Skippy, Inc. v. CPC Intern., Inc.

• Decision Date: 05 March 1982
• Docket Number: Nos. 81-1043,81-1044,s. 81-1043
• Parties: SKIPPY, INC., Appellant, v. CPC INTERNATIONAL, INC., Appellee. SKIPPY, INC., Appellee, v. CPC INTERNATIONAL, INC. Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 209

674 F.2d 209

216 U.S.P.Q. 1061

SKIPPY, INC., Appellant, v. CPC INTERNATIONAL, INC., Appellee.

SKIPPY, INC., Appellee, v. CPC INTERNATIONAL, INC. Appellant.

Nos. 81-1043, 81-1044.

United States Court of Appeals Fourth Circuit.

Argued Nov. 5, 1981.

Decided March 5, 1982.

Stephen M. Trattner, Washington, D. C. (Thomas B. Shull, J. Michael Cleary, Brylawski & Cleary, Washington, D. C., on brief), for appellant/cross-appellee.

Wm. Mack Webner, Arlington, Va. (Littlepage & Webner, Brian P. Gettings, Harvey B. Cohen, Arlington, Va., Joanne F. Alper, Washington, D. C., Cohen, Gettings & Sher, Arlington, Va., on brief), for appellee/cross-appellant.

Before BUTZNER, WIDENER and CHAPMAN, Circuit Judges.

CHAPMAN, Circuit Judge:

This appeal and cross appeal are from a trademark infringement and unfair competition suit in which the plaintiff charged the defendant with infringement of its Skippy trademark. Defendant cross-claimed for damages for breach of contract and certain declaratory and injunctive relief based on its rights in the Skippy trademark. The district court granted defendant partial summary judgment, dismissing all plaintiff's claims for damages. After a nonjury trial on the merits, judgment for defendant was entered on plaintiff's claims for declaratory and injunctive relief. The district court held for the plaintiff on defendant's cross-claim for damages. The district court also held for the plaintiff on defendant's claim that plaintiff had abandoned its trademark rights in the mark Skippy. The district court granted defendant's cross-claim for a declaratory judgment that its registration of the mark Skippy had become incontestable pursuant to 15 U.S.C. § 1115.

Plaintiff appeals the judgment against it on its damage claims. It also appeals denial of its claims for declaratory and injunctive relief. Plaintiff asserts that it is entitled to a new trial on all its claims since it was denied a jury trial. In addition, plaintiff appeals the declaratory judgment for defendant on its claim to incontestable rights. Defendant cross appeals the district court's denial of its cross-claim for a declaratory judgment that plaintiff had abandoned its rights to the Skippy mark. We affirm the district court's resolution of these issues, except the declaratory judgment that defendant's right to the mark Skippy for peanut butter had become incontestable, which must be vacated.

In March of 1923, Percy L. Crosby created a cartoon featuring a school-aged child he named Skippy. Within a few years of its creation the cartoon had been syndicated to newspapers throughout the country, where it was published as a newspaper comic strip. During the first decade of publication, and to a lesser extent thereafter, Crosby capitalized on the popularity of the "Skippy" comic strip by marketing "Skippy" cartoon books, magazine articles and novels. Crosby also licensed rights to use the Skippy name and concept to commercial interests for product endorsements, radio programs and at least one motion picture.

In 1925 Crosby obtained a federal trademark for the mark Skippy for the title of cartoons depicting a humorous juvenile character. Skippy, Inc., the appellant/cross appellee herein and plaintiff below, was organized by Crosby in 1932. Crosby reportedly transferred his rights in the Skippy trademark to Skippy, Inc. in return for stock in the corporation. CPC International, Inc., appellee/cross appellant herein and defendant below, acquired its right to the mark Skippy for peanut butter in a 1958 merger with The Best Foods, Inc. Best Foods had acquired Rosefield Packing Company in 1954, obtaining with it Rosefield's rights to the mark Skippy for peanut butter. Rosefield began marketing Skippy brand peanut butter in 1933 when it was a fledging packing company distributing food products in the California area.

Rosefield initially placed a white slat fence and a bucket with a paintbrush in it on its Skippy peanut butter labels. The white slat fence, the bucket and brush, and the hand painted name Skippy, all appearing on the label of Rosefield's peanut butter, were arguably suggestive of Crosby's "Skippy" comic strip. Rosefield, Best Foods and CPC continued to use the fence, the bucket and brush and the hand painted Skippy mark on their labels until approximately 1960.

Syndication of the "Skippy" comic strip ceased in 1945, but Crosby and Skippy, Inc., continued to seek commercial uses for the Skippy cartoon character after 1945. In 1947 Skippy, Inc. retained the Al Dvorin advertising agency to promote and license the Skippy mark and concept. It is apparent that these efforts met with little success since Skippy, Inc.'s total income from 1945 to 1980 was $45,000, with $25,000 of this sum being received from CPC for what CPC asserts was a settlement of the parties' differences over use of the Skippy mark.

