Walter Baker & Co. v. Slack

JENKINS, Circuit Judge, after stating the facts as above, delivered the opinion of the court. The appellee sold the product of William Henry Baker in the exact form of package and style of label sanctioned by the decrees of the courts referred to in the statement of facts. He had purchased from William Henry Baker the product in the form and style which those courts had authorized Baker to make and sell. To that extent the appellee, we are disposed to hold, was justified.' It must not, however, be overlooked that the word “Baker,” as applied to chocolate and cocoa manufactured by the appellant, had in the course of years come to represent to purchasers the product of Walter Baker & Co., and was so generally known to the trade. The appellee had largely dealt in those products, and was well informed of those facts, prior to the time when he undertook the sale of the product of William Henry Baker’s manufacture. It must also not be overlooked that William Henry Baker instituted his business and applied the name of “Baker” to his products fraudulently, with the expectation of profiting by the trade-name of “Baker,” and in the hope of diverting to himself some part of the trade which legitimately belonged to Walter Baker & Co., Eimited. We must therefore deal with the conduct of the appellee in the marketing of this product of William Henry Baker in the light of these circumstances. ^ He had the right, as we assume, to sell that product, but honesty and good faith required that he should not palm it off as the product of Walter Baker & Co.; that he should not represent it as “Baker’s Chocolate” or “Baker’s Cocoa,” for that meant to the purchaser that it was the product of Walter Baker & Co., Eimited. We need not be diligent to assemble the many instances [518] which the record discloses of wrongful imposition upon purchasers of the one product for the other, since the appellee himself furnishes the key to his conduct. It is satisfactorily shown that for a long time prior to this suit purchasers inquiring for “Baker’s Chocolate” would be supplied with W. H. Baker’s product, and this because “we made a little more on that.” Upon the commencement or threatening of the present suit, he instructed his salesmen to say to purchasers demanding “Baker’s Cocoa” or “Baker’s Chocolate,” “We have two Bakers. Which do you want, W. H.' or Walter Baker?” He also said that 9 out of 10 purchasers would not know the difference, saying, “Which is best? Give me the best.” And the salesman would then furnish the W. H. Baker product. Without enlarging upon this conduct, we think it evidences a deliberate design and intention to deceive. The purchaser was entitled to that which he demanded, to that which had been approved to his taste by experience, or which he had 'been recommended to purchase. In the market there were no “two Bakers’ ” products. There was but one, and that was the product of Walter Baker & Co., Limited. The courts had enjoined William Henry Baker from using the word “Baker” alone, and had required to be prominently placed upon each package the statement that “W. H. Baker is distinct from the old chocolate manufactory of Walter Baker & Company.” No such statement or representation was by the appellee directed to be made to the inquirer for “Baker’s Chocolate” or “Baker’s Cocoa.” Instead, there is manifested a clear design to mislead and confuse the proposing purchaser with the statement that there were two “Baker” products in the market. The courts sanctioned the use by William Henry Baker of his name “Baker” upon the packages, with the explanation stated, to avoid, as far as possible, confusion of goods; but they did not sanction the use of the name “Baker” in connection with the term “chocolate” or “cocoa.” We have no difficulty, therefore, in finding that the appellee, with full knowledge of the situation, sought to palm off the spurious goods as the genuine. The court below was evidently of that opinion, but by its decree enjoined the appellee from selling “any cocoa or chocolate other than that made by Walter Baker & Co., Limited, in response to requests for ‘Baker’s Cocoa’ or ‘Baker’s Chocolate,’ unless prior to such sale the purchaser is actually notified that the cocoa or chocolate about to be furnished is not manufactured by the old chocolate manufacturer, Walter Baker & Go.” This, as we conceive, gave the appellee leave to sell the spurious article as “Baker’s Cocoa” or “Baker’s Chocolate,” if it was accompanied by the statement that it was not manufactured by the old chocolate manufacturer, Walter Baker & Co. We may safely take it for granted that not one in a thousand knowing of or desiring to purchase “Baker’s Cocoa” or “Baker’s Chocolate” know of Walter Baker & Co., Limited. The name “Baker” is identified with the product, and known, in connection with the product of the appellant, as a badge and guaranty of excellence. To sanction the sale of the spurious article as “Baker’s Chocolate” or “Baker’s Cocoa,” even if accompanied with the statement that it was manufactured [519] by William Henry Baker and not by the old manufacturer, Walter Baker & Co., Limited, would not inform the purchaser that it was a different article, or other than the article known to the trade and to the world as “Baker’s Chocolate” and “Baker’s Cocoa,” and the identity of the name is the more subtle in the deception. The pux-chaser was entitled to that for which he had asked. We do not mean to say that it is not within the province of the seller to represent to the proposing purchaser that another article which he has is superior in excellence to that which is called for, and to induce him by proper argument or statement to purchase that other, but he must not represent such other to be the product which the purchaser had called for. In this respect we think the decree below failed to give adequate relief, and that the prayer in the amended bill in this respect correctly states the relief to which the appellant is entitled, and safeguards the right of the appellee to sell William Henry Baker’s products in a proper manner. Prior to this suit the appellee advertised the product of William Henry Baker as “Baker’s Chocolate” and “Baker’s Cocoa.” This was done because the name “W. H. Baker” was a new name, and the advertisement in the original name would draw the custom of persons