Stratton & Terstegge Co. v. Stiglitz Furnace Co.

• Decision Date: 12 March 1935
• Citation: 258 Ky. 678,81 S.W.2d 1
• Parties: STRATTON & TERSTEGGE CO. v. STIGLITZ FURNACE CO.
• Court: Kentucky Court of Appeals

81 S.W.2d 1

258 Ky. 678

STRATTON & TERSTEGGE CO. v. STIGLITZ FURNACE CO.

Court of Appeals of Kentucky

March 12, 1935

Rehearing Denied May 7, 1935.

Appeal from Circuit Court, Jefferson County, Chancery Branch, First Division.

Suit by the Stratton & Terstegge Company against the Stiglitz Furnace Company. From a judgment dismissing the petition, plaintiff appeals.

Affirmed.

Crawford Middleton, Milner & Seelbach, of Louisville, and Murray &amp Zugelter, of Cincinnati, Ohio, for appellant.

Woodward Hamilton & Hobson and Thos. S. Dawson, all of Louisville, for appellee.

STANLEY Commissioner.

The suit by the appellant seeks to enjoin the defendant from using the word "Monarch" as a trade-mark on furnaces sold in Kentucky and for an accounting of damages claimed for infringement and unfair competition. The appeal is from the judgment denying relief and dismissing the petition.

Some time before 1890 the Kruse & Dewenter Company, of Indianapolis, began the manufacture of a steel warm air furnace which was given the name of "Monarch." This was sold in Louisville for a while by a firm which went out of business. Not long thereafter, about 1902 or perhaps earlier, Stratton & Terstegge Company was organized, and a contract was made by it and Kruse & Dewenter whereby it was agreed that Kruse & Dewenter would sell its furnaces to Stratton & Terstegge as sole agents and distributors in certain territory, including the state of Kentucky, for one year. A similar contract for the limited term was made every year until 1927. The prices varied from time to time, and the transactions were straight-out sales and purchases under the monopolistic terms of the contracts; Stratton & Terstegge establishing its own selling prices independent of any control of the manufacturer. If not from the commencement of these relations, it was shortly thereafter that the name of Kruse & Dewenter was eliminated from the furnaces sold appellant, and only the name of Stratton & Terstegge, together with the trademark "Monarch," was placed upon them. That company advertised the furnace extensively during the period of twenty-five years or more; but the manufacturer made substantial contributions to the cost. Its sales were many and satisfactory. The name "Monarch" in association with Stratton & Terstegge became familiar, and the local public understood that the "Monarch" was that company's furnace. There was evidence, however, showing that among the trade generally it was known that the Kruse & Dewenter Company was the manufacturer of this furnace. In parts of the country other than in the territory covered by appellant's contract that company extensively sold the same furnace under the name "Monarch."

Because the manufacturer had not kept the furnace modernized according to the ideas of Stratton & Terstegge, in 1927 that company declined to renew the contract with Kruse & Dewenter and contracted with the Williamson Heating Company of Cincinnati to make a furnace for it similar in general construction but different in particular respects. This was also given the name "Monarch" and put upon the Kentucky market by Stratton & Terstegge. In 1931 Kruse & Dewenter entered into a contract with the appellee, Stiglitz Furnace Company, for the handling of its "Monarch" furnaces in the territory, and that company proceeded to advertise and handle them in Kentucky in the same manner as had the appellant in the years past, advertising itself as exclusive agent for "Monarch" furnaces. This suit followed. There was no counterclaim. Inasmuch as the appellee was authorized by Kruse & Dewenter thus to use the name, the decision is dependent upon that company's right to the trade-mark.

