The Coca-Cola Co. v. Nehi Corp.

• Citation: 25 A.2d 364,53 U.S.P.Q. 140,26 Del.Ch. 140
• Court: Court of Chancery of Delaware
• Decision Date: 20 March 1942
• Parties: THE COCA-COLA COMPANY, a corporation of the state of Delaware, Complainant, v. NEHI CORPORATION, a corporation of the State of Delaware,

25 A.2d 364

26 Del.Ch. 140, 53 U.S.P.Q. 140

THE COCA-COLA COMPANY, a corporation of the state of Delaware, Complainant, v. NEHI CORPORATION, a corporation of the State of Delaware,

Court of Chancery of Delaware, New Castle

March 20, 1942

[Copyrighted Material Omitted]

BILL IN EQUITY filed by The Coca-Cola Company against the Nehi Corporation, alleging illegal trade-name and trade-mark infringement, and other related acts of unfair business competition.

The case was before the court on final hearing, and the evidence was heard, in part, on oral testimony and exhibits, and, in part, before an examiner.

Both The Coca-Cola Company and the Nehi Corporation were corporations of the State of Delaware, but their business predecessors were originally organized in the State of Georgia. The Coca-Cola Company was organized in that State under that name, in 1892, and Asa G. Candler, of Atlanta, was chosen president, and F. M. Robinson, secretary. The trade-name "Coca-Cola" was first registered in the United States Patent Office in 1887; subsequent registrations will appear in the opinion of the court.

The right to the name and the formula for the manufacture of that beverage were acquired by Mr. Candler in that year. He subsequently manufactured and sold Coca-Cola in Atlanta in connection with the wholesale drug business, known as "Asa G. Candler & Co." The Georgia corporate predecessors of Nehi Corporation were first, Chero-Cola Company, organized in 1912, and later Nehi, Inc., organized in 1926. The present defendant, Nehi Corporation, was organized in Delaware in 1938.

Other material facts will appear in the opinion of the court.

The complainant company sought to perpetually enjoin the defendant corporation, its officers and agents:

(1) From using the names Royal Crown Cola, RC Cola, or any other colorable imitation of the complainant's registered trade-mark "Coca-Cola".

(2) From using the word "Cola" in a name under which defendant's product was being sold.

(3) From representing, or suggesting in any manner, that defendant's goods could, or might be passed off as Coca-Cola, and from aiding or abetting such passing off.

(4) From otherwise infringing complainant's trade-mark, or competing unfairly.

The complainant company also prayed:

(1) That defendant be required effectually to distinguish its product from Coca-Cola.

(2) That the defendant be ordered to deliver up and destroy all receptacles, packages, labels, and other material bearing any colorable imitation to complainant's registered trade-mark.

The Coca-Cola Company further prayed for an accounting for damages claimed to have been sustained by it for the illegal profits realized by the defendant, and that such damages and profits be increased to a sum not exceeding three times the amount thereof.

That company also prayed for general relief.

Bill of complainant dismissed.

Hugh M Morris, E. S. Rogers, of New York City, Marion Smith, of Atlanta, Ga., Hilary W. Gans, of Baltimore, Md., James H Rogers, of Chicago, Ill., and Joseph M. Collins, of Atlanta, Ga., for complainant.

Robert H. Richards and Caleb S. Layton, of the firm of Richards, Layton & Finger, Theodore Kiendl, of Davis, Polk, Wardwell, Gardiner & Reed, and Ellis W. Leavenworth, both of New York City, C. L. Parker, of Washington, D. C., and W. Willis Battle, of Columbus, Ga., for defendant.

Clarence A. Southerland, of the firm of Southerland, Berl, Potter & Leahy, Arthur T. Vanderbilt, of Newark, N. J., and Herman Shulman, of Hays, Podell & Shulman, of New York City, representing the Pepsi-Cola Company, Milton Handler and Benjamin Algase, both of New York City, of counsel, were also permitted to appear and file a brief as amicus curiae.

OPINION

THE CHANCELLOR:

This case is before the court on a bill filed by The Coca-Cola Company to enjoin alleged trade-name and trade-mark infringement by the Nehi Corporation, the defendant. Other related acts of unfair business competition alleged to have been committed by the defendant company are also sought to be enjoined.

Dr. John S. Pemberton, of Atlanta, Georgia, first manufactured and sold Coca-Cola, under that trade-name, written in script letters, under which appeared a paraph or flourish, as early as 1886; and since that time it has been manufactured and sold under the same trade-name by his individual and corporate successors. That name was registered as a trade-mark, in the United States Patent Office, under the various Trade-Mark Acts, in 1893, 1905, 1927 and 1928, and is still registered in that office.