acquainted with the product of the appellant. This was seeking to use the reputation and the good will of the appellant in the sale of the spurious product, and was an efficient means to that end. This was as much a fraud as an actual oral representation to a proposing purchaser, and should have been enjoined. Singer v. Wilson, L. R. App. Cases, 389; Jay v. Adler, 6 R. P. C., 136, 139; Mitchell v. Williams, 106 Fed. 168, 45 C. C. A. 265. The remaining questions arise upon the directioxis of the decree with respect to an accounting, and the report of the master thereon, confirmed by the court. First. The court adjudged that the complainant should recover of the defendant profits which the defendant had made, and the damages which the complainant had suffered, through the defendant’s violation of complainant’s right, as decreed, since May 1, 1900. The complainant below excepted to so much of that decree as limited the accounting of profits and damages by that date. This date was an arbitrax-y date, and no reason is suggested in the record for its selection. The evidence discloses that from December, 1898, there had been repeated infringements of the complainant’s right, and, necessarily, resulting damage. The complainant was entitled to full compensation for the injury sustained. We perceive no reason why it should be debarred of recovery for the time prior to May 1, 1900. In that respect the decree was faulty. Second. The proofs adduced to the master had reference oxily to the profits accruing to the defendant from the illegal sale. The question of the true measure of damages in ¿ases of this sort is an interesting one. The injured party is entitled to full compensation for the injury, but how shall that be measured? Manifestly, the profits which the infringer has made would not in all cases be compensation to the injured. The latter’s loss in part inheres in the failure to acquire a just and deserved gain; also in the injury to [520] the reputation of his product by reason of the substitution of the spurious article. The latter element is difficult, if not impossible, of accurate admeasurement. It can only be approximately compensated by an allowance in the nature of punitory damages, resting largely in discretion. But as to the actual loss, is it not more reasonable to say that the loss sustained is the profit which the injured party would have made if the genuine goods had been supplied, and not the profit which the party inflicting the injury actually made by the unlawful sale? That is to say, ought not the injured party to recover the difference between the cost to him of the manufacture of his article and the price at which he is able to dispose of it in the market, together with such sum as the court in its discretion should think the genuine article had lost in its reputation by substitution of the spurious article? Should not regard be had to complainant’s loss, rather than to defendant’s profits? Hall v. Stern (C. C.) 20 Fed. 788. It has been supposed that the measure of damages in these cases is analogous to the measure of damages allowed for infringement of a patent, but Judge Sawyer suggests that the analogy will not hold. Benkert v. Feder (C. C.) 34 Fed. 534. We are, however, spared the necessity of resolving this interesting question, since the complainant below failed to take any exception to the decree in this regard, and contented himself before the master with proving the profits which the infringer had made; and the only question presented for decision is whether the master, whose report was confirmed by the court below, was right in deducting from the gross profits made by the defendant by the sale of the spurious goods a proportionate percentage for the expense of operating the general business of the defendant. In The Tremolo Patent, 23 Wall. 518, 23 L. Ed. 97, decided in 1874, the court held, with respect to an infringement of the patent right, that, in the ascertainment of profits made from sales of an organ with, a patented attachment, it was proper to prove the general expenses of the business in effecting sales of organs generally, and to deduct a ratable proportion from the profits made from the patented attachment. In Société Anonyme v. Western Distilling Co. (decided in 1891 [C. C.]) 46 Fed. 921, Judge Thayer, delivering an oral opinion, stated that the expenses of business to be allowed must be expenses necessarily incurred in the unlawful venture, which would not have been incurred but for engaging in such venture. He says that “when an unlawful business is carried on in connection with the defendant’s regular business, and the same agencies are employed in doing that which is lawful and that which is unlawful, no rule of law of which I am aware requires any deduction for expenses in estimating the profits of the unlawful business.” He makes no reference to the decision in the Tremolo Patent, although in that case there was, as in the case before Judge Thayer, a like invasion of a right. See, also, N. K. Fairbank Co. v. Windsor (C. C.) 118 Fed. 96. Considering that the action for damages for the invasion of such right sounds in tort and not in contract, there is much force in Judge Thayer’s reasoning. It does not seem quite just that the wrongdoer should be permitted to escape without pecuniary loss to himself, and yet [521] we must remember that here the appellant has chosen to prove, as the basis of recovery, merely the profits which the wrongdoer has made, and in estimating those profits we feel concluded by the ruling of the ultimate tribunal, that, to ascertain the net profits accruing to the wrongdoer,' as in ascertaining profits in any other case, the expense of making the sale should be deducted from the gross proceeds of the sale, upon the same principle that the cost of the spurious article is deducted from the gross receipts of its sale. The failure to receive adequate compensation for the injury done in such case proceeds from the act of the party in seeking recovery for the profits made by the wrongdoer, rather than the loss sustained by the injured party. The decree will be reversed, and the case remanded with a direction to the court below to render an interlocutory decree pursuant to the prayer of the amended bill, and to ascertain, according to law, the loss, injury, and damage sustained by the complainant, and to decree accordingly.