties: , 102 U.S.P.Q. 177 SCHWARTZ v. SLENDERELLA SYSTEMS OF CALIFORNIA, Inc. L. A. 22972.

Page 857

271 P.2d 857

43 Cal.2d 107, 102 U.S.P.Q. 177

SCHWARTZ v. SLENDERELLA SYSTEMS OF CALIFORNIA, Inc.

L. A. 22972.

Supreme Court of California, in Bank.

June 25, 1954.

Rehearing Denied July 21, 1954.

Samuel Maidman, Los Angeles, for appellant.

Newlin, Holley, Tackabury & Johnston and Hudson B. Cox, Los Angeles, for respondent.

EDMONDS, Justice.

Harry M. Schwartz sued Slenderella Systems of California, Inc., to enjoin the assertedly wrongful use of a trade name. His appeal from an adverse judgment presents for decision questions as to the sufficiency of the evidence and the findings to support the judgment.

Some of the facts were presented by stipulation. Counsel also agreed that the trial court should consider as evidence certain depositions, photographs, advertising matter, the stationery used by each of the parties, and an affidavit concerning a trademark search made by counsel for the defendant.

These facts are undisputed:

For several years, Schwartz has engaged in the retail sale of women's apparel under the trade names of 'Slenderella' and 'Slenderella of Hollywood.' At the time this action was tried, he operated two stores in the Los Angeles area, catering primarily to larger-sized women, and specializing in large size and half-size garments. He began using the name 'Slenderella of Hollywood' in 1939 when he opened his first store and filed with the clerk of Los Angeles County a certificate of doing business under that fictitious name. Civ.Code, §§ 2466, 2468. Schwartz opened his second 'Slenderella' store in 1947.

The name 'Slenderella' had been used previously in California by one J. P. Schwarze, who registered it in 1933 with the secretary of state for use in connection with the manufacture and sale of wheat flour. At about the same time, one Henry Semeria began using it for his business of selling women's apparel in stores located in San Francisco and Sacramento. Both of these prior uses were discontinued before Schwartz began his business.

In 1944 Schwartz registered with the secretary of state the names 'Slenderella' and 'Slenderella of Hollywood' for use in connection with the sale of women's apparel. Approximately 50 or 60 percent of the merchandise sold by him bears one of these names, either on the goods or their containers. By reason of his business experience, and through the care and high standards maintained by him, he has established a good reputation, and his merchandise has become known to the users and prospective purchasers of it under his trade names. He advertises his business under these names in local newspapers and by mailing cards and circulars to 17,500 customers. The total annual advertising cost is between $1,500 and $4,400.

Slenderella Systems is a California corporation affiliated with corporations doing business under the same name in New York, Maryland, the District of Columbia, Ohio, Illinois, and Michigan. The affiliated corporations are engaged in the business of operating slenderizing and weight reducing salons specializing in weight reduction, diet control and posture correction for women. The respondent maintains four salons in the Los Angeles area. It neither owns nor operates any women's dress or apparel shops, nor does it or its associates manufacture or sell any women's clothing or accessories.

Prior to December 1951, the affiliated corporations had operated under the trade name of 'Silooete.' In that year, one of the companies acquired by assignment the rights of Erika Schneider in a business using the name 'Slenderella' as a trademark. Schneider had registered the name with the United States Patent Office in 1941 for use in connection with the manufacture and sale of sugarless candy for health purposes. Those foods were not sold in California before the respondent corporation was formed and began using them in connection with its reducing courses.

Before adopting the name 'Slenderella Systems,' the affiliates instituted a trademark search in each state into which it was contemplated that the business would extend. Several previous registrations of the name, both federal and state, were discovered as well as unregistered uses of it. The Schwartz registration was discovered at that time, but the health system's use of the name was in good faith and without intent to capitalize on the reputation Schwartz had built up. Since it began using the name, Slenderella Systems has advertised it in the metropolitan newspapers of Los Angeles, and by 1952, had expended in excess of $15,000 for that purpose. The respondent and its affiliated companies maintain uniformity in their general advertising throughout the several states in which they operate, their advertising being substantially the same as that used by them when they operated under the trade name 'Silooete.'

By reason of the similarity in names, Schwartz has received some misdirected mail and telephone calls intended for Slenderella Systems. Some of his customers have gone to the respondent's salons in the belief that Schwartz operated women's clothing stores at those locations. Other customers have stated to him or his employees that since he is in the weight reducing business they would rather first reduce their weight before purchasing large or half-size apparel from him.

