PROTH

A PHASE OF ACCOUNTING IN

TRADE-MARK CASES.

ROTECTION against unfair dealing by imitation of trade names, marks, or symbols, is now afforded the injured trader on one of two grounds, either by the judicial recognition of his technical trade-mark to which he may have an exclusive right in connection with a particular class of goods, or by the protection of names, marks, or signs to which he has no such exclusive right, on the ground of unfair competition.1 It is the "good will" of the merchant, or the right to have the benefit of the reputation of his products, which is thus guarded by the courts.2

In Elgin National Watch Co. v. Illinois Watch Co.,3 Chief Justice Fuller defines thus the technical trade-mark:

"The term has been in use from a very early date, and generally speaking, means a distinctive mark of authenticity, through which the products. of particular manufacturers or the vendible commodities of particular merchants may be distinguished from those of others. It may consist in any symbol or in any form of words, but as its office is to point out distinctly the origin or ownership of the articles to which it is affixed, it follows that no sign or form of words can be appropriated as a valid trade-mark which, from the nature of the fact conveyed by its primary meaning, others may employ with equal truth, and with equal right, for the same purpose."

Within the field of marks which are capable of exclusive ownership, a trader may become entitled to the exclusive use of a name or symbol, provided he can show priority of ownership and continuous use thereof associated with a particular class of goods.* And his rights, so far as an injunction is concerned, are to be protected irrespective of the innocent character of the defendant's acts. In cases of unfair competition the courts in England logically enough do not require fraud on the part of the defendant as a necessary element of a complainant's cause of action. But fraud.

1 For a discussion of the relationship between the law of trade-marks and of unfair competition, see 10 HARV. L. REV. 275, and 12 ibid. 243.

2 George G. Fox Co. v. Glynn, 191 Mass. 344, 349.

seems to be a necessary prerequisite in the United States courts.! The remedy in trade-mark cases may be by action at law or in equity; in cases of unfair competition it may be in equity; in cases of trade-mark the injunction is absolute against the use of the offending mark;2 in the other class of cases it is against the use of the complainant's marks without signs sufficiently distinguishing to prevent confusion of the two commodities in the public eye.3

If the aggrieved trader resorts to a court of equity and is held entitled to an injunction to protect him against infringement of his trade-mark or against unfair competition, he is in the United States, in most cases, entitled to an account of damages and profits to be estimated by a master in chancery. Generally speaking, the successful complainant can recover the damages sustained by reason of the wrongful user and the profits earned by the defendant through such wrongful user. If, however, the defendant's acts were purely accidental, without any deliberate intention to deceive the public, an account of profits may not be ordered.5

It is the purpose of this article to discuss a rule relating to an accounting of profits affirmed by the Supreme Court of Massachusetts in a recent trade-mark case. This rule is found in the case of Regis v. Jaynes. The plaintiffs in that case had built up since 1877 a small business in the sale of dyspepsia tablets in boxes marked "Rex." They began advertising in 1898, and the business was confined to Haverhill, Mass., and surrounding towns. The defendants were retail druggists, and began in Boston in 1903 advertising on a large scale "Rexall Dyspepsia Tablets " in ignorance of the plaintiffs' rights. The defendants' labels, except for the similarity of names, differed from those of the plaintiffs, but both remedies consisted of two sorts of pills to be taken in connection with each other. The defendants did a large busi

1 Elgin Nat'l Watch Co. v. Illinois Watch Case Co., 179 U. S. 665, 674; Howe Scale Co. v. Wyckoff, 198 U. S. 118; French Co. v. Saratoga, 191 U. S. 427, 440. And see W. R. Lynn Shoe Co. v. The Auburn-Lynn Shoe Co., 100 Me. 461; 16 HARV. L. REV. 272.

2 Bass v. Feigenspan, 96 Fed. Rep. 206.

3 Reddaway v. Banham, [1896] A. C. 199.

* Saxlehner v. Eisner & Mendelson Co., 138 Fed. Rep. 22; Walter Baker & Co. v. Slack, 130 Fed. Rep. 514; Singer Mfg. Co. v. June Mfg. Co., 163 U. S. 169, 207.

