Clark Thread Co. v. William Clark Co.

| New York Court of Chancery | May 15, 1897

Reed, Y. C.

This bill is filed to enjoin the defendant from using certain trade-marks which are alleged to be the property of the complainant, and also for an accounting for the profits diverted from the complainant to the defendant by reason of the previous illegal use by the defendant of such trade-marks.

Both complainant and defendant are manufacturers of spool cotton thread. The complainant insists that long before the organization of the William Clark Company (the defendant), the Clark Thread Company (the complainant) had by use acquired an exclusive right to employ, in the sale of its goods, certain words and letters upon the labels upon its spools and boxes. It insists that the defendant has, by the use of the same or similar words and letters printed upon its labels upon its spools and boxes, infringed upon the property right of the complainant in its trade-marks.

The questions presented are, first, whether the Clark Thread Company had acquired an exclusive right to use a trade-mark; second, whether this right has been infringed by the defendant, and third, whether there should be an injunction against the further use of such trade-marks by the defendant, and for an accounting for profits arising from the illegal use by the defendant of such trade-marks.

An original examination of these questions in this case is excluded because of a previous adjudication made in the federal courts. This judgment is set up by both complainant and defendant as an estoppel against a relitigation of the points in issue, so far as the former decree circumscribed and defined the extent of the exclusive right of the complainant to use certain words and letters, and as an estoppel, so far as the judgment enjoined the use of these words and letters by the defendant. This previous adjudication is also set up by the defendant as a final determination against the right of the complainant to an account for profits in this case.

The points to be decided are resolved into an inquiry whether the decree in the former suit has put at rest all the questions raised by the pleadings in the present suit.

To understand the manner in which the suits are related, it is essential that the purposes of the first suit, the parties to it and the several decrees made in it shall be set out. It is equally essential that the pleadings in, and the progress of, the present suit, in relation to the former suit, shall also be exhibited.

The bill in the first suit was filed in the United States circuit court for the southern district of New York, in January, 1893. That suit was brought by the Clark Thread Company, the present complainant, against one Herbert G. Armitage. Armitage had been and then was the general manager of the sales department of the William Clark Company. The William Clark Company openly defended the suit against Armitage. The bill in that suit was filed upon the same facts as is the bill in the present suit. It specifically prayed for an injunction restraining the defendant from selling thread under the name or designation of “ Clarks,” or the “ William Clark Company,” or under a designation of which the word “-Clark” or “Clarks” should be a part, or from using, in connection with the thread, the collocation of the three letters “ N. E. W.,” horizontally arranged across a circular spool label or otherwise. The bill also prayed for an accounting for profits.

In May, 1895, a decree was made in that case by Judge Coxe, in the district court. By that decree the defendant was restrained from using the word “ Clark ” or “ Clarks ” except when those words occurred in the name of the corporation, viz., “ The William Clark Co.,” and when so used in good faith the word “ Clark ” was not to be printed in Gothic type or otherwise so as to be in violation of the injunction. The decree was silent as to the right of Armitage to use the letters “ N. E. W.,” the court refusing to restrain their use.

After this decree by Judge Coxe was made, the bill in the present case was filed on July 17th, 1895, against the William Clark Company, a New Jersey corporation. This bill, as I have already observed, is grounded upon the same facts as the previous bill, and prays for the same relief against the William Clark Company as the former bill had asked against Armitage, To this bill an answer was filed by the William Clark Company on November 14th, 1895, in which answer it was set up that the decree made by Judge Coxe in the former suit had established the right of the defendant to use the corporate name of the William Clark Company upon the thread sold by that company.

On November 27th, 1895, the complainant filed a petition of appeal from a part of the decree made in the circuit court of the United States to the United States court of appeals for the second circuit, and. on the same day the defendant Armitage filed a similar petition, appealing from parts of the same decree. These appeals were decided on May 28th, 1896. The court • of appeals affirmed the decree below in respect to its order restraining the defendant Armitage from using the word “Clark” or “ Clarks,” but the court also decreed that the defendant was not entitled to use the collated letters “IST. E. W.” upon its labels and circulars, and directed an injunction against Armitage accordingly. In the meantime, nothing had been done in the present suit subsequent to the filing of the answer.

