L. E. Waterman Co. v. Modern Pen Co.

Me. Justice Holmes delivered the opinion of the court. This suit was brought by the L. E. Waterman Company to enjoin the Modern Pen Company from using in connection with the manufacture and sale of fountain pens, other than those of the plaintiff’s make, the name A. A. Waterman or any name containing the word Waterman in any form, and for an account. The decision of the Circuit Court of Appeals upon' an order for a preliminary injunction is reported, 183 Fed. Rep. 118; 105 C. C. A. 408; that of the District Court upon the merits, 193 Fed. Rep. 242; and that of the Circuit Court of Appeals, 197 Fed. Rep. 534; 197 Fed. Rep. 536; 117 C. C. A. 30; 117 C. C. A. 32. The final decree, in the parts material here, restricted the defendant to using the name Arthur A. Waterman & Co. instead of A. A. Waterman & Co., and required the words 'not connected with the L. E. Waterman Co.’ to be juxtaposed in equally large and conspicuous letters when the permitted name was marked upon any part of the fountain pen sold by the defendant or upon boxes containing such pens, and whenever the name was used by way of advertisement or otherwise to denote any fountain pens made or sold by the defendant, or to, denote that it was the maker or seller of such pens. 183 Fed. Rep. 118. 193 Fed. Rep. 242, 248. 197 Fed. Rep. 534, 535, 536. See further L. E. Waterman Co. v. Standard Drug Co., 202 Fed. Rep. 167, 171. 120 C. C. A. 455, 459. The bill besides alleging diversity of citizenship and unfair competition seemingly relied upon the registration of 'Waterman's' and 'Waterman's Ideal Fountain Pen, N. Y.' as trade-marks under the Act of Congress of March 3, 1881, c. 138, 21 Stat. 502, as a ground of juris *94 diction. Jacobs v. Beecham, 221 U. S. 263, 274. Both parties appeal. The defendant’s appeal is from the requirements that it use the name Arthur A. Waterman & Co. instead of A. A-. Waterman & Co. and that it juxtapose the words 'not connected with the L. E. Waterman Co.’ After the finding of two courts and upon the evidence it must be assumed that the defendant had used the name Waterman in such a way as to mislead the public and to interfere with the plaintiff’s rights unless the defendant had the right to use the name as matter of law because it was the selling agent of a firm calling itself A. A. Waterman & Co. and deriving its name from a man who started in business long after the plaintiff had acquired whatever rights it has. In support of this proposition the defendant lays hold of language in Howe Scale Co. v. Wyckoff, Seamans & Benedict, 198 U. S. 118, 140, and in other books, to the effect that courts will not interfere with the use of a party’s own name 'where the only confusion, if any, results from a similarity of the names and not from the manner of the use.’ But, whatever generality of expression there may have been in the earlier cases, it now is established that when the use of his Own name upon his goods by a later competitor will and does lead the public to understand that those goods are the product of a concern already established and well known uñder that name, and when the profit of the confusion is known to and, if that be material, is intended by the later man, the law will require him to take reasonable precautions to prevent the mistake. Herring-Hall-Marvin Safe Co. v. Hall's Safe Co., 208 U. S. 554, 559. There is no distinction between corporations and natural .persons in the principle, which is to prevent a fraud. Ibid. Howe Scale Co. v. Wyckoff, Seamans & Benedict, 198 U. S. 118, 136. Donnell v. Herring-Hall-Marvin Safe Co., 208 U. S. 267, 273. In the Howe Scale Co. Case it was stated upon the same page *95 with the passage quoted that 'defendant’s name and trade-mark were not intended or likely to deceive.’ The only other ground for the defendant’s appeal that needs a word after the findings below is a decree of the Supreme Court of New York in .a suit by the plaintiff against Arthur A. Waterman and Edward L. Gibson, partners doing business as the'A. A. Waterman Pen Company of New York and Boston. The defendant alleges that it has succeeded to A. A. Waterman’s rights. The decision found in the strongest terms that the name was used with fraudulent intent and the decree in some detail enjoined the defendant from using that or any corporate name containing the word 'Waterman,’ and from using in connection with the business of making or selling fountain pens the word Waterman alone or with others in such collocation with the word pen as to indicate that such pens were a variety of Waterman’s fountain pens. This rather damaging decree is thought to give some help because of a following sentence to the effect that the defendants were not prohibited from indicating that their pens were made or sold for or by Arthur A. Waterman & Co. or A. A. Waterman & Co. But that sentence was subject to the previous prohibition and consistent with it. The present defendant still not only may indicate the source of its pens in undeceptive ways but may mark them Arthur A. Waterman & Co. if only it add words that prevent the fraud that it insists upon the right to effect.' It is unnecessary to go into other considerations presented by the record to show that the defendant’s appeal cannot be maintained. The plaintiff’s appeal is from the failure of the decree to prohibit the use of the name Arthur A. Waterman & Co. even with the suffix required by the court. The ground upon which it claims this broader relief is that the agreement with A. A. Waterman by which he purported to become a partner in the firm of Á. A. Waterman & Co. *96 was a sham, that the firm does not make the pens sold by the defendant, and that all the arrangements between Waterman the firm and the defendant were merely color-able devices to enable the defendant to get the name upon its pens. If we were to adopt this view of the facts the nature