Coca-Cola Co. v. J. G. Butler & Sons

229 F. 224, 1916 U.S. Dist. LEXIS 1032

• Court: District Court, E.D. Arkansas
• Decided: February 7, 1916
• Docket: No. 1857
• Status: Published

Opinion

TRIEBER, District Judge

(after stating the facts as above). It is not disputed by the defendants that the plaintiff is the lawful owner of the trade-mark “Coca-Cola,” that it is an asset of great value, and that the defendants are bottling, offering for sale, and selling a bottled preparation, under the name of “Coca-Cola,” using the tops and labels prepared by the plaintiff for the preparation bottled under its supervision, and furnished by it to those who are engaged in bottling it, under its authority or license, and that these tops and labels indicate to the public that it is the plaintiff’s preparation, made under its supervision and guaranteed by it. Although counsel have argued many important questions, there are only two issues, which under the allegations in the bill, answer, and agreed statement of facts are necessary for the determination of this case:

(1) That the preparation bottled by the defendants is made of syrup made and sold by the plaintiff, and that it was purchased by the defendants for the identical purpose to which they have applied the same, and from parties who were the lawful owners thereof by purchase from the plaintiff, but not from the plaintiff, nor from its authorized vendees.

(2) That by its manner of doing business, as is fully set out in the agreed statement of facts, the plaintiff seeks to establish an unreasonable monopoly in restraint of trade, and therefore in violation of the Act of Congress of July 2, 1890, c. 647, 26 Stat. 209, known as the “Sherman Act,” and the amendments thereto, and the Act of October 15, 1914, c. 323, 38 Stat. 730, and known as the “Clayton Act.”

[1,2] In determining the issues in this case it is important to keep in mind the well-established principle of law that the protection given by law to trade-marks has a twofold object: To protect tire owner in his property, and to protect the public from being deceived by reason of a misleading claim that the article bearing the trade-mark is the article manufactured by the owner of the trade-mark, when in fact it is not, but a substitute. The use of any simulation of a trademark, which is likely to induce common purchasers, exercising ordinary care, to buy the article to which the trade-mark is affixed, thereby indicating that it is the product of the.owner of the trade-mark, is unlawful and will be enjoined. McLean v. Fleming, 96 U. S. 245, 251, 24 L. Ed. 828; Kann v. Diamond Steel Co., 89 Fed. 706, 711, 32 C. C. A. 324, 329; Layton Pure Food Co. v. Church & Dwight Co., 182 Fed. 24, 34, 104 C. C. A. 464, 474.

[3] As the plaintiff, according to the allegations in the complaint and the agreed statement of facts, in addition to selling its product, guarantees it to be wholesome, palatable, and uniform, as well as its cleanliness and excellence of manufacture, carbonating, and bottling, and for that purpose maintains a very elaborate system of supervision, it would not only be an.imposition on the public, who purchase the bottled preparation, but may cause great damage to the plaintiff, if permitted.

If a person buying the bottled preparation, which has all the indicia of having been 'put up under the plaintiff’s supervision and guaranty, the tops and labels on the bottles giving assurance of that fact, should sustain an injury by reason of the fact that it was improperly prepared, was unclean, contained .unwholesome ingredients, had insufficient carbonic acid gas for its preservation, and by reason thereof is unfit as a beverage, or for any other cause, due to the negligence of plaintiff’s licensed bottler, is injured, the plaintiff may be liable to heavy damages. Having assumed this guaranty of its bottlers, the plaintiff not only has the right, but it is its duty, to take such steps as are necessary, by a proper system of inspection, to guard the public, as well as itself, against this danger. 'The well-recognized rule of law is that the manufacturer of any article of food, drink, or drug intended for consumption, or of any dangerous articles, may be liable to the ultimate purchaser and consumer for negligence causing an injury, although there is no direct contractual relation between them, such an action resting on tort, and not on contract. Waters-Pierce Oil Co. v. Deselms, 212 U. S. 159, 29 Sup. Ct. 270, 53 L. Ed. 453; Standard Oil Co. v. Murray, 119 Fed. 572, 57 C. C. A. 1; Huset v. J. I. Case Threshing Machine Co., 120 Fed. 865, 57 C. C. A. 237, 240, 61 L. R. A. 303; Riggs v. Standard Oil Co. (C. C.) 130 Fed. 199; Keep v. National Tube Co. (C. C.) 154 Fed. 121; Ketterer v. Armour (D. C.) 200 Fed. 322; Mazetti v. Armour, 75 Wash. 622, 135 Pac. 633, 48 L. R. A. (N. S.) 213, Ann. Cas. 1915C, 140; Thomas v. Winchester, 6 N. Y. 397, 57 Am., Dec. 455; Statler v. Mfg. Co., 195 N. Y. 478, 88 N. E. 1063; Wellington v. Oil Co., 104 Mass. 64; Roberts v. Brewing Co., 211 Mass. 449, 98 N. E. 95; Norton v. Sewall, 106 Mass. 143, 8 Am. Rep. 298; Bishop v. Weber, 139 Mass. 411, 1 N. E. 154, 52 Am. Rep. 715; Peters v. Johnson, 50 W. Va. 644, 41 S. E. 190, 57 L. R. A. 428, 88 Am. St. Rep. 909; Peterson v. Standard Oil Co., 55 , 106 Pac. 337, Ann. Cas. 1912A, 625; Tomlinson v. Armour & Co., 75 N. J. Law, 748, 70 Atl. 314, 19 L. R. A. (N. S.) 923; Dixon v. Bell, 5 Maul. & Sel. 198.