After the adjudication in the court of appeals in the preceding suit, a supplemental bill was filed in this suit on August 1st, 1896. This bill set up the decree in the appellate court as conclusively determining between the parties in this suit the effect of and the extent of the infringement by the defendant of the trade-marks of the complainant. To this supplemental bill an answer was filed on March 3d, 1897. The answer admitted that the preceding decree was conclusive upon'all matters litigated in that suit, and claimed that, inasmuch as the bill in.the former case prayed for an accounting for profits, and as the decree in that case was silent upon that point, that the matter of accounting was thereby conclusively settled against the right of the defendant to an accounting, and so estopped the Clark Thread Company from now insisting upon a decree for an .accounting.

It is therefore perceived that, by the pleadings in this suit, it is assumed and admitted by both parties that, in so far as the decree in the federal court fixes the right of the parties in relation to the use of the word “ Clark ” or “ Clarks ” and the use of the letters “N. E. W.,” the judgment is to be regarded as a final determination.

The mooted point is whether the decree in the preceding case concludes the complainant from a decree for an accounting for profits in this case.

Assuming that the William Clark Company, by openly appearing and defending Armitage, its servant, for acts done within the line of his employment, are estopped from litigating anew any point in issue and decided in that cause (Lyon v. Stanford, 15 Stew. Eq. 411, 414, and cases cited), and assuming that, by the doctrine of mutuality of estoppels, the complainant was also concluded from again litigating in a suit against the master, any question so settled in a suit against the servant, the question remains, does the estoppel reach this matter of accounting ?

The effect of an estoppel by judgment may present two aspects — one where a second suit between the same parties is brought for the same cause of action; the second where a second suit between the same parties is brought not for the same cause of action, but for a cause of action so related to the cause in the preceding suit, that some matter, the establishment of which is essential to the recovery by the complainant in the last suit was in issue and determined in the preceding suit.

In respect to the first phase in which the question of estoppel presents itself, it is entirely settled that after one judicial determination by a court of competent jurisdiction, a second suit for the same matter, between the same parties or their privies, cannot be relitigated in the same or any other court. Nor does it matter that, in the first suit, evidence existed which was withheld or undiscovered, or that the law was misconceived by the court, or left uncited by counsel, or that no defence was made and judgment went by default, or that only one of several defences was interposed by the defendant; in spite of any of these defects in the prosecution or defence of the action, the judgment stands as an absolute bar against a second litigation of the same cause of action.

When, however, a second suit is brought not for the same demand, but for a- cause which was a part of the same matter, but was not included in the first action, the estoppel is not so sweeping. In such instance only those issues which are common to both suits, and which had to be or were actually decided in the first suit, are regarded as res adjudieata in the second. This distinction between the two kinds of estoppel is lucidly stated by Mr. Justice Field in Cromwell v. Sac County, 94 U.S. 351" court="SCOTUS" date_filed="1877-04-16" href="https://app.midpage.ai/document/cromwell-v-county-of-sac-89476?utm_source=webapp" opinion_id="89476">94 U. S. 351. In that case there had been an action upon certain county bonds, in which action the county succeeded. In a subsequent action by substantially the same parties, upon other coupons on the same bonds, the previous judgment was set up as an estoppel. Mr. Justice Field, after speaking of the absolute estoppel as to every ground which might have been presented in the preceding case, when a second action is brought for the same cause, goes on to say: “ When a second action is upon a different claim, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted upon the determination of which the finding of the verdict was rendered. In all cases, therefore, when it is sought to apply the estoppel of a judgment in one case to matters arising in a suit upon a different cause of action, the inquiry must always be as to the point or question actually litigated and.determined in the original action, not what might have been litigated or determined.”

In accordance with this view, it had been held in Steam Packet Company v. Sickles, 65 U.S. 333" court="SCOTUS" date_filed="1861-01-28" href="https://app.midpage.ai/document/washington-alexandria--georgetown-steam-packet-co-v-sickles-87407?utm_source=webapp" opinion_id="87407">65 U. S. 333, that where the record of the. first suit does not show that the point involved was actually decided, parol evidence is admissible to show the state of affairs that existed at the trial, with a view to ascertain what was decided.

