Skil Corporation v. Rockwell International Corp.

• Citation: 375 F. Supp. 777
• Decision Date: 06 May 1974
• Docket Number: No. 74 C 22.,74 C 22.
• Parties: SKIL CORPORATION, Plaintiff, v. ROCKWELL INTERNATIONAL CORPORATION, a corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

375 F. Supp. 777

SKIL CORPORATION, Plaintiff, v. ROCKWELL INTERNATIONAL CORPORATION, a corporation, Defendant.

No. 74 C 22.

United States District Court, N. D. Illinois, E. D.

May 6, 1974.

COPYRIGHT MATERIAL OMITTED

Thomas A. Reynolds, Jr. and Winston & Strawn, Stanley A. Walton, III, Chicago, Ill., for plaintiff.

Caryl P. Bonotto and Kirkland & Ellis, Steven P. Handler, Chicago, Ill., for defendant.

OPINION

AUSTIN, District Judge.

This is an action to enjoin alleged violation of Section 43(a) of the Lanham Act (15 U.S.C.A. § 1125(a)),¹ to enjoin various forms of unfair competition, and to obtain an accounting of gains and profits derived from defendant's illegal activities, as well as judgment for compensatory damages. Original federal jurisdiction of the Lanham Act claim is predicated upon 15 U.S.C.A. § 1121,² and 28 U.S.C.A. § 1338(a).³ Pendent federal jurisdiction is alleged with respect to the unfair competition claims under Illinois law, relying upon 28 U.S.C.A. § 1338(b).⁴

The gist of the action is that the business of the plaintiff ("Skil") was and is presently being injured by advertisements of the defendant ("Rockwell"), in that such advertisements make false and misleading factual statements and comparisons of the companies' respective products which compete with each other in interstate commerce. The case is presently before the Court to resolve those questions raised by defendant's motion to dismiss the action partly for failure of the Complaint to state a claim upon which relief may be granted and partly for lack of subject-matter jurisdiction.

I.

The alleged facts, which must be taken as true in deciding the pending motion, are as follows:

Skil and Rockwell are Delaware corporations which manufacture, advertise and sell various portable electric tools, including drills and jigsaws, for the home consumer market in direct competition with each other in Illinois and in interstate commerce under their respective trademarks and tradenames. Plaintiff has invested large sums of money on research, development, inventions, patents and trademarks for its products and also in the development of public acceptance and goodwill associated with those products.

Since September 1, 1973, Rockwell has been conducting a national and local advertising and promotional campaign in such media as television commercials, trade journals, popular consumer magazines, brochures, form reply letters to the public and printed product test summaries available on request. An estimated eighty million people have seen some or all of these advertisements.

The theme of Rockwell's campaign centers upon product testing done by an independent testing concern which tested, under supposedly normal use conditions, a variety of similar consumer electric drills and jigsaws manufactured by Skil and Rockwell and two other companies. In the course of this advertising campaign, Skil's tradename and trademark has been named and clearly depicted in the form of product photographs. In its related communications, Rockwell has made certain factual statements in comparative and absolute terms concerning the qualities and relative performance of its own products and those of Skil. These statements are alleged to be false, misleading, deceptive and incomplete.

Because of these deceptive and misleading statements and comparisons, Skil has suffered a loss of present and potential customers and a decline in its goodwill. Skil further alleges it has suffered serious and irreparable damage to its tradename, trademark and sales.

Count I of the Complaint seeks injunctive and other equitable relief, recovery of damages and an accounting of profits, and an award of costs plus attorneys fees under Section 43(a) of the Lanham Act (15 U.S.C.A. § 1125(a)). Federal jurisdiction of this count is alleged to exist by virtue of 28 U.S.C.A. § 1338(a) and 15 U.S.C.A. § 1121.

Counts II through IV allege that Rockwell's activities constituted false advertising, unfair competition, and public disparagement of the quality of Skil products. The relief sought is the same as in Count I. Pendent federal jurisdiction allegedly exists by virtue of 28 U. S.C.A. § 1338(b).

Count V alleges that Rockwell's advertising campaign is in violation of the Illinois Deceptive Practices Act (121½ I. R.S. §§ 311-317,⁵ which confers upon Skil a private cause of action. Again, the same relief as in Count I is sought.

II.

Defendant Rockwell moves to dismiss Count I of the Complaint for failure to state a claim upon which relief may be granted under the Lanham Act. Rockwell also moves to dismiss Counts II through V for lack of subject-matter jurisdiction, since they are founded upon state law and diversity of the parties' citizenship is lacking. Thus, if Count I is dismissed, there is no basis for federal jurisdiction of the remaining counts under either 28 U.S.C. § 1338(b) or the common law doctrine of pendent jurisdiction.

