276 P. 1100 | Or. | 1929
This is a suit to enjoin the defendant from the use of its corporate name, "Federal Securities Corporation," and also to prevent it from using the name which it assumed for engaging in business in Oregon, "Federal Securities Corporation of Illinois." Plaintiff was organized and incorporated in May, 1920, under the laws of this state; its articles of incorporation authorize it to engage in the business of buying and selling securities. Immediately following its incorporation the plaintiff began the transaction of business by purchasing and selling stocks and bonds and engaging in similar transactions in commercial paper consisting of the title reservation installment contracts executed by purchasers of automobiles; the latter, at that time, constituted a very substantial portion of its business. Until November of 1925 its customers were so limited in number and were so intimately identified with the plaintiff that it did not secure a permit as a dealer in securities under the provision of Section 6840, Or. L. In November of 1925 it organized itself for actively engaging in the sale of securities and in that month secured a dealer's permit. Its sales in the year prethe *378 institution of this suit amounted to the sum of $2,000,000, one-fourth of that amount represented its transactions in commercial paper, the balance consisted of the sale of bonds. It was possessed of approximately 300 customers and twice a month circularized about 400 individuals consisting of the 300 just mentioned, and about 100 prospective customers. Following its organization the plaintiff established desirable connections with corporations which originated large offerings of securities; these connections enabled it to become a member of syndicates which participated in the sales of such issues. Due to the fact that the plaintiff confined itself to conservative methods and the sale of securities of very high standing, it was acquiring a favorable reputation. By advising its customers of opportunities to sell their securities to good advantage and of other opportunities to convert their holdings into some more desirable form of investment it maintained a very intimate contact with them. The plaintiff depended on such means for the development of its business, rather than advertising and an indiscriminate search among possible prospects. Its reputation and business was entirely local and confined to a comparatively small number. Its name had not come to import any secondary meaning.
The defendant Federal Securities Corporation was incorporated under the laws of Illinois in the year 1919 and immediately began the transaction of business. Its articles of incorporation described the nature of the business which it was authorized to transact in words similar to those found in the plaintiff's charter; however, it pursued a very different course in achieving its purpose. It at once became an originator of bond issues and did not attempt *379 to gain a personal contact with buyers, but reached the latter by wholesaling its issues to retail dealers. In the year 1919 it originated issues to the amount of $3,500,000, the next year to the amount of $22,463,000; to and including the year 1927 issues originated by it amounted to more than $800,000,000. From the time that it opened its local office November 7, 1927, to some time in January, 1928, it sold bonds in this state in the amount of $1,300,000. Before it opened its local office it had sold bonds in this state by the process of correspondence. As we stated before, the defendant depended upon the wholesale method as the means of disposing of its bond issues; approximately 90 per cent of its business was of that type; on the other hand only 15 or 20 per cent of the plaintiff's business consisted of wholesaling. The latter originated no issues. In the period from 1919 to November 7, 1927, the defendant was authorized and actively pursued business in several other states. On the latter date it field with the Corporation Commissioner of this state an application for a dealer's permit, pursuant to the provisions of Chapter 189. When the Commissioner observed that confusion might arise through the similarity of the defendant's name with that of the plaintiff, the defendant readily acquiesced in the suggestion that the words "of Illinois" be added to its name; it thereupon complied with Section 7777 to Section 7782, Or. L., regulating the transaction of business under assumed names, and then filed the appropriate application to do business in this state under the name of "Federal Securities Corporation of Illinois," thereupon the permit was granted. The defendant at once opened an office in the City of Portland, five blocks distant from that occupied by the plaintiff. *380 Its stationery and business cards bore not only the phrase "of Illinois," but in addition carried the information that its main office was in Chicago. The evidence justifies the finding that it has confined itself to its assumed name in the transaction of all of its business in this state. On one occasion there appeared in a Portland newspaper an advertisement concerning a large bond issue offered by a syndicate of dealers, of which the defendant was a member; its corporate name appeared in that advertisement. However, that advertisement was contracted from its Chicago office, and the incident occurred shortly after its entry into this state. Those circumstances may authorize the inference that the omission of the qualifying phrase was inadvertent.
