Simmonds Aerocessories v. Elastic Stop Nut Corp.

• Decision Date: 16 July 1958
• Docket Number: No. 12466.,12466.
• Citation: 257 F.2d 485
• Parties: SIMMONDS AEROCESSORIES, Limited, Appellant, v. ELASTIC STOP NUT CORPORATION OF AMERICA.
• Court: U.S. Court of Appeals — Third Circuit

257 F.2d 485 (1958)

SIMMONDS AEROCESSORIES, Limited, Appellant, v. ELASTIC STOP NUT CORPORATION OF AMERICA.

No. 12466.

United States Court of Appeals Third Circuit.

Argued April 22, 1958.

Decided July 16, 1958.

As Amended August 8, 1958.

Joseph A. Weisman, Newark, N. J. (Weisman & Freedman, Newark, N. J., Joseph A. Weisman, William A. Ancier, Newark, N. J., on the brief), for appellant.

Hamilton Hicks, New York City (Riker, Emery & Danzig, T. McCurdy Marsh, Newark, N. J., Curtis F. Prangley, Chicago, Ill., on the brief), for appellee.

Before MARIS, KALODNER and HASTIE, Circuit Judges.

MARIS, Circuit Judge.

The plaintiff, Simmonds Aerocessories, Ltd., appeals from a judgment entered in the District Court for the District of New Jersey, upon the motion of the defendant, Elastic Stop Nut Corporation of America, dismissing the first count of its complaint. Jurisdiction was based upon diversity of citizenship and the trademark laws of the United States. The complaint consists of two counts. From the complaint and the affidavits submitted to the district court it appears that the plaintiff, a British limited company, and the defendant, a New Jersey corporation, manufactured and marketed a similar product, a metal nut known as an "elastic stop nut" which contains a red fibre insert possessing elastic properties which enable it to be gripped securely to an accompanying bolt. Because of its locking qualities this product is extensively used in the manufacture of metal products and is indispensable to the aircraft and automotive industries. Both parties acquired licenses from the inventor, Ture Gustav Rennerfelt; the defendant in 1927 was licensed to manufacture and sell in the United States and certain other countries of North and South America, and the plaintiff in 1932 was licensed to manufacture and sell in other parts of the world. The patents and licenses have expired and the right to manufacture this product is now in the public domain. During World War II the elastic stop nut manufactured by the plaintiff was sold almost exclusively as war material and substantial quantities were imported into Canada and the United States, principally for aircraft purposes. Since the end of the war and up to the present time the plaintiff has marketed this product in Canada. In 1953 the plaintiff, desiring to expand the North American market for its product, sold and distributed it in the United States under its own name as its product and in packages so labelled.

On June 1, 1954 the defendant addressed a letter to the plaintiff stating:

"We have been informed that stop nuts of your manufacture have been imported into the United States. The sample which we have received has a red fiber locking collar. A red collar has been one of the distinctive marks of our product during the entire period of our manufacture which began in 1927.

"In this connection we call your attention to the decision in Elastic Stop Nut Corporation of America v. Greer D.C. 62 F.Supp. 363. In the court\'s decision in that case Mr. Greer was enjoined in the use of a red fiber collar in his product. We should like to know that your product when shipped to this country will not be identified by the red locking collar."

To this letter the plaintiff on July 16, 1954 replied as follows:

"Thank you for your letter of the 1st instant drawing our attention to the case of ESNA v. Greer, in connection with the above.

"We have delayed replying in order to obtain the opinion of a reliable American attorney as to our legal position vis a vis any rights which may appear to be accorded to you by the Greer case.

"We have now received advice and opinion that the circumstances surrounding the import of our red insert lock nuts into the United States are clearly distinguishable from those involved in your action against Greer, and that the judgment in that case cannot be held to affect us.

"We await your further comments, but hold ourselves free in the meantime to continue to export standard Simmonds red fibre nuts to the U.S.A. May we also add that we do not identify our Fibre Elastic stop nut either in advertisements, trade mark, letter headings, etc. by reference or otherwise to a red collar."