The use of marks for the purpose of indicating the maker or seller of merchandise has existed for centuries. They are found on articles discovered in the ruins of the ancient civilizations. In time, such distinctive and identifying marks came to have legal significance, and the English courts early began to protect persons using them against their competitors copying the marks upon their goods. Nims on Unfair Competition & Trade-Marks, § 185; Trade-Mark Cases (United States v. Steffens) 100 U.S. 82, 25 L.Ed. 550. A mark or name used in trade designates and distinguishes the goods one manufactures or sells, and its function is to enable him to secure such profits as result from an established reputation and to protect his good will, or at least to point out the maker of the article to which it is attached. Its object likewise is to enable the consumer to identify the commercial source of the merchandise. The right of adoption and use of these distinguishing names, symbols, or devices to the exclusion of all others is property in a qualified sense, for the violation of which damages may be recovered or an injunction against infringement or piratical use may be obtained. 63 C.J. 311; Trade-Mark Cases, supra; Hanover Star Milling Company v. Metcalf, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713; Beech-Nut Packing Company v. P. Lorillard Company, 273 U.S. 629, 47 S.Ct. 481, 71 L.Ed. 810; Avery v. Meikle, 81 Ky. 73; Commonwealth v. Kentucky Distilleries & Warehouse Company, 132 Ky. 521, 116 S.W. 766, 21 L. R. A. (N. S.) 30, 136 Am. St. Rep. 186, 18 Ann. Cas. 1156; Newport Sand Bank Company v. Monarch Sand Mining Company, 144 Ky. 7, 137 S.W. 784, 34 L. R. A. (N. S.) 1040; Bonnie & Co. v. Bonnie Bros., 160 Ky. 487, 169 S.W. 871; Mayfield Milling Company v. Covington B rothers & Co., 212 Ky. 262, 278 S.W. 562. Old Times Distillery Company v. Casey & Swasey, 104 Ky. 616, 47 S.W. 610, 20 Ky. Law Rep. 994, 42 L. R. A. 466, 84 Am. St. Rep. 480; E. H. Taylor, Jr., & Sons Co. v. Taylor, 124 Ky. 173, 85 S.W. 1085, 27 Ky. Law Rep. 625; Nims, § 217; 63 C.J. 321, 340; Yellow Cab Company v. Sachs, 191 Cal. 238, 216 P. 33, 28 A. L. R. 105.

Statutes have been enacted in many jurisdictions to protect, or rather to fortify the protection of, these rights, the principal of which is the federal law. U.S. Code, title 15, § 81 et seq. (15 USCA § 81 et seq.). We have in this state statutes relating to the publication, registration, and protection only of branded bottles and other containers (section 1279 et seq.) and logs and timber (section 1409-1 et seq.); also labor union labels (section 4749 et seq.). The registration of a trade-mark under a statute is deemed prima facie evidence of ownership, but the property right depends upon acquisition by prior use. U.S. Code, title 15, § 96 (15 USCA § 96); Robertson v. United States, 52 App. D. C. 368, 287 F. 942; Gaines & Co. v. Rock Springs Distilling Company (C. C.) 179 F. 544; Columbia Mill Company v. Alcorn, 150 U.S. 460, 14 S.Ct. 151, 37 L.Ed. 1144. We are here concerned with a common-law trade-mark, which is one appropriated under the rules of the common law, regardless of the statutes. Nims, § 185; 63 C.J. 309; United States Ozone Co. v. United States Ozone Company of America (C. C. A.) 62 F.(2d) 881. The case must be determined under those rules.

It seems to be conceded that Kruse & Dewenter, by reason of priority of appropriation, owns the trade-mark "Monarch" as applied to furnaces, elsewhere than in Kentucky, and that in the beginning of its relations between that company and the appellant it was entitled to its exclusive use. Appellant contends that it acquired the exclusive territorial right to use the trade-mark through abandonment and a species of adverse possession. It is maintained that, by reason of its extensive advertisement, sale, and repair of furnaces in exclusive association with its own name and entirely disassociated from the name of the manufacturer, and the resultant identity with its name and consequent development of the related good will in Kentucky, appellant became and is entitled to the trade-mark and the right to place it upon an entirely different furnace manufactured by another, and to protection from infringement by the appellee as the dealer in the original "Monarch" furnaces. It is argued that the relationship of the manufacturer and appellant throughout the years was that of seller and buyer, and not of principal and agent, and that the actions of Kruse & Dewenter resulted in its loss of the trade-mark rights in the word in Kentucky.

It is true there was a straight-out sale and purchase of the furnaces and the seller exercised no dominion over the resale price or otherwise controlled their disposition. But the contracts annually repeated that Stratton & Terstegge Company was the sole agent of the manufacturer and exclusive dealer in the furnaces, and that Kruse & Dewenter would prevent competition in the designated territory. Hence there was something more than a mere sale and purchase. While, strictly speaking, there was no agency in fact, and the dealer did not represent the manufacturer, such relation as existed is frequently called "sales agency," 55 C.J. 1343 note; Hendrickson v. International Harvester Company, 100 Vt. 161, ...