The evidence indicates that after the defendant opened its office in Portland, some mail matter, telegrams and packages intended for the one were delivered to the other. Instances occurred where telephone calls were misdirected and upon two occasions the telegraph companies became confused in making charges for their services. We are satisfied, however, that much of this sort of confusion will disappear as the postal department, telegraph companies, and delivery men become acquainted with the two companies; such was the experience inUmpqua B. Exch. v. Um-Qua V.B. Growers,
The problem before us is a practical one, attended with important consequences to both parties. Fortunately the principles of law applicable to it do not restrain the court from applying any remedy which is likely to be beneficial and avoid confusion; the only obstacle which prevents an easy and complete avoidance of confusion, is the facts themselves. By its incorporation in Illinois the defendant was legally invested with its name: Newby v. Oregon Central Ry. Co., Deady, 609 (Fed. Cas. No. 10,144); Howe Scale Co. v. Wyckoff, Seamans Benedict,
Our reports contain several decisions which illustrate the application of the foregoing principles and particularize their meaning to various sets of facts. In Duniway Publishing Co. v.Northwest Printing Publishing Co.,
"A corporate charter grants no immunity in the use of a deceptive name. The same rule applies to corporate names as applies to the name of natural persons. The name may be used, but only if used honestly. A name selected and adopted for the purpose of deception and calculated to produce it will be enjoined. Corporate names will be protected from imitation constituting unfair competition. Injunction will be refused where no probability of deception by reason of the name is shown. Priority in adoption and user usually confers the superior right. In cases of alleged conflict of corporate names a court of equity is guided by the same principles that are applied in the protection of individuals in the use of trademarks and trade names. The question for consideration is whether the public purchasing the commodity or service in question will probably be deceived to the injury of plaintiff."
Two more cases from this district may be read with interest; one determined by this court, the other by the federal Circuit Court for this district: Union Fishermen's Co. v. PointAdams,
Counsel for the two parties have called to our attention a large number of cases from the various other jurisdictions; they add but little now to the statement of the principles which we have previously *386
reviewed, but due to the fact that several of them involve sets of circumstances somewhat similar to those now before us a brief review of the facts of those cases may be helpful in determining what result should be reached in the problem before us. InCentral Trust Co. v. Central Trust Co. of Illinois, 149 Fed. 789, both corporations were engaged in the same kind of business in the City of Chicago; the plaintiff was a Nebraska corporation which began business before the defendant corporation, but its previous entry into the field was illegal due to its failure to comply with the corporation laws of Illinois. It now sought to enjoin the postoffice authorities from delivering to the defendant "The Central Trust Company of Illinois" mail matter addressed to "The Central Trust Company"; the suit was dismissed. The court made frequent mention of the plaintiff's illegal entry into the field, perhaps, for reasons akin to those developed and applied in Mutual Export Import Corporation v. Mutual Export Import Corporation of America (D.C.), 241 Fed. 137, which we shall presently review. The following obiter dictum is found in the decision: "It is evident that while there is a slight difference in the names of the two corporations, it is so slight that for all practical purposes that would be considered practically identical, and in a proper case made for unfair competition the court would have to so direct." It is to be observed, that both establishments were located in Illinois. InEastern Outfitting Co. v. Manheim,
The foregoing constitutes a review of all the principal cases cited by counsel, together with a few others which came to our attention; their number could be readily multiplied. We believe that they justify the conclusion that primarily it is not the name which is protected, but the business; the latter is guarded against injury through a fraudulent traffic in its name by later comers. The business will be protected whether conducted in the name of an individual or that of a corporation; whether the name is fanciful or not. But, to justify relief the circumstances must be such that it appears that the business will suffer from a deceptive use of its name, or that by reason of a similar act of unfair competition, the public will be imposed upon.
