Petition for Writ of Certiorari — American Aloe Corp. v. Aloe Creme Laboratories, Inc.

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Supreme Court af the Gnited States

OCTOBER Tew, a My 76

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“AMERICAN? ALOK CORPORATION, =!

: : Petitioner,

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AKOR CREME LABORATORIES, INC:

: : —* . Respondent.

CROSS. PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS ee?

____ FOR THE SEVENTH CIRCUIT- oe an

ae: ¥ & ,

| Davin R. Macnonatp 0

re James G. Barnes

: Attorneys for

American Aloe Corporation!

Petitioner. 2 Ae

OF Counsel: -

Baker & McKenzik ae

700 P rude ntial Plaza” oe

ne hicago, “Tilinois 606014 ar

312-828-0400 --

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- The Scheffer Press, Inc.—ANdover 3-6850

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Opinions Below. Vaan ee sees te ARE NABI tee ssscosiyees : 1:

. Jurisdiction ees sea paths sewions aamuaeaeal Cae

2. , * 4 ;

Questions Presé ted Nerueat pai astieiaeudaes DSvacane LDR ae ee ae

‘ sis o

Statutes. “{nvolved - pail petteeeeneatens seta gs secesedeesessenee Rises 4,

Statemsht “Of the Pi ca: he OS ies aR genes

The Reasons for Granting: the: gb ES at ER Rar ane te

Conclusion ..2...c.cee: — seas igbessieieicanses VERMA

a TABLE or © ASES’

Becknay Instruments, Ine. v. me ‘hemtronies, Inc., 1970

Trade Cases, Para 7 (3,158 th © ir. L900), Le oe

; Continental. Ore Co. ve U mion Carbide © Corp. is 370 US.

ce ica eed Riiccttukantes 15, 19

Delawars & H. Canal Co. v. Clack; 13 Wall 311

(B72) eessseseeeeeee eaeaenetied Syereeeseeaenetesessmemeteoeytiones AS

Kellog ge v. Rational Biss uit Co, 305 US. M1 (18) . 15

Kelloge Company ¢. National Rise ‘uit Company, fi

F.2d 662 (2nd. Cir. 1934) serene ee eee = ell- 13

steMing Nelson: & Sons, : Inc. v.. Rangen, Ene. 23h

F.Supp. 393 ().. Idaho, 1964), aff'd. 351 F.2d Bal."

(oe oe.) emer eceemmnenmer Sate My NA ee pee Meee 15

Timken Roller Bearing Co. v. eer States ,o4lL-US

- *) 3 2 . a te” et

093 ( 1951 ) eis a crecsinnavameniies Nepeseeeeeeeenedteenee ne gy spain Mises ee

Fs mee

Union Leader or p. Ve: ‘Newspapers of New England,

: Ine., 284 F.2d 582. (ist Cir. 1960), cert. denied 365

U.S. 833 (1961) Cee ho Oe Tes a Cee an ae 19

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7 ony . , : ‘ os

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: PAGE

United Stites v. Besser Mig. a 96° F.Supp. 304

-(E.D. Mich. 1951), aff'd. ‘on gther grounds, 343 U.S.

ER 6a Seetet nan yo 19. -

Walker. Process Equipment t} Food ighiners ‘&-

Chemical an 382 US. 172 (1965) ........:.10-14 © :

~— ey Pe 7 %

Sherman Act, Section 2 (15 USC. $2) ae 2, 4,,10,11,

. Pee *, 20

' Robinson- Piitiann Act, “Section 2(e) (15 U.S.C. §13_ oe,

“RIED sapencaienniens heen See? veivelcts wevndy 4, 14, 15, 18..

Clayton. Act,. Section 3 (15 ust. TS Sean ore “15,18

Lanham Act, Section 33(b) (7) (15 U.S.C. § 1115(b)

OF Pawn ated AE aes RONG Sew ner aie tee is F

s -” -MiscenLangous ~ '

Rowe, ‘Price *Discrimination under the Robinson- -

Patnian Act, page 151. (1962) .........22... sacar (aa

‘ : ig : . . +. .

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Gat ‘ righ IN THE © ; Bo | ea

| SUPREME COURT OF THE UNITED STATES

" Octoser Term, 1969 : oe Ms

AMERICAN ALOE CORPORATION, .

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-£%

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. ALOE CREME LABORATORIES, INC.,

Petitioner, .

‘Respondent.

-CROSS- PETITION FOR A WRIT OF CERTIORARI ‘TO.

‘THE UNITED STATES COURT OF APPEALS

> -FOR THE SEVENTH CIRCUIT

See Se ar

The cross-petitioner American Aloe Corporation® re: |

spectfully prays that a writ of certiorari, issue to review

-the. judgment and opjnion.of the United: States Court of |

Appeals for the Seventh Circuit entered in this proceeding

' on January 9, =

“OPINION BELOW:

The. opinion of the District Court for ‘the’ Northern

a sg.enas of Hlinois, Bastern Division, is reported in 291

* ices. petitioner, American ‘Aloe Corporation, wilt be

referred to as plaintiff, and eross-respondent, Aloe Creme.

are Laboratories, tye will be referred to as defendant.

a.

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rm)

’

FE Supp. G45. The opinion of the Coiirtof Perens on peti-;”

+ tions for rehearing, 4 420.1? 2d. l: 248, | 1970 CCH ‘Trade Cases, \ |

: - Parai-73,027, mepe rs in the appendix hereto and Ts, ited |

fis “Op, sitececee w ranse eript Shh aig i are cited as ae. an

a ee ae JURISDICTION: 7% °°

The’ judgrnent ot the ‘Court of Appials for the Seventh:

Circuit upon petitions for rehearing was enter edoon Janu »

ary 9 1970, Leave. to-files petitions for a second rehearing

Was granted on Januery 26. LITO. The: ‘petitions were de-

-nied on: ‘February 25, “1970 and this cross-petition for cer-

tidrari. was: fiked within finety days of ‘that date: Phis

‘Court's jurisdiction is invoked under 28 -.U.S.C.- “2#(),

.

. ’ © [

- QUESTIONS PRESENTED

Magy an attempt to exelude competition ht mdemé

of adel publicized, bad faith claims to trademark owner: :

os eship of. the generic maine of an agrieulturdl” commodity

contravene Section ” of the She rman Acta Bo Ps ’

*y. S) Anas te

2. Does the defendant viplate See tion : Slo) of the. Robin,

". son- Patman Act by making a practice of granting a i per-.

voriak incentive chonus tora pet tait store. mamaser tvhiet ler

or not the manager Is also the’ store Divner), the amount

of whigti bonus ts tied to incre: ASCs in. thie store’s purchaser:

: yi of de Te ndaitt’s s entire: lme of products? a

‘~~

.

