Monsanto Chemical Company v. Perfect Fit Products Manufacturing Co.

349 F.2d 389, 146 U.S.P.Q. (BNA) 512, 1965 U.S. App. LEXIS 4773
CourtCourt of Appeals for the Second Circuit
DecidedJuly 28, 1965
Docket29179
StatusPublished
Cited by6 cases

This text of 349 F.2d 389 (Monsanto Chemical Company v. Perfect Fit Products Manufacturing Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Monsanto Chemical Company v. Perfect Fit Products Manufacturing Co., 349 F.2d 389, 146 U.S.P.Q. (BNA) 512, 1965 U.S. App. LEXIS 4773 (2d Cir. 1965).

Opinion

349 F.2d 389

MONSANTO CHEMICAL COMPANY, Successor by merger to The Chemstrand Corporation, Appellee-Appellant (Plaintiff),
v.
PERFECT FIT PRODUCTS MANUFACTURING CO., Inc., Appellant-Appellee (Defendant).

No. 384.

Docket 29179.

United States Court of Appeals Second Circuit.

Argued March 17, 1965.

Decided July 28, 1965.

Walter H. Free, New York City (Brumbaugh, Free, Graves & Donohue, and John F. Neary, Jr., Richard A. Lochner, New York City, on the brief), for appellee-appellant (plaintiff).

Jay F. Gordon, New York City (Natanson, Gordon & Reich, and Melvyn Altman, New York City, on the brief), for appellant-appellee (defendant).

Before LUMBARD, Chief Judge, and MOORE and MARSHALL, Circuit Judges.

LUMBARD, Chief Judge:

The issue on this appeal is whether the district court erred in refusing to allow an accounting of the profits gained by the defendant through its deliberate infringement of the plaintiff's trademark on the ground that the parties were not in direct competition. We conclude that the public interest in deterring fraudulent sales practices requires that such an accounting be allowed, and we therefore remand the case for such accounting.

The facts, as found by Judge McLean after a trial at which the defendant adduced no evidence, are undisputed. The plaintiff, Monsanto Chemical Co., produces an acrylic fiber, which it markets under the registered trademark "Acrilan." This mark was registered under the Lanham Trademark Act of 1947, 15 U.S.C. § 1051 et seq. The defendant, Perfect Fit, deliberately infringed this mark by selling mattress pads falsely labeled as Acrilan-filled. The pads were produced for Perfect Fit by the Carolina Manufacturing Co., which was in effect Perfect Fit's manufacturing division.1

After initial discussion between Perfect Fit and Monsanto concerning manufacture of a 100 per cent Acrilan-filled coverlet, Perfect Fit decided in March of 1958 to market an "Acrilan" mattress pad instead. It ordered some 20,000 pounds of acrilan fiber from Monsanto and 30,000 "Acrilan"-labeled polyethylene bags from a supplier. The first pads were shipped in late April, but Monsanto did not learn of them until late May and then only through a trade publication; all of the prior communications between the parties had concerned the proposed coverlet.

Monsanto tested one of the pads, supplied at its request by Perfect Fit, and found that it contained only 8.5 per cent acrylic fiber, the rest being rayon. When confronted with this finding, Perfect Fit explained that Carolina must have made a mistake, and it promised to send another sample with 100 per cent Acrilan. The second sample never arrived.

Monsanto then purchased a number of the Perfect Fit pads in retail stores. All these pads, labeled as Acrilan mattress pads, contained less than 25 per cent of acrylic fiber and some contained none whatever. The rest of their fill consisted of cotton, acetate, nylon and other fibers, mixed in various proportions. Some of the fibers were second-hand waste material, such as fibers from floor sweepings, which contained considerable amounts of dust.

The labels on the pads claimed that the pads were "completely sanforized to prevent shrinkage" and "allergy — dustproof — mothproof — will not mildew." Each of these claims was false. In addition, the covers for the pads, as the district court found, were made of

"cheap, poor quality cloth, low in thread count and heavily sized with 30 per cent by weight starch and talc to give the appearance of good quality cloth. As evidenced by before and after washing specimens, the sizing rinsed out with a single washing leaving a dust-porous, rough fabric having an inferior appearance." At a meeting on July 25, Perfect Fit admitted the mislabelling, and, on Monsanto's insistence, supplied what purported to be a list of the customers for the pads. In fact, however, the largest customer was not on the list.

The parties again conferred in August, and Perfect Fit proposed to manufacture a nylon-Acrilan pad, so labeled. Nothing came of this, however, and Monsanto brought suit in November in the Southern District, alleging infringement of its trademark and unfair competition. Jurisdiction was based on 28 U.S.C. § 1338. In December, Perfect Fit consented to a preliminary injunction.

Following a trial without a jury, Judge McLean found that Perfect Fit had infringed Monsanto's trademark, that its acts constituted unfair competition, and that it had acted "wilfully with full knowledge of plaintiff's rights and as part of a pre-conceived plan to trade upon plaintiff's goodwill." He granted a permanent injunction and awarded $15,877.88 legal fees. However, he found that Monsanto had failed to prove that it had sustained any damage, and he concluded that an accounting could not be allowed since the parties are not competitors; this latter conclusion he regarded as being required by our decisions in Admiral Corp. v. Penco, Inc., 203 F.2d 517 (2 Cir.1953) and Triangle Publications, Inc. v. Rohrlich, 167 F.2d 969 (2 Cir. 1948).

Both parties appeal. Perfect Fit objects to the award of legal fees on two grounds: first, since prior to trial it had proposed a consent decree as broad as the injunction ultimately ordered by Judge McLean, Monsanto gained nothing from the trial and was in fact an unsuccessful litigant; and, second, that the award is excessive. Monsanto's appeal attacks both Judge McLean's finding that it has not adequately proved damages and his conclusion that an accounting is unavailable since the parties are not competitors.

We affirm Judge McLean's refusal to award damages. However, we hold that an accounting should be allowed on the facts of this case, and we overrule Admiral Corp v. Penco, Inc., supra, and Triangle Publications, Inc. v. Rohrlich, supra, so far as they are inconsistent with our holding in the present case. We therefore remand for an accounting of the defendant's profits resulting from its infringement of the Acrilan trademark.

With respect to the defendant's appeal, since the relief ultimately granted will go beyond that offered by the defendant in settlement prior to the trial, we do not reach the question whether an award of legal fees would otherwise have been improper. We find that the legal fees awarded for the litigation prior to this appeal are reasonable in amount; we leave for determination by the district court on remand whether a further allowance should be made for the expenses incurred on remand. We also allow Monsanto $1,500 for legal expenses on this appeal.

I. The Rationale for an Accounting.

Consideration of the principles which we think should govern the award of an accounting in the present case must begin with § 35 of the Lanham Act, 15 U.S.C. § 1117, which provides for the award of damages and accounts for the infringement of marks registered under the Act.

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349 F.2d 389, 146 U.S.P.Q. (BNA) 512, 1965 U.S. App. LEXIS 4773, Counsel Stack Legal Research, https://law.counselstack.com/opinion/monsanto-chemical-company-v-perfect-fit-products-manufacturing-co-ca2-1965.