Krauss v. Jos. R. Peebles' Sons Co.

TAFT, Circuit Judge, (after stating the facts.) For the sake of convenience and brevity, Krauss, Hart, Felbel & Co. will be referred to as Krauss, the Joseph it. Peebles’ Sons Co. as Peebles, and Jas. E. Pepper & Co. as Pepper. The first question is whether Krauss has the right to bring this action. Ordinarily the mere sale by the maker of an article of merchandise does not entitle the vendee to sue a third person for piracy of his vendor’s trade mark. In the case at bar, Pepper has not assigned his trade-mark to Krauss, for he continues to make whisky, and to bottle it under his trade-mark, and to transfer, not his trademark, but the finished product bearing his trade-mark, to Krauss. Still it is manifest that the terms of the Pepper-Krauss contract are such that Krauss has a deep and substantial interest in preventing unlawful competition with Pepper’s bottled whisky by the wrongful use of Pepper’s trade-mark. Krauss is given sole and exclusive control of Pepper’s bottle product for five years. Pepper agrees not to permit others to use his trade labels. Krauss could doubtless require Pepper to file a bill to protect his trade-mark, and, in the event of Pepper’s refusal to do so, might file the bill himself. The defect in the hill as filed is that no reason is shown why Pepper was not made comp lain ant. As this defect can he cured by amendment stating the reason, or by making Pepper a complainant, I shall pass to the merits of the case. Peebles is placing upon bottles of whisky filled and offered for sale by him the trade label and trade-mark originated and used by Jas. E. Pepper & Co. This is not denied. The harden is on Peebles to show that he has a right to do so. His counsel contend that the right may he maintained, — First, on the ground that the whisky contained in the bottles is whisky made by Pepper & Go., and was sold to Peebles in barrels, upon which was Pepper’s shield trademark; and, second, on the ground that Popper gave Peebles the right to use the trade-mark and gold label by express contract;. I do not think that Peebles’ conduct, complained of in this case, can be justified on the first ground. It is doubtful whether the sale of merchandise in bulk under a trade-mark of the maker carries with it as incident thereto the right in the vendee to use the same trademark as a trade-mark on smaller and. retail packages. It is true that the vendee cannot be prevented from stating the truth in reference to his wares, and that he may place upon his packages the statement that their contents were made by the real maker, and that they were sold by Mm under Ms trade-mark, but it seems to me it is a different tiling for the vendee to use the trade-mark as such. Such use might be characterized as the use of the maker’s sign manual to guaranty that the contents of ihe smaller packages are his manufacture, whereas the truth of that assertion depends wholly on the good faith of the vendee. However this may be, ihe complaint in the present case is not that Peebles uses the Pepper shield trade-mark alone, but that he uses the gold label containing the trade-mark, — a peculiar arrangement of colors, and other distinguishing marks. The gold label is not used on whisky barrels. It is peculiarly adapted to use upon bottles. It was for that pur [592] pose that it was originated by Pepper and used by him. Now, it is manifest that the sale of merchandise in bulk by a manufacturer does not justify the vendee in using on his retail packages the label which the manufacturer uses upon the same merchandise only when prepared by himself on smaller packages for the retail trade. Coming now to the second ground upon which Peebles’ right in the premises is contended for, the question is one of fact. Pepper admits that from 1886 until the latter part of 1892 he permitted Peebles to use his bottle trade label known as the “gold label” on quart bottles and flasks filled and sold by Peebles, and that he furnished these labels to Peebles at his own expense. He says that he did so merely to accommodate Peebles, without consideration, and that he was under no obligation to continue the license to use the labels. I am clearly of the.opinion that the circumstances under which permission to use the gold label was given to Peebles and continued for six years do create an obligation on Pepper’s part to allow Peebles to use the gold label in the manner he has always used it, at least until Peebles shall have sold all the Pepper whisky which he bought on the faith of his being able to bottle and sell it under the gold label. . The truth is the use by Peebles of the gold label was originally a favor to Pepper in advertising Pepper whisky. Pepper’s letter of December, 1889, expressly states that he only bottled it himself to advertise his brand of whisky, and of course it would still further advertise his brand if his wholesale customers bottled and sold under the same brand. As a further evidence of this pux*-pose, Pepper’s allowance to Peebles of a certain amount of whisky in each consignment .for advertising purposes is significant. On the faith of the use of the gold label, Peebles has bought Pepper whisky, and built up a trade of his own. It would, of course, be a pecuniary loss to him to be compelled to> change his label and the appearance of his goods, the excellence of which have doubtless become associated in the mind of the buying public with this gold label and other marks used by him. But Peebles, in his correspondence, admits that his license to use the gold Pepper label upon his bottling of Pepper’s bourbon whisky (and we have here to do only with bourbon whisky) was limited to quart bottles and flasks, and