of the parties’ rights and powers perhaps might need a more careful discussion than, so far as we are aware, it has received as yet. Under the decree in its present form the plaintiff gets all the protection to which it is entitled as against another Waterman who has established himself in the business, even though one of his motives for going into it was the hope of some residual advantages from the use of his own name. If with the warning, that the law decrees sufficient to prevent a fraud a second Waterman could go into the business and give it his name, the question occurs whether a man might not change his name to Waterman and do the same thing, and, if so, whether the nature of the defendant’s title to the name is any concern of the plaintiffs — whether in short the protection now granted is limited by reason of a personal privilege or is the measure of the plaintiff’s rights as against the world. We express no opinion upon the point beyond saying that it would have to be considered before the plaintiff could obtain a broader decree. For the purposes of decision we give the plaintiff the benefit of the doubt. Whatever view may be taken of the agreements, there is no question that they were intended, with A. A. Waterman’s assent, to authorize the use of his name in a business that he had pecuniary reasons for wishing to see succeed. He purported to transfer to the' partnership the good will attaching to his name. While it very well may be true that the transfer of a name without a business is not enough to entitle the transferee to prevent others from using it, it still is a license that may be sufficient to put the licensee on the footing of the licensor as against the plaintiff. Moreover two courts have upheld the arrangements *97 as effective to give the defendant the protection of such rights as A. A. Waterman would have had in establishing a business after the plaintiff, and therefore we shall not go into any consideration of the facts. It cannot be said the partnership agreement was ineffectual for the present purpose as matter of law. The object is pretty plain, -but it is none the worse for that. The leading features are as follows: A partnership is formed under the name A. A. Waterman & Co. Contributions of capital are to be deemed loans and bear interest. The two partners other than Waterman have the management of the business and alone can sign negotiable paper and contracts. • The business is to make, buy and sell fountain pens, and the defendant corporation is to be formed, (the parties to be interested in it) and is to be the sole selling agent of the-firm. Waterman grants to the firm the exclusive use of his own and the firm names in connection with the business, and all the-good will attaching to either.. The Continent is divided into two defined districts, and Waterman has the exclusive right to do business under the name A. A. Waterman & Co. in the Western District, if he begins it before July 1, 1906, and the remaining members the exclusive right to the Eastern District. In any event Waterman leaves the present firm at that date. Each party has the free use of all patents, trade-marks and trade-names within their territories that either party has or may acquire. Eastern Territory goods are to be marked ‘A. A. Waterman & Co., New York’ and'those made in the Western, ‘A..A. Waterman & Co., (or some similar name) Chicago/ Waterman covenants not to compete for thirty-six years, or to use or allow the use of his name except as provided.' Finally if Waterman does not go into independent business he is to have the. exclusive agency for the Western Territory for the thirty-six years, and his commissions are fixed in detail and with care. *98 As we have said we do not reopen the matters of fact that must be taken to have been found by the two courts. So we assume that there was nothing to hinder Waterman from making this agreement and that the defendant was organized and acted under it. Whether he had more or less good will to convey perhaps is not very material. We are not prepared to say as matter of law that a man who for years has been trying to do business, may not join a partnership for a long time enough to start it with his name and whatever good will he has, and provide that thereafter he will divide territory as above stated or become a selling agent, at his choice. The obvious motive is met by the protection given in the decree, but does not deprive him of all rights in his name. A sufficient interest is disclosed to sustain the transfer as against the plaintiff and to free the defendant from a greater liability than would have fallen on A. A. Waterman had he gone on alone. Decree affirmed. Me. Justice Pitney: In No. 72, the appeal of the Modern Pen Company, I concur in the result. In No. 54, the appeal of the L. E. Waterman Company, I dissent from the conclusion reached by the court. It seems to me that the alleged partnership agreement of June 12, 1905, made between Arthur A. Waterman and others, pursuant t<? which the Modern Pen Company was organized and under which it claims the right to use the name of “A. A. Waterman” and "A. A. Waterman & Co.,” appears upon its face to be a mere sham and a fraudulent device, and is demonstrated to be such by the other evidence. The case presents no question respecting the right of an individual to tj^e bona fide use of his name, but rather the question whether a partnership or a corporation can, *99 by purchase or otherwise, obtain the right to use the name of a third party for the very purpose of employing it in unfair competition with the established business of still another party. The case in its circumstances closely resembles International Silver Company v. Rogers Corporation, 67 N. J. Eq. 646, and, for reasons sufficiently indicated by a reference to that case, I think the Modern Pen Company should be unqualifiedly enjoined from using the name "Waterman.”