3. Given thé following steyR taken by defendant, duiring

.

a" ®t the anid-1960's and. established by the record in this. case,

snambly, that’: : oa inte see ere Nae

ny on ra oot, oe s 4 Soe wep ne

co —- () Defendant. maintained 2b ten-year céntracts with -

independent aloe. growers W ee gave defendant an exclu--

sive option on the entire aloe. output of these ZL growers

{approximately four times the amount of aloe that defen-

és dant normally: needs) and> which’ are - Ac meal ah defen-

dant! s option only, for another ten years

oe *

“¢h) tilentedl! ‘which enjoyed a monopoly in aloe’

products for ov er ten years, represented to tlie. public that

defendant's contracts gave. it 80% tor 85% control over

the aloe stipplys

(@) “Defendant iicmcabed and maintained 750 to 1,000

“Exclusive Drug Store Franchise Agreements” which pro-

vided for. full line foreing and a personal ‘bonus to the —

drugstgre - maanager (whether or ‘not. the manager is the

st »sowner), which bonus. increases with the store’s in-

creasing - pitreliases of defendant’s produets ; |

(d) . Defendant summarily cut off the aloe supply to a

competitor (who was: then put out of business) for refus-

ing to obey defendant’» cease ‘and , desist letter against.

cae using the word “aloe”; oe

Fe

(ef, Defendant threatened infringement suits’ against

all of its new aloe competitors ( plaintiff admittedly being

, the prime target) and hundreds of retail. stores handling

-aloe~products based upon defendant’s claims to exclusive

rights in the common ‘generic word “aloe” and to a non- >

existent “registered” ALO- and design trademark;

(f) Defendant falsely ‘accused all of its new aloe com-

petitor’ ( plaintiff admittedly ‘being the. prime target) in’

its lettets to hundreds .of retail stores, of “capitalizing on

defendant’s research” and’falsely implied. that none of its «

Ree competitors could make a competent produet unless they

~had- misappropriated defendant? s trad secrets;

is plaintiff, on remand, entitled toa judicial, redetermination

- of its monopolization cliarge’ in. which ‘the above acts. are :

not considéred separately, but together as steps in the un- .. |

"lawful maintenance. of a monopoly; over the production and :

sale of aloe products? -= - >

©) lating i alee

- STATUTORY PROVISIONS INVOLVED -

: Sherman Act, Section 2 (15 U.S.C. § 2):

Every person who shall monopolize or attempt to -

oaaeniii or combine or conspire with any, other

person or persons, to monopolize dny part of the .

trade or commerce among the several states, or with .

foreign nations, shall.be deemed guilty of a misde-

| meanor} and, on conviction thereof shall be punished

by fine Kot exceeding five hundred thousand dollars,

or by jmprisonment not exceeding one year, or by .

both said punishments, in the discretion of the. court.

. Robinson-Patmarr’ Act, Section 2(c) (15 US. C.-§ 13(¢)

That it shall be unlawful for any person, engaged

In commerce, in the course of such commerce, ‘to pay

_ or grant, or to receive or accept, anything of vaiue

as & commission, brokerage, or other. ‘compensation,

or any allowance or discount in lieu thereof, exeept-

_for services rendered _in_eonnection with the-sale—or——

purchase of goods, wares, or mefchandise, either to the

other party to such transaction or to an agent, repre- '

sentative, or- other intermediary therein where such

intermediary is acting in fact for or in behalf, or is

subject to the direct or indirect control, of any party

‘ to such transaction other than the person by whom |

such compensation is so- granted or paid.

STATEMENT OF. THE CASE

Aloe is the generic name of a large genus of ‘succulent

plants and of products prepared from the aloe vera vari-

ety of that plant. It has, since biblical times, been noted

_ for its _— and soothing qualities.* ants plant is cul-

* “As the valleys are they spread forth, as. gardens by

the river’s side, as the trees of lign aloes ‘which the Lord

‘ had planted, and as cedar trees beside the waters.” Num- —

bers 24:6. “All thy garments smell of myrrh, and aloes, |

and cassia, out of the ivory palaces, whereby they have

made thee glad.” Psalms 45:8. “And there came also

Nicodemus, which at the first came to Jesus by night, and

brought a mixture of myrrh and aloes, about a hundred

went , 4 ohn 19:39. : ;

7] .*

caniae =) eaten

tivatedy as a row crop in southern’ Florida ‘and southern

Texas an: requires approximately. three and one-half

years to mature into. commerctal usefulness. Normally,

it asst adequate supply, Dut after a frost or freeze ‘In the

Florida or Texag arewing area, the aloe supply becomes:

very limited. ea

, , .

‘Defendant, Moe Creme Ladvovatovies, Inc., i in the

business of selling cosmetics and other produets which |”

contain as their principal substance the gel of the aloe.

Defendanit: Way virtually the sole processor of aloe pro-

ducts: and maintained its Inonopoly over a relatively long

period of time, from 1953 to mid-1960’s. (Op.6). Dur-

Ing the mid-4960's other distributors attempted to enter

the gnarket for aloe products. Besides th® plaintiff, which

operated as “House of Aloe, there were Patricia _Carrel}———

Cosmetics Co. Inc. (Aloe (ilo) ; T ‘D. Hazelwood (Aloe-V |.

Acne Creme); Betty Willis, Ine: ( Aloe Gel); Milsan, Ine.

(Aloe Magic, Aloe Vita and Oil of Aloe) ; Aloe 99, Ine.

(Aloe 99); Pet Beauty P roducts, Ine, (‘Pet Beauty” aloe

products for dogs) + and Regenertro] (Regenertrol, an Aloe

sprodurt). : :

Defendant greeted the entry of these competitors as |

‘follows: to ur Vee mes

(1) By categorically denouncing all of its new com-

petitors ax. trademark . infringers: hy apousing: ite com-

petitors of " ‘apitalizing on its research”: and by threéaten-

ing retailers With infringement litigation for carrying

products which contained the word “Aloe” on their labels

or which avere advertised asy Aloe products or otherwise

eanphasized their aloe content,

(2) By utilizing “against competition” dete nilant’s

contractual control over 80C° to 855% of the supply of aloe,

particularly against (1) plaintiff, Which had to: pay exor-

—6—.

bitantly to obtain a satisfactory aloe. supply, and (2)

Patrieia Carroll Cosmetics, which had its gupply of aloe

ae’

cut off for refusing to acquiesce in defendant's trademark

claims.

(3) ~ By executing Exclusive Drug Store . Franchise

Agreements with 750 .to 1,000 prestige drugstores, which

agreements provide for “full line forcing” together with

an increasing personal bonus té the store manager (whether

or not he is the store owner) in return for increasing an-

nual purchases by the retailer of defendant’s products.

Illustrative’ of this type of predatory activity during the x

mid-1960’s is the defendant's attack’ upon “Regenertrol”.

Jackson/Byron’s department store in. Miami posted a sign

advertising Regenertrol as an “Aloe Product”, which, of

, S hese. ’ ’

- course, it was. The defendant immediately threatened the °

retailer with trademark ere ee Ee,

retailer replied; :

We have received your letter dated May 11, 1964 in

_regard to the Jace kson’ </Byrons advertising of kegen- °

g

ertrol-as an “Aloe Product.”

As you know, Regenertrol is a product of the Aloe-

Vera Plant. However, if confusion has resulted be-

cause of this terminology, we at Jackson’s will dis-

continue any further advertising of Ie ‘genertro]. as

an {Aloe Product. 4

The defendant’s s- president then reported to his Board of |

Directors: :

This is to advise you that we originally gave to

Jackson-Byrons Department Store a Cease and Desist

under Infringement ‘Notice as of May 11th; as they

* advertised another product under the name of Q-

Products. Jackson-Byron has promptly replied ind

advised that they would not again advertisé this prod-

uct as an ALAD- pom. This product was Regener-

‘trol,

, , e

2

: Be

~We want to call your attention that any time you see (

a product cosmetic advertised as an‘ ALO- product”, *

would you please advise us promptly and.send us the

advertisement in ordey. that we night give such person

a Cease and Desist and a strong Infringement Notice.

[PX 12-14; T 101-105, 1112-1119]

Pursuant to the-above policy, the defendant, ffom early

1964 to late 1966; sent about 50 threats of infringement to —

ten different competitors and transmitted blanket threats

of infringement to 1,200 different retailers.

Piaintiff, American Aloe Corporation, began<selling aloe

products in late’ 1964. Shortly thereafter, defendant sent +

a cease and desist letter, to plaintiff, thréatening to bring

a trademark: infringement suit for plaintiff’s use of. the

term Aloe Essence on its products: Defendant did net,

however, {ile suit agamst plaintiff. Instead,-in April, 1965,

it sent a letter to 400-500 midwestern ret tailers, claiming:

. Aloe Creme Laloratories, Inc., is the owner ots ‘ALO-

‘and design”,.. . . and other ALO- combination designs.