From Nims on Unfair Competition, etc. (2 ed.), Section 98 we quote: *395
"What names are `calculated to deceive' and what names are so `different,' or `dissimilar,' as not to tend to cause confusion or deceit? What standard can be applied to measure names, to discover whether or not they are conflicting? The house of Lords has said that no witness is entitled to express an opinion as to this. The names may be put in evidence, together with the facts as to their use, and the circumstances surrounding the choosing of them; but there is no standard, except what the court in each particular case believes has worked fraud, or may work fraud or loss to the plaintiff. The probability of injury resulting from the use of the two names is the test to be applied by the court for the purpose of deciding whether or not the name will conflict. The `Merchant Banking Company' was established in 1863. In 1878 the `Merchants' Joint Stock Bank' was started. No one had been misled. The two banks were at a distance from each other, although both in London, and the Chancery Court refused an injunction, being `satisfied that there is not likely to be any damage or injury to the plaintiffs at all, from the act of the defendants.' In most cases, however, such similar names would cause confusion. The mere fact that two concerns happen to be widely separated geographically is no proof that no confusion can or will result from the use of the same name by both. In Ball v. Best, Best Co. in Chicago was held to be in unfair competition with Best Co. of New York; and, again, two concerns may be but a short distance apart and yet be fairly competing, as for instance: the `Fulton National Bank of New York' and the `Fulton National Bank of Brooklyn.' Again, names of corporations may be similar or exactly the same and the companies be located very near each other without creating any unfair competition if the names are distinct and businesses dissimilar."
The ultimate question is always whether trade is being unfairly diverted, and whether the public is *396 being cheated into the purchase of something which it is not in fact getting: the courts interfere solely to prevent deception. The law recognizes a right of property in a name, and generally permits each to conduct his business in his own name; these rights are subject to the limitation that they shall not be so dishonestly exercised that the public will be misled as to the identity of a business or the source of a piece of merchandise. The sole distinction between a corporate and an individual name, in the application of these principles, is that a second incorporator comes to the name not unconsciously, but by choice, and that he need not select the name of an already well-established business. Should he do so he thereby will supply evidence that he intends to palm off his goods as those of the first appropriator. And as is suggested in Newby v. OregonCent. Ry. Co., supra, "although not technically a trade-mark, the authorities are in favor of holding that a corporate name deserves the same consideration as a trade-mark." The injury guarded against is twofold: (1) injury to the public by having palmed off upon it a spurious article believing it to be the product of the old-established firm in which it reposes confidence, (2) injury to the defrauded corporation by having its trade diverted to the newcomer. The case of Buckspan v.Hudson's Bay Co., supra, is an illustration of where the public was the principal beneficiary of the decision. A greater degree of simiarlity in names will be tolerated where they are geographical or descriptive than where the first corporation's name is fanciful and arbitrary; the cases of Kansas Milling Co. v. Kansas Flour Mills Co. and Sweet Sixteen v. Sweet "16"Shop, supra, are good illustrations of the application of that principle. As we observed before *397 the thing protected is the business; good illustrations are the cases of United Drug Co. v. Rectanus Co., supra, andBorden's Ice Cream Co. v. Borden's Cond. Milk Co. While there is no necessity to prove fraud, yet when fraud appears it seems patience ceases to be a virtue and the relief may become broader: good illustrations are Wood v. Wood, supra, and Danton v.Mohler Barber School, supra.
