U-Drive-It Co. v. Wright & Taylor

• Decision Date: 16 November 1937
• Citation: 270 Ky. 610,110 S.W.2d 449
• Parties: U-DRIVE-IT CO. v. WRIGHT & TAYLOR.
• Court: Kentucky Court of Appeals

110 S.W.2d 449

270 Ky. 610

U-DRIVE-IT CO. v. WRIGHT & TAYLOR.

Court of Appeals of Kentucky

November 16, 1937

Appeal from Circuit Court, Jefferson County, Chancery Branch, Second Division; J. J. Hancock, Judge.

Suit by the U-Drive-It Company against Wright & Taylor, a corporation. From a judgment of dismissal, plaintiff appeals.

Reversed.

Woodward Dawson & Hobson, Franklin P. Hays, and H. H. Roth, all of Louisville, for appellant.

Allen P. Dodd, Sr., of Louisville, for appellee.

STANLEY Commissioner.

The case is one of unfair competition. We give the essential allegations of the appellant's petition as amended, which was dismissed upon a failure to plead further after a demurrer was sustained to it.

The plaintiff is an Ohio corporation, and since November 1, 1935 has been continuously engaged in the city of Louisville in the business of renting automobiles to be driven by persons hiring them. It has built up a valuable and profitable business, and used its corporate name, "The U-Drive-It Company," in advertising and dealing with the public. Its name is a valuable asset, developed by the spending of large sums of money in establishing a good will. The public has come to and does associate the name "The U-Drive-It Company," with the plaintiff's business, and it is so recognized in the community. On March 1, 1929, another corporation was creted under the laws of Kentucky by the name of "U-Drive-It Company, Incorporated," which engaged in the same business until October 29, 1935. During that period it built up a valuable and profitable business always using the name "U-Drive-It Company." On that date the Kentucky corporation sold its assets to the plaintiff, assigning and transferring the right to use the name "U-Drive-It," and agreed to and did dissolve and cancel its corporate name. The good will and the association which the public had made of the term "U-Drive-It" with that company was carried over to the plaintiff, and since November 1, 1935, has been associated with its business. From March 1, 1929, until January 1, 1936, when the defendant began its operations, no other business conducted in Louisville or vicinity used the name "U-Drive-It," or any term having the same sound.

The defendant, Wright & Taylor, is a Kentucky corporation. Since about January 1, 1936, it has been engaged in the business of renting automobiles to be driven by the persons hiring them. On or about March 30, 1937, the defendant filed in the office of the clerk of the Jefferson county court notices that it was the owner of "Francis You Driveit Garage" and "You Driveit Francis Garage." The defendant is now conducting its business under the names of "Francis You Driveit Garage" and "You Driveit Francis Garage," and maintains a sign on its place of business, "You-Drive-It Company." The sign and names under which the defendant is operating are confusing to the public, and have led the public to believe that the plaintiff is conducting the business being operated by the defendant. The defendant also maintains a sign on its garage, "Branches in Principal Cities," when in fact it has never had and now had no other business in any other city similar to its business in Louisville. The "U-Drive-It Company, Inc.," did have branches in cities other than Louisville, and the plaintiff for many years has operated branches in other cities. It is alleged that the maintenance of this sign has been intended by the defendant to deceive the public into believing that the plaintiff is engaged in the business operated by the defendant; that the same is calculated to deceive the public, and has caused the public to patronize the defendant under such belief.

The petition asks an injunction against the defendant enjoining it from using the name "Francis You Driveit Garage" and "You Driveit Francis Garage" in connection with the business in renting automobiles; from advertising its business under those names; and from maintaining any signs upon its premises under the phrase "U-Drive-It" therein. By an amended petition it asked an injunction against the defendant using signs containing the words in effect of "Branches in Principal Cities," and an accounting and judgment for all the defendant's net profits made in connection with the term "U-Drive-It."

The appellant submits that its petition states a cause of action, arguing that it pleads the defendant is engaged in unfair competition; that it has intended to deceive the public and has done so; that the phrase "U-Drive-It" is such as to constitute a valid trade-mark, but in any event it has acquired a secondary meaning in connection with its business in Louisville.