The fact that the syrup used by the defendants is that manufactured by the plaintiff, assuming that it had been made for bottling purposes, is immaterial, for the syrup, although the principal ingredient of the finished product; is only one of several used for the preparation, when offered to the consumer. To maintain the reputation, and consequently the favor of the consuming public, it is important to the manufacturer of the preparation bearing its trade-mark that it should be wholesome, palatable, clean, and free from all impure and dangerous substances, regardless of the fact whether it was bottled by itself and sold by it directly to the consumer, or through its licensees. In this case the bill charges, and the agreed statement of facts admits, that the plaintiff manufactures two different syrups, one for bottling and the other for fountain trade; that the syrup for bottling purposes differs in several material respects from that intended for the fountain trade; that the bottler’s syrup contains more sugar, has 10 per cent, more caramel for coloring purposes, contains more phosphoric acid, and less caffeine than the fountain syrup; and these two syrups are put up and sold in distinctive packages.

The authorities are numerous that, when a manufacturer of only one article of food and drink sells it in bulk, and also puts it up in bottles, the latter bearing a distinctive trade-mark, a purchaser of the article in bulk will be guilty of unfair competition, and enjoined, if bottling it and affixing the manufacturer’s distinctive labels upon the goods bottled by him. Krauss v. Peebles Co. (C. C.) 58 Fed. 585, 592; People v. Luhrs, 195 N. Y. 377, 89 N. E. 171, 25 L. R. A. (N. S.) 473; Hennessy v. White, Cox, Manual Trade-Mark Cases, 377; Browne on Trade-Marks, §§ 910, 759, and authorities there cited. One of the reasons given for this rule is that, “unless the manufacturer can control the bottling, he cannot guarantee that it is the genuine article prepared by him.” To this may be added that he cannot tell whether it is bottled in so careful a manner as is essential to the preservation of the article and the maintenance of its good reputation. This rule, of course, applies with much greater force when there are two varieties manufactured by the same party and sold under the same trade-mark, but intended to be placed on the market for different purposes, as is the case in the instant cause. Russia Cement Co. v. Katzenstein (C. C.) 109 Fed. 314; Cook & Bernheimer v. Ross (C. C.) 73 Fed. 203; Thomas G. Plant Co. v. May Mercantile Co. (C. C.) 153 Fed. 229; McIlhenny v. Hathaway (D. C.) 195 Fed. 652; Gillott v. Kettle, 3 Duer (N. Y.) 624; Spalding v. Gamage, 32 R. P. C. 273; Sebastian on Trade-Marks, page 159; Hopkins on TradeMarks, page 275. A case almost identical with the facts in this case is Charles E. Hires Co. v. Xepapas (C. C.) 180 Fed. 952.

In Powell v. Birmingham (Yorkshire Relish Case) 14 R. P. C. 730, it was testified that the difference between the two articles under consideration was only a pinch of salt, and the court held that, even in the case of such a small difference, the defendant had not proven the identity of their product with the plaintiff’s. Of what benefit would a trade-mark be, if one buying the article protected by it were permitted to adulterate it, or given an opportunity to do so, and then offer it to the public as the genuine article, protected by the trademark ? The greatest value of a trade-mark is the reputation established by the excellence of the article, and the knowledge and appreciation of that fact by. the consuming public. An article without any merit cah derive no benefit from a trade-mark, and only a temporary benefit from the most extensive advertisement. It is like the value of a “good will” in an established going concern. It depends upon the successful operation of the business. Without that there is no value to ih Who would pay for the good will of a business conducted at a loss? The court is clearly of the opinion that, upon the facts in this case, the defendants are guilty of unfair competition.

