Sweet Sixteen Co. v. Sweet" 16" Shop Inc.

• Decision Date: 17 November 1926
• Docket Number: No. 7234.,7234.
• Citation: 15 F.2d 920
• Parties: SWEET SIXTEEN CO. v. SWEET "16" SHOP, Inc., et al.
• Court: U.S. Court of Appeals — Eighth Circuit

15 F.2d 920 (1926)

SWEET SIXTEEN CO. v. SWEET "16" SHOP, Inc., et al.

No. 7234.

Circuit Court of Appeals, Eighth Circuit.

November 17, 1926.

Sloss & Ackerman, of San Francisco, Cal., for appellant.

Stewart, Alexander & Budge, of Salt Lake City, Utah, for appellees.

Before LEWIS, Circuit Judge, and MUNGER and FARIS, District Judges.

FARIS, District Judge.

This is an action in equity for an injunction and an accounting, based on the alleged infringement of plaintiff's trade-mark and trade-name. The decree below went for defendant, and plaintiff appealed in conventional mode.

While numerous errors are assigned, there is, in the last analysis, but one question presented upon the record. That question is whether, upon the facts shown by the evidence, which were practically undisputed, plaintiff was entitled to the relief prayed for. Mere inspection and pronunciation disclose that the names of plaintiff and defendant are so similar as to bespeak infringement, if (a) plaintiff, the conceded prior user of the mark and name involved, and defendant, when defendant set up its business, came into actual competition in the same field or territory of trade, or (b) if defendant, when it began business, knowingly assumed plaintiff's name and mark in a contiguous field of trade, or territory into which plaintiff had already penetrated with its trade to an extent, and into which plaintiff must soon go extensively by the natural expansion of its business.

There is but little dispute about the controlling cases which announce the law. Largely, both sides rely upon the same cases and authorities. The solution of the case depends upon the application of the practically undisputed evidence to these controlling cases, which situation renders necessary a brief statement of the facts shown upon the trial. The record is long, but the salient facts are fairly simple and not involved. They run thus: In the year 1916, plaintiff began business in San Francisco, as a dealer in women's ready-to-wear clothing, under the name of Sweet Sixteen Company, a corporation. In its business and advertisements it referred to many of its garments and goods as "Sweet Sixteens," it designated its system of dealing as the "Sweet Sixteen System," and it sold many of the garments kept for sale by it at $16 per garment. In the beginning it had but one store. It prospered in such wise as that, by the year 1921, it was the owner of five stores, two in San Francisco, and the others in three other cities of the coast states, namely, Los Angeles, Portland and Seattle, as also an office and general purchasing agency in New York. It was advertising its business in divers trade journals and in the daily newspapers of the several cities in which its stores were located. Some 75 of these newspapers were daily sold and read in Utah. Its annual advertising expenditures in the year last mentioned exceeded $30,000, and in the year in which this suit was begun, amounted to more than $120,000. It had a very considerable mail order business, through which it sold some goods in some 12 or 15 different states, among which was the state of Utah. While the business done thus in the state of Utah was, in proportion to its total business, negligible, it was making efforts to increase it, and to this end, in the year 1921, it sent same 1,500 of its printed catalogues into that state. In the year 1922 it supplemented this selling and advertising campaign in the state of Utah by distributing therein pictures and drawings of many of the articles kept by it for sale.

Prior to 1923, and about the year 1921, it put on foot tentative plans to rent and establish a store in Salt Lake City, Utah. These plans were not consummated, however, up to April 3, 1923, when defendant started in Salt Lake City a wholly similar business, (save that it does not particularly cater to the mail order business), dealing in like merchandise, which defendant ran and operated under the name of the Sweet "16" Shop, Inc. Defendant was incorporated in the state of Utah on the 17th day of May, 1923. Prior to such incorporation, and on April 3, 1923, defendants Provol and Wrigley procured the issuance to them, as copartners, of a certificate of trade-mark from the secretary of state of the state of Utah, carrying the designation "Sweet `16' Shop." Some four days prior to the issuance of this certificate, and a like period before defendants Provol and Wrigley began business, Provol, one of the copartners, was advised by wire from plaintiff of the existence of plaintiff corporation and was warned not to use the name "Sweet 16" in defendants' business. Thereupon defendants took legal advice as to their right to use this name. While this advice was favorable to them, there is left no question in the case that defendants assumed this name with full knowledge of its use by plaintiff, if such fact shall be of controlling importance.

