Howard Dustless Duster Co. v. Carleton

THOMAS, District Judge. This case is now before the court on defendants’ exceptions to the report of the master, to whom it was referred after the entry of the interlocutory judgment awarding the plaintiff an injunction. The injunction was granted on the theory that although the defendant the Tate Manufacturing Company had the full [882] right to manufacture and sell its black dust cloth so long as it. did not furnish it in a package resembling that of the plaintiff, yet— “if the Tate Manufacturing Company has made and sold its dust cloths to Carleton, which the latter sold, so that they may or have been actually used, by Carleton so as to mislead the public, it became a joint tort-feasor with Carleton and is guilty of contributory infringement of plaintiff’s rights, * * * the means of deceiving purchasers giving a right of action.” The defendants thereupon presented before the master their account in the form of debit and credit, following the practice as directed in Equity Rule 63 (198 Fed. xxxvii, 115 C. C. A. xxxvii), and no examination was had vive voce or upon interrogatories, and no evidence was offered by the plaintiff. The master thereupon filed his report, finding profits due from the Tate Manufacturing Company in the sum of $434.63, and from Carle-ton in the sum of $90. The Tate Manufacturing Company has alone excepted to this report, filing two exceptions which raise substantially the following points: First, that the plaintiff, not having shown that it has lost any sales it otherwise would have made but for the acts of this defendant, is entitled to a merely ñominal award for damages, and) is not entitled to recover any profits whatever; and, second, that the master erred in finding on the uncontroverted affidavit of the Tate Manufacturing Company, the same being incorporated in his report, that its affidavit of cost in connection with the manufacture of dust cloths was too indefinite and uncertain to be allowed as to any of its items, whereas most of these are entirely definite and all are uncontradicted. [1] 1. The defendant bases its argument upon the erroneous assumption that the showing of lost profits in a trade-mark or unfair competition case is the foundation of the plaintiff’s right of recovery. In Benkert v. Feder (C. C.) 34 Fed. 534, Judge Sawyer held that there was no just analogy between the infringement of a patent for a machine and a trade-mark (and trade-mark infringement is but a specific! form of unfair competition), and that the owner of a trade-mark is entitled to recover of an infringer, the profits arising from the sale of the spurious goods with the trade-mark impressed upon them, and is not limited to the difference between the price for which the spurious goods would sell with, and the price of the same goods without the trade-mark impressed upon them. In the course of his opinion (34 Fed. at page 535), the learned judge said: “To adopt as tbe measure of compensation for sucb injuries tbe difference between tbe price for wbieb tbe spurious goods would sell without tbe trademark and for wbieb tbey will sell witb it imprinted tbereon would be a mockery of justice. In my judgment tbe infringer should at least account for tbe entire profits made upon the goods wrongfully sold with the trade-mark impressed thereon. And this is the rule established, after mature consideration, in Graham v. Plate, 40 Cal. 598 [6 Am. Rep. 639], and Sawyer v. Kellogg (C. C.) 9 Fed. 601. There may also be damages beyond tbe mere profits resulting to tbe owner of tbe trade-mark infringed, which be may recover. See, also Cod. Trade-Marks, pars. 237, 246. I do not think there is any just analogy witb respect to profits and damages between tbe infringement of a trade-mark and a patent for an improvement in a machine. A machine may embrace inventions for half a dozen improvements, for each of which there is a patent held by different individuals. One machine might infringe them all. In sucb case, each would be entitled to recover the profits attributable to his own inven883 tlon, and not the profits made npon the machine as an entirety. There is no analogy to snc-h a case on the infringement of a trade-rnark. The infringer fraudulently attaching another man’s property to his own occasions only a confusion of property with a view of taking advantage of that other’s property. The trade-mark sells the whole article, however inferior or injurious in that particular, and prevents the sale of the owner’s goods of equal amount. At least that is the fraudulent purpose, and the natural tendency, whether always accomplished or not; and the injured party should have at least the whole profit resulting from the wrongful act, and'such I understand and hold the rule to be. The damage may be much more arising from destroying the reputation of the owner’s goods.” This opinion was subsequently affirmed by the Circuit Court of Appeals for the Ninth Circuit in 70 Fed. 613. To the same effect is the decision of the Supreme Judicial Court of Massachusetts