5 Elgin Nat'l Watch Co. v. Illinois Watch Co., 179 U. S. 665, 674; Saxlehner v. Siegel-Cooper Co., 179 U. S. 42; N. K. Fairbank v. Windsor, 124 Fed. Rep. 200; Ellen v. Slack, 24 Sol. J. 290; Moet v. Couston, 22 Beav. 578.

6 191 Mass. 245.

ness, but almost entirely in Boston and so substantially outside the territory of the plaintiffs. There was no fraud involved except that the defendants continued to sell their tablets after notice from the plaintiffs of infringement of their trade-mark "Rex"; and this continuance caused absolutely no diversion of the plaintiffs' business. The plaintiffs obtained an injunction against the use by the defendants of the name "Rexall Dyspepsia Tablets" in connection with the sale of their pills. A supplemental bill was filed praying for damages and profits for infringement since the filing of the original bill. The case was recommitted to the master; and at the hearing before him the defendants offered to prove that no actual deception or mistake had occurred by reason of the defendants' acts, and that there had been no sales of the defendants' tablets as and for the goods of the plaintiffs during the period covered by the accounting. The master ruled that both these offers were immaterial and that the defendants were liable for all profits. The defendants alleged exceptions. The unusual question was, therefore, directly presented to the Supreme Court of Massachusetts, whether, in an accounting in a trade-mark case, the defendant cannot show in relief of himself that he made no sales by reason of the resemblance between the two labels, and that there had been no confusion of the competing commodities in the public mind.2

Judge Sheldon, who expressly dealt with the case apart from the trade-mark statute in Massachusetts, found sufficient fraud on the part of the defendants in their continuing infringement after the filing of the original bill to satisfy the requirements of Saxlehner v. Siegel-Cooper Co.1 and other cases.5 He overruled the defendants' exceptions, and held that a defendant must account for all profits earned by the infringing trade-mark, irrespective of the question whether the purchasers had in fact bought the goods of the plaintiff believing them to be the goods of the defendant. To the correctness of this ruling we now address ourselves.

The situation was certainly an unusual one. In the ordinary accounting, from the nature of the subject-matter, it is as difficult for the plaintiff to show that any one purchaser from the defendant

would have bought the plaintiff's goods had he not been misled into buying the defendant's, or that any one purchaser actually bought the defendant's goods as and for those of the plaintiff, as it is for the defendant to show the contrary. But here the small local character of the "Rex" business as compared with the infringing "Rexall" business enabled the defendants to show affirmatively what is rarely possible. Ought not the infringer to be allowed the benefit of this proof?

Let us turn to the authorities in Massachusetts, in this country, and in England. In Massachusetts, certainly, the Supreme Court was not fettered by any previous judicial expression in favor of the complainants' position. The first case before the full bench.

1 Outside the present case, there is no trade-mark or unfair competition case in Massachusetts which has reached the full bench in which an accounting has been completed. Up to 1878 there was no decree for damages or profits in a trade-mark suit in equity in any case before the full bench.

Suits in equity to protect symbols, in which the defendants succeeded and in which, of course, no question of accounting arose, are: Ames v. King, 2 Gray (Mass.) 379; Rogers v. Taintor, 97 Mass. 291; Emerson v. Badger, IOI Mass. 82; Hallett v. Cumston, 110 Mass. 29; Boston Diatite Co. v. Florence Mfg. Co., 114 Mass. 69; Gilman v. Hunnewell, 122 Mass. 139; Magee Furnace Co. v. Le Barron, 127 Mass. 115; Connell v. Reed, 128 Mass. 477; Warren v. Warren Thread Co., 134 Mass. 247; Chadwick v. Covell, 151 Mass. 190; American Order of Scottish Clans v. Merrill, 151 Mass. 558; Weener v. Brayton, 152 Mass. 101; Covell v. Chadwick, 153 Mass. 263; Burt v. Tucker, 178 Mass. 493; Garst v. Hall & Lyon Co., 179 Mass. 588; Dover Stamping Co. v. Fellows, 163 Mass. 191; Martin v. Bowker, 163 Mass. 461; Crossman v. Griggs, 186 Mass. 275; Lothrop Co. v. Lothrop, Lee & Shepard Co., 191 Mass. 353; Messer v. The Fadettes, 168 Mass. 140.

