United States v. Guerlain, Inc.

• Decision Date: 09 July 1957
• Citation: 155 F. Supp. 77
• Parties: UNITED STATES of America, Plaintiff, v. GUERLAIN, Inc., Defendant. UNITED STATES of America, Plaintiff, v. PARFUMS CORDAY, Inc., Defendant. UNITED STATES of America, Plaintiff, v. LANVIN PARFUMS, Inc., Defendant.
• Court: U.S. District Court — Southern District of New York

155 F. Supp. 77

UNITED STATES of America, Plaintiff, v. GUERLAIN, Inc., Defendant.

UNITED STATES of America, Plaintiff, v. PARFUMS CORDAY, Inc., Defendant.

UNITED STATES of America, Plaintiff, v. LANVIN PARFUMS, Inc., Defendant.

United States District Court S. D. New York.

July 9, 1957.

COPYRIGHT MATERIAL OMITTED

Paul W. Williams, U. S. Atty., New York City, by Joe F. Nowlin, Washington, D. C., Richard B. O'Donnell, John D. Swartz and Paul D. Sapienza, Attys., U. S. Dept. of Justice, New York City, on the brief, for the United States.

Shearman, Sterling & Wright, New York City, by Charles C. Parlin, Jr., New York City, of counsel, for Guerlain, Inc.

Joseph L. Hochman, New York City, for Parfums Corday, Inc.

Jay Leo Rothschild, New York City, for Lanvin Parfums, Inc.

EDELSTEIN, District Judge.

In three separate but similar civil actions consolidated for trial to the court without a jury, the Government charges each of the three defendants with a violation of § 2 of the Sherman Act, 15 U.S.C. § 2, 15 U.S.C.A. § 2. There is no allegation of conspiracy. The defendants are American corporations¹ marketing trade-marked toilet goods² of better quality and relatively high price. Each of the American companies is closely associated with a French company that originated the trade name, first marketed products under the trade-marks and supplies the products, manufactured under secret formulae, sold by the American company, or the essential ingredients of those products. The Government alleges that, in each case, the American company and the French company constitute a single international enterprise. The toilet goods sold in the United States by the defendants are obtained from the French companies in packaged form ready for sale, or in bulk and bottled in the United States, or compounded in the United States by adding alcohol to the essences or concentrates obtained from the French company. These products are sold in the United States under trade-marks identical with those used by the French company upon similar products, and the advertising emphasizes the prestige factor of origin with Parisian perfumers.

In each case the French company has given to its associated American company an exclusive right to distribute its products in the United States and has transferred to the American company trade-mark rights intended to be sufficient to justify registration in the United States Patent Office on the basis of a claim of ownership by the American company.³ And each of the defendants has filed with the Bureau of Customs, United States Treasury, certificates of registration of certain trade-marks for the purpose of preventing the competitive importation of products bearing those trade-marks without the written consent of the American registrant, under the terms of § 526 of the Tariff Act of 1930.⁴

The Government takes the position that such utilization of § 526 by each defendant is unwarranted and constitutes a violation of § 2 of the Sherman Act: an attempt to monopolize and a monopolization of the importation into and sale within the United States of these trade-marked products, by preventing the importation and reselling by others who purchase such goods from the French company that forms but the foreign part of a single international enterprise with a defendant.

Most of the factual questions in the case were disposed of by stipulation and the remaining proof was largely documentary. Left for decision are the following issues: (1) the factual issue of whether for each defendant and its associated French company, there exists a single international enterprise; (2) the legal issue of whether, where such a single international enterprise is found, the American part of that enterprise may exclude the competitive importation of the trade-marked products sold abroad by the French part of the enterprise, under the provisions of § 526 of the Tariff Act of 1930; (3) the legal issue of whether, if a defendant is not authorized to exclude competitive imports under § 526, conduct in doing so constitutes monopolization under § 2 of the Sherman Act; and (4) involved in the legal issue of monopolization under the Sherman Act, the factual issue connected with the determination of the relevant market, the issue of the uniqueness of the defendant's products.

1. Relations between Defendants and Their Associated French Companies.

I have found as a fact in each case, beyond any gnawing doubt, that the defendant and its French counterpart constitute a single international enterprise. In order to avoid any undue extension of this opinion, reference is made to the appended specific findings of fact.⁵ The defendants, with varying degrees of vigor, deny integral existence with their foreign associates, but an examination of the facts leaves the denials utterly unconvincing. The asserted independence is contrived and the "corporate veil" is easily pierced by the merest glance through the forms of the business organizations to the realities of the relationships. See United States v. Reading Co., 253 U.S. 26, 62-63, 40 S.Ct. 425, 64 L.Ed. 760.

