# Appendix — V. E. B. Carl Zeiss, Jena v. Carl Zeiss Stiftung

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1971
- **Citation:** 403 U.S. 905

## Text

Supreme Court, U.S.
FILED

LIBRARY 1588
SUPREME COURT, U. ha APR 15 1971
MD: eccasdncweteendle
Se ner SER CER |
IN THE

Supreme Court of the United States

October Term, 1970

V.E.B. CARL ZEISS, JENA; STEELMASTERS, INC.;

ERCONA CORPORATION,
Petitioners,

V.

CARL ZEISS STIFTUNG, doing business under the name and
style of CARL ZEISS; and ZEISS IKON A.G.,

Respondents.

- APPENDICES

Harry I. RAND
200 Park Avenue
New York, N. Y. 10025
Attorney for Petitioners

CONTENTS

APPENDIX A—Judgment of Court of Appeals

Apprenpix B—Order and Judgment of District
Court

Appenpix C—Denial of Petition for Rehear-
ing in the Court of Appeals

Appenpix D—Opinion of Court of Appeals

Appenpix E—Opinion of District Court on
Trademark Ownership

Appenpix F—Opinion of District Court on
Antitrust Misuse Defense

ean

”

UNITED STATES COURT OF APPRALS
‘POR THE
SECOND CIRCUIT

At a Stated Term of the United States Court of Appeals,
in and for the Secon Circuit, held at the United States
Courthouse in the City of New York, on the second day of
November one thousand nine hundred and seventy.

Present: HON. J. EDWARD LUMBARD,
Chief ‘Judge

HON, STERRY R, WATERMAN,
Circuit Judge

. “HON, WILLIAM J, JAMESON,
; District Judge

Carl Zeiss Stiftung, doing business :

under the name and style of Carl Zeiss;

and Zeiss Ikon A.G.
Plaintiffs-Appellees,

v. : 62 Civ. 850
V.B.B. Carl Zeiss, Jena; Steelmasters,
Inc.; and Brcoona Corporation :
Defendants-Appellants,
Bxakta Camera Company, Inc.; Camera :
Specialty Company, Inc. and Carl
Zeiss Inc., :
Defendants.

Appeal from the United States District Court for the
Southern District of New York.

This cause came on to be heard on the transcript of record
from the United States District Court for the Southern District
of New York, and was argued by counsel.

ON CONSIDERATION WHEREOF; it is now hereby ordered, adjudged,
and decreed .that the judgment of said District Court be and it
hereby is modified and as so modified said judgment be and it
hereby is affirmed in accordance with the opinion of this court.

A, DANIEL FUSARO

U.S, District Court Clerk
Piled Jan. 6, 1971 A true copy
8.D. OF N.Y.

/e A. Daniel Pusaro
Docketed as a nt 2 lerk
on January 7, ion #71,209 4

Apr. 1, 1969
UNITED STATBS DISTRICT COURT S.D.N.Y.

SOUTHERN DISTRICT OF NEW YORK

CARL ZEISS STIFTUNG, Reene Pasigese $
under the name and style of CARL
ZEISS; and ZEISS IKON A.G., :

Plaintiffs, :
~against- , | :
62 Civ. 850
Vv.E.B. CARL, ZRISS JENA; STEEL- :
ERCONA CORPORATION ORDER AND JUDOMENT

MASTERS
EXAKTA barana’ COMPANY ;
CAMERA SPECIALTY COMPAuY, iae

? Defendants,
CARL ZEISS, INC.,

Additional Defendant
on Counterclaims. :

The separate issues in the above-entitiled action
(presented bythe complaint, the denials set forth in para-
graphs 1 through 61 of the amended answers of defendants
VEB Carl Zeiss Jena, Steelmasters, Inc. and Ercona Corpora-
tion, the defenses and counterclaims set forth in paragraphs
62 through 114 of the amended answer of defendant VEB Carl
Zeiss Jena, paragraphs 62 through 119 of the amended answer
of defendant Ercona Corporation, and paragraphs 62 through
83 of the amended answer of Steelmasters, Inc., the defenses
set forth in paragraphs 115 through 121 of the amended answer
of defendant VEB Carl Zeiss Jena and paragraphs 120 through
126 of the amended answer of defendant Breona Corporation,
and the defenses to said counterclaims as set forth in the

amended replies of plaintiffs and Carl Zeiss, Inc.), which

ae ale A a a sinc oeteliann tear

were heretofore severed from the remaining issues herein,
having been considered by the Court upon the pleadings, the
evidence presented at the trial and the briefs submitted by
counsel for the parties, and the Court having filed its ;
opinions, findings of fact and conclusions of law with res- |
pect thereto on November 7, 1968, and March 12, 1969,

*

IT IS ORDERED, ADJUDGED AND DECREED as follows:

1. Plaintiff CARL ZEISS STIFTUNG, trading under
the name and style «. CARL ZEISS (hereinafter "Carl Zeiss"),
is the owner of the United States trade names "Zeiss" and
"Carl Zeiss" and the United States trademarks "Carl Zeiss",
“Carl Zeiss" in a distinctive lens frame, the distinctive
lens frame alone, "Zeiss" and the monogram "CZ" and is entitled
to the sole and exclusive right to use such names and marks in
commerce within and with the United States and to prevent
others from using in the United States such names and marks
and all other names and marks of which the words "Carl Zeiss",
"Zeiss", the initials "CZ" or the distinctive lens frame form
any part.

2. Plaintiff ZEISS IKON AG is the owner of the
United States trade name "Zeiss Ikon" and the United States
trademarks "Zeiss Ikon" and "Zeiss Ikon" in a distinctive
lens frame and is entitled to the sole and exclusive right to
use such name and marks in commerce within and with the
United States.

3. None of the defendants, either jointly or sever-
ally, has any right, title or interest in or to, or the right
to use, any of the United States trade names "Zeiss",

@2-

"Carl Zeiss" or "Zeiss Ikon" or any of the United States

trademarks referred to in paragraphs 1 and 2 hereof,
4, Since at least 1953 defendants VEB Carl Zeiss

Jena, Steelmasters, Inc, and Eroona Corporation have during
various periods infringed each of the trademarks of plain-
tiffs, i.e., "Carl Zeiss", "Carl Zeiss" in a distinctive
lens frame, the distinctive lens frame alone, "Zeiss", the
monogram "CZ", "Zeiss Ikon" and "Zeiss Ikon" in a distinctive
lens frame, in the United States and have unfairly competed
with plaintiffs through the use of the trade names "Optik
Carl Zeiss Jena VEB" ami "VEB Carl Zeiss Jena" and trade-
marks consisting of the words "Carl Zeiss Jena" in a dis-
tinctive lens frame, the distinctive lens frame alone and
the letters "CZ" and "CZJ" in trade within and with the
United States.

