La Societe Anonyme des Parfums LeGalion v. Jean Patou, Inc.

• Citation: 495 F.2d 1265
• Decision Date: 09 April 1974
• Docket Number: No. 530,Docket 72-2409.,530
• Parties: La SOCIETE ANONYME des PARFUMS LE GALION, Plaintiff-Appellant, v. JEAN PATOU, INC. and Michael Stramiello, Jr., Collector of Customs of the Port of New York, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

495 F.2d 1265 (1974)

La SOCIETE ANONYME des PARFUMS LE GALION, Plaintiff-Appellant, v. JEAN PATOU, INC. and Michael Stramiello, Jr., Collector of Customs of the Port of New York, Defendant-Appellee.

No. 530, Docket 72-2409.

United States Court of Appeals, Second Circuit.

Argued February 22, 1974.

Decided April 9, 1974.

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Arthur A. March, New York City, for plaintiff-appellant.

Alex Friedman, New York City (Martin J. Beran, David A. Weinstein, and Blum, Moscovitz, Friedman & Kaplan, New York City, of counsel), for defendant-appellee Jean Patou, Inc.

Before LUMBARD, FRIENDLY and TIMBERS, Circuit Judges.

FRIENDLY, Circuit Judge:

Plaintiff LeGalion, a French perfume manufacturer, has for years sold its perfume under the trademark "SNOB" in a number of foreign countries. The sales have been substantial, amounting in one recent five-year period to almost $2,000,000. LeGalion has been unable to sell SNOB in the United States, however, because in 1951 defendant Patou,¹ an American perfume manufacturer, obtained a trademark registration for SNOB in this country. Pursuant to § 42 of the Lanham Act, 15 U.S.C. § 1124,² Customs officials subsequently refused to permit LeGalion to import its SNOB perfume because of the conflict with defendant's registered mark. In spite of the registration, Patou has never made a serious effort to merchandise SNOB; between 1950 and 1971, it sold only some 89 bottles of SNOB,³ and it engaged in no advertising or other sales efforts on behalf of the product. Patou's sales of SNOB between 1951 and 1969 generated a "gross profit" of only about $100, on retail sales of less than $600.

In 1956, LeGalion filed suit in the District Court for the Southern District of New York, seeking declaratory relief that would permit it to import its SNOB brand and give it trademark rights in the name. LeGalion claimed that Patou had never used the SNOB trademark sufficiently to sustain its claim of ownership. After Patou filed its answer, however, plaintiff took no further steps to prosecute the case, and it was dismissed by Judge Herlands in 1958.

After a hiatus of some seven years, LeGalion brought a second action in the United States Patent Office in 1965 seeking cancellation of Patou's SNOB registration. Again LeGalion did nothing to bring the case to trial, and it was dismissed in 1967.

Continuing in its languorous course, plaintiff in 1966 filed another complaint in the District Court for the Southern District of New York, demanding essentially the same relief as the 1956 complaint. Specifically, LeGalion sought to force the Collector of Customs to permit the importation of its SNOB perfume and requested declaratory relief, damages, cancellation of Patou's SNOB registration, and "such other and further relief as to this Court may seem just." After more delay, the case finally came to trial in July, 1972. In a six-page memorandum decision, Judge Gagliardi held that although Patou's sales of SNOB were minimal, they were sufficient to maintain its trademark rights, and thus to block the importation of LeGalion's product. The court based its conclusion on three grounds. First, it found that the sales program was not a sham: each sale was profitable, and each was effected on order from a bona fide customer. On that basis the court distinguished Merry Hull & Co. v. HiLine Co., 243 F.Supp. 45 (S.D.N.Y. 1965), where the plaintiff's practice of distributing its product only to relatives, friends, and employees was held not to constitute a bona fide commercial use of the trademark. Second, it held that Patou's minimal use of its SNOB trademark was sufficient "in the light of the customary practice of perfumers to `reserve' a name and to carry on trademark maintenance programs," 353 F.Supp. at 293. The court noted that the difficulty of finding new and attractive trade names for perfumes had caused manufacturers to hold a number of potential trade names in reserve until such time as the company might decide to begin large-scale distribution of the product under that name. Minimal bona fide use for the purpose of trademark protection, the court wrote, is all the law requires. Finally, the district court held that the pendency of legal proceedings since 1956 concerning the validity of Patou's SNOB mark constituted a valid defense to LeGalion's claim that Patou's use of the mark had been only token in nature. From the district court's judgment for defendants, 353 F.Supp. 293 (S.D.N.Y.1972), plaintiff brought this appeal.

I.

