Wm. Filene's Sons Co. v. FASHION ORIGINATORS'GUILD, 3223.

• Decision Date: 01 June 1937
• Docket Number: No. 3223.,3223.
• Citation: 90 F.2d 556
• Parties: WM. FILENE'S SONS CO. v. FASHION ORIGINATORS' GUILD OF AMERICA, Inc., et al.
• Court: U.S. Court of Appeals — First Circuit

90 F.2d 556 (1937)

WM. FILENE'S SONS CO. v. FASHION ORIGINATORS' GUILD OF AMERICA, Inc., et al.

No. 3223.

Circuit Court of Appeals, First Circuit.

June 1, 1937.

Edward F. McClennen, of Boston, Mass. (Jacob J. Kaplan, of Boston, Mass., on the brief), for appellant.

Charles B. Rugg, of Boston, Mass., and Milton C. Weisman, of New York City (Ropes, Gray, Boyden & Perkins, of Boston, Mass., of counsel), for appellees.

Before BINGHAM, WILSON, and MORTON, Circuit Judges.

WILSON, Circuit Judge.

This is an appeal from a decree of the District Court of Massachusetts in a bill in equity praying for an injunction against the continuance of an alleged conspiracy in the restraint of and to monopolize interstate commerce in violation of sections 1 and 2 of chapter 1 of title 15 U.S.C.A. known as the Sherman Anti-Trust Act, and for relief under section 16 of the Clayton Act (Title 15 U.S.C.A. § 26) against threatened loss and damage by the violation of the Sherman Act.

The case was first heard before a judge of the District Court on motion for a preliminary injunction, which was denied. The case was then referred to a special master to hear the parties and their evidence and report to the court his findings of fact and his conclusions of law thereon. The evidence before the master was not reported and the District Court in a final decision stated that, so far as the report presents findings of fact, they are adopted by the District Court as the statement of facts required by Equity Rule No. 70½, 28 U.S.C.A. following section 723. We must accept the facts as found by the master.

The master reported the following facts: The plaintiff, Wm. Filene's Sons Company, hereinafter referred to as Filene's, owns and operates a ready-to-wear specialty store in Boston, with numerous branches in other parts of Massachusetts, and owns all the capital stock of R. H. White Company, hereinafter called White's, which operates a department store in Boston.

The defendant Fashion Originators' Guild of America, Inc., hereinafter called The Guild, is a corporation organized under the laws of New York on March 7, 1932.

Prior to the war, the ladies' ready-to-wear industry was of small consequence. Shortly after the war, the manufacture and sale of ready-to-wear dresses became more common, and the volume of sales of such dresses increased year by year, until in 1934 the dollar volume of such sales in this country reached a level of $430,000,000.

Some manufacturers of ready-to-wear dresses originate their own styles for the dresses they make. Other manufacturers do not originate their own styles, but copy the styles and designs of other manufacturers. Manufacturers who originate their own styles and designs are called "original creators," and manufacturers who copy the styles and designs of other manufacturers are called "copyists."

The copying of other manufacturers' styles and designs is commonly called in the trade "style piracy" or "design piracy." The terms "style" and "design" are sometimes used as though they were synonymous. But strictly speaking, "style" as applied to a dress refers to its general characteristics, such as the length of the skirt, the size of the sleeves, the height of the waist, etc., while "design" as applied to a dress includes all the details involved in its makeup. A style is a type, while a design is an interpretation of the style. A single style, therefore, may be followed in almost any number of different designs.

Styles in ladies' dresses are usually determined in the so-called style centers of the world, of which Paris is the principal one. A manufacturer who is an original creator generally sends his stylists and designers to Paris for inspiration. After making observations and determinations, such stylists and designers prepare their own designs and use their knowledge of the probable requirements of their employers' customers and their own ideas as to what will be popular with the buying public which they serve. Styles and designs prepared in this way are considered in the industry to be original creations.

There are five seasons a year in the dress industry, the spring season, the summer season, the fall season, the winter season, and the winter resort season.

A manufacturer makes up a line of samples for each season. The cost to produce a single line is between $30,000 and $50,000. When a line has been prepared, it is put on display in the manufacturer's showroom and is there shown to prospective retail buyers.