5. Since in or about 1953 defendants VEB Carl
zeiss Jena, Steelmasters, Inc. and Ercona Corporation have,
in violation of § 43(a) of the Lanham Act, 15 U.S.C. 1125(a),
from time to time falsely described and falsely designated
the origin of goods imported by them into the United States
and sold in United States commerce as being goods produced
by plaintiff Carl Zeiss or its licensee when in fact such
goods were produced by defendant VEB Carl Zeiss Jena, a
nationalized East German concern, which has no legal or other
connection with plaintiff Carl Zeiss or any of its affiliated
firms.

6. Each plaintiff is entitled to enforecement of
its rights in its trade names and trademarks against the
defendants and to the relief demanded against the defendants,
including damages, defendants' profits and an injunction.

7. Defendants and each of them, their officers,
agents, servants, employees, attorneys, and privies, and
all those persons in active concert or participation with
them who receive actual notice of this order and judgment
by personal service or otherwise, are permanently enjoined
and restrained from importing into, or selling, distribut-
ing or offering for sale in, the United States, either in-
dividually or in concert with others, any products (other
than products manufactured by plaintiffs) bearing any of
the names or trademarks of plaintiffs, i.e., "Carl Zeiss",
"Carl Zeiss" in a distinctive lens frame, the distinctive
lens frame alone, "Zeiss", the monogram "CZ", "Zeiss Ikon"
amd "Zeiss Ikon" in a distinctive lens frame, or any other
marks of which the words "Carl Zeiss", "Zeiss", the initials
"CZ" or the distinctive lens frame form any part, or any
colorable imitations or variations thereof, or using any
such names or marks in the United States to refer to them-
selves or any of their products in any advertising or
promotional material or correspondence or communication, or
in any other manner.

8. Defendants, and each of them, their officers,
agents, servants and employees are directed to deliver up
for destruction all labels, signs, prints, packages, wrappers,
receptacles, advertising and other such material in their
custody or possession in the United States bearing or con-
taining as a reference to defendants the designations or
names "Optik Carl Zeiss Jena VEB", "VEB Carl Zeiss Jena" or
any designations or names containing the words "Zeiss" or

"Carl Zeiss" or bearing or containing as a reference to

~ oe

defendants' products trademarks consisting of the words

"Carl Zeiss Jena", "Carl Zeiss Jena" in & distinctive lens
frame, the distinctive lens frame alone, the initials "Cz"
or "czy", "Zeiss Ikon" or any trademarks of which the

words "Carl Zeiss" or "Zeiss" or the initials "CZ" or "czJ"
or the distinctive lens frame form any part, or bearing or
containing as a reference to defendants or their products
any reproduction, counterfeit, copy or any colorable imita-
tion thereof, and all plates, molds, matrices or other means
of making the same in their custody or possession in the
United States.

j 9. Defendants Ercona Corporation, its officers,
agents, servants, employees and attorneys are permanently
enjoined and restrained from prosecuting in the United
States Patent Office oppositions to applications bearing
Serial Nos. 36,037, 36,035, 657,816 and 49,329 for registra-
tion of the trademarks "Zeiss", the words "Carl Zeiss" in a
distinctive lens frame and "Zeiss Ikon" filed with the
United States Patent Office by piaintiffs, and from prosecut-
ing in the United States Patent Office petitions for
cancellation of Registrations Nos. 722,796 and 727,470,
issued, respectively, to plaintiff Carl Zeiss on October 17,
1961 and to plaintiff Zeiss Ikon on February 13, 1962.

10, The United States Commissioner of Patents is
hereby directed to register in the name of plaintiff Carl
Zeiss the trademarks "Zeiss" and the words "Carl Zeiss" in a
distinctive lens frame, and in the name of plaintiff Zeiss
Ikon the trademarks "Zeiss Ikon", for which registrations

the respective plaintiffs have heretofore filed applications

Ne

bearing Serial Nos. 36,037, 36,035, 657,816 and 49,329 and
to dismiss the oppositions and petitions for cancellation
filed by defendant Ercona Corporation and referred to in
paragraph 9 hereof. .

ll. The defenses contained in the amended answers
of defendants VEB Carl Zeiss Jena, Steelmasters, Inc. and
Ercona Corporation, and all counterclaims contained in said
amended answers with the exception of those set forth in
paragraphs 115 through 119 of the amended answer of defendant
VEB Carl Zeiss Jena and paragraphs 119 through 124 of the
amended answer of defendant Ercona Corporation, are dismissed
on the merits, except insofar as they pray that the rights of
the parties be declared,

12. Each of the defendants is directed to file with
the Court and serve on plaintiffs' attorneys, within sixty (60)
days after the service on the defendants' attorneys of a copy
of this order and judgment, a report in writing under oath
setting forth in detail the manner and form in which such
defendant has complied with this order and judgment.

13. The Court expressly determines, pursuant to
Rule 54(b) of the Federal Rules of Civil Procedure that there
is no just reason for delay in entering judgment on the
separate issues heretofore tried and decided, and the Clerk
is directed to make entry of this judgment in accordance
with Rule 58 of the Federal Rules of Civil Procedure.

14, The remaining issues in this action raised by
plaintiffs' claims for damages and an accounting of defen-
dants' profits and by the counterclaims set forth in para-
graphs 115 through 119 of the amended answer of defendant

-6-

yEB Cari Zeiss Jena and in paragraphs 120 through 124 of
the amended answer of Ercona Corporation shall be éeferred

for subsequent trial.

15. Plaintiffs may tax the cost to which they are
entitled as of the date of the entry of this judgment;
further taxation of costs shall await the entry of @ further
judgment following the trial of the remaining issues.

16, Jurisdiction is retained by this Court for the
purpose of the subsequent trial of the remaining issues in
this action and also for the purpose of enforcing compliance
with thig judgment and punishing any violation thereof.

pated: New York, N.Y.
April 1, 1969

/s Walter R. Mansfield
U. mz D. J.

Judgment Entered 4/1/69
/s John Livingston
Clerk

33676

UNITED STATES COURT OF APPEALS
SECOND CIRCUIT

- SESS SSF SSBSSBVSHSBVB|S|ASHAIVBIABAOBSGOOS oeceoaeX

Carl Zeiss Stiftung, doing business
under the name and style of Carl
Zeiss; and Zeiss Ikon A.G.,
Plaintiffs-Appellees,
ve
V.E.B. Carl Zeiss, Jena;
Steelmasters, Inc. and Ercona
' Corporation,

, Defendants-Appellants,
Exakta Camera Company, Inc., et al.,

Defendants.

eee eeeceeeaaeneenX

A petition for a rehearing containing a
suggestion that the action be reheard in banc having
been filed herein by counsel for the appellants, and
no active circuit judge having requested that a vote
be taken on said suggestion,

Upon consideration thereof, it is

Ordered that said petition be and it hereby
is denied.