~ Recently, Wwe have been mitted that newly pro-

moted comp: etitors have unfairly copied some of our

famous trademarks. Naturally, we will: take whatever

‘.steps necessary to protect. our TRADEMARKS .

_ against infringer's and to insure the purchasing publie

agajnst confusion and mistake. [PX-9; T 82- 93]

Followi ing this letter, plaintiff's sales dropped from $11, 830

in March, 1969 to. $1,132 in August, 1965. A’ secend, letter

was sent by defendant. in K ebruary, 1966 to 800-900 south

and southeastern (prufcipally Florida) retailers. In this -

letter defendant again stated : |

_ Aloe Creme Laboratorics, Ine., is the owner of “ALO-

and design”, : . . and other ALO-combination designs.

These trademarks are registered in the. United States, a

Patent Office. |

~~

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~

—

~

.

s : DP nt Ss —

+

} Recently, we haye been informed that newky promoted

competitor® have unfairly copied some of our famous

- trademarks. Naturally, we will take whatever steps

* necessary to protect our TRADEMARKS against in-

tringers and to insure the purchasing public against

confusion and mistake. [PX-11, 7 93-97 | :

Pollosving this/tetter ; plaintiff's sales in Florida Reacua

from $15,970 m February, 1966: sto a negative $7,002. in

June, 1966. | PX “D6: T 1469, 1449 |

Defendant-hgs never owned: an “Alo- and design” trade-

mark nor a federal registration for “Alo- and design”

In 1963, an application for “Alo- and desig” was rejected

by the Patent Office and abandoned by defendant. On

Mebruary 3, 1965, just prior to the dissemination of its

letter quoted above, another application by defendant for

7 Alo and design” wa was rejected by the Patent Office. prin- —

om af the mark was “merely descrip-

tive of the ila: Within the. meanme of Section. ey or

the Act’... in_thatat-sets Torth | the substance from which

The preparations are made. 2°." | PX-10; T 89-91 |

Defendant acquiesced in this determination, amended

its application to include the picture and name of Queen

Nefertiti, and disclaimed “alo” and the design except: in

combination with (ueen Nefertiti.

After the destruction of plaintiff? s sales in the inidwest, ’

plaintiff brought this action against defendant on June iB

1965 -in. the District Court for the Northern Distriet of

linois for a declaratory judgment that the word “aloe”

ix” generic, for‘unfair competition and for restraint of

trade and monopolization in violation of Seetions 1 and 2

of the Sherman Act. Defendant counterelaimed for trade-

dark infringement and demanded treble damages. After .

a trial on the merits, the District Court dismissed plain-

a Eaten

tHff's-complaint, sustained, the counterclaim, and adopted

° ves, defendant’S proposed findings and conclusions verbatim,

7 awarding treble damages to’ defendant for plaintiff’s use

of the word “aloe”, and pernianently enjoining plaintiff

from using “aloe” in its tradenames or trademarks.

ee ‘The, Court of Appeals for the Seventh Cireuit reversed

ah — the District Court, finding that defendant had no trade-

inark right to the generic, work “aloe” or “alo”. The.

Court of “Appeals found that defendant having “main-.

tained a natural and’ legalsmonopoly in tlie product over

a relatively long period of time, .. .. seeks to prevent

# others from successfully competing in the aloe cosmetic

market by foreclosing their effective. promotion of aloe

" products.” (Op. 6). Phe Court of Appeals reversed the

“ Distriet Conft with respect to the long term aloe supply

eontracts,.and remanded this issue’ for a de termination as

to whether. these contracts: were ysed in restraint of trade :

and whether aloe vera leaves constitute i relevant market

(Op. 12-14). | ~~

The Court of Appeals also determined that there was

"a serious question as to det fendant’s. good faith” in ¢laim-

ing * ‘ALO- and design” as a federally registered’ trade-

mark. Yet the Court of. Appeals limited its remand on the

issue of defendant’s-appropriation of the word “Aloe” to

‘the question of amfair competition, and denied plaintiff's

request for a remand on the antitrust question whether de-

fendant’s. activities in attempting to suppress the com-

petitive use’ of the word “aloe” had violated Section 2 of

the Sherman Act: (Op, 11)..

- REASONS FOR GRANTING THE WRIT

1. The first’ issue which merits this Court's atten-

tion is whether the had faith threa: s of trademark in-.-

\ % a

v4

wd ‘

Nitingioai suits ee a cies tee eR

~ Advertising aloe as the principal ingredient in their prod.

ucts could under any circumstances violate the antitrust

laws. * 4° ,

The. defendant in this case ‘aaaod ‘to bring lawsuits ©

against over 1200 retail stores if they hagdled competing |

*- aloe products in which the aloe content was emphasized.

Addressing itself to retailgrs , located throughout Florida, .

—~the Southeast and the Southwest, the: defendant stated:

“Aloe Creme i ereteries, Inc., is the owner of “ALO-

and design”, “ALO-FACHK”, “ALO-MOISTURE

PLUS”, “QUEEN, NEFERTITI”, design of “PLANT” . *

and-other ALO- combination designs. These TRADE- '

MARKS are registered in the United States Patent ;

- Office. Se hes " | =

can OE

Recently, we have heen informed: thatnewty promoted

competitors have unfairly copied some of our famous -

trademarks. Naturally, we will take’ whatever steps

necessary to protect oyr TRADEMARKS against in-

fringers and to insure the. purchasing public against

confusion and mistake. femphasis added J [PX-11]

‘In fact, the United States Patent Office had not registered

the trademark “Alo- and design”. In fact, the Patent Office... -

denied defendant registration of “Alo- and design” in °

1964 and “Alo and design” in 1965. Following this, defen-

dant disclaimed the word “Alo” in order to obtain. regis-

tration of another trademark. (Op. 9-11) |

The Court of Appeats below ruled that, while this con-

duct could well constitute a cause of action for unfair |

\ competition, such threats could not give rise to a violation ~—

_ of Section 2 of the Sherman Act. In so ruling, the Court

_ of Appeals for the Seventh Cireuit is in direct: confliét

_(1) with the logical implications of this Court’s holding

in’ Walker Process Equipment ¥. Food Machinery &

v. National Biscuit. Company, 71: F.2d 662 (2nd Civ., 193%).

Whether the principles of Walker Process are to be

limited to the patent area, or whether those principles’

are also applicable to trademarks and other kinds of

industrial property is an important question which this

Court should: resolve,

in Walker Provess this Court had hefore it a manu-

facturer Who. allegedly sought. to restrain his competitors

by asserting rights in.a patent that had been fraudulently

procured fram the’ Patent Offices This Court ‘ concluded

Yhat sucha course of action could violate Section 2 of

the Sherman Acttand renianded the case fora determina-

tion as to whether » relovant market was encompassed-by

cireufled the route folloyed in Walker Process. Waving

failed tw lee to obtain from: the Patent Office a registered

the ve « of the patent elaims. Here, the defendant short-

trademarkg for “Alo- and, design”, the defendant —by-.

passed the Patent Office and metely represented to the

retail trade that, it had registered such a. trademark.

Unless a distinetion is to ‘he drawn between patents and

trademarks in the aren of fraudulent procurement and

enforcement of industrial property rights, Walker Process

should surely control here,

: é ;

Admittedly, a trademark is not identical to a patent.

While a: patent ix a limited exception to the antitrust

laws sanctiondd by the ‘Patent Code, a trademark should -

serve to. promote competition by. enabling the, merchant

to identify himself as the source of his goods and appro-

priate to himsel’ whatever good will has been created »

by the price, quality or other attributes of his goods.