When it has been found that there is a similarity of names, a court does not cease its inquiries and at once grant relief, but proceeds to ascertain whether the other facts are such that deception and injury are likely. The cases of W. H.Walker, Inc., v. Walker Bros. Co. and Borden's Ice Cream Co. v. Borden's Condensed Milk Co. justify this statement; but we shall proceed to particularize: it is evident from the foregoing review of cases that where a business offers its services only to a small highly specialized group, capable of close discrimination, as in Diamond Drill Contracting Co. v.International Diamond Drill Contracting Co., supra, a greater degree of similarity will be tolerated, than where the business offers itself generally to all comers, most of whom will respond to similarity and not investigate identity; this is especially true where the articles are commonplace and are purchased without a careful scrutiny of the identity of the vendor, like clothing, soap, bricks, or a barber's services: good illustrative cases are: Eastern Outfitting Co. v. Nanheim, supra, Charles S.Higgins Co. v. Higgins Soap Co., supra, American Clay Mfg. Co. v. American Clay Mfg. Co. of New Jersey, supra, and TerminalBarber Shops v. Zoberg, supra. See especially Hopkins on Trademarks, etc., ยง 123. The difficulty of acquiring precise information as to identity is increased when the article *398 is of modest value and is passed from manufacturer to consumer through the medium of independent retailers, like in the Waterman case. Such circumstances increase the possibility of deception. But where the article is of great value, and the buyer is more interested in the personnel than in the name of the institution, and is brought in direct contact with the former, as in Farmers'Loan Trust Co. v. Farmers' Loan Trust Co. of Kansas, the danger that lurks in similarity of names is diminished.
When prompt action is taken before the second comer has established itself, a greater distinction may reasonably be demanded, as in the case of the Glucose Suger Refining Co. v.American Glucose Refining Company. The addition of a geographical phrase which includes both corporations may fail to make a sufficient distinction: the above case is an example as well as that of the case concerning the Knights of Pythias Lodge where the second appropriator added "of North and South America" to a well-established fraternal society name; that phrase included the same territory in which the plaintiff operated and obviously would create no discrimination in the public mind. Likewise the addition of the phrase "of Illinois," in the Central Trust Co. case failed to distinguish the one from the other because both were located in Chicago. Likewise the second comer became first in the field through an illegal entry.
Applying these conclusions to the case before us we find that both corporations are transacting business with customers who are alert, and capable of discrimination. This statement is substantiated by the fact that the plaintiff's customers are largely people of wealth, while the defendant's business is done principally with financial institutions. Such buyers *399 do not give a hasty glance at the door and then repose confidence in whomsoever they find inside; but, customers of such institutions are interested in the officials as well as in the entity. Transactions negotiated by buyers of high-class securities are not upon a basis of the taking of bids, like in the buying of bricks, but they are generally preceded by a personal solicitation by a salesman, followed by an investigation of not only the bond but also of the dealer. We believe that while confusion may continue for a while and perhaps, never entirely cease, no probability of deception appears. We are entirely satisfied that no intended piracy of a name is involved in this suit. But moreover, the plaintiff cannot in justice, demand that the defendant should be denied the right to the use of its assumed name. The plaintiff's name is not fanciful, but the words composing it lie in the public domain. Both corporations were establishing themselves in this state at approximately the same time through the sale of securities; the plaintiff personally, the defendant through the medium of correspondence. Undoubtedly the goodwill and repute which accrued to the plaintiff was far greater in value than that which came to the defendant, but, nevertheless, as a result of those activities the defendant came to this state November 7, 1927, not as a stranger, but as one whose name was known and who was possessed of an established trade here.
Both names are truthful; neither is arbitrary nor fanciful. Where the words selected for a corporate name are chosen from the public domain and imply a national business, and where the territory in which it operates is one that will probably be reached through the natural expansion of an established institution, which is in fact national in scope, *400 the former cannot demand a complete exclusion when the latter bids entry, but must be content with such explanatory matter as will prevent deception, although it may not entirely eliminate confusion by the careless.
The decree of the Circuit Court ordered the defendant to continue the practice of using the phrase "of Illinois" in connection with its name, and directed that it should be printed in type as large, at least, as the defendant's name, and in an equally conspicuous place. The relief thus granted meets with our approval.
The decree should not have recited that the complaint was dismissed, but this is not a matter of grave consequence; the appropriate relief was allowed and it is clear what was intended. Affirmed. Costs to neither party.
AFFIRMED. REHEARING DENIED.
COSHOW, C.J., and McBRIDE and RAND, JJ., concur.