/s 3. EDWARD LUMBARD
Chief Judge

December 16, 1970

33676

UNITED STATES COURT OF APPEALS
SECOND CIRCUIT

- x
Carl Zeiss Stiftung, doing business
under the name and style of Carl
Zeiss; and Zeiss Ikon A.G.,
Plaintiffs-Appellees,
Vv.

V.B.B. Carl Zeiss, Jena;
Steelmasters, Inc.; and Eroona
Corporation,

Defendants-Appellants,
Exakta Camera-Compary, Inc., et al.,

- Defendants.

A petition for a rehearing having been filed
herein by counsel for the appellants,
Upon consideration thereof, it is
Ordered that said petition be and it hereby is
DENIED.

December 16, 1970

UNITED STATES COURT OF APPEALS
For tHE Seconp Circurr
>
No. 767—September Term, 1969.
(Argued May 5, 1970 Decided November 2, 1970.)

Docket No. 33676
—

Cart Zeiss StirruncG, doing business under the name and
* ‘style of Cart Zerss; and Zeiss Ixon A.G.,

Plaintiffs-Appellees,
—against— '
VEB Cart Zeiss Jena; STEELMASTERS, Inc.;
Ercona Corporation,

Defendants-Appellants.
—

Before:
LumBarp, Chief Judge,
Waterman, Circuit Judge, and
JaMESON, District Judge.*

vies

Appeal from a judgment of the United States District
Court for the Southern District of New York, Walter R.
Mansfield, Judge, adjudging that plaintiffs-appellees are
the owneis and entitled to the exclusive use of certain
trade names and trademarks in the United States; en-
joining defendants-appellants from further use of the
names and marks; and providing for damages for unlaw-

* Senior District Judge of the District of Montana, sitting by desig-
nation.

4499

ful infringement. Judgment modified by deleting provi-
sion for damages and affirmed.

—>

MiLBank, Tweed, Haptey & McCuoy, New York,
New York (William E. Jackson, Isaac
Shapiro, Walter J. Derenberg, Von Maltitz,
Derenberg, Kunin & Janssen, of counsel),
for plaintiffs-appellees.

Boretn, Hays, Sxuar & Herzperc, New York,
New York (Harry I. Rand, Donald E. Nawi,
David Kremen of counsel), for defendants-
appellants.

<>—
JaMEsON, District Judge:

This trademark infringement action involves the owner-
ship and use in the United States of the “Zeiss” and “Zeiss
Ikon” names and marks on optical and mechanical preci-
sion instruments. Plaintiffs-appellees are the Carl Zeiss
Stiftung (or Foundation) doimg business under the name
of Carl Zeiss, located in Heidenheim, West Germany, and
its subsidiary, Zeiss Ikon A.G., located in Stuttgart, West
Germany. The defendants-appellants are VEB’ Carl Zeiss
Jena, located in East Germany, and two of its distributors
in the United States, Steelmasters, Inc., and Ercona Cor-
poration.’

Appellees claim ownership and the right to exclusive use
of the trademarks as a successor of the original Carl Zeiss

1 VEB, or Volkseigener Betrieb, means “Peoples-Owned Enterprise.”

2 Exakta Camera Company, Inc. and Camera Specialty Co., Inc., named
as defendants, did not participate in the proceeding in the district court
and are not parties on this appeal.

4500

Stiftung (Foundation) created in Jena in 1889. Appellants
claim the right to exclusive use, or in the alternative the
right to concurrent use, as the assiguces and licensees of the
Jena Foundation.

The district court held that the appellee Heidenheim
Foundation was identical to the Carl Zeiss Stiftung and was
therefore entitled to the exclusive use of the “Zeiss” name
and trademarks in the United States; that Zeiss Ikon A.G.
was entitled to the exclusive use of the “Zeiss Ikon” name
and mark in the United States; and that since 1953 appel-
lants had infringed those trademarks and had violated Sec-
tion 43(a) of the Lanham Act, 15 U.S.C. $1125(a), by de-
scribing and designating goods they had imported from
Jena and sold in the United States as goods produced by a
licensee of the Zeiss Stiftung. The court rejected the de-
fenses of laches, acquiescence and abandonment; held that
the appellants were barred from asserting any claim to
ownership of the “Zeiss” name and marks by provisions
of Section 5(b) of the Trading With The Enemy Act (50
U.S.C. App. §1 et seq.) and regulations promulgated there-
under (8 C.F.R. $507.46) ; and struck the antitrust defense
asserted by the appellants.

Statement of Facts with Respect to Ownership
and Use of Trademarks

The basic facts as set forth in the court’s formal findings
and supplemental discussion with respect to the ownership
and use of the trademarks* may be summarized as follows:

3 Following a six week trial on the issues relating to the ownership
and use of the trademarks, the court made 481 findings of fact and
filed an opinion on November 7, 1968. That portion of the opinion re-
lating to the applicable law is reported in 293 F. Supp. 892, with the
notation that, “At the court’s request the factual background, becaus®
of its length, is not published.” The court made 27 additional findings

4501

In 1846 Carl Zeiss established a workshop for the manu-
facture of optical and mechanical precision instruments in
Jena in the Grand Duchy of Saxe-Weimar-Eisenach.* In
1875, Dr. Ernst Abbe, a mathematician and physicist teach-
ing at the University of Jena, joined Zeiss as a partner.
In 1884, with Otto Schott, they organized the companion
Schott Works for the manufacture of optical and other
types of glass.

In 1889 the Carl Zeiss Stiftung was created in Jena with
the required approval of the Duchy of Saxe-Weimar-EHisen-
ach. In 1891 all assets of the Zeiss firm were conveyed to
the Carl Zeiss Stiftung (FF 10) and since then the Founda-
tion has been the sole owner of the Zeiss firm (FF 11).
JA 817. In 1896 a new basic governing instrument desig-
nated a “Statute” was prepared and approved.® The stat-
ute was amended from time to time, the last time in 1941.

The Carl Zeiss Foundation was not charitable or public
in nature, but was established as a private foundation for
the purpose of owning and operating the Zeiss optical] busi-

of fact on the issues raised by appellants’ antitrust counterclaim and
filed an opinion on March 12, 1969, which is reported at 298 F. Supp.
1309, In this opinion FF refers to formal findings of fact on the issu2s
relating to use of the trademarks and JA to joint appendix.