When a competitor abandons*this salutary purpose, how-

\

Chemical Corporation, 382 U.S. 172°(1965), and (2) with’

the holding of the Seceotd Circuit in “Kellogg Company ~~

-&

’

a

ever, and seeks to. appropriate to “himself the common

and only name of an agricultural |commodity (and there-_

fore all of the. goodwill inhering in the: commodity itself)

by fraudulently claiming the government-sanctioned right

to prevent others from using that name 0 describe their’

products, he transcénds the protection accorded to trade-

~ marks and embarks upon an: ex¢lusionary “course which

ean only be analogous to the exclusionary, course’ found

in Walker Process. ea ) ies ‘

' This Court has already firmly established that a trade-

mark can be used unlawfully as an instrument of ex-

-elusion. Timken Roller Bearing Co. v. United States, 341

US. 593 (1951) held that trademarks, cannot, any more

than patents, be used in license agreements to restrain

the trade encompassing an entire market. This Court has.

also. firmly ,established_thatthetrandutent-procurement -

‘or enforcement of patent claims may. violate the antitrust

‘laws, and the federal courts of appeal have, following

: Walker Process, permitted full reconsideration of ‘Section

2 claims. upon reversal of-a_distriet-court’s determination —

fof patent validity: Beckman Instruments, Inc. v. Chem-

‘tronics, Inc., 1970 Trade, Cases, Para. 73,138 (Sth Cir.,

1970). The. cireuit courts are now divided, however, on

the applicability of Section 2 to bad faith enforcement of

trademarks. The Seventh ‘Circuit's decision below cannot

he reconciled with the Sceond Cireuit’s decision: in Kellogg |

Company Vv. National Biscuit U sii do 71 F. 2d 662 (2nd

Cir., 1934) :

If a person dns: no substantial claim to a trade-

-mark in the words “shredded wheat” uses the claim

‘in bad ‘faith to threaten-a competitor and his cus-

tomers with lawsuits in order. to prevent dealings

.

by thie latter in ‘that commodity, they. would seem

to be steps: ik-ay attempt to obtain a ey

a é ty

While it doubtless - would not be ‘within the aatitrust. ¥

acts to bring a suit to assert a patent or. trademark *

right whatever the motive, if the claim was valid,

an atten pt. to assert a known invalid claim would

be a different matter. (71 F.2d at 665, 666). - Rider

This Court has long noted the sais ee. a

in keeping enforcement of trademark claims within’ rea-

sonable bounds. In Kellogg v v. National Biscuit Ua. » 305

US. 111, ‘122 (1938) this Court ssasctiede 2 ere

Sharing in ry nee ee of an. article unprotected

by patent or -trademark is the exercise of a right

possessed ‘hy all—and _.in_the_f free_exeréise_of whieh-——-——

—_ is deeply interested. eenisiooncs

added) | : 5 ;

Long before the passage of the Sherman Act, this Court

~ pointed -ont: PEN TREE ee exiacto

“No one can claim protection: for .the exélusive use -

of a trademark or, tradenaine. which would practically -

give him a monopoly-in the sale of any. goods other

_ than’ those produced or made: by. himself. De laware

' € Hl. Canal Co. v.-Clark, 18 Wall ail, 323 (1872).

Congress has also expressed its coneern in’ ‘the Lanham

Act over the, possible .antitrust use of tradémarks by .

denying. incontestability to a- trademark which. “has been

or is being ‘used to violate the anti-trust laws of the

‘United States.” 33(b)(7) of The Lanham Act (15 U.S.C.

¥§ 1115(b)(7)).

Just as eninipetilion was threatened in Walker Pee acess

by enforeément of a known invalid patent, so here a

monopoly may result from the purported appropriation

_of the generic, name of an agricultural product. We do

=

: ; | a a » = by o . P hy : :

ie 0° io — 14%. 7 : . .

e

not helieve that) this Court ‘intended to limit Walker.

Process to the patent: aren aya thus, santtion a competitor's

~ attempt to exclude its competition | from that whieh -

- ve _ properly belongs inthie ‘public domain.

4, - Commencing in January, 1965. and “continuing to

ie time of tr Fial, defendant’ had cxeented its. EM xelusive

yo Drug Store Franchise - Agreemen

/ prestige drug stores. These any nts are signed / by

“. the ipnestore mannger (hethey of aot he is the owner)

- sid : . : :

and specifically | provide Tor an annual bonus to theman-:

ager that increases as Zhe store’s ese deté mi

_—mtire alge’ cosmetie line incre: ases. | PX . {19-127 |

These bors arrangements With the store manage 3

given in Maljtion to. ) must he distinguishes from,

so-called “push money” given to sales girls who do_not

with 750° to. to.

Ne

= —‘ontro! the stores purchases, but rather: perform resale

: a nee oe

- services forthe supplier. - eo ” ‘

ssiiadiias The District Court conclided that these Piahilitee agree:

‘ments did wot_vidlatethe conmmarcitt bribery provision

of the Robinson- Patman: Act, 15 U.S.C. S13(e), | Caneln-

sion 17 |. T he Court of Appeals affirmed ‘without comment,

| Op. 12}. : :

.

Bonuses of this type should he spec ‘ifieally hind absolutely

barined within the language of Section 2(¢) of the Robin-

son-Patman: a under whieh it’ ts unlawful

» : Bee

to pay org rant . .. anything of value ax ae onunission,

. brokerage, or other compe nsation, 2... except for

4 services rendered in connection with the sale or pur-

vthase of goods, ‘wares, or’ merchandise, 2. ..fo an.

| agent. representative, or other. intermediary Cyerein

‘2 | where such intermediary is. . 7 subject to the direct

“is so granted or paw:

° > ;

¢ ‘ . }-

or indirect control, of any party to stch transaction —

other than the person by Whom such compensation ,

Ineaddition, defendant scile no steps to obtain the: store

.* -owner’s signature. to the agreement and confessed ignor-:

ance as to whether the store, owner. was aware. of the —

fs. bonus arrangement with the’ manager. This conduct has =

a _ been held to constitute tr aditional commercial bribery to

/ which Section 2(e) has ‘been held applicable. Sterling

‘ . Nélson & Sons, Inc. . Rangen, .[nk.,- 235. F.Supp. 393

. (D. Idaho, 1964), aff a 351 F.2d "851 (9th: Cir, 1965). ,

j

The granting of a. per rsonal bonus ‘Paped on quantity

purchases 40 the individual responsible for the customer’ S

purchases tis a pernicious . practice. - Like tying and- re¢]- -

_ procity, if injects an “alie-factor Anto* the struggle for’ 4

that- customer’s “ busingss and werks imevitdhly toward - .

" exelusive dealing between the grantor ‘and thie ‘recipient

\ of the br ibe. _ Give en the scale upon which defendant’ engages

+ ~ in this practice, these volume, bonuses should: be held °

2. to, violate, Seetion 3 of the Clayton Act as well. Cf. Rowe, .

Price Discrimination” ‘under the’ Robinson-Patman . Act,

. page 151, footnote 47 (1962). be ee

x

This Court’s observations upon the. legality of such

bonuses Within the context of Section 2(c) of the Robinson-

- Patman Act. and Section 3 of the Clayton Act would be -

| welcome to any new competitor who faces this rcseinian cd i

2 prevalent p ‘actice. | ke eae

re 3. The Court of Appeals seinnaded the antitrust issue

of defendant’s exelusive aloe supply contracts’ (Op. 12),

| but: failed to allow ‘the-district court -to consider the ~

~~" remaining activities of the defendant as component parts ©

‘of ‘oné monopolization plan. In, so limiting the District — *

Court, the Court of Appeals..misapplied, the rile of —

Continental Ore Co. v. Union C arbide Corp., 370 U. S. 690,

699 (1962), that the- trier of fact “must logk at the whole | *

‘picture and not ‘merely at the individual figures in it.”

e . . : 2

: ‘+ ’ , ‘

, y

In this ease, the “whole. picture’ is sordid indeed.