Actions at law in which the defendant succeeded: Thomson v. Winchester, 19 Pick. (Mass.) 214; Marsh v. Billings, 7 Cush. (Mass) 322; Chase v. Mayo, 121 Mass. 343. In the following cases, although an injunction was granted restraining the use of plaintiff's symbols, no accounting of profits was ordered: Hoxie v. Chaney, 143 Mass. 592; Russia Cement Co. v. LePage, 147 Mass. 206; International Trust Co. v. International Loan & Trust Co., 153 Mass. 271; Noera v. Williams Mfg. Co., 158 Mass. 110; American Waltham Watch Co. v. U. S. Watch Co., 173 Mass. 85; New England Awl Co. v. Marlborough Awl Co., 168 Mass. 154; Flagg Mfg. Co. v. Holway, 178 Mass. 83; Hildreth v. McDonald Co., 164 Mass. 16; Viano v. Baccigalupo, 183 Mass. 160; Bowman v. Floyd, 3 Allen (Mass.) 76; Samuel v. Spitzer, 177 Mass. 226; Cohen v. Nagle, 190 Mass. 4; George G. Fox Co. v. Glynn, 191 Mass. 344.

Commonwealth v. Jacob Rozen, 176 Mass. 129; Commonwealth v. Abe Strauss, 188 Mass. 229; and Commonwealth v. R. I. Sherman Mfg. Co., 189 Mass. 76, were criminal proceedings under statute and have no application to this case.

In Frank v. Sleeper, 150 Mass. 583, an injunction was granted and the case sent to a master to assess damages. Nothing was said as to profits. The case is still pend

ing in the Supreme Court; and no final decree has been entered.

New England Awl Co. v. Marlborough Awl Co., 168 Mass. 154, was the case of an imitation of a label. The Supreme Court gave the plaintiff an injunction and sent the case back to the Superior Court, where accounting was waived.

in a trade-mark suit in which an injunction and accounting were ordered was Lawrence Mfg. Co. v. Lowell Mills. In 1878 the court below made such a decree for injunction, damages, accounting, and costs. This was affirmed by the full bench in 1880. There is nothing in the case to show that any profits were ordered by the full bench to be paid to the plaintiff, which were not profits made from customers who were deceived by the similarity between the defendant's mark and that of the plaintiff.

Lawrence v. Hull 2 was dismissed shortly in the present case on the ground that it raised none of the questions before the court. It was a bill in equity based on the statute to restrain the unlawful use of the plaintiff's name in a partnership designation. The complainant secured his injunction, but the court went on to say: 4

"We see no ground for giving the plaintiff profits. The plaintiff has not been competed with unfairly, and his loss bears no relation to the defendants' gains. He ought not to recover more than compensation for his loss, even if the reasoning of the Supreme Court of the United States should seem to suggest that possibility in patent cases. Tilghman v. Proctor, 125 U. S. 136, 148. Compare Root v. Railway Co., 105 U. S. 189, 214, 215."

There seems to be nothing in the statute under which the proceeding in Lawrence v. Hall was brought, which should differentiate the principles of accounting there binding from those in a proceeding to protect a common law or statutory trade-mark. This language above quoted seems to recognize a difference between the rule of accounting in a patent case under the express provisions of the United States Statutes, and an accounting in cases closely allied to the present. Lawrence v. Hull deserves more consideration than the Supreme Court in the present case gave it.

3 Mass. Pub. Stat., c. 76, § 6. "No person carrying on business in this commonwealth shall assume or continue to use in his business the name of a person formerly connected with him in partnership, or the name of any other person, either alone or in connection with his own or with any other name or designation, without the consent in writing of such person or of his legal representatives." § 7. "The supreme judicial court may restrain by injunction the use of trade-marks or names in violation of the provisions of this chapter."

4 P. 252.