Shortly thereafter, on November 3, 1954, the defendant applied to the United States Patent Office for the registration of a trademark giving it the exclusive use of a red insert for elastic stop nuts. The plaintiff had no knowledge of this application and continued to export its product to this country. On September 6, 1955 the defendant's application was granted and the design was registered. Thereafter the defendant, under Section 42 of the Lanham Trade-Mark Act, 15 U.S.C.A. § 1124, caused the trade-mark registration to be recorded in the Department of the Treasury and facsimiles of its trade-mark were transmitted to United States ports of entry. On October 4, 1955 the plaintiff shipped 143 drums of its product to the United States for sale and distribution which arrived at New York on October 19, 1955 and were seized by the Collector of Customs at that port. The plaintiff, to prevent a forfeiture, withdrew its shipment from customs, it was returned to England, and the plaintiff has ever since been thus prevented from shipping its product to the United States for sale, use and distribution. The complaint asserts that the defendant has no exclusive or proprietary interest in the color red or the design or shape of the elastic stop nut and is not entitled to the protection of the United States trade-mark laws, that the registration was fraudulently procured for the purpose of unlawfully suppressing and stifling competition and to prevent the plaintiff from importing its elastic stop nut into the United States and selling it in competition with the defendant's product and that unless the trade-mark registration is cancelled and the embargo lifted, the damage to the plaintiff will be substantial and irreparable. The relief sought by the plaintiff in the first count was, as summarized by the district court, 154 F.Supp. 615, 617, as follows:

"(1) A declaratory judgment

"(a) that plaintiff has the right to manufacture and import its product;

"(b) that defendant never had any monopoly of the red color for its fiber insert;

"(c) that defendant had no lawful right to procure the trade mark registration; and

"(d) that said registration is void;

"(2) An injunction against interfering with plaintiff\'s sale of its elastic lock nuts in the United States;

"(3) A cancellation of defendant\'s registration;

"(4) A directive to defendant to notify the Collector of Customs that defendant removes all objection and consents to the importation of plaintiff\'s product;

"(5) An injunction against the assertion of any claim that plaintiff\'s product infringes that of the defendant;

"(6) An adjudication that defendant\'s registration was procured by false or fraudulent representation; and

"(7) Compensatory and punitive damages."

The second count of the complaint incorporates the allegations of the first count by reference, charges that the acts and omissions therein set forth constituted unfair competition with plaintiff's business, and seeks damages in the sum of $1,000,000.

The defendant filed motions which, inter alia, so far as pertinent here, were: (1) a motion to strike the first count of the complaint for lack of jurisdiction of the subject matter under the Declaratory Judgment Act, 28 U.S.C. § 2201, and under the trade-mark laws, 15 U.S.C.A. § 1051 et seq.; (2) a motion to strike paragraph 16 of the first count of the complaint for failure to particularize the charge of fraud; and (3) a motion to strike the entire complaint for failure to state a claim upon which relief could be granted. The district court granted the motion to strike the first count on the ground that it failed to disclose jurisdiction in the district court over the subject matter and failed to state a claim upon which relief could be granted, holding that plaintiff's only recourse was by direct attack upon the validity of the trade-mark in the form of a proceeding for its cancellation before the Commissioner of Patents under section 14 of the Lanham Trade-Mark Act, 15 U.S.C.A. § 1064. 154 F. Supp. 615.

The plaintiff moved for reargument and for leave to amend the first count by alleging fraud with particularity in a new paragraph 9(a). Further affidavits, containing excerpts from defendant's application for registration of its trade-mark, were submitted disclosing that on November 16, 1954 the defendant had petitioned the Commissioner of Patents to make special its application of November 3d and to advance his consideration on the ground that plaintiff's product was being imported into the United States in direct competition with the defendant's product to defendant's injury, and that "All attempts to persuade this British competitor to refrain from further infringement of Applicant's trade-mark have been fruitless." On December 3, 1954 registration of defendant's trade-mark was refused on the ground that the use of red color constituted an ornament rather than a trade-mark and that the decision of the district court in Elastic Stop Nut Corporation of America v. Greer, D.C.Ill.1945, 62 F.Supp. 363, did not apply. The defendant, in an amended application of May 11, 1955, submitted other material in support of its original application including a complete copy of findings of fact and conclusions of law of the district judge in the Greer case. Registration was granted on September 6, 1955. Under date of October 14, 1955 the defendant wrote to the plaintiff as follows:

"There are enclosed photostatic copies of documents having to do with protection afforded us by United States Trade Mark Law. You will note that our "Red Collar" Trade Mark, identified by 611.674. has been recorded with the Commissioner of Customs of the United States of America.

"The real purpose of this action on our part is to prevent your company and

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