Besides its campaign to exelude others from using the

word “aloe”, the defendant's exclusionary. efforts éxtended

to every facet of the aloe industry.” .

Erclusion of others from aloe supply: Because aloe

takes so long to mature, and can be so easily damaged

by frost or freeze, defendant realized that by cornering -

the aloe supply, it could effectively prevent anyone from

competing With it. To accomplish this, defendant entered

into ten year contracts with’ 21 aloe suppliers. Utider

these contracts the- defendant has: the right (but not the

@obligation) to take the aloe grower’s entire output, and

defendant (but not: the grower) has the right to. renew

this privilege for another ten years, LAGE T 62- G9 |

Defendant's purpose in entering into these contracts

and the extent of control gained by defendant’ s contracts

is best stated in a News Release which defendant Hself

distributed in’ 1965, Quoting an investment analyst, Lin

Tso, the defendant stated" .

Perhaps of greatest importance... . ix his statement.

“itis the access lo the raw material that counts”

Investment) analyst and author. Lin Tso, explains

that Aloe Creme has 85% of the production of the

“stloe Vera plant under contract and that the gompany

enjoys a large raw material position, vol only agamst -

competition, but also against: possible damage by the

elements to the Aloe Vera plants”. *. (emphasis added)

| PX- 6; EF 69-76)

Subsequently, defendant prepared and circulated 100000

reprints of a magazine article (PX-7) which stated:

Rodney Stockton knew that his company was making

progress when major cosinetic houses offered to, buy

himr- out: one company futilely tried to acquire the

°

es

majority. of his stock. An effort to restrict him by

cornering the market on his plants also failed when

hi _it Was discovered ‘that Stockton already: controlled

“SO percent of the rare: aloe vera growing in the

country. . .

“Keeping women beautiful is a cut-throat business,”

he admits. (emphasis added) | PX-7; T 7 77-79, 443- 444,

1493, 1994]

The use of these’ supply contracts as ah offensive

“competitive weapon cannot be fully appreciated until it is

realized that) defendant normally purchases ey 25%

of He aloe supply that it has under codtract FStockton,

T 149]. )

Nor has defendant hesitated to use its monepoly power

to close off the aloe supplé In September, 1964, the de-

fondant learned that its aloe purchasing agent.in Texas

Was also supplyitig a small competitor, Patricia Carrol

Cosmetics, which sold “Aloe Glo”. Defendant threatened

Patricia Carrollawith trademark infringement because sof

the “aloe” in Aloe Glo. After” Patricia Carroll refused

to change the name, defendant did not attempt to enforce

its claims ina court of law. Much easier it was for defen-

dant to ease iis Texas agent merely to cancel Patricr

Carroll’s aloe supply. As defendant's Viee President in

charge of supply” put ite: i

= (): "Now. why is Patricia Carroll Canes: He

longer on the market? ac .

,

A: Well, because they had what I felt was a trade-

QQ: And so what happened?

AX: Well, Mis. lewald | the Texas agent of defen-

dant | didn't produce it for them any more, | Holland,

T 552]

mark that: was -in conflict With ours, and they ‘had -

nade some renarks around Texas, derogatory to us.,

~

jf

a eee - eRe

One small group of aloe growers in Brownsville, under

the leadership of T. D. Hazelwood,-refused to sign defen-.

dant’s ten year contract. Defendant then complained to

‘the Texas Department of Agriculture (and others) that

Hazelwood’s plants were diseased, and accused Hazelwood

of violating | defendant’s right to “aloe” (Hazelwood

marketed alge d/b/a “Aloe-V Distributors”).’ Defendant

then instructed the same Texas agent in’ September of

1964: s

As you and | know, people are funny and there are

. always those who try to ride the coattails of success-

’ ful operations. | am sure with some of your connee-

‘ . tions you can spike their sales and we also will take

“any action we. can to clean up this unethical

competition. (emphasis added) [PX-124; Holland,

T 537-538 | ; f

Exclusion of competilion ‘from prestige drugstores:

Defendant's 750-1,000 “Exclusive Drug Store Franchise

Agreements” contain “full line forcing” clauses, ic,

requirements that the drugstore stock and sell defendant's

full. line of aloe cosmetics. More- important, the agree-

ments have a most unusual clause granting the drugstore

manager (whether or not he is the store wwner) a personal

bonus which increases: as’ the store’s purchases of defen-

dant’s products increase. The inevitable effect of these

contracts, which defendant began to use in 1 January of

- 1965, is to induce the store manger not tot purchase

competitive aloe products. These commissions, as previ-

/

x ously noted, violate Section 2(¢) of the Robinson-Patman

Act, Section 3 of the Clayton Act, and the laws against

commercial bribery. For the purposes of this issue, how-

~~ + ever, these “private concessions” constitute steps in the

unlawful maintenance of monopoly power which have been

— 4 , ee

. . > % %,6 ‘ ° °

characterized as “an unfair, practice evincing an exelu-

sionary intent” under Section 2. Union Leader Corp. v

Newspapers of New, England, Ine., 284 F.2d 582 (1st C ir.,

1960), cert. denied 365 ULS. 833° (1961). a

During the same period (1965-1966) the drugstore

managers were told, under threat of infringement, not to

deal with ‘any’ of defendant’s aloe competitors, whom

«lefendant. categorically condémned as trademark and

trade secrets infringers. Threats of infringement suits

such as defendant made against retailers and: competitors

like Patricia Carroll and plaintiff, which threats are not

intended to be followed by the actual filing off.a lawsuit?

have been held to constitute steps in a scheme to monopo-

lize. Eonited States ve Besser Alfa. ('o., 96 F.Supp. 304

(EOD. Mich. 1951), affirmed on other grounds, 343 -ULS.

444 (1952).

The Court of Appeals erred in “compartmentalizing”

plaintiif’s monopolization case and thereby overrode a

fundamental Sherman Act dectrine established By this

Court in Continental Ore’ Co. vy. Union’ Carbide Corp...

370 US. 690, G9S-99 (1962) :

It ‘is apparent from the foregoing that ‘the Court of

Appeals approached Continental's claims as if’ they

were five completely separate and unrelated lawsuits.

We think this. was improper. In cases such as this,

plaintiffs should be given the: full benefit of their

. proof Without tightly coinpartmentalizing the various

factual components and wiping the slate clean after

sertitiny of each... |The character and effect of a

conspiracy are not to bes judged by dismembering

it-and viewing its-separateé parts, but only by looking

at it as a whole. United States v. "Patten, 226 US

N25, OH. . '

‘

— 20—

In the light of the “mechanical adoption” by the trial

court of defendant’s proposed findings of fact and the

resultant determination that plaintiff's hands were un-

clean, plaintiff's monopolization charge “was never fully

considered below. Plaintiff should be afforded an oppor-

tunity on remand to obtaina full and meaningful redeter-

mination of~plaintiti’s charge under Section 2 of the

Sherman Act. a

” é

,

CONCLUSION |

-_

~.

lor the reasons given, this Cross-Petition for Writ of

Certiorari should be granted. |

e . .

Respectfully submitted, ~

Davip R. Macponaup, . *.

JAMES Gi. BARNES,

Attorneys for American Aloe

Corporation, Petitioners

Of Counsel: .

Baker & “McKENzirE

700 Prudential Plaza

Chicago, [linois 60601

312 828-0400

“

— la—

APPENDIX

he a THe”

“UNITE dD STATES COURT OF APPEALS: .

For THe ‘SEVENTH Circurr,

No. 17250 Sepremper Term 1968— Apri Session 1969 _

AMERICAN ALOE CORPORATION, ) Appeal from. the

Plaintiff-A ppellant, United: States Dis-

’ : ; trict Court for the

= ee Ste ‘ r. Northern District

ALOE CremMr Laporatorizs, INc., of Illinois. Eastern

Defendant-Appellec.) Division.