At the outset we must consider the related problems of jurisdiction and mootness. In its complaint, LeGalion alleged jurisdiction under the Lanham Act and on the basis of diversity of citizenship. However, Patou's registration for SNOB expired on January 2, 1971, and its counsel stipulated at trial that the registration had not been renewed. The demand for cancellation of the defendant's 1951 registration is therefore moot. Since the Lanham Act section that bars importation of a product bearing a conflicting trademark applies only if the established mark is registered, the claim for injunctive relief would also appear moot. With those two major claims out of the case, plaintiff has shifted its ground somewhat: on appeal, it has requested that the court grant a declaratory judgment that Patou has no rights to the SNOB trademark.⁴ That request falls fairly within the scope of the catch-all paragraph in its complaint, but it does not arise under the Lanham Act if Patou's only remaining trademark claim stems from common law rights.⁵ The last possible basis for federal question jurisdiction is plaintiff's request for "an accounting of all damages caused by the defendant Jean Patou, Inc. in preventing the importation . . . of plaintiff's perfumes." The Lanham Act contains no specific provision for recovery of damages in this context. However, § 38 of the Act, which provides a damages remedy for injuries suffered in consequence of a false or fraudulent registration, might be read to extend to plaintiff's claim,⁶cf. Landstrom v. Thorpe, 189 F.2d 46 (8 Cir.), cert. denied, 342 U.S. 819, 72 S.Ct. 37, 96 L.Ed. 620 (1951); D. M. & Antique Import Corp. v. Royal Saxe Corp., 311 F.Supp. 1261, 1272 (S.D.N.Y.1970). While it appears that the damages claim is at least sufficient to afford a ground for federal jurisdiction, it may not be necessary to reach that issue, since diversity of citizenship appears to provide a sufficient jurisdictional basis.⁷ It seems highly likely that plaintiff will be able to sustain its allegation that there is more than $10,000 in controversy; if this should be challenged, the district court on remand should determine this and make whatever other factual inquiries may be necessary to resolve any remaining doubts on the question of jurisdiction.⁸

II.

Beyond the jurisdictional question, this case presents several difficult questions concerning trademark law and the principles of res judicata. The difficulties relating to trademark law stem from the tension between providing relative security to a business in maintaining its trademarks and preventing a business with only a nominal claim to a valuable trademark from barring its use by a party with a substantial financial stake in using the mark.

Under familiar trademark principles, the right to exclusive use of a trademark derives from its appropriation and subsequent use in the marketplace. The user who first appropriates the mark obtains an enforceable right to exclude others from using it, as long as the initial appropriation and use are accompanied by an intention to continue exploiting the mark commercially, Trade-Mark Cases, 100 U.S. 82, 94, 25 L.Ed. 550 (1879); United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 39 S.Ct. 48, 63 L.Ed. 141 (1918); Kohler Manufacturing Co. v. Beeshore, 59 F. 572, 576 (3 Cir. 1893); Worden v. Cannaliato, 52 App.D.C. 254, 285 F. 988, 990 (1924); American Foods, Inc. v. Golden Flake, Inc., 312 F.2d 619 (5 Cir. 1963); Restatement (Second) of Torts § 719, comment b (tent.draft 1963). The Supreme Court wrote in the United Drug Co. case, 248 U.S. at 97, 39 S.Ct. at 50:

There is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed. The law of trademarks is but a part of the broader law of unfair competition; the right to a particular mark grows out of its use, not its mere adoption; its function is simply to designate the goods as the product of a particular trader and to protect his good will against the sale of another\'s product as his; and it is not the subject of property except in connection with an existing business.

Adoption and a single use of the mark may be sufficient to entitle the user to register the mark, see Maternally Yours, Inc. v. Your Maternity Shop, Inc., supra, 234 F.2d 538; Montgomery Ward & Co. v. Sears, Roebuck & Co., 49 F.2d 842, 18 CCPA 1386 (1931); Fort Howard Paper Co. v. Kimberly-Clark Corp., 390 F.2d 1015, 1017, 55 CCPA 947, cert. denied, 393 U.S. 831, 89 S.Ct. 99, 21 L.Ed.2d 101 (1968); Community of Roquefort v. Santo, 443 F.2d 1196, 58 CCPA 1303 (1971). But more is required to sustain the mark against a charge of nonusage. Xtra, Inc. v. Warren Petroleum Corp., 175 U. S.P.Q. 660 (Trademark Trial & App. Bd. 1972); Arnold, A Philosophy on the Protections Afforded by the Patent, Trademark, Copyright and Unfair Competition Law, 54 Trademark Rep. 413, 431 (1964); Kegan, Trademark "Use" — Fact or Fiction, 55 Trademark Rep. 175 (1965). To prove bona fide usage, the proponent of the trademark must demonstrate that his use of the mark has been deliberate and continuous, not sporadic, casual or transitory, 3 Callmann, Unfair Competition, Trademarks & Monopolies § 76.2(d) (1969).

Plaintiff claims that the minimal use in this case was not sufficient to constitute the bona fide use of the trademark necessary to...