that it did not extend7 to “fives.” This fully corroborates the contention of Pepper and Krauss that Pepper alone had the right to use the gold trade label on “fives,” and that it was only used on bottles filled by Pepper at the distillery. As we have found that Peebles’ right to use the gold label was based only on contract, the right would seem to be limited to the terms of that contract. It follows, then, that Peebles cannot justify his use of the gold trade label on his bottling of Pepper whisky in “fives,” either on a contract implied from the purchase of the Pepper whisky or an express irrevocable license. Counsel for defendants contend that, even if Peebles cannot show a right, expressly or impliedly conferred by Pepper, to use the gold label on “fives,” Pepper cannot get any relief — First, because what he seeks protection for is not and cannot constitute a trademark in law;- and, second, because the trade label and caution [593] notices which he uses on his bottles contain false representations of material facts calculated to deceive the public. The light upon which a claim for relief must be based in this case is a very narrow one. It is not the exclusive right to use a trade-mark and trade label generally, but only the exclusive right to use them on a bottle of a certain size and quality, and with a certain arrangement of caution and other notices. Neither the size nor quality of the battles is peculiar to claimants, nor could it be. Nor does the general arrangement of caution notices seem to have been new with the claimants. It is well settled that one cannot assert a trade mark light in a peculiar form of package, or in,a particular size or quality of covering. After plaintiffs’ exclusive right to that which constitutes a lawful trade-mark is established, then the similarity in the size, form, and manner of packing plaintiffs’ a.nd defendants’ goods is a circumstance of great significance in determining whether defendant intends to mislead and has misled the public into taking his goods as the plaintiffs’. But the size, form, and manner of packing are not a part of trade-mark property. I am very doubtful, therefore, whether Pepper has not, as a matter of law, by allowing other bottlers of his whisky to use his gold label, to indicate only that the contents are Pepper whisky, on their bottles, lost the exclusive right to use his trade label upon “fives” to indicate particular bottling. It is not necessary, however, to definitely decide the question of law just discussed, for the reason that, whatever the correct answer, there is a ground upon which all equitable relief must be refused to complainants, and the motion for the preliminary injunction must be denied. The one important and prominent idea which the gold label and the caution notices upon the Pepper bottles are intended to make clear to the public is that the bottles contain whisky distilled by Jas. E. Pepper & Co., unmixed with any other whisky. The trademark of the shield is one which for more than 10 years has been placed on whisky barrels containing nothing but whisky distilled by Jas. E. Pepper & Co. The whisky had come to be known as “Old Pepper Whisky.” The words “Old Pepper Whisky,” placed upon a bottle, are an express statement that the bottle contains “Old Pepper Whisky.” The shield trade-mark, and the words which accompany it, were obviously first adopted for use upon barrel packages of Old Pepper whisky; but to place such a trade-mark upon a bottle is to say to the purchaser that .the contents were drawn from such barrels. “Consumers should satisfy themselves that the whisky is distilled by Jas. E. Pepper & Co.” Can any construction of these words, however ingenious, escape the meaning that the whisky contained in the bottle upon which they are placed is whisky distilled by Jas. E. Pepper & Co.? “This whisky is distilled under the same formula and process used by the grandfather and father of our Mr. Jas. E. Pepper more than one hundred years ago.” What whisky? The whisky contained in this bottle, of course, which the purchasing public has been assured by the gold label was Old Pepper whisky, distilled by Jas."E. Pepper & [594] 'Co. Finally we Rave printed upon the caution notice: “Bottled at tlie distillery warehouse, and warranted perfectly pure and non-adulterated.” The manifest advantage which “distillery” bottling has in the bottled whisky trade arises from the improbability that a distiller bottling whisky at his own distillery warehouse would bottle any whisky but that which he had distilled, and which could be drawn from the original packages in the warehouse. The purpose of stating that the whisky was bottled at the distillery warehouse, therefore, is to clinch the proof that nothing is contained in the bottle but whisky made by Jas. E. Pepper & Co., unadulterated by mixture with it of anything else. It is proven and admitted that Jas. E. Pepper & Co., for the 18 months preceding July, 1893, instead of bottling pure, unadulterated Old Pepper whisky has bottled a mixture of Pepper whisky and other whis-kies, of which mixture 35 per cent, was not Pepper whisky. In some months the mixture contained less Pepper than foreign whisky; in other months it contained more. The average proportion of Pepper to other whisky, however, in the output of 18 months, was as 65 to 35. To bottle such a mixture, and sell it under the trade label and caution notices above referred to, is a false representation, and a fraud upon the purchasing public. A court of equity cannot protect property in a trade-mark thus fraudulently used. It is not material whether the foreign whisky mixed with Pepper’s is as good or better whisky than Pepper’s, or whether the