in Reading Stove Works v. Howes, 201 Mass. 437, 87 N. E. 751, 21 L. R. A. (N. S.) 979, where it is held that a manufacturer of detachable parts of stoves, who wrongfully sells such parts as the product of another manufacturer by making them with the trademark and trade-name of such other manufacturer, is liable in a suit in equity to account for the entire profits, if any, which he has derived from the sale of parts bearing the infringing marks. Another case directly in point is W. R. Lynn Shoe Co. v. Auburn-Lynn Shoe Co., 100 Me. 461, 62 Atl. 499, 4 L. R. A. (N. S.) 960, where it is held, as well settled, that the profits recoverable in equity for unfair competition are governed by the same rule as the cases of trade-marks, and that: “The rule which now prevails in the equity courts, respecting the wrongdoer’s accountability for the ‘profits and damages’ resulting from his unlawful acts, requires the master not only to take an account of all profits made by the defendant, but also to make an inquiry in regard to all damages sustained by the plaintiff on account of the defendant’s wrongful acts, and since it cannot be ascertained with any reasonable certainty how much of the profit is due to the trade-mark and how much to the intrinsic value of the commodity, the whole will be awarded to the plaintiff. It is equally well settled that the profits recoverable in equity for unfair competition are governed by the same rule as in cases of infringement of trade-marks, and are not limited to such as accrue from sales in which it is shown that the customer is actually deceived, but include all made on the goods sold in the simulated dress or package, and in violation of the rights of the original proprietor. Fairbank Co. v. Windsor [C. C.] 118 Fed. 96; Benkert v. Feder [C. C.] 34 Fed. 534; Williams v. Mitchell, 106 Fed. 168 [45 C. C. A. 265]; Sawyer v. Kellogg [C. C.] 9 Fed. 601; Saxlehner v. Eisner & Mendelson Co., 179 U. S. 19 [21 Sup. Ct. 7, 45 L. Ed. 60]; Singer Mfg. Co. v. June Mfg. Co., 163 U. S. 169 [16 Sup. Ct. 1002, 41 L. Ed. 118]; Graham v. Plate, 40 Cal. 593 [6 Am. Rep. 639]; Avery v. Meikle, 85 Ky. 435 [3 S. W. 609, 7 Am. St. Rep. 604]; McLean v. Fleming, 96 U. S. 437 [(245) 24 L. Ed. 828].” Other decisions bearing out this proposition are Regis v. Jaynes, 191 Mass. 245, 249, 77 N. E. 774; Lever v. Goodwin, 36 Ch. Div. 1; Hamilton Shoe Co. v. Wolf Bros., 240 U. S. 251, 261, 36 Sup. Ct. 269, 60 L. Ed. 629. Under this rule it seems clear that there was no error on the part of the master in refusing to rule that the plaintiff, not having shown that it would have sold to any of the parties to whom Carleton sold, is not entitled to recover any profits whatsoever. [2] Moreover, there was the prima facie presumption that the sales [884] of all dust cloths bearing the infringing wrapper, packing, etc., were due to the wrapping, packing, etc., and any evidence to the contrary, if such there was, should have been produced by the defendants, for they are the only persons who know the facts, or could make the proof. [3] 2. In my opinion the master did not err in disallowing all cost items of the Tate Manufacturing Company. In its affidavit it stated that it was unable to state the exact profits on any one branch of goods manufactured, and the master’s conclusion was that this statement was “so indefinite and uncertain * * * as to render it utterly impossible to determine with any approach to accuracy any approximation of the profits.” As was said by Judge Sawyer in Benkert v. Feder, supra: “The trade-mark sells the whole article, however inferior or injurious in that particular, and prevents the sale of the owner’s goods of equal amount,” and “the injured party should have at least the whole profit resulting from the wrongful act.” The vice of the defendant’s argument is that it erroneously assumes that the profits recoverable in equity for unfair competition do not include all sales, and are limited to such as accrue from sales in which it is shown that the customer is actually deceived. The authorities cited show that this is not the law, but that the damages do include all sales made of the goods sold in the simulated trade-mark or package, and in violation of the rights of the original proprietor. If that is so, the question as to the exact profits on any one branch of goods manufactured is immaterial. Especially is this the case here, where it cannot be ascertained, with any reasonable certainty, how much of the profit is due to the trade-mark and how much to the intrinsic value of the commodity. [4] The real fact is that the facts admitted by the defendant in its account and affidavit made a prima facie account for the plaintiff, viz.: (a) The amount of sales; (b) that some profits were made; and (c) the defendant’s treasurer was unable, from the books or otherwise, to more than estimate the amount of profits, and the defendant has not discharged itself of the burden of proof cast upon it. Let an order be entered overruling the exceptions and confirming the report of the master.