January 9, 1970

ieecsibias aE PETITIONS FOR, REHEARING!’

Before Casti’, Chief Judge, Fatrenitp, Circwt Judge

»- and Beamer, District Judge? ' :

Beamer, District Judge. This is. an appeal. from the

Northern District of Mlinois*involving claims.of trademark

infringement and invalidity, unfair competition and anti-

trust violation and counterclaims based on similar charges.

The central question, before the Court.is the validity of

defendant-appellee’s, “ALLO-” trade ‘names, and plaintiff-

appellant’ s alleged infringement -thereof. ,

1 On consideration: of the petitions for rehearing filed

by each of the parties and the answer of defendant-

appellee to’ plaintiff- appetlant’s » tition (filed at the re-

quest of the Court) the opinion filed herein July 31, 1969,

- is withdrawn and this opinion Is adopted as the opinion

of the Court. a) |

* Judge Beamer is sitting by designation trom the

Northern District of Indiana. !

e-:

—- 2a —

Defendant, Aloe Creme Laboratories, Ine. began -the

sale of an ointment in 1953, and cosmetics in 1957, both

containing the gel of. the sub-tropical aloe vera. plant.

The use of the fresh gel from the cut leaves of this plant

had long heen known. to the natives of the region in which -

it.is grown as a remedy for’sun burn. Prior to defendant’s

entry into the market.and its development of ca process

of stabilizing and preserving the gel, it had too short a’

shelf life to be commercially, valuable. Due to defendant's:

efforts over the intervening vears, its products, containing -

Atoe vera gel, became widely known and commercially

suceessfid. Beginning in 1953 and throughout this period,

the defendant operated under the trade name “Aloe Creme

Laboratories; Ine.”. Its. first product was. known under

the trade name ALO-C REME OINTALE NT which was

changed to ALO-OINTMENT in) 1963, Commencing in

1957, defendant began ‘the manufacture of various cos-.

metics known as ALO-CREME FACK, and ALO-CREME

HANDS, and ALO-CREME BODY, which names were

abbreviated to ALO-FACK. ALO-TANDS. and ALO-

BODY in 1965. Since: 1963, the defendant has also used

the trademarks ABO-PLUS,. TRAV-ALO, ALO-MOLS-.

‘TURE PLUS, ALO-V SKIN CLEANSER, ALOSBEAU-

‘TY MATTE. ALO-TONE, ALO-ROUGE, ALO-LIP-

STICK, ALO-POUDRE. ALO-V SHAMPOO, ALO-COS-

METICS, ALO-CABANA SET. ALO-LEGS. FASHION

TAN and AFTER TAN, all of which were the subject of

trademark registrations.

Plaintiff commenced operations on January 20, 1964,

and made its first ‘sales of products bearing trademarks |

on March 8. 1965. Plaintiff adopted as its trademarks,

HOUSE OF ALOK, ALOK ESSENCE, DESIGN: OF

PLANT, JEL D’ALOK,: MASQUE OF ALOK and

TROPICALOE. After defendant notified plaintiff of Jits

claim to a, family of ALO trademarks, whieh it claimed

. was infringed by plaintiff's use of ALO in its trade

names, plaintiff commenced this action asking a declara-

tory. judgment finding defendant's trademarks invalid and

upholding plaintiff's. right to use its ALOK trademarks,

—3a—

Bane with a claim. of unfair ‘competition and antitrust

violation. Defendant counterclanned for trademark in-

fringement and unfair competition. The- district ‘court

found for the defendant-counterclaimant on all issues,

dismissed the complaint, awarded treble damages and

enjoined the plaintiff from using ALOE in its trade names

or trademarks. seinen 3

‘ies

Central to a dete Pnliaicbiann of the: issues in this ease

is whether deferdant’s ‘ise of the term ALO- is sufficient

to preclude others from using the words’ Aloe or Alo.

‘Also in question is defendant’s claim to trademark regis-

tration of “ALO- and Design”. We hold that defendant

has no trademark rights, through use or registration,

in the term “ALO-" by itself. 7 3

Aloe is the generic name of a large genus of succulent

plants and of the drugs pre pared from the aloe vera’

variety of that. plant. (Webster’s New. International Dic-

tionary, 2d ed. 1934:) In particular, for purposes of this

ease; it is the generic name for the eel of the aloe. vera

plant. It is gndisputed that in the absence of a strong ;

showing of secondary meaning, a generic name cannot

be the basis of a trademark. Nelldgg Co. v.. National

Bisewt Co., 305 UeS. 111, 83 Lied. 73) (1938) . ‘(shredded °

wheat); JTenry Heide, Inc. v. George Ziegler Co., 354

F.2d 574 (7th Cir.. 1965) (ju-jubes); Donald F. Dunean,.

Inc. v. Royal Tops Manufacturing Co.. 343 F.2d 655 (7th ’

Cir. 1965) (vo-yos).

‘Defendant concedes that this is the law, but maintains

that it is not marketing “Aloe” as such, but is. selling

cosmetics containing Aloe, which are not: encompassed

within the generic or descriptive name. and with respect

to which. the word “Aloe” is at most. suggestive, In view

of the fact that Al6e is the distinguishing. ingredient i

defendant’s produets’ upon ‘which its claims ‘to apioeii

effectiveness are based, the Court must find that “Aloe”

is the generic and descriptive term for that. class of cos-

meties containing Aloe and that any claim to a trademark

in the name must be based Gn “secondary meaning”. .

qs

setae ep

The. case is unlike Coca-Cola Co. v. Noke Co., 254 US.

143, 65 L.Ed 189 (1920). where the term Coke or Coca

Was originally descriptive of the extract of Coca leaves,

or cocaine contained in ‘the plant, bot which “lost. this

generi¢ sense when the plaintiff. was compelled to remove

any. effective cocaine from the product, after which Coea

or Coke acquired ‘a purcly secondary. Meaning. Neither

ix this ease controlled by those decisions which have found

that exact copies or phonetic equivalents infringe purely

suggestive names which have acquired trade “name: sig-

nifieance, such as Douglas Labs: Corp. v: Copper Tan,

Ine., 210 F.2d 453 (2nd Cir. 1954) which said “copper

tone” for sun ‘tan lotion was suggestive rather than de-

seriptive; and Orange Crush. Co. v. California Crushed

Fruit Co., 297 I. 892. (D.C. Cir, 1924) whieh said “Crush”

Was not descriptive’ of a soft drink and was. not used: in

its generic sense: nor is it in the same ‘class with those

which hold that terms having a genéral deseriptive but

not denoininative -se i acquired secondary meaning.

“Weller Products, Ine. Rubber Linings Corp... 213) Fd.

382 (7th Cir, ie (Fab ( ‘ove Vv. Tub Nove): Speaker

. Shaler, Co, 87 F.2d 985 (7th Cir. 1987) (Ilot Patches

. Tot Patche tor vileanizing products); Bartou v. Rew-

‘oi Co., Inc.,- 29° Fd 474 (3rd Cir. 1928) -(Dyanshine

> Dye & Shine hor shoe polish). It must also be distin-

Bee ie" from the Supreme Court's decision inutrmstrong

Paimt & Varnish Works v. Nu-Enamel Corp., 305 U.S.