From the slowly developed recognition of a symbol or design as an exclusive trade-mark, there came in 1867 what seems to be the first legal recognition of an exclusive right in a coined word as a distinctive trade-name ("Cocaine" as a hair tonic). Burnett v. Phalon, *42 N.Y. (3 Keyes) 594. The courts reluctantly but eventually recognized that the requirements of commerce and modern trade demanded protection of word emblems. "Trade-Mark Protection and Unfair Trading," Darenberg, pages 28 et seq. The present day specific law of unfair competition, at least in certain aspects, is of recent origin, generally regarded as having developed at the beginning of the twentieth century. It "is the natural evolution of the law of the trade-mark out of which it has grown." Coty, Inc., v. Parfums de Grand Luxe (C.C.A.) 298 F. 865, 878, Peculiarly, as the Supreme Court has stated, the law of trade-marks was a part of the broader law of unfair competition since there was no property right in a trade-mark except as a right appurtenant to an established business or trade. United Drug Company v. Rectanus, 248 U.S. 90, 39 S.Ct. 48, 63 L.Ed. 141. Cf. Stratton & Terstegge Company v. Stiglitz Furnace Company, 258 Ky. 678, 81 S.W.(2d) 1. The modern application of this broad principle of business integrity and common justice in protecting business reputation was at first by way of analogy to trade-mark law. By this time it has become almost a separate branch of the law, requiring special consideration, although closely interrelated with trade-marks. See Churchill Downs Distilling Company v. Churchill Downs, Inc., 262 Ky. 567, 90 S.W.(2d) 1041; G. W. Cole Company v. American Cement & Oil Company, 130 F. 703 (C.C.A.7th). In the relationship of the case at bar, the following definition adopted in Newport Sand Bank Company v. Monarch Sand Mining Company, 144 Ky. 7, 137 S.W. 784, 34 L.R.A.(N.S.) 1040, and in Crutcher & Starks v. Starks, 161 Ky. 690, 171 S.W. 433, 435, is appropriate: "Unfair competition may be defined as passing off, or attempting to pass off, upon the public the goods or business of one man as being the goods or business of another. Any conduct tending to produce this effect constitutes unfair competition and may be enjoined. The means employed are wholly immaterial."

The law of unfair competition is most active. Equity is quick to prevent misrepresentation or fraud which tends to give to one party an advantage over a competitor by imitating or simulating his peculiar distinctive designation so as to deceive the public. Speaking of the appropriation of another's name, it is said in Aunt Jemima Mills Company v. Rigney & Co. (C.C.A.) 247 F. 407, 410, L.R.A. 1918C, 1039: "This is a wrong which equity will enjoin without reference to the character of the article, or to the question of competition or of prior occupation of the market in any particular territory. No one has a right to apply another's name to his own goods."

In Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 844, 79 L.Ed. 1570, 97 A.L.R. 947, Chief Justice Hughes accepts this modern idea as established, saying: "'Unfair competition,' as known to the common law, is a limited concept. Primarily, and strictly, it relates to the palming off of one's goods as those of a rival trader. *** In recent years, its scope has been extended. It has been held to apply to misappropriation as well as misrepresentation, to the selling of another's goods as one's own --to misappropriation of what equitably belongs to a competitor. International News Service v. Associated Press, 248 U.S. 215, 241, 242, 39 S.Ct. 68, 63 L.Ed. 211, 221, 2 A.L.R. 293.

Unfairness in competition has been predicated of acts which lie outside the ordinary course of business and are tainted by fraud or coercion or conduct otherwise prohibited by law."

We have thus come a long way from the formative cases in England and America. Still farther removed from old conceptions are some of the recent acts of Congress, and an act of the General Assembly of Kentucky, of 1936 (chapter 109), denouncing certain trade practices as unfair and illegal. Section 4748h-1 et seq., Kentucky Statutes. So we may well heed Mr. Justice Holmes' admonition against relying too implicitly on "whatever generality of expression there may have been in the earlier cases." L. E. Waterman Company v. Modern Pen Company, 235 U.S. 88, 94, 35 S.Ct. 91, 92, 59 L.Ed. 142. This modern concept or policy in respect of regulating trade competition suggests that any act smacking of unfair competitive methods should be viewed with a critical and suspicious eye.

The case at bar, as presented by the petition, is strictly one of unfair competition, since it involves actually competitive enterprises. It affords natural grounds for deception of the public and a more ready acceptance of the charge that another's purpose has been to take advantage of the reputation that one has built up for his adopted name or catchphrase to his injury. This character of case received much earlier recognition for the intervention of equity than a case where two parties were engaged...