Youngs Rubber Corporation v. CI Lee & Co.

• Decision Date: 15 December 1930
• Docket Number: No. 347.,347.
• Citation: 45 F.2d 103
• Parties: YOUNGS RUBBER CORPORATION, Inc., v. C. I. LEE & CO., Inc., et al.
• Court: U.S. Court of Appeals — Second Circuit

45 F.2d 103 (1930)

YOUNGS RUBBER CORPORATION, Inc., v. C. I. LEE & CO., Inc., et al.

No. 347.

Circuit Court of Appeals, Second Circuit.

July 21, 1930.

On Reargument, December 15, 1930.

COPYRIGHT MATERIAL OMITTED

Crichton Clarke, of New York City, for appellant.

Bernard Katzen, of New York City, for appellees.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

SWAN, Circuit Judge (after stating the facts as above).

The questions of law which have been argued by the parties cannot properly be decided upon this record. There being no diversity of citizenship, the District Court is without jurisdiction to grant relief except pursuant to the terms of the Trade-Mark Act of 1905 as amended (15 USCA § 81 et seq.). Hunyadi Janos Corp. v. Stoeger, 10 F.(2d) 26 (C. C. A. 2). Assuming the validity of the plaintiff's trade-mark, and assuming further that its right to maintain suit has not been lost by use of the trade-mark in unlawful business, as provided by Trade-Mark Act 1905, § 21 (15 USCA § 101), its case fails for want of proof of any use of the mark by defendants in interstate or foreign commerce. Section 16 of the act (15 USCA § 96) provides as follows:

"* * * Any person who shall, without the consent of the owner thereof, reproduce, counterfeit, copy, or colorably imitate any such trade-mark and affix the same to merchandise * * * and shall use, or shall have used, such reproduction, counterfeit, copy, or colorable imitation in commerce among the several States, or with a foreign nation, or with the Indian tribes, shall be liable to an action for damages therefor at the suit of the owner thereof. * * *"

In a trade-mark suit under the federal act, it is essential for the plaintiff to allege and prove an infringement which falls within the terms of this section; counterfeit use of the mark in intrastate sales is not sufficient. Kasch v. Cliett, 297 F. 169 (C. C. A. 5); United States Printing Co. v. Griggs, Cooper & Co., 279 U. S. 156, 158, 49 S. Ct. 267, 73 L. Ed. 650; Louis Bergdoll Brewing Co. v. Bergdoll Brewing Co., 218 F. 131 (D. C. E. D. Pa.); and see, as to the Trade-Mark Act of 1881 (21 Stat. 502), Ryder v. Holt, 128 U. S. 525, 9 S. Ct. 145, 32 L. Ed. 529; Warner v. Searle & Hereth Co., 191 U. S. 195, 24 S. Ct. 79, 48 L. Ed. 145.

The bill of complaint is absolutely barren of any allegation that defendants have used, or threaten to use, plaintiff's mark in interstate or foreign commerce. Proof of this fact is equally lacking. We have searched the record in vain for evidence of such use. The closest approach to it is Young's testimony at folio 112:

"* * * In regard to the reappearance in the market of defendant's Trojan goods, I have seen the goods and seen the invoices in numerous places. Reports from all our salesmen about the goods being offered around the country had reached me."

This is entirely consistent with the defendants having made only intrastate sales, and their purchasers, without connivance on their part, having resold them in other places. The only infringements proved were sales made by defendants within the state of New York. Since the necessary jurisdictional facts were neither alleged nor proved, the bill should have been dismissed for lack of jurisdiction instead of lack of equity.

The decree is reversed, and cause remanded for dismissal on the ground herein stated.

On Reargument.

The appeal having been decided upon a jurisdictional point raised by the court of its own motion, a reargument was granted upon that point. Thereupon the plaintiff moved (1) for leave to amend its bill of complaint by inserting therein an allegation that the corporate defendant sells "in commerce among the several states" the infringing articles; and (2) that certain affidavits filed in the court below on the motion for a preliminary injunction be admitted in evidence.

An appeal from a decree in equity is not a trial de novo, and this court lacks power to take new evidence. It may, of course, permit an incomplete record to be corrected by addition of what was omitted, but the affidavits in question were not offered in evidence on the trial below, and therefore cannot be deemed part of the record brought up for review by this appeal. Boone v. Chiles, 10 Pet. 177, 208, 9 L. Ed. 388; Hovland v. Smith, 22 F. (2d) 769, 770 (C. C. A. 9). Hence the motion as to the affidavits must be denied, and we do not consider whether the statements and admissions they contain would be sufficient to prove sales in interstate commerce by the defendants.

