Defendants except to the report of the master, submitted upon an accounting ordered following an adjudication of unfair competition.
The rеport finds that defendants during the period of their offending practices in marketing “Doc’s” root beer secured profits totalling $6,275.69 from sales of that product. Plaintiff waived its right to prove damages' “other than those resulting from profits which may have been made by the defendants.”
Defendants urge, principally, that plaintiff is not entitled to these sums inasmuch as it has not suffered loss, nor been denied profits, as the result of defendants’ activities. They assert that plaintiff made no effоrt to distribute its own root beer in the New York market during the interval of defendants’ condemned operations there, and that the parties are not in the same business because plaintiff deals in the flavoring matter contained in the drink while defendants sell the beverage itself. However, the findings of fact, previously filed herein, indicate that plaintiff was in the root beer beverage business, that it marketed its product, and that in this connection, it established a distinctive name, labels, and other identifying characteristics by which its root beer could be distinguished. It advertised its product extensively, and those who were entitled to bottle the bevеrage *122 from concentrate prepared and supplied by plaintiff, employed plaintiff’s name, devises, and descriptions in the marketing of the drink.
Defendants had been a franchised bottler and distributor of plaintiff’s root beer fee-fore beginning the production of their competing beverage. Thereupon, the franchise was terminated by mutual consent, and defendants proceeded to supply the former customers with their own product in a guise deceptively similar to plaintiff’s, without calling attention to the change in merchandise and, in fact, actively representing that they were still furnishing plaintiff’s beverage. Nоtwithstanding plaintiff’s notice and demands that these acts be discontinued, there was no cessation of the above conduct. In the face of their blatаnt attempt at deception and the palming-off that occurred, defendants’ objection comes with little grace.
Nevertheless, defendants insist that аn accounting of profits is unwarranted as a matter of established judicial precedent. But, in this field a most imprecise standard, replete with vague and gеneral criteria, governs the imposition of a remedy. See, 2 Nims, Unfair Competition and Trade Marks, Secs. 424 et seq. (4th ed., 1947). The cases upon the subj ect displаy a multidunious array of factors tending to influence the courts whose ultimate object is to mould relief adequate to satisfy the equities of each varied situation. As said in Nims: “The question as to whether or not the court should order either an accounting of profits or a proceeding to determine the amоunt of an award of damages seems to be based on so many considerations as to make it largely a matter of discretion.” 2, Nims, supra, Sec. 428a, p. 1378.
Here, defendants have profited from unlawfully appropriating plaintiff’s reputation for their own benefit, in a scheme which would have deteriorated рlaintiff’s position in a market it had previously served. It is not a novel principle that a wrongdoer be required to disgorge ill-gotten gains.
In this proceeding, the lаw of the State of New York with respect to unfair competition is controlling. Radio Shack Corp. v. Radio Shack, 7 Cir., 1950,
This language was quoted with approval in Warren, Inc., v. Turner’s Gowns, Ltd., 1941,
Moreover, the rule governing federal trademark infringement is to the following effect:
“The right to use a trademark is recognized as a kind of property, of which the owner is entitled to the еxclusive enjoyment to the extent that it has been actually used. * * * The infringer is required in equity to account for and yield up his gains to the true owner, upon a prinсiple analogous to that which charges a trustee with the profits acquired by wrongful use of the property of the
cestui que trust.”
Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 1916,
Upon the above authority it has been held that the infringer must relinquish
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profits secured in territory in which the trademark proprietor was not conducting its business. Lawrence-Williams Co. v. Societe Enfants Gombault et Cie, 6 Cir., 1931,
This rule of the Hamilton-Brown case has found specific expression in New York law with reference to unfair competition. Thus, in Michel Cosmetics, Inc., v. Tsirkas, 1940,
Ample authority supports the accounting heretofore ordered. Upon the facts, it would be unconscionable to permit defendants to retain any reward from their illegal enterprise. Nor should the law be such as to offer the slightest encouragement to those who perpetrate the kind of acts herein condemned.
It may well be that this accounting will deprive defendants of some profits legitimately'earned by them. Also, to some extent, plaintiff may enjoy a windfall. But, in the circumstances, there is an inability to refine proceedings to the point where each individual sale can be analyzed, the motivations which induced it appraised, and an apportionment made of that which defendants might rightfully keep. To do this, defendants bear the burden of demonstration, which they have not sustained. Courts are willing to accept the above imperfections rather than coddle the wrongdoer. See, Mishawaka Rubber & Woolen Mfg. Co. v. S. S. Kresge Co., 1942,
The remaining exceptions to the report are also without merit. With reference to each of them, the conclusion of the master finds full support in the record of the hearings before him.
The disallowance of the tax credit to Harkavy Beverage Company (paragraph 10, subdiv. (g) of the report) follows logically under the method defendants employed for accurately representing that portion of overhead properly applicable to “Doc’s” root beer. The taxes involved are рart of overhead, and pursuant to defendants’ formula, which governed all other such items, the taxes should have been excluded. The record is unconvinсing that a deviation from the formula is required in this instance.
The report of the master is approved. Submit judgment with allowance to the master in the amount requested by him. The services he rendered were efficient, painstaking and intelligent; no objection has been made by counsel to compensation for him in this amount.