United Drug Co. v. Parodney

• Decision Date: 09 January 1928
• Citation: 24 F.2d 577
• Parties: UNITED DRUG CO. v. PARODNEY.
• Court: U.S. District Court — Eastern District of New York

24 F.2d 577 (1928)

UNITED DRUG CO. v. PARODNEY.

District Court, E. D. New York.

January 9, 1928.

Harry D. Nims, of New York City (Minturn De S. Verdi and Wallace H. Martin, both of New York City, of counsel), for plaintiff.

David D. Levinson, of New York City (Alexander S. Drescher and Harold J. Drescher, both of Brooklyn, N. Y., of counsel, and Solomon A. Hauptman, of Brooklyn, N. Y., on the brief), for defendant.

INCH, District Judge.

Plaintiff brings suit to obtain a decree forbidding the defendant from using the name "United Drug." Defendant has duly answered. Jurisdiction is based upon the diversity of citizenship of the parties, and same has been duly proved.

The plaintiff is a Massachusetts corporation, resident in said state. The defendant is a resident of the state of New York. The complaint alleges unfair competition on the part of the defendant by his use of the said name "United Drug Exchange." No money damages are sought. The sole relief asked for is a permanent injunction, forbidding the use of said name by defendant.

The case was carefully tried by able trial counsel, and a considerable latitude was allowed by the court in regard to the introduction of evidence owing to the nature of the suit. Most excellent briefs have been submitted, and they have been of great assistance to the court. There is, however, no necessity for quoting in this opinion the many cases thus presented, for, once the essential facts in this case have been ascertained, the law applicable thereto is well settled. British-American Tobacco Co., Lim., v. British-American Cigar Stores Co., 211 F. 933, Ann. Cas. 1915B, 363 (C. C. A. 2d).

The facts briefly are that about 25 years ago plaintiff was organized as a New Jersey corporation under the name "United Drug Company." The reason for the selection of this name will be hereafter referred to. The business continued until a reorganization occurred, when as a part of such reorganization a New York corporation was formed, in 1916, also having the name of "United Drug Company." Shortly thereafter, in the same year, the present plaintiff, the Massachusetts corporation, having the same name, "United Drug Company," was there incorporated. Plaintiff has not filed a certificate in the office of the secretary of state, state of New York, under the General Corporation Law of the state. Laws 1927, c. 425, § 15; McKinney's Corp. Laws of New York, vol. 22.

It thus appears that this business has always been conducted, during a quarter of a century, under the name "United Drug Company"; that the business has had three residences, first New Jersey, then New York, and finally Massachusetts. During all this time this business has gradually increased, until to-day, under the name "United Drug Company," plaintiff sells in every state and important city of the country. It also manufactures a considerable portion of its products. The remainder of its merchandise consists of well-known articles. Its method of merchandising is to and through many thousands of independent retail drug stores. These drug stores are not owned by the plaintiff, but are selected as leading drug stores in a community, and by such selection they become known as stores so expressly selected and approved of by plaintiff. This selection is made to the public by a sign showing that they are, for example, a "Rexall" or a "Liggett" store; these being chains of stores that occupy prominent places in the principal cities and towns and are operated by independent corporations.

Plaintiff likewise sells to any drug store anywhere in the country, or to the public directly, where its products are not accessible to such consumer by reason of there being no selected drug store in that community. According to the testimony, 70 per cent. of the merchandise manufactured by plaintiff bears the name "United Drug Company." The total amount of such product was recently $28,000,000. In addition there is a large amount of the merchandise not so manufactured by plaintiff, but sold and handled by it in the way above described, a large proportion of which is also marked "United Drug Company." This is for the purpose of indicating to the public plaintiff's approval of the product. The total amount of sales of this plaintiff recently amounted to approximately $90,000,000.