mixture is better than pure Pepper whisky. The public are entitled to a true statement as to the origin of the whisky, if any .statement is made at all. The complainants and Pepper are not to be protected in a deception of the public, even if it works to the advantage of the public. It is hardly necessary to say that the statement that the whisky is pure Pepper whisky is material. The importance attached in the whisky trade to the fact that bottled whisky is of the make of a particular distillery is manifest both from common knowledge and also from the great particularity of statement and variety of proof offered of this in the various bottle trade-marks, labels, and advertisements shown in this case. In view of the false and material statements contained in the trade label and caution notices of Jas. E. Pepper & Co., both that firm and their privies, the complainants in this suit, who may be reasonably presumed to have known the mode in which Pejiper was carrying on his business, must be denied the equitable relief they ask. I am inclined to think that the actual knowledge of complainants of the fraud is not material, for the reason that the only right they have in this controversy depends wholly on Pepper. Moreover, it is quite improbable that with an agent to represent them at the distillery, complainants should not have received actual notice of the facts. The only case which it is necessary to refer to is that of Medicine Co. v. Wood, 108 U. S. 218, 2 Sup. Ct. Rep. 436, where the principle which must govern this court in cases like the present ' is authoritatively settled. It was there held that “a court of equity will extend no aid to sustain a claim to the trade-mark of an ar595 tide which is put forth with a misrepresentation to the public as to the manufacturer and as to the place where it is manufactured, both of which particulars were originally circumstances to guide the purchaser of the medicine.” Mr. Justice Field refers to the leading English case of Leather Cloth Co. v. American Leather Cloth Co., 4 De Gex, J. & S. 137, and 11 H. L. Cas. 523, and quotes with approval this language of the court, as follows: “When t.hc owner of a trade-mark applies for an injunction to restrain the defendant from injuring his property by making false representations to the public, it is essential that the plaintiff should not, in his trade-mark or in the business connected with it, be himself guilty of any false or misleading representation; for if a plaintiff makes any material false statement in connection with the property he seeks to protect he loses, and very justly, his right to claim the assistance of a court of equity.” “Where a symbol or label claimed as a trade-mark is so constructed or worded as to make it contain a distinct assertion which is false, I think no property can be claimed in it; or, in other words, the right to the exclusive use of it cannot be maintained.” See, also, Buckland v. Rice, 40 Ohio St. 526; Palmer v. Harris, 60 Pa. St. 156; Prince Manuf’g Co. v. Prince’s Metallic Paint Co., (N. Y. App.) 31 N. E. Rep. 990. The distinction sought to he made between a trade-mark containing an express statement of a falsehood and words intentionally so used as necessarily to raise an implication that is false, cannot he supported either on reason or authority. Moreover, in the present case, the false statements are express. Counsel for complainants rely much on the case of Appeal of Pratt, 117 Pa. St. 401, 11 Atl. Rep. 878. In that case it appeared that farmers engaged in making hutter under a trade-mark “Darlington” did not always use their own cream, and in rare instances, in an emergency, even bought butter made by others and sold it. The court disregarded this deception of the public, apparently on the maxim “de minimis non curat lex.” Chief Justice Paxson does use some language, however, in arguendo that cannot he supported as sound. He gives as one reason for not entertaining the defense that complainants’ trade-mark contained a false representation, the fact that the public were not complaining, and he, in effect, says that the fact that such a false representation was made would not justify defendant in appropriating complainants’ trade-mark. The principle laid down in Medicine Co. v. Wood is always applied in trade-mark infringement cases, and the public is never present in them complaining. In such cases also the defendant is usually seeking to appropriate complainant’s trade-mark, and to profit by the same fraud which he pleads as a ground for refusing complainant’s relief. The reason why relief is refused complainant in such cases has nothing to do with defendant’s rights or wrongs. It is' that tire court will not protect a fraudulent business of a plaintiff, however much in the wrong the defendant may he. If the reasoning of Chief Justice Paxson in the case referred to were sound, the principle of Medicine Co. v. Wood could never he followed. [596] Pepper offers as an excuse for bottling a mixture that the demand for his goods had so increased that he could not supply it with Pepper whisky. What was this demand for? Plainly for pure and unadulterated Pepper whisky, bottled at the distillery. If this could not be honestly supplied, then it could not be supplied at all in such a way as to keep the business within the protection of a court of equity. Whether Peebles, by selling, as agent of Pepper and complainants, the distillery bottled goods, connived at the sale of the mixture as pure Pepper whisky after he knew its exact origin or not, is wholly immaterial. Relief is refused to Pepper and his privies because of his misrepresentations to the public. The motion for a preliminary injunction is denied.