The period between the first order of a dress of a particular style and design and the last substantial reorder of it is called the "style life" of the dress, which is usually not more than three months.

A manufacturer who is a copyist does not send stylists or designers to Paris for inspiration. Instead he copies original designs of other manufacturers, which is accomplished in different ways. Sometimes a copyist buys dresses from retailers who have purchased them from original creators. Sometimes employees of copyists visit the showrooms of original creators and memorize or take notes of the details of the original design there displayed. Sometimes copyists obtain sketches or photographs of successful designs of original creators from agencies which make a business of supplying such sketches and photographs. Sometimes copyists bribe employees of original creators to furnish samples of their employers' original designs or to let them see samples from which they make sketches, and occasionally the original designs are stolen from the original creators.

Copying destroys the style value of dresses which are copied. Women will not buy dresses at a good price at one store if dresses which look about the same are offered for sale at another store at half those prices. For this reason, copying substantially reduces the number and amount of reorders which the original creators get. With this uncertainty with respect to reorders, original creators cannot afford to buy materials in large quantities as they otherwise would. This tends to increase the cost of their dresses and the prices at which they must be sold.

Reputation for honesty, style, and service is an important asset of retailers. Copying often injures such a reputation. A customer who has bought a dress at one store and later sees a copy of it at another store at a lower price is quite likely to think that the retailer from whom she bought the dress lacks ability to select distinctive models and that she has been overcharged. Dresses are returned and customers are lost.

In the spring of 1935 in dollar volume a very large per cent. of the total ready-to-wear dress business in the United States was in copies. Prior to the activities of The Guild, manufacturers of cheaper dresses copied most of their designs.

With the dress industry in a seriously chaotic state, due in large part to the prevalence of "style piracy," a group of dress manufacturers who were original creators organized The Guild in 1932. The purposes for which The Guild was formed as set forth in its certificate of incorporation are as follows:

"To protect the originators of fashions and styles against copying and piracy of styles of any trade or industry; to promote co-operation and friendly intercourse in the wearing apparel industries; to establish and maintain uniformity and certainty in the customs and commercial usages of trade; to acquire, preserve and disseminate information and literature which will tend to augment the sale of the commodities manufactured or sold; to advance the trade and commercial industries of its members throughout the Americas and to promote the sale, identification and recognition of original style and merchandise of the industries of its members."

A registration bureau was established by The Guild in 1933. Its purpose was to record the fact that an applicant for registration claimed that the dress whose registration he sought was his own original design. A regulation of The Guild required that when registered dresses were shipped to customers they should bear Guild labels, to the effect that the dress was an original design registered by a member of the Fashion Originators' Guild.

At the time of the formation of The Guild its members comprised principally manufacturers selling dresses at wholesale at $22.50 and up. Later other manufacturers became members of or were affiliated with The Guild, who were engaged principally in manufacturing dresses which sold at wholesale at $16.75 and above. In the latter part of 1936 the Association of Buying Offices, representing some 1,700 retail stores, requested The Guild to extend its style protection program to lower priced dresses, and later manufacturers of dresses wholesaling at low as $3.75 were admitted as protective affiliates of The Guild. At the end of 1935 a total of about 12,000 retailers were co-operating with The Guild. When members or affiliates of The Guild received orders from retailers who were not in fact co-operating with The Guild, or who had not signed declarations of co-operation, they declined to accept such orders.

When it is established to the satisfaction of The Guild that the retailer is not cooperating with The Guild in its efforts to suppress style piracy, The Guild notifies all its members and affiliates by sending them red cards stating the facts. After a retailer has been so notified, members and affiliates of The Guild are not to sell any merchandise to the retailer unless and until he evidences his intention to co-operate with The Guild.

The rules and regulations of The Guild are enforced by fines and expulsion from The Guild for a third offense in any one year, which the master found to be reasonable regulations.

In the spring of 1936 there were about 3,000 dress manufacturers in the United States. Of these 2,130 were in New York City and about 870 outside New York City. Of the 2,130 manufacturers in New York City only 130 were Guild members or affiliates....