4 In 1920 the Grand Duchy of Saxe-Weimar-Eisenach was dissolved
and incorporated into the newly established Land of Thuringia, a state
in the German Federal (Weimar) Kepublic. In 1952, the Land of
Thuringia was dissolved, and since then Jena has been located in the
District of Gera, a new political subdivision of the German Democratic
Republic, which had been established in October, 1949.

5 The Statute provided that the domicile of the Foundation should be
Jena (Section 3), that this provision could not be amended or rendered
inoperative (Section 121), and that its Works (including the Zeiss and
Schott Works) should not be transferred outside the immediate neigh-
borhood of Jena (Section 39). Upon dissolution one half of the “re-
maining value of assets” was to be distributed between Jena and a
neighboring community, the other half to go to the University of Jena
(Section 116).

4502

AE Det

¢ a Cig ee

ness for profit.* The profits were to be used primarily to
maintain, develop and increase the business enterprises and
to provide economic benefits for the workers. Any surplus
was to be used for promotion of technical knowledge and
science outside of the works, and for participation in com-
munity organizations and measures intended to help the
working population in Jena, where the works were then
located.

The Zeiss and Sthott firms were each under the direction
of a separate “Board of Management.” A “Special Board”
was to administer the nonindustrial assets of the Founda-
tion and to supervise the noncommercial activities. A
“Foundation Deputy” appointed by the Special Board was
to represent it on the Boards of Management of the indi-
vidual commercial enterprises.’

Between 1891 and 1945 the Foundation acquired inter-
ests in numerous other commercial enterprises, including
the Schott firm and Zeiss Ikon A.G. Since the early 1900s
(with interruptions during the two World Wars) the Zeiss

6 As set forth in the district court’s discussion of the facts: “TA]
private ‘Stiftung,’ or Foundation, is a legal entity or juristic person
with some attributes similar to those of a corporation under American
law, including the capacity to own property, enter contracts, engage in
business activities, sue and be sued, etc. It differs from a stock corpora-
tion (known as an ‘AG’ under German law) in that it has no stock-
holders. On the other hand, the absence of stock ownership does not
mean that it is therefore a public, non-profit, charitable or eleemosynary
enterprise. It is more in the nature of a trust to which the attributes
of separate legal existence as an entity are extended.” JA 969.

7 Each Board of Management was to consist of three or four members
appointed for a fixed period or for life. Only an employee having a
lifetime contract of employment was eligible for appointment. Two
members of each Board were appointed by the Special Board as the
“Mandatory” and “Deputy Mandatory.” Membership on a Board could
terminate only by voluntary resignation accepted by the Special Board,
expiration of a fixed period of appointment, or termination or cancella-
tion of the lifetime employment contract, which could be effected only
for gross violation or neglect of duty or disreputable behavior.

4

4503 a

firm has sold high quality optical and other scientific in-
struments in the United States under the Zeiss name and
the trademarks “Zeiss,” “Carl Zeiss Jena,” “C.Z.” and
others. Zeiss Ikon has sold photographic and related equip-
ment in the United States since 1926 under the “Zeiss Ikon”
and other names and marks.’

Beginning on April 13, 1945 the city of Jena was occu-
pied by the Allies. It was first occupied by the Armed
Forces of the United States, who remained for two and one-
half months, relinquishing control in July, 1945 to the
Soviet Military Forces, after it was decided that Thuringia
was to be part of the Soviet Zone, pursuant to the Allied
statement on Zones of Occupation, issued on June 5, 1945,
which divided Germany into four military occupation zones.

At the time of Germany’s surrender, the Zeiss Founda-
tion deputy was Professor Abraham Esuun, and its Board
of Management consisted of Professor Walter Bauersfeld,
Paul Henrichs, Dr. Heinrich Kueppenbender, and Pro-
fessor Georg Joos. The Schott Board consisted of Dr. Erich
Schott, Richard Hirsch and Mr. Henrichs. The adminis-
trative offices and principal manufacturing establishments
of both firms were in Jena, but Zeiss also had branch estab-
lishments in Berlin, Cologne, Hamburg, Vienna, and a num-
ber of foreign countries, all outside what was to become the
Soviet Zone, and Schott had a branch factory in Landshut,
Bavaria, which was within the American Zone.°

8 The use of the trade names and marks by both parties in the United
States is set forth in more detail later herein.

9 The total number of employees of the various enterprises in which
the Carl Zeiss Foundation had an interest was approximately 45,000
when the American Armed Forces first occupied Jena. Approximately
15,000 were employed in Jena and its vicinity, and 30,000 at outside
iccations. The employees in the plant at Jena included 2,000 foreign
workers and 3,000 conscripted laborers. By June, 1945 the 5,000 non-

4504

In mid-June, 1945, when it was evident that Jena was
shortly to become a part of the Soviet Zone, American Mili-
tary authorities evacuated all members of the Boards of
Management of the Zeiss and Schott firms and approxi-
mately 122 top scientific, production and administrative
personnel, to Heidenheim, Wuerttemburg, in the United
States Zone of occupation, where they established a tuctory
to assist in the continuing war effort against Japan. The
management and scientists did not depart voluntarily but
under military orders.

The members of the Board of Management of Zeiss desig-
nated three Zeiss employees, Dr. Friedrich Schomerus, Vik-
tor Sandmann, and Dr. Hugo Schraue, to act during their
absence. The Board of Schott made a similar designation
of three of its employees.’® Appellants contend that the
members of the Boards orally resigned. On conflicting tes-
timony the district court found that the departing Boards
of Management did not resign, “but arranged with three
trusted employees to exercise their functions during the
Board’s absence on the understanding that upon the Board’s
return it would assume exercise of its management func-
tions in Jena.” * (FF 82). JA 839.

regular workers had left the employ of the Zeiss Firm (FF 49, 50, 51).
JA 830-831.

10 Esau and all members of both Boards had been members of the Nazi
party. Their designees had not been identified with the Party. Each
designee had been employed for over ten years but did not have a life-
time contract. Lifetime contracts of employment were executed by
Schomerus and Schrade.

Kueppenbender, Schott and Schrade testified at the trial. All re-
maining members of all Boards were then deceased.

11 The district court said in part: “After careftlly reviewing the evi-
dence and appraising the witnesses (including Kueppenbender, Schott
and Schrade), we find that the credible evidence establishes that while
the Zeiss Board members evacuated to Heidenheim granted broad man-
agement powers to Schomerus, Sandmann and Schrade * * * and later

On June 9, 1945 the United States Armed Forces at-
tempted to set up a provincial government and “purported
to appoint” Herman Brill as Prime Minister of Thuringia.
Brill in turn appointed Dr. Walter Wolf as Minister of
Education (FF 66). There is no evidence, however, that
the Armed Forces of the United States had authority to
organize a new provincial government (FF 67). Under
the agreement of June 5, 1945 Thuringia had already been
allotted to the USSR for occupation, and the agreement
provided for the exercise of governmental authority by
each Commander-in-Chief only “in his own zone of occu-
pation” (FF 68). JA 834-835.