Skippy, Inc.'s federal registration of the Skippy mark was not renewed when it expired in 1945. In 1947 Rosefield registered the mark Skippy for peanut butter without opposition from Skippy, Inc. From 1958 to 1979 net sales of Skippy peanut butter totaled $1,218,000,000. Marketing and advertising expenses during that same period totaled $105,700,000.

Management of Skippy, Inc. changed hands in 1968 when Joan Crosby Tibbetts was elected president. In early 1977 Tibbetts advised CPC of her knowledge that Skippy, Inc. had successfully opposed Rosefield's attempts, in 1933, to register the mark Skippy for peanut butter. Shortly thereafter Tibbetts began negotiating with CPC to settle any claims that Skippy, Inc. might have against CPC. From May 1977 until September 1977, Tibbetts discussed several matters with CPC, including what came to be designated an "option" agreement entitling CPC to use the mark Skippy and the Skippy cartoon character in advertising its food products. This agreement contained a release of CPC by Skippy, Inc.

The district court, Judge Albert V. Bryan, Jr., presiding, granted CPC partial summary judgment and dismissed Skippy, Inc.'s claims for monetary damages on grounds of laches. Skippy, Inc. now appeals the grant of partial summary judgment, asserting that laches is not a defense to a claim for damages. Skippy, Inc. also asserts that laches, even if applicable to claims for damages, was improperly applied to the instant damage claims since Rosefield and its successors were guilty of bad faith infringement.

Laches is a defense to claims for damages for trademark infringement and unfair competition. Greyhound Corp. v. Rothman, 84 F.Supp. 233 (D.Md.1949), aff'd, 175 F.2d 893 (4th Cir. 1949); Worcester Brewing Corp. v. Rueter & Co., 157 F. 217 (1st Cir. 1907); 1 Gilson, Trademark Protection & Practice § 8.12(12)(K). While the availability of laches as a defense to claims for injunctive relief may be limited when the defendant is guilty of bad faith infringement, see Menendez v. Holt, 128 U.S. 514, 9 S.Ct. 143, 32 L.Ed. 526 (1888) and Saxlehner v. Eisner, 179 U.S. 19, 21 S.Ct. 7, 45 L.Ed. 60 (1900), laches will bar a claim for damages for bad faith infringement. Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713 (1916); Greyhound, supra.

Skippy, Inc.'s failure to pursue its claims against Rosefield from the late 1940's until 1979, when the instant suit was filed, convinces us that Judge Bryan did not abuse his discretion in applying laches to bar Skippy, Inc.'s claims for damages for trademark infringement and unfair competition.

Skippy, Inc.'s claims for declaratory and injunctive relief were tried nonjury to the district court, Judge Oren R. Lewis presiding. Judge Lewis held for CPC on Skippy, Inc.'s claims for declaratory and injunctive relief. The holding was based on several grounds, including Skippy, Inc.'s release of CPC from all Skippy, Inc.'s claims against CPC for use of the mark Skippy for peanut butter. We address only the release defense since we find the district court was not clearly erroneous in ruling that the release barred Skippy, Inc.'s claims against CPC for use of the mark Skippy for peanut butter.

The release of CPC by Skippy, Inc. obligated Skippy, Inc. to hold CPC harmless "from any and all differences and controversies which may have existed in the past or may now exist ... as relates to the use of the ... name 'Skippy' ". After hearing the evidence on negotiation of this release, the trial court concluded that the release was a settlement of the parties' differences over CPC's continued use of the mark Skippy for peanut butter. On appeal Skippy, Inc. asserts that the trial court was clearly erroneous in enforcing the release since it was procured by fraud. The first alleged fraud in the procurement of the release was "CPC's alleged false representations that it wanted to execute (a) marketing agreement" with Skippy, Inc. entitling CPC to use the Skippy cartoon character in advertising Skippy peanut butter. According to Skippy, Inc., CPC made these representations when it had already selected another advertising concept.

When Skippy, Inc. threatened to sue CPC in March of 1977, CPC assigned attorney Hanes Heller to handle the threatened suit. Between May and September of 1977, Tibbetts, on behalf of Skippy, Inc., and Heller, on behalf of CPC, engaged in negotiations for settlement of CPC's asserted past wrongs and discussions involving future income to Skippy, Inc. from use of the Skippy cartoon character in advertising CPC's peanut butter. Tibbetts testified that Heller orally represented that CPC had selected a concept involving use of the Skippy character. Heller testified that no such representations were made. Judge Lewis apparently credited Heller over Tibbetts, a judgment we do not find to be clearly erroneous.

The second assertion of fraud in procurement of the release was the alleged refusal to CPC and its present attorneys, Lord, Day & Lord, to permit Skippy, Inc. access to its own files and records until after the release had been...