315: 83 bed. 195 (1939) where the essentially deseriptive

and denominative term “nu-enamel” had acquired a see-

ondary meaning at least partially through its widespres ud

application to products other the in racine panies as paint |

brushes. |

This case is, properly classified with ‘those where the

temn in question was the common name Yor the article

sold and herice sie igang of that article regardless’

‘of mae Kellogg Co. National Biscuit Co., 305 U.S. -

111, 3 Led. 73 (1938) oe shredded wheat) : Ile sti Ileide

Pigg? v; isle Ziegler Co., 354 Fe ad 574 (7th Cir. 1965)

(ju-jubes); Donald F. Duncan, Inc. v. Royal “1 wee Mana-

~

* Se

the product. Compare LeBhane <1

— ha | . \

facturing, Co., 342 F.2d 655 (7th Cir. 1965). (vo-yos) and

particularly with) those: ‘ases Where the term was de-

nominative of the prime or distinguishing ingredient: in

eee Co. ve Coty, 293

FL 544 (2nd. Cir. 1923) (Lorigan vy. L’Origav de Coty—for

perfume); Pimaud, ine. ucbschman, 27 B24 531 (F.D.

NY, 1928) (Litas De France’y. Lilas De France—tfor

perfume): Wells & Richardson Co. vy. Siegel, Cooper &.-

Co., 106 1. 77 (NLD. TL 1900) (Celery Compound v.. Celery

Compound) with Divi ‘ola Laboratories, Tne. v. ( ‘oqa-Cola

Co. WT Pd 352 (4th Cir, 1941) (cola Vv. cgla—tpr soft

‘drink containing, extract of cola nut). It is clear from-an:-

examination of the cases“that while the test way be stated |

in the same: language in hoth types of cases, it is much

o.

al Ld

4

3S

t

more difficult to ‘establish secondary meaning in a’ denomi-

native term ¢as used-herein) than ina purely descriptive

one, fg oe ae rt WL tp ae

The criteria for determinin&” whether a denominative

term has aeqnired the necessary secondary meaning. to

“bea trademark are best described in the language of the

Supreme Court in Kellogg Co, Vv. National Biseuit Co...

205 TUS. TI. TIS, 83. Lied. 73, 79 (1938) :

It ix contended that the plaintiff hax the exclusive |

right to the name ‘Shredded Wheat,” because those

words aequired the ‘secondary meaning’ of shredded

Wheat inade at Niagara Falls by the plaintiff’s pre-

decessor. There is no basis here for applying the

doctrine of secondary Incaning. The evidence shows

only that due to the long period in whieh the plaintiff

or-its predecessor was.the only manufacturer of the .

product, many people have come: to associate the

product, and as a consequence the name by whieh’.

the: product ix generally known. with the plaintiff's

factory at Niagara Falls. But to establish a trade

name in, the term ‘shredded Wheat’ the plaintiff must

show. more than a subordinate’ meaning which applies -

to it. Tt must show that the primary significance. of

the term in the minds of the corisuming public is not

the product but the: producer, ays ae:

= .

_” ~ ‘e s

. yf .

« is

‘ tf "ba --

In the reeent: decision of Henry Heide. Ine: v George

Ziegler Co., 854 F.2d 574, 576 (7th Cir. 1965) dei Wing with,

the term. “jujubes’’ for fruit favored gum candy,” this

Court said: “But more. importantly, a generic term) in.

cireuinstances such as those before as may not be ex-

elusivel¥ appropriated: as. 2 trademark, rewardless: of the

length af time it may have been used by a single distribu-

tor at the constimer tevel and despite Whatever: promo-

tional effort hhe-anay have expended to exploit. it.’ See

Donald FB. Diucan, uc. y. Royal Tops Manufacturiig

Co., 482 F.2d 655 (7th ¢ ir, 1965): Divi- Cala Laboratories

Vv. Coca-( ie Co., 110 Fd 352 (4th Cir. 1941).

The defendant-appellee, Aloe Crome Laboratories, Ine.

here secks to accoRipsish what the courts prohibited in the

above cases. Having originated the use of a stabilized

aloe gel in comneties and wiaintated a niaitural and legal

monopoly.in the product over a relatively long period of

tine, it seeks fo prevent others from suecessfully com-,

peting in the Aloe cosinetic amarket by foreclosing their

effective promotion of -aloc products. Defendant ‘cannot

“appropriate for its own trademark tse the generic ga

sof the distinguishing and effective ingredient in its préd

wet. Defendant has neither pate ut rights in the “ingredient

concept? of using «Aloe. i cosinetics nor a legal right to

invintain a monopoly ino Aloe cos smeties. By using. the

‘phonetic equivalent of the generic name as the sole eom-

‘mon and distinguishing anark of its products, defendant

invited confusion. Until 1965, defendant differentiated. its

_ product by the nanre MM. AO-CREMIE, which would shave

-come nearer toSmaintaining its trademark signifieanee,

but in the two to threr years between the adoption-of the

singular ALO- and the iling of this suit, “Aloe” or “Alo”

did not lose its generie meaning or denominative sense.

Those cases relied upon dy defendant to establish the

secondary meaning in the name of a plant.used as an

~~ ingredient are distinguishable. : coe

Th LeBluine. Tmport ue * Coty, 293 F. 344 (2 ad Cir.

1923) the court found that 1 origan, or_L’Origan, although

generic when applied to a particular genus. of. plant, had

geome to mean the. blended pe ftune produced ‘by Coty,

‘and not the fragrance \of the particular plant. It laid -—

stress on the fact®that Me perfume in question was a,

- blend, unidentifiable with the genus of plants whose name

it bore. In contrast. both plaintiff: ‘s and defendant's prod-

ucts here are promoted for their coinmon ingredient—

Moc—with which both product lines are clearly’ identi-

fiable. ‘The defendant here cannot seek to promote. its

products by stressing” the’ active ingredient which is

available tovall and also claim that the only proper name

af that ingredient has lost its primary generic signific ance,

In Pinaud, Ine. Mine bschman, 7 F.2d 531 (B.D. N:Y.

1928) the Court gti. that the French expression Lilas

De France, whew ‘appli¢d to a perfume Tong manufactured

and, promoted. Py one company. had acquired a secondary

meaning, but it also indicated that the Mnglish counter-

part of the same words, “French Lilac,’ was Sn Age

- seriptive. and tg secondary meaning. , In Wells

— Richardson Cov v. Siegel, Cooper & Co... 106 F. 77 €N. >.

~ fil. 1900) the: Court found that. the expression “Celery

Compound” had acquired a, secondary meaning and that.

others could not copy it, but it did not. find:thati “Celery”

had acquired a similar meaning. Thus’ a term which in.

itself does not have trademark significance nay be ecom-—

bined witli others. in such a manner’as to mean one prod-

uct and one manufacturer only. While “Aloe” and “Hands”

may both be: generic terms—as are most words—their

combination in the phrase “*ALO-Hands” may constitute

a valid trademark as found by the Patent Office in issuing

a registration for that -term. Therefore, here the. Court:

holds that the varions ALO- trademarks of defendant in

themselves are valid, but’ cannot be considered to have

established a secondary, meaning in the word Aloe itself.

Others may. not copy the exact trademarks used by defen

dant, because those have come to. mean defendant’s prod-'

ucts exclusively, but*they may use the avord “Aloe” as

-part-of their own trademark, Just as defendant has Gone, -

a) : ® oe * rigs

°

+,

J

Defendant contends, and the trial court found, that’ it:

has a “family of ALO- trademarks” such as to preclude

others fromy using the term “Aloe” in their trade names!

This conclusion must be reversed, It is apparent that a

generic term cannot be the basis of a family of trade-

marks such as to preclude others from using thie term

‘uniess the term has acquired : “seconditry meaning”,

Compare Lauritz cu & Co., Ine. v. Borden C ompany, 939 °

2d 405 (Court of C axtoms il Patent Appeals, 1956)

with Motorola, Inc. v. Griffiths Electronics, Ince., 317 F.2d

397 (Court of Coat and Patent Appeals, 1963). The

family of trademarks doctrine is essentially similar to

that of “secondary meaning”. Without “secondary mean-

ing” there.is no “family of trademarks” in the sense.

defendant contends here. The lack of a “family of ALO-

trademarks” does not. of course, invalidate each of defen-

dant’s registered trade names whieh. share the “ALO-”

term. Each trade name in itself may be. distinetive

enough to ereate a valid trademark even though the

common tern among the group has bot achieyad sufficient,

secondary meaning to preclude others from using the term.