On July 1, 1945 the military forces of the United States
turned over control of Thuringia (including Jena) to the
Soviet Armed Forces, who continued Dr. Wolf as Min-
ister of Education for Jena, which had the effect under
the statute of constituting him the Zeiss Special Board.
Wolf purported to revoke the appointment of Professor
Esau as Foundation Deputy and to name Dr. Arno Barth
in his place.

Some time after the deportation and when it became ap-
parent that the enforced absence of the Zeiss and Schott
Boards of Management from Jena would be longer than
expected, a dispute arose over management between the
boards in the American Zone and their designees in the
Soviet Zone. On conflicting evidence, and after careful
analysis of all letters exchanged between the two groups

even agreed temporarily to refrain from exercising their own powers as
Board members and to permit the latter to hold themselves out as the
‘Board of Management’ in order to appease Soviet occupation authori-
ties, the Zeiss Board never resigned.” JA 987-988. The court rejected
Schrade’s testimony because of his “obvious interest and his d:meanor
as a witness” and because it was “inconsistent with his prior testimony
on the subject.” JA 989.

4506

and testimony relating to the intention of the parties, the
district court held that the Heidenheim groups remained
as the official and legal boards, although they had in the
exchange of letters acknowledged that the Jena caretakers
were the sole responsible management in Jena.”

In December, 1945 the Soviet Military authorities se-
questered the assets of Zeiss firm as reparations, the plants
having supplied equipment for the Nazi military effort.
Notice was given'to the Zeiss Works, and Schrade was
appointed sequestrator. Commencing on October 22, 1946
the Zeiss and Schott plants in Jena were almost totally dis-
mantled and 94% of all plant equipment and more than 300
employees were transported to the Soviet Union. Under
Order 124, the trademarks used in connection with the
sequestered assets were included in the sequestration (FF
226). JA 899.

Thuringia authorized a partial rebuilding of the Jena
plants. Between 1945 and 1948 plants for the manufacture
of Zeiss products were continued and established in the
Western Zones."* The Jena group continued to manage

12 The court’s findings on this issue are summarized in its discussion
of the facts as follows:

“The makeshift arrangements served temporarily to appease the
Russians. The Jena management, although but caretakers, main-
tained its appearance as the Boards of Management to the Russians,
thereby avoiding removal by the Soviet occupation authorities and
replacement by communist functionaries, but secretly recognized
the Boards in Heidenheim as the official management by not re-
quiring a resignation, by not pursuing their removal, and by
assuring them that upon their return to Jena they would resume
actual management of Zeiss business in the Soviet Zone. In the
meantime the Boards in Heidenheim continued to lend themselves
to the facade for the purpose of avoiding Soviet scizure by acting
in the West under the powers of attorney from Jena rather than
asserting their true powers as the Board.” JA 1008.

13 ‘In the summer of 1946 the Zeiss group obtained space in a factory
in Oberkochen. In October, 1946 a limited liability company was or-
ganized in Heidenheim under the name of “Opton GmbH.” Its prin-

4507

Foundation interests in the Soviet Zone and to hold itself
out as the Boards of Management. Foundation interests
in the Western Zones were managed by the Heidenheim
group under power of attorney from the Jena group, even
though the Heidenheim group considered itself responsible
for those interests as the Board of Management (FF 180).
JA 882. Heidenheim and Landshut became in fact new
centers of the Foundation, equal in importance to Jena in
the administration of the Foundation’s interests (FF 235).
JA 901. |

In early 1948 the Expropriation Commission for Thurin-
gia, established by the Soviet authorities, voted to include
Zeiss and Schott on a list of business enterprises whose
sequestered assets were to be expropriated (FF 237), and
on April 17, 1948 the Soviet Military Administration issued
Order No. 64 ratifying this action (FF 239). JA 902. In
February, 1948 the Soviet Military Administration had
created the German Economic Commission to supervise the
establishment of a new Socialist economy in the Soviet Zone
(FF 240). This Commission issued two decrees providing
that trademarks were to be included among sequestered

assets which were expropriated, unless expressly excepted
(FF 241). JA 902-903.

Decrees entered June 1, 1948 by the Government of the
Land of Thuringia confirmed the expropriation of the
Zeiss and Schott Works, including assets which had been
sequestered in accordance with Order No. 124. There was
no evidence that any exceptions of trademarks had been
made (FF 242-244). JA 903. After the expropriations the
Jena managements no longer had any function to perform

cipal assets consisted of the Oberkochen production facilities (FF 200-
203). JA 889-890.

4508

with respect to the Foundation enterprises Zeiss and Schott
(FF 249). JA 904.

Since the expropriation and transfer to state ownership,
VEB has been the instrumentality through which the East
German Government has operated the expropriated Zeiss
plant in Jena (FF 264-269). JA 908-909.

Neither the nationalization decrees nor the deed or ex-
propriation purported to terminate the existence of the
Zeiss Stiftung. In discussing its finding that the Founda-
tion’s capacity to function was destroyed, the district court
said in part:

_ “Thus the Foundation’s capacity to function in the
Soviet Zone in accord with the Abbe Statute was com-
pletely destroyed by the Soviet expropriation decree,
which finally and unequivocally stripped it of its com-
mercial enterprises, which were the source of its ex-
istence in Jena, thereby working a basic change in
substance, not merely one in form. Beginning in June
1948 and continuing until May 1951 the Zeiss and
Schott enterprises in Jena were transferred from the
Foundation to the V.V.B. Optik, an association of
peoples-owned enterprises engaged in manufacture of
precision mechanical and optical instruments. On No-
vember 30, 1948 the firm name Carl Zeiss was cancelled
in the Commercial Register of the County Court of
Jena, and a new entry was made stating that the firm
was the ‘property of the people,’ in line with the Soviet
authorities’ socialization of the East. This was fol-
lowed by a further entry on November 20, 1949 chang-
ing the name of the firm to ‘Optik Carl Zeiss Jena
VEB,’ meaning ‘peoples-owned enterprise.’ In May,
1951 the Zeiss and Schott enterprises were separated
by the German Democratic Republic from V.V.B. Optik

4509

SU ci ot Nae en a in ee

ee ee

association, and converted into independent V.E.B. en-
tities under the direct supervision of the Ministry of
Machine Construction in East Berlin, subject to con- '
trol by other East German governmental agencies.

