Sutton Cosmetics (PR) v. Lander Co.

• Decision Date: 25 January 1972
• Docket Number: Docket 71-1722.,No. 208,208
• Citation: 455 F.2d 285
• Parties: SUTTON COSMETICS (P. R.) Inc. et al., Appellees, v. LANDER CO., Inc., Scott Chemical Co., Inc., Appellants.
• Court: U.S. Court of Appeals — Second Circuit

455 F.2d 285 (1972)

SUTTON COSMETICS (P. R.) Inc. et al., Appellees, v. LANDER CO., Inc., Scott Chemical Co., Inc., Appellants.

No. 208, Docket 71-1722.

United States Court of Appeals, Second Circuit.

Argued October 28, 1971.

Decided January 25, 1972.

Morton Amster, New York City, N. Y. (Alfred B. Engelberg and Amster & Rothstein, New York City, on the brief), for appellees.

Arthur H. Seidel, Philadelphia, Pa. (Allen L. Greenberg, McKeesport, Pa., and Seidel, Gonda & Goldhammer, Philadelphia, Pa., on the brief), for appellants.

Before LUMBARD, HAYS and OAKES, Circuit Judges.

LUMBARD, Circuit Judge:

Appellants Lander Co., Inc., a Delaware corporation, and Scott Chemical Co., Inc., a New York corporation, hereinafter Lander were preliminarily enjoined by the district court for the Southern District from using the surname "Sutton" as a trademark in the sale of cosmetics and toiletries and from selling any Sutton products which Lander had produced and held in inventory.

Judge Metzner held that Lander's use of the trademark "Sutton" was a false designation of origin proscribed by section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), because "Sutton" was already being used as a trademark in the sale of men's cosmetics by a competitior, Sutton Cosmetics (P.R.), a Puerto Rican corporation, which had made sales in Puerto Rico, Dade County, Florida and metropolitan New York City. As the record amply supports the conclusion that there was a sufficient showing of the likelihood that Sutton Cosmetics (P.R.) would prevail, the district court properly exercised its discretion in granting preliminary relief. With the single modification of limiting the geographical scope of the injunction to the areas in which Sutton Cosmetics (P.R.) has sold, we affirm.

The trademark "Sutton" was registered in 1952 in the United States Patent Office by Sutton Cosmetics, Inc.,¹ a New York corporation, for use in the cosmetic market.² On December 24, 1964, the registration was assigned to White Laboratories, Inc., a subsidiary of the Schering Corporation. From 1964 until the middle of September 1970, Schering and its subsidiary manufactured and sold Sutton deodorants throughout the United States, Puerto Rico and the Virgin Islands. In addition, Schering licensed others to engage in this activity under the mark "Sutton." Through Schering's efforts (and previously those of Sutton Cosmetics, Inc.), the Sutton mark had gained a substantial following among Spanish-speaking persons in the markets where Schering and its affiliates sold.

On June 4, 1970, Schering formally announced its intention to discontinue the manufacture and sale of Sutton products effective September 15, 1970. Schering also determined to abandon the mark "Sutton" rather than sell it or the goodwill attached to it.³

Cesar Castillo, Inc., a Puerto Rican corporation, had been one of Schering's wholesale customers in Puerto Rico for Schering's Sutton products. When Cesar Castillo, its president, learned that Schering intended to discontinue the Sutton line and abandon the Sutton mark, he attempted to buy the entire line of business in Puerto Rico. Schering refused to sell the trademark, but was willing to sell its inventory and packaging. Castillo then arranged to buy from Schering a great part of the Sutton inventory including finished Sutton goods, raw materials, molds to make Sutton products, empty product packages, display materials and shipping cartons — all of which were imprinted with the Sutton trademark and Sutton's distinctive package design, a blue-and-white stripe with diagonal emblem.

Sutton Cosmetics (P.R.) Inc. had been formed on June 29, 1970 as a subsidiary corporation of Castillo for the purpose of carrying on the Sutton business. With the acquisition in September of the Sutton inventory from Schering, Sutton Cosmetics (P.R.) began its sales of Sutton products which, of course, were marked and packaged exactly the same as the products which had been sold by Schering. From late September 1970 on, it sold Sutton products in Puerto Rico, Dade County, Florida, and metropolitan New York City.

The remainder of the Schering Sutton inventory not sold to Sutton Cosmetics (P.R.) evidently was sold to only two other purchasers, P. Daussa Corporation and E. W. Abrahams & Sons, Ltd. P. Daussa was Schering's German and Austrian distributor and E. W. Abrahams manufactured Sutton products under license from Schering and sold these products in Jamaica, B.W.I. P. Daussa resold to Sutton Cosmetics (P.R.) a substantial portion of the Sutton inventory that it had purchased from Schering. E. W. Abrahams apparently resold its Sutton products in Jamaica, B.W.I.