An appellate court may permit an amendment to conform the pleadings to the proof (Norton v. Larney, 266 U. S. 511, 516, 45 S. Ct. 145, 69 L. Ed. 413), but we are not aware of any principle which would justify us in going further. Therefore the motion to amend must be denied, since we cannot find in the record proof of interstate sales by the defendant.

We have carefully gone over the record again in the light of plaintiff's petition for reargument and the argument thereon, but we are constrained to adhere to our former opinion that evidence of interstate sales is lacking. Mr. Youngs' testimony that he had reports of the defendant's Trojans being offered for sale in Virginia and North Carolina was objected to, and the objection was sustained. Without this, his testimony comes down to the statement that the plaintiff's business is nation wide and is greatly affected by the competition of defendants' Trojan goods. In addition there is Exhibit 9, defendants' price list, which does not refer to any market, local or national, and which plaintiff would have us take as evidence that it is addressed to a national market. It was obtained by Pollaci in connection with an intrastate sale. There is also Exhibit 11, which describes defendants as "manufacturers and jobbers," and contains an order blank reading:

"Address "City ............... State ......."

This was also issued to Pollaci. All the evidence is as consistent with intrastate as with interstate business by defendants. The only sales actually proved were intrastate.

However, we think the order contained in our original opinion was unduly strict in directing dismissal of the suit for lack of jurisdiction. It is obvious that the parties tried the case on the theory that the only issue was the question of legality or illegality of plaintiff's business and of its trade-mark on goods of this character. Plaintiff should be given an opportunity to prove, as counsel asserts it can, that defendants are really infringing in interstate commerce, and of course the defendants may contest that issue. It is within our power to send the case back for further evidence upon a single issue. Drainage Dist. No. 7 v. Sternberg, 15 F.(2d) 41 (C. C. A. 8). See Lee v. State Bank & Trust Co., 38 F.(2d) 45 (C. C. A. 2). Accordingly, the cause will be remanded, with directions to dismiss for lack of jurisdiction, unless plaintiff shall amend its complaint to allege sales by defendants of the infringing article in interstate commerce, and, in that event, to reopen the case for evidence by both parties upon that issue, and, if infringement in interstate commerce is proved, for the entry of an appropriate decree.

The entry of a decree, if infringement in interstate commerce is proved, will require a determination by the District Court of the merits of the controversy which has been briefed and argued on this appeal, namely, whether the character of its business is such as to preclude plaintiff from obtaining protection in a court of equity. If we express no opinion on this question, we are assured that another appeal will follow, however it may be decided below. No new evidence is to be received on this issue; the evidence is already before us, and its legal effect has been fully argued. Under these circumstances, we think that the time of this court will be conserved and justice will be accorded the parties more promptly, if we express our views at this time. Consequently we shall do so, though recognizing that it is contrary to our usual practice of deciding no more than is essential to dispose of an appeal.

There is no federal statute forbidding the manufacture or sale of contraceptives. The articles which the plaintiff sells may be used for either legal or illegal purposes. If, for example, they are prescribed by a physician for the prevention of disease, or for the prevention of conception, where that is not forbidden by local law, their use may be legitimate; but, if they are used to promote illicit sexual intercourse, the reverse is true. The plaintiff confines its own sales to druggists and to jobbers who will agree to sell only to licensed drug stores. If purchasers from it sometimes resell illegally, that, plaintiff says, is a matter with which it has nothing to do, and should not put its business beyond the pale of equitable protection against an admitted infringement of its trade-mark.

The relief which plaintiff may obtain depends upon the provisions of the Trade-Mark Act of 1905, as amended, and section 21 thereof (33 Stat. 729 15 USCA § 101) reads as follows:

"That no action or suit shall be maintained under the provisions of this Act in any case when the trade-mark is used in unlawful business, or upon any article injurious in itself, or which mark has been used with the design of deceiving the public in the purchase of merchandise, or has been abandoned, or upon any certificate of registration fraudulently obtained."

It is the defendants' contention that this provision precludes the maintenance of plaintiff's suit.

As already stated, no federal statute forbids the manufacture or sale of contraceptives. By the local law of New York, such articles are not absolutely prohibited. Section 1145 of the Penal Law authorizes the supplying of them to lawfully practising physicians, or by their direction. In People v. Sanger, 222 N. Y. 192, 195, 118 N. E. 637, 638, there is a dictum that "* * *...