The point so decided, namely, that in the second class of estoppels it must appear that the point set up by way of estoppel Avas, or must have been, determined in the original suit, was reaffirmed in the case of Wilson v. Deen, 121 U.S. 525" court="SCOTUS" date_filed="1887-04-25" href="https://app.midpage.ai/document/wilsons-v-deen-91945?utm_source=webapp" opinion_id="91945">121 U. S. 525; was recognized in Dooley v. Potter, 140 Mass. 49" court="Mass." date_filed="1885-09-07" href="https://app.midpage.ai/document/dooley-v-potter-6421750?utm_source=webapp" opinion_id="6421750">140 Mass. 49; Daggett v. Daggett, 143 Mass. 516" court="Mass." date_filed="1887-02-23" href="https://app.midpage.ai/document/daggett-v-daggett-6422333?utm_source=webapp" opinion_id="6422333">143 Mass. 516; Kilander v. Hoover, 111 Ind. 10" court="Ind." date_filed="1887-05-11" href="https://app.midpage.ai/document/kilander-v-hoover-7048873?utm_source=webapp" opinion_id="7048873">111 Ind. 10; People v. Hall, 104 N.Y. 170" court="NY" date_filed="1887-01-18" href="https://app.midpage.ai/document/people-ex-rel-bridgeman-v--hall-3630008?utm_source=webapp" opinion_id="3630008">104 N. Y. 170; Bigley v. Jones, 114 Pa. St. 510; Russell v. Place, 94 U.S. 606" court="SCOTUS" date_filed="1877-04-16" href="https://app.midpage.ai/document/russell-v-place-89519?utm_source=webapp" opinion_id="89519">94 U. S. 606.

The strictness with Avhich this rule has been applied is illustrated in the case of Burlen v. Shannon, 99 Mass. 200" court="Mass." date_filed="1868-03-15" href="https://app.midpage.ai/document/burlen-v-shannon-6415322?utm_source=webapp" opinion_id="6415322">99 Mass. 200.

This was an action brought to charge the defendant for board furnished by the plaintiff to defendant’s wife. The defence set up was, first, that the defendant had been divorced by a decree of divorce granted by an Indiana court; second, that the Avife had later, herself, sued for divorce on the ground of cruelty and desertion, to which suit the husband had set up two defences— first, a denial of the cruelty and desertion, and second, that he had already obtained a divorce in Indiana, and that in the suit of the wife against him the cause was dismissed.

The judgment in this case was relied upon in the subsequent aclion for board as conclusively establishing the divorce, and so operated as a complete defence to the action brought against him for the wife’s board. But the court held otherwise, because the judgment which dismissed the wife’s suit for divorce might have gone upon either of two grounds, namely, that the husband was not guilty of cruelty and desertion or that he had been previously divorced. It not appearing, therefore, that the question of divorce must have been the ground upon which the case was decided, or was the ground upon which it was decided, the court refused to recognize the judgment of dismissal as an estoppel.

In the opinion in this case by Judge Foster, all the cases in .the Massachusetts court are collected in support of the doctrine that it must appear that the point involved was necessary to the judgment in the preceding cause, or was a fact in issue and was decided. In the language of Mr. Smith, in his learned note to the leading ease of Duchess of Kingston, 2 Sm. Lead. Cas. marg. p. 590 :

“It is not necessary that the point on which it is sought to estop should have been the only one in issue on the previous occasion; it is enough if it be one which must have been decided.”

The strictness in which this rule should logically be, and has been, enforced is illustrated by that leading case itself. In that case the house of lords had propounded to the judges the question whether a sentence by a spiritual court against a marriage in a suit for jacitation of marriage is conclusive evidence, so as to estop the counsel of the crown from proving the marriage in an indictment for polygamy. The answer of the judges was that (apart from the fact that the parties in the two proceedings were not the same) there was no estoppel because, in the ecclesiastical court, the sentence had only a qualified effect, viz., that the parties had failed in the proof, and that the libellant was free from all matrimonial contract, so far as yet appears, leaving it open to new proof of marriage, so that the sentence only proved that it did not yet appear that they were married, and not that they were not married. “The sentence and this judgment,” said Chief-Justice De Gray, “ may stand well together and both propositions be true.”

ISTow, the obvious rule controlling estoppels, as stated and illustrated by this case, is, in my judgment, applicable to the point involved in the present case. The test, as stated by Chief-Justice De Gray, is whether the decree in the former suit refusing an accounting, and a decree in this suit awarding an accounting, can stand together. The condition calling for the application of the rule, it is true, is in this case novel, but the applicability of the rule seems to be logically certain.

