Standard Oilshares, Inc., a Corporation of State v. Standard Oil Group, Inc.

• Decision Date: 02 April 1930
• Citation: 150 A. 174,17 Del.Ch. 113
• Court: Court of Chancery of Delaware
• Parties: STANDARD OILSHARES, INC., a corporation of the State of Delaware, v. STANDARD OIL GROUP, INC., a corporation of the State of Delaware

150 A. 174

17 Del.Ch. 113

STANDARD OILSHARES, INC., a corporation of the State of Delaware, v. STANDARD OIL GROUP, INC., a corporation of the State of Delaware

Court of Chancery of Delaware, New Castle

April 2, 1930

INJUNCTION BILL. The complainant was incorporated under the laws of this State on May 16, 1928. There are thirty-six companies familiarly known as the Standard Oil group, by which is meant that these companies, if not entirely, at least substantially constitute the units into which the old Standard Oil Company was broken by decree of the federal court filed in the anti-trust litigation which the United States instituted against that company some years ago.

The business of the complainant is briefly as follows: It buys stocks in certain of the Standard Oil companies, deposits the stocks so purchased with a trustee in groups of 191 shares and receives therefor from the trustee certificates evidencing participating rights in the deposited Standard Oil shares. Participating shares in the amount of 1,000 are issued by the trustee against each group of 191 Standard Oil shares deposited with it. Thus each participating share issued by the trustee entitles the holder to a one-thousandth interest in the group of 191 deposited oil shares. The companies whose shares may be purchased to make up the group or unit of 191 are specifically designated in the trust agreement and on the participating certificates, and the number of shares of each company that may be bought is likewise specifically designated. The companies which are designated number thirty-one out of the total of thirty-six of the so-called Standard Oil group. The participating certificates are named on the face by the complainant, and traded in on various exchanges, as "Trustee Standard Oilshares." The "Trustee Standard Oilshares" are sold to the investing public and a market in them is maintained by the complainant.

The complainant first marketed its "Trustee Standard Oilshares" in July, 1928, but sales were in no considerable volume until August, 1928. The bill was filed July 31, 1929, by which time the complainant had sold in twenty-five states of the Union through one hundred and seventy-one dealers and distributors, seven thousand registered certificates and sixty-five hundred bearer certificates calling for 577 500 participating shares having a market value of $ 6,800,000; and the complainant had spent $ 30,000 in advertising its business and upwards of $ 126,000 in its organization and development.

The defendant was incorporated February 28, 1929, by George G Norris, who had previously been chairman of the board of directors of the complainant and who had severed his connection with the complainant in the preceding December. The defendant's business is similar to that of the complainant. Mutatis mutandis, its certificate of incorporation is identical with the complainant's. Instead, however, of confining its purchases and trust deposits of Standard Oil stocks to only thirty-one of the companies in the Standard Oil group, the defendant purchases and deposits with a trustee stocks in all thirty-six of the companies in that group. The participating shares which the defendant markets and deals in are described and known as "Standard Oil Trust Shares," and, because of the grouping of their underlying securities, sell for slightly less than do the "Trustee Standard Oilshares" of the complainant--about one dollar less. The defendant first marketed its "Standard Oil Trust Shares" in June of 1929. It appears not to have done a very large volume of business for the reason, according to its president, that the panic of last autumn interrupted its progress.

The bill seeks to enjoin the defendant from using the corporate name "Standard Oil Group, Inc.," from issuing selling, advertising or otherwise dealing in "Standard Oil Trust Shares," or from designating its trust shares by any name similar to "Trustee Standard Oilshares," used by the complainant, and for an accounting.

Heard on bill, answer, oral testimony taken before the Chancellor and exhibits.

Bill dismissed, costs on the complainant.

Charles F. Curley, John Sherman Myers, Frederick W. R. Pride, and Joseph A. Barrett, of the firm of Hughes, Schurman & Dwight of New York City, for complainant.

Caleb S. Layton, of the firm of Richards, Layton & Finger, for defendant.