Appointed by East Germany as the ‘Works Director’
of both VEB enterprises, Schrade was responsible
solely to the Ministry for Machine Construction, and
not to the Foundation or to any Board of Management, }
Deputy, or Special Board.” JA 1014-1015. '

ee eS .

The Foundation had industrial and other assets located
outside the Soviet Zone of occupation valued at more than ;
thirty million marks, which could not be reached by the
expropriation decrees. The district court found that the
existence and operation of these commercial assets in the
West could not serve to prolong the Foundation’s existence :
in the East since, as far as Soviet authorities were con-
cerned, the assets had been expropriated and no longer
belonged to the Foundation but represented state-owned
properties.

On June 16, 1948 the German Economic Commission
adopted a resolrtion recognizing the “existence and opera-
tion of the Car Zeiss Foundation” and directed that the
rights and duties of the “people’s-owned” Zeiss and Schott
enterprises should be established in a “new version to be
drawn up of the Statute of the Foundation” and providing
that until the new version was prepared “the powers of all
the governing bodies of the Foundatiou will be exercised |

14 The court said further: “The properties in Jena were thenceforth
not to be managed by a Deputy and Boards of Management but by
direction of the State, which specified what funds would be appropriated :
and furnished for their continued operation. The Abbe Statute never ;
authorized a state-directed and state-controlled eleemosynary institution. ;
On the contrary, Abbe expressly stated he did not intend such an :
enterprise.” JA 1017. }

4510

by a Foundation Commissioner to be appointed by the
German Economic Commission.” No new “version” was
ever prepared and approved. Although a Foundation Com-
missioner was appointed, he never functioned. J A 1020.

On July 30, 1948, following the expropriation decrees,
the Board at Heidenheim, after conferring with legal coun-
sel, applied to the Minister of Education of Wuerttemberg
for a decree creating:a new domicile for the Foundation in
Heidenheim. On February 23, 1949 Wuerttemberg’s Min-
ister of State issued a deerce amending the Foundation’s
statute to create a new domicile in Heidenheim,** and pro-
viding that the affairs of the Foundation should be admin-
isteréd by Messrs. Bauersfeld, Kueppenbender and Hen-
richs of the Zeiss Board pursuant to section 114 of the
Statute.* The district court found that “The Wuerttem-
berg decree of February 23, 1949 gave legal recognition to
the Zeiss Board’s identity as the official Board and to its
de facto control and administration of the Foundation’s
assets in the West.” ?” JA 1030.

15 The bases for the new domicile are summarized in the district court’s
discussion of the facts as follows: (1) the Zeiss Foundation was a
German federal entity; (2) Germany, despite its occupation by the
four Allied Powers remained a single unitary sovereign state being
administered by the occupants pursuant to Article 43 of the Hague
Regulations; (3) Article 87 of the German Civil Code authorized crea-
tion of an additional domicile, or a change in domicile, for the Founda-
tion because the Soviet expropriation made it impossible for it to fulfill
its purposes in the East by preventing it from conducting its essntial
commercial operations; and (4) Wuerttemberg, as a member state of
the German Federal Government, had the power to effectuate such im-
plementation of Article 87. JA 1029-1030.

16 Notice of this decree apparently did not come to the attention of
VEB in Jena until sometime in November, 1951, when it was apprised
of the decree in connection with a proceeding pending in the German
Patent Office in Munich (FF 310). JA 921.

17. A further Administrative Decree was issucd in May 1954 by the
Minister of Education of Wuerttemberg amending the Statute of the
Carl Zeiss Foundation to eliminate Jena as a legal domicile (FF 311).

4511

In May, 1951 East Germany’s Minister of Machine Con-
struction directed the President of Thuringia to appoint
a new “Foundation” Deputy and new “organs” of “Carl
Zeiss Stiftung,” pointing out the urgency occasioned by
threatened litigation by the West. On June 27, 1951 the
Minister of Education wrote a letter to five persons ad-
vising them that they were appointed “as organs of the
Carl Zeiss Foundation for the management of industrial
activities *.* *, such appointment to take effect June 27,
1945.” JA 1033-1034. There was testimony from legal ex-
perts, however, that as far as East Germany was concerned
the Foundation had ceased to exist after expropriation of
its commercial enterprises there.” In July, 1951 the prac-
tice of holding Foundation meetings, which had been dis-
continued in June, 1948, was resumed.

Although appellants argue that even though the Zeiss
and Schott Works were nationalized, the Stiftung in Jena
has remained alive, we agree with the district court “that
the so-called ‘Foundation’ which the East German govern-
ment sought to ‘revive’ or ‘warm up’ in 1951 is not the
Foundation established by Dr. Abbe and is not identifiable
with, or a successor to, that Foundation.” ?® JA 1035.

JA 921-922. On August 3, 1967 the Parliament of the Federal Republic
of Germany adopted legislation purporting to confirm the validity of
measures taken to transfer such domiciles to West Germany (FF 320).
JA 923-924.

18 This testimony was given by “Richter, an experienced German
lawyer who was then head of the legal department of the East Ger-
many Ministry, and Schacht, another trained German lawyer acting as
a Jena VEB’s counsel in the matter.” JA 1034.

19 In its discussion of the facts, the district court continued: “It repre-
sents a pseudo-type organization, deliberately established by East Ger-
many as a sham or facade for litigation purposes, with a view to trying
to create a color of right to assets outside of East Germany, including
Zeiss trademarks. * * * The record reveals beyond any serious doubt

4512

Appellee Zeiss Ikon A.G. was organized in 1926 and regis-
tered in the Commercial Register of the County Court in
Dresden, Saxony, Germany, and has been engaged in the
manufacture and sale of photographic equipment and re-
lated goods, using the trademark “Zeiss Ikon.” In June,
1947 the Ministry for Economics and Economic Planning of
the Government of the Land of Saxony, located within the
Soviet Zone, expropriated the enterprise Zeiss Ikon A.G.
of Dresden without compensation, effective July 1, 1946.
The “Zeiss Ikon” trademarks were included in the expro-
priation (FF 330-336). JA 926-927.

On March 3, 1948 at a special meeting of stockholders
in Stuttgart, in the American Zone, a resolution was
adopted transferring the domicile of Zeiss Ikon A.G. from
Dresden to Stuttgart. The bylaws then in effect provided
that meetings of stockholders could be held in Dresden,
Berlin, Stuttgart, or Jena. In a judgment rendered Febru-
ary 14, 1958 the Federal Supreme Court of West Germany
upheld the validity of the transfer of domicile from Dres-
den to Stuttgart. The district court found that the transfer
of domicile of Zeiss Ikon A.G. was legal under German law
and that appellee Zeiss Ikon A.G. is identical with the cor-
poration of that name organized in 1926 and domiciled in
Dresden until its expropriation in 1947. (FF 338-343). JA
927-928.