In the present case the estoppel against the master rests upon the identity of himself and his servant as defendants in the previous suit. It is apparent that if the identity of the two defendants in the two suits was not perfect in respect to their several responsibilities for the matters involved in the two suits, the causes of action would not be identical. The cause of action against the servant would not be the same cause of action for which the suit against the principal is prosecuted. As to those matters decided in the previous case, as to which there was perfect identification, i. e., matters done by direction of the master, and which could not have been decided for or against the servant without deciding that the power of the master to so direct his servant was with or without legal warrant, there was a complete estoppel against the latter. In respect to such conduct of the agent, an adjudication that it was or was not legal was an adjudication that the direction of the master was or was not legal. If, however, the decision in favor of the agent had been put upon the ground that the agent had done none of the acts charged, while it would be conclusive in a subsequent suit against the principal for the result of any of those acts of that agent, it would clearly afford no immunity to the principal for any act done by another agent. So of any act of the agent aside from the scope of his agency, either by original authorization or subsequent ratification, it seems entirely clear that a judgment for or against the former could not affect the latter. There would be no identification of parties in regard to such matters, and so the latter suit would have been brought for a different cause — indeed, against different parties. For instance, if the former suit in the federal court could have been and had been brought for a simple accounting and had failed because the agent had not sold any goods, it would have settled nothing in a suit against the principal for goods sold by any other agent. So if, by the terms of the agency, there was no right of the agent to receive profits, or he had received none, it is equally apparent that a judgment on that ground in favor of the agent would decide nothing as to the principal who had actually received profits. Now, the latter condition of affairs seems to be the present posture of the litigation before me. In the former suit brought by this complainant against the selling agent of the present defendant, the selling of the goods by the servant was. admitted, and it was conceded that the use of the labels by the servant was by direction of the master. The right of the agent depended upon the right of the master to use the interdicted labels. If the agent had no right, the master had none, and vice versa. The same evidence which supported or destroyed the right of one equally supported or refuted the right of the other. It was impossible to grant or refuse an injunction against the agent which did not rest upon the right of both master and servant to employ the questioned devices in the defendant’s absence. Conceding, then, that the defendant company had so identified itself with the servant in the preceding suit, as to be bound by the decision of the court in regard to the right of the agent to use the labels, it is entirely clear that so far the issues in the two cases are precisely the same.

But when we leave the ground upon which the injunction went, and reach the matter of an accounting for profits, the two cases present quite different aspects. It is apparent at once that, assuming that both principal and agent were guilty of violating the property rights of the complainant by an illegal use of its trade-marks, nevertheless the question of the liability of each to account for profits must depend'upon1 entirely different considerations. A decree for an accounting could go only if it appeared that there was something for which the defendant was liable to render an account. If the court is satisfied that nothing is due to the complainant from the defendant, no further proceedings will be permitted and the bill will be dismissed. Campbell v. Campbell, 4 Halst. Ch. 738; Stout v. Seabrook’s Executors, 3 Stew. Eq. 187.

The same obvious course in refusing an accounting in a-patent case was taken in Bergmann v. Macmillan, 17 Ch. Div. 423, Mr. Justice Fry saying that he could not direct an accounting for profits which were non-existent.

It is entirely clear from the record in the preceding case and the testimony in this, that this was the reason why the decree in the former case was silent upon the question of accounting. It appeared in the evidence of the preceding case, without contradiction, and was stated in the brief of counsel for the defendant in that ease, that Armitage was an employe of the 'William Clark Company upon a stated salary, beyond which he received nothing. All the profits received from sales made through his agency went to the present defendant. If the agent received no profits, it did not follow that the principal received none. Therefore, the decree in the first case, based upon the fact that the agent had received no profits, could not conclude the complainant from an accounting against the principal for profits which it had received. The two decrees can stand together.

In my judgment there exists no estoppel against a decree in favor of the complainant for an accounting.

But the defendant interposed another objection against the award of an accounting for profits. This objection is based upon the insistence that a court of equity has no jurisdiction to entertain a suit simpliciter for an accounting for profits; that such an accounting can only be awarded as incidental to an injunction; that the complainant is not, in this suit, entitled to an injunction.