The record discloses fairly numerous instances wherein dealers, customers, and potential customers were misled by the similarity of names into mistaking defendants' business for that of plaintiff. It is well settled that, both in cases of unfair competition unaccompanied with trade-mark infringement, and in cases of infringement of technical or common-law trade-marks, the essence of the wrong consists in the sale or mistaking of the goods of one dealer or manufacturer for those of another, and that this essential element is the same in both classes of cases. "In fact, the common law of trademarks is but a part of the broader law of unfair competition." Hanover Star Milling Co. v. Metcalf, 240 U. S. 403, 36 S. Ct. 357, 60 L. Ed. 713.

Much difficulty has been encountered, and much confusion is created on the record, by the bill of complaint, the nature and the contents of the evidence, and the briefs of counsel, touching whether this action is intended to be bottomed on the infringement of a technical or common-law trade-mark and a trade-name, or whether it is bottomed on that specific branch of unfair competition arising from palming off by defendants, through their course of action, name and dealings of their goods as the goods of the plaintiff. The pleadings, the evidence, and the briefs carry implications that it is bottomed on the infringement of a trade-mark and trade-name created by prior use, as well as unfair competition, arising from the name and manner of dealing of the defendants. Casually it seems to fall into that category of redressable wrongs arising from the alleged piracy and use of plaintiff's trademark and trade-name by the defendant, the latter of which is, more accurately speaking, a branch of unfair competition. But since, as seen, there is no difference in the essential test of guilt, and since both parties agree touching that test, nomenclature is perhaps unimportant.

This we deem to be so, because, as said, both largely rely on the same cases to sustain their respective contentions. These cases are Hanover Star Milling Co. v. Metcalf, 240 U. S. 403, 36 S. Ct. 357, 60 L. Ed. 713, and United Drug Co. v. Rectanus Co., 248 U. S. 90, 39 S. Ct. 48, 63 L. Ed. 141. Both sides agree, as they needs must, that the two above cases announce the law which is decisively to be applied to some of the facts. They disagree as to whether these facts show either (a) that plaintiff had entered the Salt Lake City field of trade before defendant took and used plaintiff's trade-mark and trade-name therein; or (b) that the disputed territory, in and about Salt Lake City, is within the natural field of plaintiff's legitimate trade expansion. In fairness it may be said that defendant does not concede, as a matter of law, either that plaintiff is entitled to a field of trade for natural business expansion, or that the doctrine of the cases it relies on leaves such a field open to plaintiff.

Before the cases of Hanover Star Milling Co. v. Wheeler Co. and United Drug Co. v. Rectanus, both supra, were decided, much confusion is to be found and much diversity of opinion existed among the courts which dealt with the points which are here decisive. The above cases crystallized the law, and prior learning, so far as the federal courts are concerned, becomes of negligible value. The one decisive question here, broadly stated, is whether, on the facts, this case is within the rule announced in the above cases, or within the exceptions which plaintiff insists are clearly noted in these cases.

The brief and salient facts in the Rectanus Case are that, about the year 1877, Mrs. Regis began to use the word "Rex" as a trade-mark for certain medicinal preparations made by her in Haverhill, Mass. Thereafter, through mesne assignments and continued use, this trade-mark came, about the year 1911, into the hands of the United Drug Company. During all of the years between 1877 and 1911 the sales of this medicinal preparation were confined to the New England states, with inconsiderable sales in New York, New Jersey, Canada, and Nova Scotia. In the meantime, and in the year 1889, one Rectanus, familiarly known as "Rex," began at Louisville, Ky., to use the word "Rex" as a trade-mark for another sort of medicinal preparation, which he sold and advertised in Kentucky. In 1912 the United Drug Company for the first time extended the sale of its medicines, bearing its "Rex" trade-mark, into the state of Kentucky. When it did so, and prior thereto, it had notice that the assignee of Rectanus was using the identical trade-mark in Kentucky on its medicines. These facts and all of them notwithstanding the United Drug Company sued the Rectanus Company for the infringement of its trade-mark. In the Supreme Court the decree went for defendant; the court saying, among other things, this:

"Undoubtedly, the general rule is that, as between conflicting claimants to the right to use the same mark, priority of appropriation determines the question. See Delaware & H. Canal Co. v. Clark, 13 Wall. 311, 323, 20 L. Ed. 581; ...