Having determined that. the veneric term "ALO hats

neither achived trademark signifieance, nor become thre

basis of a “family of trademarks”, we now examine de-

fendant’s claim of trademark registration of “ALO. and,

. Design” in Registration No. 804,536.

The ‘trial court in its finding of faet No.-16 > found:

“Defendant is the owner of the following trademarks and

registrations therefor issued to it by the United States

Patent Office: .. ..No. SOLD for NLO- and Design... 2”

This portion of finding No, 16 is clearly erroneous. Trade.

mark Registration -No. “ge ote while owned by the defen-

dant, is ‘nof for “ALO- Design” . but rather for’

“Queen Nefertiti ALO ; Design’. "Phis facet is made

clear by the ‘lly are Mirsene. of application for regis-

tration and the proceedings thereafter in the Patent Office.

. ; ; t

~~

f

—_—

On July 30, 1964, defendant applied for registration of

“ALO- and design of a plant”. The following drawing was

submitted by the defendant:

s

— 10a—

The Patent Office treated this as an application for a

trademark for “ALO and Design”; the Patent Office

dropped the hyphen after ALO presumably because the

drawing submitted included no hyphen.

On February 3, 1965,.the Patent Office sent defendant

notice of its refusal to register “ALO and Design”.

Among other reasons for the refusal, the Trademark

Examiner pointed out that the mark was “merely deserip- —

tive of the goods . . . in that it sets forth the substance

from which the preparations are made together with a

representation thereof, inasmuch as ALO is short for’

Aloe which is the genus designation for the species Aloe

Vera and others.”

Defendant’s application for registration included a spec-

imen of the following. mark which had been used in defen-

dant’s advertising:

oA

Nefertiti

\

—lla—-

The Patent Office pointed ont that this drawing could not

he the basis of a registered mark’ in “ALO and Design”

by itself since the word ALO and the design of the plant

“ix tied in. with the portrait of Queen Nefertiti and docs

molt create a separate impression.” (Emphasis added.)

The Patent Office requfred the defendant to add the. words

“Queen Nefertiti” and her portrait to the drawing origi-

nally submitted. Defendant was further required to include

a disclaimer of registration of the word * ALO” and the

represe ntation of the aloe vera plant.

.

Defendant amended. its: application to.inelude the dis-

-¢lainier of ‘registration of ALO and a of

“plant and submitted a new. drawing which included the

words “Queen Nefertiti” and the portrait of the Queén.

The Patent Office then renamed the amended application

“Queen Nefertiti ALO and Design”. Defendant was sent

notice. that the “Queen Nefertiti ALO and Design’ mark

would be published on December 14, 1965. On Mareh 1,

1966. the mark was registered and oe No. 804,536.

A sérious “question as to defendant's wood t faith ix raised)

by its claimothat in No, 804.536 it owns the registration

‘for “ALO- and Design.” The Patent Offiee specifically

rejected defendant’s application for vegistration of “ALO

and Design” stating that “ALO” is a descriptive term.

There can be no claim that "ALO and Design” as included

in “Queen Nefertiti ALO and Design has separate signifi-

cance since the Patent Office informed.defendant that the °

“ALO and Design” docs not create a separate impression.

Furthermore, in obtaining registration for “Queen Nefer-

titi ALO and Design” defendant. specifically disclaimed

registration rights in "ALO and*the representation of the

aloe plant” (as it was required to do hy the Patent Office):

Defendant's questionable use of No. 804,536 began even

before the mark was registered: On February 21, 1966,

defendant Sent letters to” several hundred -retailers in

which it claimed to be the owner of “ALO- and design,”

‘e Wademmnrs “registered im the United’ States. Patent

*

o

— 12a —

_ Office.” This letter, which threatened to “take whatever

steps necessary” to stop. “newly erst competitors”

from infringing on this and other trademarks, was sent |

‘nearly two weeks before the sl Office registered the

“Queen Nefertiti ALO and Design” mark. :

In light of the foregoing, we remand this case for

redetermination, of the question of defendant’s unfair tom-

‘petition. We pverrule: the finding that defendant is the

omnet of a registered "ALO- and Design” trademark. We

hold that defendant's use of the generie term “ALO-” has

not created a secondary mei ining in that word, and there-

fore; defendant has no exclusive trademark rights .in the

word “ALO-" by itself. We reverse the trial couirt’s con-

clusion that defendant owns a “ family of ALO- trade-

marks” such as to” preclude others. from using the word

“Aloe” in theiy trade names.

We reverse the trial court’s conclusion that plaintiff’s

TAN LAFE infringed defendant’s, FASHION TAN and

AF TER TAN trademarks, beéause the only common word,

“tan”, ix too descriptive tobe the hasis: of trademark

rights.under the facts of this, case. . (

On the basis of ‘these conclusions we reverse the district

court’s holding that plaintiff was guilty of trademark

infringement. We leave to the district court the determina-

tion of whether plaintiff.was guilty of unfair competition

. absent of showing a trademark infringement.

Finally we come to the question of whether defendant

* is guilty of violating the antitrust laws by. its use of its’

growers’ supply’ contracts and its dpugstore franchise

agreements. We. affirm the conclusions of the trial court

that defendant’s drugstore franchise agreements were not

used in violation of the antitrust laws. However, we must

set aside the conclusion of the trial court that defendant’s

growers’ supply contracts were not used in violation of

the antitrust laws since the district court’s findings of

fact are insufficient to support this conclusion.

— 13a —

Before there can be a conclusion as to whether there’

has been a substantial lessening of competition, monopo:

lization, or a contract in restraint of trade, a.determina-

tion must be made’ as to what are the relevant. product

markets within which to guage a firm’s power or the

effect of its activities. In Brown Shoe Co. v. United

States, 370 U.S. 294, 325, 8 L.ed.2d 535 (1962) the Su. .

preme Court stated:

‘The outer boundaries of a product. market arddeter-

mined by the reasonable, interchangeability of use or

the cross-elasticitv of demand between the product

itself and substitutes for it. However, within this

broad market, well defined submarkets may exist

which, in themselves, constitute product markets for

antitrust purposes.

Factors such as a product’s peculiar characteristies and

uses, distinct prices, and sensitivity to price ‘changes are

all indicia which may he used in determining boundaries

of a submarket. . |

The. findings of fact made by the trial court do ‘not

provide .a basis for its’ conclusion that ‘the cosmeties -

industry is the relevant market. On remand, the district

court should/re-examine this question weighing the factors

set out in the Brown Shoe opinion. It will be necessary »

to make a determination whether there exists a separate

market for aloe vera leaves.’ The-distriet court will als6

need to inquire whether aloe vera products constitute a

submarket of the cosmetic industry. |

Once the district court has decided which product mar-

kets are relevant: for antitrust consideration, the effect .of

defendant’s growers? supply'-contracts will have to he

weighed within those markets. The ease of entry into

these, markets and the cost of aloe vera leaves to defen-

dant and its competitors are findings of fact which will

have to -he. made. On the basis of these findings, the

district court will he able to decide the issues raised by

a — Ida —

plaintiff's charges of antitrust violation. based on the

defendant's exclusive contracts with the growers of a large

percentage of aloe vera leaves produced in the United

States.

Affirmed in part and reversed in parts

Remanded to the district court for further proceedings

consistent with this: opinion.

Appellant shall recover its costs of appeal.

- Suprene Court of. ‘the nite States 7 a

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