Schwartz' complaint is on the theory of unfair competition. He alleged that if the respondent is permitted to carry on its business under the name 'Slenderella,' his customers and business associates will be misled and defrauded into believing that the two businesses are one. If he is denied an injunction, he alleged, his business will be damaged in its reputation, good will and in loss of profits.

The trial court made findings in accordance with the stated facts. It further found that the respondent's use of the trade name 'Slenderella' in an unrelated and non-competitive business has not caused damage or injury to Schwartz and has not resulted in the deception or misleading of the public. Regarding the instances of confusion which had occurred, it found that '(s)uch confusion arises from the similarity of names and in the result principally of inattention and carelessness on the part of persons so confused.' In its opinion, such confusion, 'no doubt, has been or will be of short duration.'

In attacking the judgment denying an injunction and the findings upon which it is based, Schwartz contends that the trial court has overly emphasized the defendant's good faith and the fact that the parties are engaged in non-competing businesses. On the other hand, he argues, it has given too little weight to the incidents of confusion established by the record and to the character of 'Slenderella' as a fanciful and distinctive trade name.

Before the amendment to section 3369 of the Civil Code in 1933, Stats.1933, p. 2482, in order to obtain injunctive relief against an asserted act of unfair competition in the use of a trade name, it was necessary to establish fraud on the part of the junior appropriator. See American Automobile Ass'n v. American Automobile Owners' Ass'n, 216 Cal. 125, 135-136, 13 P.2d 707, 82 A.L.R. 699. The statute now provides that unfair competition may include an unfair or fraudulent business practice, and either ground is sufficient to permit injunctive relief. McCord Co. v. Plotnick, 108 Cal.App.2d 392, 395, 239 P.2d 32; MacSweeney Enterprises v. Tarantino, 106 Cal.App.2d 504, 513-514, 235 P.2d 266; Wood v. Peffer, 55 Cal.App.2d 116, 124, 130 P.2d 220.

Although Schwartz asserts that 'there is an inherent lack of good faith when one appropriates the identical trade name of a well-established business,' the finding of the trial court, that respondent's use of the name 'was in good faith and without design or intent to capitalize upon the plaintiff's prior use of said name,' is supported by substantial evidence. The record shows that, before selecting the name, the respondent instituted a nation-wide search in order to avoid use of a name that would infringe upon the rights of another person. The name was adopted after advice of counsel was obtained that no infringement would result. Furthermore, the relatively small size of Schwartz' business and the limited geographical area in which it is advertised and known, as compared with that of the respondent and its affiliates makes extremely unlikely the possibility that the purpose of the latter's use was to capitalize upon Schwartz' business reputation.

Since the decision in Academy of Motion Pictures, etc. v. Benson, 15 Cal.2d 685, 104 P.2d 650, it is established, as the respondent concedes, that injunctive relief against the unfair use of a trade name may be obtained in situations other than where the parties are in direct competition. MacSweeney Enterprises v. Tarantino, supra, at 106 Cal.App.2d 513, 235 P.2d 266; Johnston v. 20th Century-Fox Film Corp., 82 Cal.App.2d 796, 818, 187 P.2d 474; Winfield v. Charles, 77 Cal.App.2d 64, 70-71, 175 P.2d 69; see 40 Calif.L.Rev. 571; contra: Yellow Cab Co. of San Diego v. Sachs, 191 Cal. 238, 216 P. 33, 28 A.L.R. 105; Dunston v. Los Angeles Van etc. Co., 165 Cal. 89, 131 P. 115, and cases cited; Weatherford v. Eytchison, 90 Cal.App.2d 379, 202 P.2d 1040; Scutt v. Bassett, 86 Cal.App.2d 373, 376, 194 P.2d 781. The basis of relief in such circumstances is the possibility of injury to the reputation and good will of the business of the prior user from an identification of it in the minds of the public with the source of the second user's goods or services. The senior appropriator may protect, by injunction, his trade name 'within the limits fixed by the likelihood of confusion of prospective purchasers.' Restatement of Torts, § 730, comment b; MacSweeney Enterprises v. Tarantino, supra, at 106 Cal.App.2d 512-513, 235 P.2d 266; Winfield v. Charles, supra, at 77 Cal.App.2d 70-71, 175 P.2d 69. Although many factors may enter into a determination of whether the use of a specific trade name is likely to result in a...