[4] Do the facts show a violation of the Sherman Act against monopolies and stifling competition? The trade-mark laws, like the patent laws, give the owner a monopoly which neither the Sherman Act nor any other act of Congress forbids. It would be a paradox to say that the exercise of a right, expressly granted by law, is unlawful.

[5] Counsel for defendants rely on Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373, 31 Sup. Ct. 376, 55 L. Ed. 502, and Coca-Cola Co. v. Bennett (D. C.) 225 Fed. 429. What was decided in the Dr. Miles Medical Company Case was that the manufacturer of an unpatented proprietary medicine cannot, after an absolute sale of the article, fix the prices for future sales. The court, in its opinion in that case, holds that the restraint of trade must be determined by the particular circumstances of the case, and the nature of the principles which are involved in it, and whether it is reasonable or unreasonable. In Coca-Cola Co. v. Bennett, there was no question of unfair competition claimed by the plaintiff, which is the cause of complaint in this case. Nor was there any claim in that case that the plaintiff guaranteed the purity, cleanliness, wholesomeness, and quality, by using its distinctive tops and labels on its bottles, arid that, for the purpose of protecting itself against claims for damages on that guaranty, it maintains a system of supervision and inspection, as set out in the agreed statement of facts herein. Nor did it appear in that case that the defendants used for bottling the syrup intended for soda fountains, and which was not suitable for that purpose. The court also found that the defendants made the preparation in the identical manner contemplated by the parties. That case is therefore not applicable. In view of the responsibilities of the plaintiff and the right of the purchasers to obtain the identical article, which they desire to buy, the requirements of the plaintiff are reasonable, and in the end beneficial to the public.

[6] Are plaintiff’s acts in violation()of tire “Clayton Act”? That act provides (section 3):

“That it shall be unlawful for any person engaged In commerce, in the course of such commerce, to lease or make a'sale or contract for sale of goods, wares, merchandise, machinery, supplies or other commodities, whether patented or unpatented, for use, consumption or resale within the United States or any territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on tile condition, agreement or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement or understanding may he to substantially lessen competition or tend to create a monopoly in any line of commerce.”

This act is invoked by the counsel for the defendants, in view of the agreed statement of facts that:

“The plaintiff, as well as the bottling companies, through whom its syrup' is sold to the retail dealer, have refused to sell to the defendants the syrup for the purpose of bottling', although the defendants offered to purchase and pay therefor, and objected to their use of the trade-mart ‘Coca-Cola,’ in connection with their bottled product.”

Whether that act is to be construed so as to compel one to sell his wares or manufactures to any one applying therefor cannot be determined in this case, as this is not an action to obtain relief of that nature, and is therefore not involved. Any one interested in that question may consult Union Pacific Coal Co. v. United States, 173 Fed. 737, 97 C. C. A. 578, and Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co. (D. C.) 224 Fed. 566, affirmed 227 Fed. 46, - C. C. A. -.

The issue in this case, as has been hereinbefore set forth, is whether one purchasing one of the ingredients of a preparation, although it be the chief one, can use it, without permission of the manufacturer, in such a manner that it may injuriously affect the manufacturer, the intending purchaser having the means to adulterate it, and by the use of the trade-mark and name of the manufacturer sell it to the public as the genuine article. It would, although not impossible, certainly be a great hardship on the plaintiff, if it were required to' permit its preparation to be bottled in every community throughout the United States, no matter how small the purchases for that community may be, and maintain such supervision over the bottling as under its system it maintains and deems necessary. By confining its sales to bottling companies doing business in cities so centrally located as to be able to supply the demand for its syrup, and at the same time enable it to supervise the bottling under its system, it does all which can be reasonably expected of it, and the law demands. The plaintiff, like all other manufacturers and dealers, is no doubt anxious to extend its trade as much as possible, and self-interest, if nothing else, will induce it to permit its preparation to be bottled in as many places as the trade, and its own interests, will justify.

The court is of the opinion that the defendants are guilty of unfair competition, and that the business of the plaintiff, as conducted, is not in violation of any of the “anti-trust acts” of the United States. A decree granting a permanent injunction in conformity with the prayer of the bill may be prepared and submitted to the court for approval.