The first and second of these propositions are entirely settled. The only way a court of equity can acquire jurisdiction to order an accounting for profits in this class of suits is by obtaining jurisdiction over some equitable matter with which the matter of accounting is so interwoven as to justify the court in settling all questions in one suit. The query remains, then, is the complainant entitled to an injunction?

At the date when this bill was filed, in July, 1895, it is entirely clear that the defendant was violating the right of the complainant by selling goods under labels having upon them the letters “ N. E. W.” It is undenied that this conduct continued' until after the decree in the United States court of appeals, on May 28th, 1896. Since then the words and letters, the use of which was interdicted by that decree, have not been employed by the defendant. The defendant insists, for this reason, that no decree enjoining it from such infringement should now be assigned against it.

It may be remarked that the property right which a party has in a trade-mark is of the same quality as a copyright or the right to a patent, and the remedies accorded to the owner of either of these kinds of property are, except as they may be controlled by statutory regulations, analogous. The rule which prevails in the federal court in respect to the granting of an accounting in patent cases is that the right does not depend upon the question whether there is need for the injunction at the time of the hearing. The rule as stated in Bragg Manufacturing Co. v. Hartford, 56 Fed. Rep. 292, is this: “ The test of jurisdiction [to decree an accounting] applied in the later cases is whether the bill is filed in season to enable the complainant, under the rules and practice of the court, to move for and obtain an injunction before the expiration of the patent.” If so, although there may be nothing for the injunction to restrain at the time of the hearing (the patent having expired), yet, jurisdiction having existed, to grant an injunction upon the bill filed, the account will be decreed. Singer Manufacturing Co. v. Wilson Sewing Machine Co., 38 Fed. Rep, 586.

The condition of affairs which existed at the time of the filing of the bill and continued to exist thereafter for ten months, was such as to entitle the complainant to a preliminary injunction, and conceding that the defendant has ceased to infringe since May 28th, 1896, that cessation will not defeat the complainant’s right to a decree. Even if there is coupled with the fact of past cessation a promise of a perpetual discontinuance of the infringement, this will not defeat the injunction. Where, upon a bill to enjoin infringements of patent rights, the defendant admits the infringement and asserts that, after the bill was filed, he refrained from the use of the thing patented and asserts that he will not afterwards infringe, this is no reason why the injunction should not issue or be made perpetual. Rumford Chemical Works v. Vice, 14 Blatchf. 179" court="None" date_filed="1877-04-02" href="https://app.midpage.ai/document/rumford-chemical-works-v-vice-8636530?utm_source=webapp" opinion_id="8636530">14 Blatchf. 179; Wollensak v. Reilrer, 28 Fed. Rep. 427; North American Iron Works v. Fiske, 30 Fed. Rep. 622; Celluloid Manufacturing Co. v. Arlington Manufacturing Co., 34 Fed. Rep. 324; Facer v. Midvale Steel Works Co., 38 Fed. Rep. 231; 1 Spell. Mr. Relief ¶ 829, and other cases there cited.

The principle upon which the injunction goes is that the defendant was a wrongdoer when the bill was filed, and having been a wrongdoer once, he may be so again, in spite of his asseveration that he will not repeat the infringement; and further, that if the defendant intends in good faith to keep his promise, the injunction will not harm him, otherwise it will be a security for the plaintiff that his right will not be again invaded. Although these cases were those where the bill was filed to enjoin the infringement of patent rights, yet, as already observed, they stand upon the same principle as bills to restrain infringement of copyrights .or trade-marks. The rule controlling the allowance of a final injunction in respect to one of these rights logically applies to cases of violation of all.

Mr. Kerr lays it down as the rule in regard to bills to restrain the violation of trade-marks, that the owner of a trade-mark, where the mark has been illegally taken by another, is not bound to rely upon his assurance or promises not to repeat the illegal appropriation of the mark, but is entitled to the protection of the court by injunction. Kerr Inj. 422; Millington v. Fox, 3 Myl. & C. 338; Edelsten v. Edelsten, 1 De G., J. & S. 185 ; Geary v. Norten, 1 De G. & S. 11.

I will advise a decree enjoining the defendants and for an accounting for profits, in accordance with the prayer of the bill.