Accordingly, the outcome of the pending motion to dismiss depends upon the answer to one question: Does Section 43(a) of the Lanham Act give rise to a cause of action whereby a manufacturer may sue its competitor who, in its advertisements, has made false descriptions and representations of material facts concerning its own product and that of the plaintiff in comparing their relative attributes, where: (a) the goods travel in interstate commerce, (b) the misrepresentations are likely to deceive consumers to the extent that their decision to buy may be affected, and (c) the plaintiff is damaged thereby? In view of the language of the Act itself and the case law in this Circuit and elsewhere, the issue must be resolved in the affirmative.

III.

A. Cause of Action Under the Lanham Act

Enacted in 1946, Section 43(a) of the Lanham Act created a new federal statutory remedy for various types of unfair competition in interstate commerce.⁶ It grew out of a recognition by Congress of the necessity to break with the restrictive guidelines laid down in such relics as American Washboard Co. v. Saginaw Manufacturing Co.⁷ because of foreign trademark and patent treaty commitments.⁸ Furthermore, Congress undoubtedly recognized and intended to remedy the destructive effect that Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) had upon the development of a uniform federal common law of unfair competition which was essential in a nation where interstate commerce was dominant.⁹ Nevertheless, presumably because of the case law which preceded enactment of Section 43(a), the response to the provision was sluggish—so much so that at least one Judge surmised that the practicing bar had yet to realize the potential impact of the statute. Maternally Yours v. Your Maternity Shop, 234 F.2d 538, 546 (2d Cir. 1956) (Clark, C. J., concurring).

Section 43(a) (15 U.S.C.A. § 1125(a)) provides in pertinent part:

"Any person who shall . . . use in connection with any goods . . . any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, . . . shall be liable to a civil action by . . . any person who believes that he is or is likely to be damaged by the use of any such false description or representation."

The governing case law in this Circuit points directly to the conclusion that Section 43(a) creates a cause of action for conduct such as that alleged here.

In Bernard Food Industries v. Dietene Company, 415 F.2d 1279 (7th Cir. 1969), cert. denied, 397 U.S. 912, 90 S.Ct. 911, 25 L.Ed.2d 92 (1970), the Court held that where the defendant, in comparing its food product to plaintiff's, made false representations of fact as to plaintiff's product, a cause of action did not arise under Section 43(a). However, the Court clearly indicated that a cause of action would have arisen if defendant, in its comparision advertising, had also made false statements about its own product, saying:

"Further support for the view that the Act does not embrace misrepresentations about a competitor's product but only false or deceitful representations which the manufacturer or merchant makes about his own goods or services is contained in L'Aiglon Apparel v. Lana Lobell, Inc., 214 F.2d 649 (3d Cir. 1954), and General Pool Corp. v. Hallmark Pool Corp., 259 F. Supp. 383 (N.D.Ill.1966)."¹⁰ 415 F.2d at 1284.

Thus, we hold that Bernard Food Industries v. Dietene Company, supra, requires plaintiff to allege the following elements in order to state a claim upon which relief may be granted under Section 43(a) of the Lanham Act: (1) in its comparison advertisements, defendant made false statements of fact about its own product;¹¹ (2) those advertisements actually deceived or have the tendency to deceive a substantial segment of their audience; (3) such deception is material, in that it is likely to influence the purchasing decision; (4) defendant caused its falsely advertised goods to enter interstate commerce; and (5) plaintiff has been or is likely to be injured as the result of the foregoing either by direct diversion of sales from itself to defendant, or by lessening of the goodwill which its products enjoy with the buying public. See Weil, Protectability of Trademark Values Against False Competitive Advertising, 44 Cal. L.Rev. 527, 537 (1956). In order to recover damages under Section 43(a), plaintiff must establish that the buying public was actually deceived; in order to obtain equitable relief, only a likelihood of deception need be shown. Hesmer Foods, Inc. v. Campbell Soup Company, 346 F.2d 356, 359 (7th Cir. 1965), cert. denied, 382 U.S. 839, 86 S.Ct. 89, 15 L. Ed.2d 81. We hold that Count I of the Complaint sets forth the above five elements. We further find that it states a claim upon which both damages and equitable relief may be recovered.

B. Federal Jurisdiction

Section 39 of the Lanham Act (15 U. S.C.A. § 1121) confers upon the federal district courts...