At a meeting in October, 1949 at which Bauersfeld, Kuep-
penbender, Henrichs, Hirsch, Schott, David and Sandmann

that following the Soviet expropriation and break-up of the Foundation
in 1948, the East German authorities had no intention of ever permit-
ting its resurrection as a viable entity conforming to the original Stat-
ute, but they considered it dead. This is vividly confirmed by the fact
that the June 27, 1951 appointment of the so-called ‘organs’ for the
Zeiss and Schott Works were expressly retroactive to June 27, 1945.”
JA 1035-1036.

4513

were present, “the Heidenheim management made it clear
that in their view only they and not the expropriated works
in the East were entitled to the Zeiss name and marks and
that they were not willing to give up the good will of the
firms symbolized by the trade names and trademarks. They
offered, however, to permit the VEB in Jena to use the
marks on the basis of a license agreement.” (FF 346-347).
JA 928-929.

On February 17, 1950 Messrs. Bauersfeld and Kueppen-
bender (signing for the Zeiss firm) and Messrs. Henrichs,
Hirsch and Schott (signing for the Schott firm) addressed
a letter to VVB Optik (the Association of State owned
enterprises of which VEB Carl Zeiss Jena then formed a
part), claiming ownership on behalf of the Foundation of
the firm names and trademarks and proposing discussions
looking toward a license agreement pursuant to which the
state-owned Zeiss enterprise at Jena would be permitted to
use the trademarks in the West. (FF 348-350). JA 929.

By letter dated December 3, 1951 members of the Zeiss
Board in Heidenheim renewed the proposal to license the
Zeiss VEB, which the district court found was “tacitly
accepted by East Germany’s Minister of Machinery Con-
struction, who on February 25, 1952, instructed Dr. Schrade
that the East German government deemed it expedient to
adhere to the proposal as a ‘modus vivendi’ and to proceed
accordingly.” JA 1037. The court found that until some-
time in 1953, with minor exceptions, products of the VEB
were sold outside the Communist Bloc countries in accord-
ance with the conditions laid down in Heidenheim’s letter
of December 3, 1951 (FF 980). JA 937.

After the East and West failed to reach an agreement
on licensing terms, the Zeiss firm in Heidenheim on Febru-
ary 12, 1954 advised the East that it intended to take legal

4514

Se waa

IB eis essa cercsonssinidss drm sn cir satin

steps to protect its rights in the Zeiss name and marks
(FF 384), and on February 18, 1954 advised all foreign
distributors to cease handling Zeiss products made in the
East (FF 38°). JA 938. On February 27, 1954 the Zeiss
firm in Heidenheim obtained an injunction in the district
court in Goettingen restraining a West German distributor
from selling VEB made products bearing Zeiss marks in
West Germany (FF 387). JA 939. .

In April, 1954 the Council of the District of Gera (a
political subdivision of Kast Germany) brought an action
in the district court of Stuttgart, West Germany, against
the Zeiss firm in Heidenheim and the members of the Board,
seeking to have the entry of the Zeiss firm stricken from
the Commercial Register in the County Court of Heiden-
heim, and to have certain trademarks, including those at
issue here, transferred to and reregistered in the name of
the Carl Zeiss Stiftung of Jena. On July 31, 1954 the
action was dismissed on the ground that the plaintiff was
not a legal representative of the Carl Zeiss Foundation
and had no authority to bring the action. Ultimately this
decision was affirmed by the Federal Supreme Court of Ger-
many on November 15, 1960.

In May, 1954 the Zeiss firm in Heidenheim brought an
action in the District Court of Duesseldorf against Zeiss
VEB (appellant in this action) and DIA” seeking an in-
junction against the use of the Zeiss trade names and
marks. This resulted in judgment for the plaintiff, ulti-
mately affirmed by the Federal Supreme Court on J uly 24,
1957 in a decision holding that the board members in
Heidenheim had never resigned and were authorized to

20 At the beginning of 1953, the Carl Zeiss Firm in Heidenheim was
advised that the sale of products produced in Jena by VEB for export
had been taken over by a state trading organization known as “DIA”
(FF 381). JA 937.

4515

aE APT IGLOS LLL LAN RIEL ELLIE OL TIE ©:
the complaint and by way of affirmative defenses snd counter-
claims allege that plaintiff Foundation is not the original
“aiae Poundation organized in 1989 and does not have any ricjint,
title or interest in or to its property: that the Foundation 1
still located in Jena, Cast Germany, in accordance with it«

charter, that the "eiss marks belong to it and to defendant

\ gaieeneeneemall _

V.B.B. Cerl teies, Jena end Ercona by license and assignasnt;
end thet the use of the “eine marke by plaintiffs and Carl
seiee, Inc. of Mew York, edditional defendant om counterclaims,
ie wunlewful. Defendants also allege res judiceta, abandonment,
scoquiescence, end other ineyuitable conduct, including trademark
misuse in violation of the antitrust laws, and seek injunctive
ané@ Gecleretory relief and damages. Trial of the antitrust
Gefenres end counterclaims and of all damege iesues has been
@eferred. Defendants Exekta Camere Co. and Camera Specialty Co.
have agreed to be bound by any final judgment, except as to
Gauages, entered egeinst the other defendants, and heve not
perticipeted further in these proceedings.

Im their reply to the counterclaims, plaintiffs allege
that the courts of west Gerwany have determined the legal status
of the Foundation in their favor, that their determination is
conclusive here: and that the purported assignment from V.&.B.
Carl Zeiss, Jena to Erooma is unlewful because the V.E.B. hac
mo rights in the trademarks assigned for the reason that the
essignment of pre-1946 United states trademarks by an Bast
Geruen nations] is prohibited by the frading with the Enemy Act,
SO U.S.C. App. §6§1-40, and regulation 8 C.F.R. 9307.46 issued
thereunger, and because the assigqnesnt wes not eccompanied by
the trensfer lying business.

«$propriation
Commission in Thuringia, of which Schraede wes 8 member, voted
in the spring of 1948 that all assets of the Zeiss ané Schott
firms should be expropriated. on April 17, 1948 the recommended

-50-

expropriation was ratified by Order No. 64 of the Soviet Military
Administration and on June 1, 1948 it was confirmed by decree

of the Government of Thuringia. The expropriation decree
confiscated without compensation all secvestered assets of the
7@ies and Schott firms and “all other assets" that hed been
sequestered, including its trademarks, and purported to seive

@®ll such assets detines Cis Soviet Y’one, including those in the
West and eleevhere.