2. § 526 of the Tariff Act of 1930.

The Government urges a construction of § 526 of the Tariff Act of 1930 that is not to be derived from a literal reading of the words of the statute. Subsection (a) of § 526 reads as follows:

"It shall be unlawful to import into the United States any merchandise of foreign manufacture if such merchandise, or the label, sign, print, package, wrapper, or receptacle, bears a trade-mark owned by a citizen of, or by a corporation or association created or organized within, the United States, and registered in the Patent Office by a person domiciled in the United States, under the provisions of sections 81 to 109 of Title 15, and if a copy of the certificate of registration of such trade-mark is filed with the Secretary of the Treasury, in the manner provided in section 106 of said Title 15, unless written consent of the owner of such trade-mark is produced at the time of making entry."

The Government contends that this provision may apply only to the advantage of an independent American trade-mark owner which may, by registering a trade-mark of a foreign producer in its own name, prevent the importation of authentic products by anyone else. But it is argued that the provision does not apply to the American part of a single international enterprise to enable it to prevent the importation into the United States of authentic products sold abroad by the foreign part of the enterprise. Despite the absence of specific language to that effect in the legislation, I am constrained to agree, in view of the litigated history of the issue involved and of the legislative history of the section.

The first statutory limitation on trademarks borne by imported articles was § 27 of the Trade-Mark Act of 1905⁶ which later became, substantially, § 42 of the Lanham Act.⁷ Prior to 1905 it was held that a person who purchased exclusive United States rights to a trademark identifying imported merchandise did not have an infringement remedy against a competitor who imported goods bearing the same trade-mark bought from the foreign manufacturer. Apollinaris Co. v. Scherer, C.C.S.D.N.Y., 27 F. 18. After the enactment of § 27 of the 1905 Act, which prohibited the importation of merchandise bearing a mark "which shall copy or simulate a trademark registered in accordance with the provisions of this Act * * *", the same result was obtained, the section being restricted to spurious goods. Fred Gretsch Mfg. Co. v. Schoening, 2 Cir., 238 F. 780. The Court of Appeals for the Second Circuit followed these precedents in the case of Bourjois & Co. v. Katzel, 2 Cir., 275 F. 539, involving a French manufacturer of face powder which sold plaintiff its American business, including trade-marks. The plaintiff continued to import the French powder and to sell it in boxes similar to the French ones. The defendant purchased the same product from the French firm abroad and sold it in the original French boxes. The court held that there was no infringement. The case went to the Supreme Court which, after a considerable delay of decision, reversed the Court of Appeals, 260 U.S. 689, 43 S.Ct. 244, 67 L.Ed. 464. In A. Bourjois & Co. v. Aldridge, 2 Cir., 292 F. 1013; 263 U.S. 675, 44 S.Ct. 4, 68 L.Ed. 501, the Court adhered to Katzel and held that where an American trade-mark was so infringed, the Collector of Customs was required by § 27 of the Act of 1905 to exclude products with infringing marks.

However, prior to the decision of the Supreme Court in the Katzel case, § 526 of the Tariff Act of 1922,⁸ currently § 526 of the Tariff Act of 1930, was passed by Congress. The record of the Congressional debate is brief, with the inclusion of § 526 being characterized as a "midnight amendment"⁹ and with floor debate in the Senate limited to ten minutes.¹⁰ Nevertheless, it appears from that debate that the purpose of the section was to protect the rights of Americans who bought foreign trade-marks and that it was aimed at the Katzel decision in the Court of Appeals, involving an American trade-mark owner independent of the foreign manufacturer.¹¹ That this was obviously the target of the legislation was pointed out by Judge Learned Hand in Coty, Inc., v. Le Blume Import Co., D.C.S.D.N.Y., 292 F. 264, 269, and by Judge Augustus N. Hand in Sturges v. Clark D. Pease, 2 Cir., 48 F.2d 1035, 1037.

The Supreme Court, in reversing the Court of Appeals in the Katzel case, did not refer to § 526. But one basis for the decision was that the defendant's use of the French trade-mark could harm the plaintiff's reputation, because the trade-mark so used in this country did not truly indicate the origin of the goods; for the trade-mark in the United States indicated that the goods came from the plaintiff. It can hardly be claimed by the defendants in the cases at bar that the trade-marks indicate an origin with them in the United...