OPINION

THE CHANCELLOR

This is a bill to restrain unfair competition. The complainant and defendant are engaged in a similar business. Each conducts an investment trust of the fixed type. Each sells to the public participating shares in Standard Oil stocks which are deposited with a trustee under an elaborate trust agreement defining the rights of the participating owners. The participating shares are evidenced by certificates. The complainant whose corporate name is Standard Oilshares, Inc. sponsors and markets participating certificates which it calls Trustee Standard Oilshares; the defendant, whose corporate name is Standard Oil Group, Inc., sponsors and markets participating certificates which it calls Standard Oil Trust Shares. In all essential respects both companies are engaged in marketing a commodity, the commodity not being a physical thing, but an intangible thing in the form of rights or participations. The commodities while similar are not the same, for while both companies sell participating shares in Standard Oil stocks, yet in the portfolio which contains the underlying securities of the complainant's commodity only thirty-one of the Standard Oil group are represented, whereas in the portfolio which contains the underlying securities of the defendant's commodity all of the thirty-six companies in the Standard Oil group are represented. It is manifest that the price at which the trust shares may be marketed and traded in is influenced by the character of the grouping of the stocks which underlie them. This is why it is that the defendant's Standard Oil Trust Shares sell at a lower price than the complainant's Trustee Standard Oilshares. The circumstance, however, that the defendant has so devised a grouping of Standard Oil stocks that participations therein sell more advantageously than do the participations in the grouping devised by the complainant, does not seem to me to be of any moment in considering the question of whether the defendant is guilty of unfair competition, for if the defendant otherwise has the right to continue to do the business it does under the names it uses, I know of no principle by which it would be compelled to work out its price ranges on a parity with the complainant's. This is especially so when it is remembered that the portfolios of the defendant are constituted differently from those of the complainant, and the things sold are therefore different in character. I am unable, therefore, to attach any significance to the mere marketing of its securities by the defendant below those of the complainant, as the solicitors for the complainant seem disposed to do.

The substantial questions in this case have to do with names. The first question is whether or not in view of the nature of the business conducted by the parties, the defendant has chosen a name for its so-called commodity, viz., Standard Oil Trust Shares which is so close an imitation of the name of the complainant's commodity, viz., Trustee Standard Oilshares, as to warrant a court of equity in restraining the use of such name in competition with the complainant. The second question is whether the defendant has a right to use the corporate name Standard Oil Group, Inc., in carrying on a business similar in its general outlines to the business carried on by the complainant under the corporate name of Standard Oilshares, Inc., prior to the defendant's existence. In other words, has the defendant unlawfully imitated the corporate name of the complainant? These questions will be considered in the order of their statement.

First, then, as to the names of the rival securities. It is elementary that the law of unfair competition will not permit one person to adopt any name, mark or device which will enable him to pass off his goods as those of another, or which may be reasonably calculated to mislead the public into confusing the origin of the defendant's goods with the origin of the complainant's.

But there are certain qualifications of this elementary principle which are as well settled as the principle itself. When it is said that no man may use another's name or mark, the converse connotation is that the present user of such name or mark has an exclusive trade right to its enjoyment. Where the right to such exclusive use is recognized, to that extent an approach to a monopoly is countenanced. But so valuable does the law consider the business which an individual has built up and identified with a name, mark or device at the expenditure of much time, labor and money, and which is the sign-manuel of a particular quality or superior excellence of product attributable to the producer's efforts, that notwithstanding the general policy of the law which abhors monopoly and favors the freedom of competition, any attempt by another to take away the business by imitating the name of its owner or by simulating his distinctive marks, will be enjoined. While the individual thus has rights to the use and enjoyment of a name which are to the exclusion of the public, the latter in turn has certain rights to names which no individual may pre-empt. Names that are descriptive of articles, things or occupations, names that are purely geographical, are names that are the common property of all men, and the law will not recognize the right in any individual, except under unusual circumstances, to appropriate unto himself to the exclusion of every...