It appears beyond a doubt, from the proof, that plaintiff is one of the largest sellers of drug store merchandise in the world. Its merchandise must have been found worthy by the public, and the standard of quality of its products been recognized, for there has been an ever-increasing use and demand for same both by individuals and by drug stores. The reputation, therefore, of the plaintiff, does not rest upon some unusual, expensive and sudden advertising campaign. It is the result of years of steady growth, during all of which time the public has been taught to identify plaintiff's goods and its approval of goods manufactured by others, by the use of the name "United Drug Company."

During these years an immense amount of money has been spent for that purpose. Millions of circulars, advertisements, labels, etc., have been used. I find no difficulty in finding from the evidence that the name "United Drug" has become fixed in the minds of the consumer, whether such consumer be a retail druggist or the ultimate consumer, those who buy over the counter of a drug store. A secondary meaning of the name "United Drug" has resulted.

Throughout the United States the products and merchandise of the plaintiff are now referred to, ordered, or asked for by many drug stores and individual consumers as that of the "United Drug." This is an identification mark, widely used, which belongs to plaintiff, which plaintiff has created by expenditure of large sums of money, and honest and skillful management, and which it is entitled to keep unless voluntarily relinquished.

Theoretically and perhaps practically as well this hard-earned right is as important as money in the bank. It should not be taken, or even nibbled away, by another, any more than any of the dollars should be taken from its bank, against its protest and without right in law or equity to do so. The rightful appropriation or the wrongful appropriation by another of such substantial property belonging to plaintiff, in connection with the ultimate disposal of merchandise, is really the serious question involved in this suit.

A court of equity need not wait for the appropriation to actually take place, such as a court of law must do, if it plainly and clearly appears that such wrongful appropriation is extremely probable and plainly likely to take place. A court of equity, so to speak, can "lock the stable door before the horse is stolen." Of course, it should only so interfere where a clear case is shown. Business should not be unduly interfered with because of extravagant claims or mere fears and suspicions. I mention this in consequence of the argument of defendant for a narrower view as to the court's right to interfere.

Finally, plaintiff's business is entirely interstate. Its orders are received and filled at Boston. In 1916, as a New York corporation, it had the corporate name given to it of "United Drug Company." The business within this state was transferred to the Massachusetts corporation and the New York corporation ceased to exist. However, this does not prevent the Massachusetts corporation from selling merchandise into the state of New York. The fact that plaintiff does a very large business throughout the United States, under the name "United Drug Company" is undisputed.

Let us now consider the defendant. The defendant, Abraham Parodney, in 1904, was a registered pharmacist. He remained a druggist until 1912. He was thus entirely familiar with the drug trade. In 1912 he went from the retail drug store into the wholesale line, under the name of the "National Drug Supply Company." Then he sold out and went back into the retail drug store business. He, however, continued to do a little jobbing and to handle occasional items wholesale. While he was in the wholesale line he had met a Mr. Arronson. Mr. Arronson was also in the wholesale line under the name of the "Royal Drug Company." Parodney and Arronson thereafter decided to go into a partnership. It is apparent that both Arronson and the defendant, Parodney, were well equipped with knowledge of the entire trade in drug supplies. This was in 1914. The plaintiff's merchandise that year was on sale in several thousand retail drug stores. It was then an extensive advertiser in the leading periodicals. It was then publishing very large catalogues selling its goods all over the United States. The evidence shows that even two years before (1912) it was doing a business of over $5,000,000. It was in 1914 plainly one of the leading drug companies of the country and was a success.

I cannot assume, or even believe, that two such experienced men as defendant and Arronson did not know all about the plaintiff, the quality and demand for its goods, and its then standing in the trade in which they had been for 10 years. There is nothing to indicate to the contrary in the evidence. Thereupon Arronson and the defendant changed the name of their company, "Royal Drug Company" (it was not incorporated) to the "United Drug Exchange." Later Arronson ceased to be a partner, and the defendant continued and still continues to conduct the business by means of this tradename, the certificate for which has been duly filed according to the laws of the state of New York. His principal place of business is in New York City.

The evidence shows that he manufactures a portion of his merchandise. The balance he wholesales, although there is testimony that what is considered by him to be wholesale is several or more articles. We...