Lander had not purchased any Sutton inventory from Schering, but in May 1970, prior to any Sutton sales made by Sutton Cosmetics (P.R.), Lander had made one sale of $45 worth of cosmetics labelled "Sutton" to a drug retailer in the New York metropolitan area. Though denominated "Sutton," these products were packaged with a yellow label quite different from the blue and white packaging used by Schering and later by Sutton Cosmetics (P.R.). In February 1971, Lander began to sell regularly a stick deodorant packaged similarly to Sutton Cosmetics (P.R.)'s deodorant in the same markets where Sutton Cosmetics (P.R.) sold. Lander's product was also called "Sutton" and the container had the same design on it as the one used by Sutton Cosmetics (P.R.) and previously by Schering. Lander attempted to sell its Sutton product by circulating advertising fliers which stated "Just what you wanted — the Sutton Boys are back with a terrific introductory offer" and by offering two stick deodorants for the price of one. As a result of Lander's sales efforts, at least two buyers cancelled their pending orders with Sutton Cosmetics (P.R.) and placed their orders for Sutton products with Lander.

Sutton Cosmetics (P.R.) then brought this suit seeking permanent injunctive relief enjoining Lander from using the mark "Sutton" in the sale of cosmetics. After hearing testimony and considering the depositions of both parties, the district court found the facts substantially as recited above and on May 7, 1971, granted preliminary relief, holding that Lander's conduct had violated section 43(a) of the Lanham Act apparently on the ground that Lander's use of the Sutton mark constituted a "false designation of origin" within the meaning of the statute. We agree with the issuance of the preliminary injunction as there was a sufficient likelihood that Sutton Cosmetics (P.R.) would prevail on the merits.

Section 43(a) of the Lanham Act provides:

Any person who shall affix . . . or use in connection with any goods, . . . a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same . . . 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.

A seller who deliberately passes off his goods as those of his competitor has falsely designated the origin of the goods within the meaning of section 43(a). Pantrone, Inc. v. A. I. Friedman, Inc., 294 F.Supp. 545, 552 (S.D.N. Y.1968); Crossbow, Inc. v. Dan-Dee Imports, Inc., 266 F.Supp. 335, 339-340 (S.D.N.Y.1967); Federal-Mogul-Bower Bearings, Inc. v. Azoff, 313 F.2d 405 (6th Cir. 1963); Chamberlain v. Columbia Pictures Corp., 186 F.2d 923, 925 (9th Cir. 1951).⁴ Deliberate use of a competitor's trademark and packaging design is obviously intended to divert business by misinforming the consumer and, accordingly, the courts have long enjoined passing off of a seller's goods as the goods of another. Croft v. Day, 7 Beav. 84, 88, 49 Eng.Rep. 994, 996 (Ch. 1843); see Flexitized, Inc. v. National Flexitized Corporation, 335 F.2d 774, 780-783 (2d Cir. 1964), cert. denied, 380 U.S. 913, 85 S.Ct. 899, 13 L.Ed.2d 799 (1965); Norwich Pharmacal Company v. Sterling Drug, Inc., 271 F.2d 569 (2d Cir. 1959), cert. denied, 362 U.S. 919, 80 S.Ct. 671, 4 L.Ed.2d 739 (1960); Corning Glass Works v. Jeannette Glass Company, 308 F.Supp. 1321, 1325 (E.D.N. Y.), aff'd 432 F.2d 784 (2d Cir. 1970).

The district court found that Lander had "deliberately packaged its Sutton product in deceptively similar containers with the name Sutton and the distinctive design under the name." In addition to the deceptive packaging, Lander marketed the deodorant by identifying itself in its advertising fliers as "the Sutton boys." Sutton Cosmetics (P.R.), of course, was already using the Sutton name and the distinctive Sutton mark and packaging which had been popularized by Schering and, before it, by Sutton Cosmetics, Inc. Potential consumers were unable to differentiate between Sutton Cosmetics (P.R.)'s Sutton deodorant and Lander's Sutton deodorant.

As the first bona fide user of the abandoned Sutton mark, Sutton Cosmetics (P.R.) had acquired trademark rights in that mark, 3 Callmann, Unfair Competition, Trademarks and Monopolies § 79.4, at least in the areas in which it had first used the Sutton name, Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713 (1916). While Lander and Sutton Cosmetics (P. R.) were equally free to attempt to capture the mark to their own use after Schering had abandoned it, Sutton Cosmetics (P.R.) had the natural advantage since Schering's sales to Sutton Cosmetics (P.R.) put it in the position to make immediate sales of Sutton products. And, as the evidence adduced at the hearing indicates, Sutton Cosmetics (P. R.) was easily able to establish priority of use in Puerto Rico, Dade County, Florida, and metropolitan New York City.

Since Sutton Cosmetics (P.R.) was the first user of the Sutton name, it had the right to use the mark unadorned. Later entrants into the markets in which Sutton Cosmetics (P.R.) was selling could use the name, if at all, only if they sufficiently distinguished it...