Coca-Cola is perhaps the most popular soft drink on the market, and has had phenomenal sales in this and other countries for many years. Ordinarily, it is sold to the public through licensed bottlers, in plain six ounce bottles, and has a dark brown color which is caused by the use of some mixture of caramel. The bottles in which it is sold have a metal cap, on which the usual trade-name or trade-mark "Coca-Cola" appears in white letters on a red background.

Nehi Corporation, the defendant, likewise succeeded an earlier corporation of the State of Georgia about December 1st, 1938. Its real registered trade-name in the United States Patent Office is "Royal Crown." That corporation and its predecessors have manufactured and sold Royal Crown Cola, in ever increasing quantities, since the latter part of December 1934; Nehi Cola since a much earlier date, and Par-T-Pak Cola since 1935 or 1936. All of the defendant's drinks are unpatented, carbonated beverages or soft drinks resembling Coca-Cola in both color and taste. The similarity in the color is likewise caused by the use of a caramel mixture.

Royal Crown Cola, or Royal Crown RC Cola as it is sometimes called, is sold by the defendant, or by its licensed bottlers, in twelve ounce, clear glass bottles, which differ in size, shape and appearance from the distinctive six ounce bottle used by The Coca-Cola Company. It is occasionally advertised as "RC Cola," but that designation alone is never used on either the labels on the bottles or on the caps. Nehi Cola and Par-T-Pak Cola may have been sold at times in bottles of a different size and type; but that all of these beverages are Nehi products is indicated by words and letters appearing in the glass of each bottle, or on the labels. The words "Royal Crown" appear at the top of the label on each bottle of that drink. The name "Cola" appears at the bottom, and above that word are the letters "RC" appearing on a truncated pyramid. The wording and its arrangement on the bottle cap is similar to that appearing on the label, except in some instances the letters "RC" are omitted from the cap. The product of each company is sold at five cents a bottle. Both the complainant and the Nehi Corporation are spending large sums of money annually advertising their drinks by the use of roadside and other large and small signs, by radio broadcast campaigns, in newspapers, magazines, and otherwise. That general advertising policy had been followed by The Coca-Cola Company for many years prior to the advent of Royal Crown Cola, at a cost of millions of dollars, and has resulted in the building up of a tremendous business good-will in its enterprise. The defendant company did not advertise Royal Crown Cola, to any great extent, until about 1937; but since that time it has likewise spent large sums of money for that purpose, and has built up a considerable business in the sale of that drink. Its other products are being sold in much smaller quantities.

The basic question is whether Royal Crown Cola, Royal Crown RC Cola, RC Cola, Nehi Cola and Par-T-Pak Cola, the various names under which the defendant's beverages are being advertised and sold, are deceptively similar to the complainant's trade-name and trade-mark "Cola-Cola". That largely depends on the right of the defendant corporation to use the word "cola" in a denominative sense in selling its drinks. Its right to use that word in a descriptive sense is conceded. The use of a similar color to Coca-Cola, together with the word "Cola", is, however, said to be an accompanying instrumentality of deception, of peculiar importance, and is likewise sought to be enjoined. The complainant company also seeks to enjoin the continuance of other related acts of alleged fraudulent and unfair business competition, such as suggestions by defendant's sales agents that Royal Crown Cola, when sold by the glass, can be profitably passed off for Cola-Cola. Various modes of advertisements are also complained of as being deceptive. But perhaps the most of these acts are mainly relied on as corroborative evidence compelling the inference that the use of the word "cola" by the Nehi Corporation is for the real purpose of deceiving the public, and to permit it to profit by complainant's well established business good-will in the trade-name "Coca-Cola". Ordinarily, the proper function of a trade-name or trade-mark, adopted by a manufacturer or merchant, is to identify the real origin and source of the goods to which it is affixed. Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 36 S.Ct. 357, 60 L.Ed. 713. The chief advantage of its use lies in its possible power to stimulate sales. The infringement of a trade-name consists in its unauthorized use, or in the unauthorized use of a colorable imitation, by another producer on goods of substantially the same character as those for which the name or mark has already been legitimately appropriated by the complainant. Hanover Star Milling Co. v. Metcalf, supra; Thaddeus Davids Co. v. Davids, 233 U.S. 461, 34 S.Ct. 648, 58 L.Ed. 1046. In all such cases confusion of origin, and not confusion of goods, is the question involved. Vick Chemical Co. v. Vick Medicine Co., (D....