In view of the defendants’ contention thet trademarks
were not tent that it was not prevented from doing so by
Soviet action in the East. The immediate problem was the
adoption of measures that would enable the Board to legalize
the de facto existence of the Foundation in the West, in
recognition of its surviving there extraterritorially after it
was rendered incapable of functioning in the Best. Without such
legelization the Board might find itself unable to gein Gay-to-
Gay recognition in the west of its right to contrel the Founde-
tion's Western assets and operations, and of its authority to
represent the Zeiss firs, proof of which in the form of registra-
tion in Commercial Registers throughout the West wes required to

assure recognition of the Board's right to act as such. If the

~63-

Foundation wes no longer able to function in the Kast, did it
survive as a legal entity or juristic personality in the ‘ est?
If so, om what theory? ‘as it a creature of the Duchy of Saxe-
Weimar (which lost its e-istence after it was merged into the
Province or Land of Thuringia in 1923), or of Thuringia (existing
in 1948 as @ Land or Province occupied and controlled by the
Soviet Military Authority), or of the sovereign state of Germany,
now divided by the Allies into four .ones, each occupied by
military forces of one of the Allies vhich controlled and
adainistered German affairs in its “one pursuant to agreements
between the four Allied Powers and administered by their Allied
Comtreol Council for Germany?” Assuming that the Foundation was

e creature of one of these governmental bodies, did it enjoy
“extraterritorial immortality," despite its having been
incapacitated in Jena, which had been its legal domicile since
its original establishment, and despite provisions in its
Statute that its legal domicile should be Jena (Sectio. 3), which

could not be amended (Section 121)? These were but a few of the

e The occupying powers were presumably subject to the
Magee Convention and the provisions of Article 43 of
the Hague Treaty Regulations thereunder (to which the
United States and the U.S.S.R. are parties), which limit
the power of en occupant to restoration of public order,
“respecting, unless abeclutely prevented, the laws in
force of the country”.

~64-

problems faced by the soard in June 1948 in seeking legal
acceptance of the Foundation's existence in the West.

After consulting with legal counsel the Boards in
Heidenheim decided to seek e decree from the lend, or state, of
Wuerttenberg cresting @ new domicile for the Foundation in
Heidenheim and # “Vorstand” or Administration for it that
would perform the functions of the Special Board which could no
longer function in Jena. on July 30, 1348, a written request
was accordingly made to the Ministry of Education of Wuerttemberg.
Although it was signed by members of the Soards as “authoriced
agents” acting pursuant to the powers of attorney from Jena, each
was also described as a menber of the Boards. It must be
remembered that at this fluid time, dominated by uncertainty,
although the Soviet expropriation was in the process of destroy-
ing the Foundation's capacity to fu -tion in the Soviet zone by
conducting commercial business for profit as provided in its
charter, there remained the faint hope, apparently still flicker-
ing in the minds of some, that Germany would eventually be
reunited, whereupon the Foundation's Jena works woulé be returned
to resume operetions as required by its charter. Scon this hope
was to be Geshed. But in the meentime, an additional Gomicile,
or legel center, would enable the Boards to continue its functions
in the west.

~65-

Upon review of the Boards’ legal predicament, it soon
beceme apparent thet it wes unnecessary to seek creation of a
new supreme organ, or “Vorstand" for the Foundation, in view of
the existence of Section 114 of the Foundation's Statute and
certain provisions of the German Civil Code which governed
foundations. Section 114 of the statute provided that if the
Special Board should cease to exist (as occurred upon. termination
of the Foundation's existence in the Bast), ite functions could
be taken over by the zeiss Board of Management, which wes
authorized in such event to assume control of the Foundation's
assets for safekeeping and administration wntil a new Special
Board was constituted. The German Civil code, which had come
inte effect in 1900 after enactment by the legislature for the
sovereign of Germany, was made applicable to existing Foundations
(euch as the Zeiss Foundation) by Article 163 of its Introductory
Lew. The Zeiss Foundation had been created pursuant to the lews
eof the Grand Duchy of Saxe-“eimer, iteelf the product of a
melange of prineipelities, oniy to be dissolved in 1920 upon its
merger with other @schies and principalities by the German
Mational Perliament into the newly established land, or state, of
Thuringia, which in turn ceased to exist in 1952 when Soviet
authorities recrganized the govermunntal structure to form the
German Democretic Republic (Zest Germany).

~66-

wert

. The evidence offered by the perties, particularly as: .
construed by Professor Ernst Steindorff, German lew expert, is
persuasive that the effect of the adoption of provisions in the .
German Civil Code governing foundations vas to constitute such
foundations (including the vei-> Foundation) netionals or
creatures of the German federal government, as distinguished fron
the “laender", or e-inting states, forming the federation; end
that thereafter the laws of each individual state (such as the.
Grand Duchy of Se’e-reimer and later the Land of Thuringia) deal-
ing with foundations (e.g., Sections 14 to 17 of the Grand
Duchy's “Ordinance of Execution of the Gexmen Civil Code" and the
"1923 Thuringien Ordinance of gxrecution of the Gersan civil Code")
were the product of e:ercise of power delegeted to them by the
Pederation in implementation of the German Civil Code. The
intent to constitute foundations German nationel entities,
administered by the individual leender or states as arms of the
German federel government; was evidenced by Article 55 of the
Intro@uctory Law to the Civili Code, which fepesied the iaws of
the laender with respect to private metters (and we are dealing
here with « private Foundation) except es otherwise provided in
the Civil Code and Introductory Lav, and by the fact that when
the German Legislature desired to preserve the character of

certain entities as nationals of a specific state only, as in the

-67~

case of the “Gotha” mining companies, it did se expressly. in
short, efter 1900 a Land, in adopting laws relating to founda-
tions, was exercising power delegeted to it by the Federal Govern-
ment through Articles 80-88 of the German Civil Code to act with
respect to a federel entity.

Article 80 of the German Civil Code provided that a
foundation might be established by approval of the state, or
Land, where it was domiciled and, in the absence of other pro-
visions, its domicile should be where the administration was in
fact conducted. Article 87 provids4:

“z¢ the fulfilment of the purpose of a

foundation has become impossible, or if it
endangers the common weal, then the appropriate
authority can impart to the Poundation another
purpose, or else dissolve it.

"In the case of a change of purpose, the
intention of the founder is to be considered,
as far as possible, and particular cere is to
be taken that the profits of the property of the
foun@setion should belong to the body to which
place they should come following as far as
possible the intention of the founder. The
authority can amend the statutes of the founds-

tion as far as the modification of purposes
requizes.°

At the time of the Soviet expropriation of the Founda- —
tion's assets in the Bast, there existed in the West the State
of weerteeubers, created by the American Occupation Authority
on September 19, 1945, which consisted of the former states,

or lands, of Beden and wuerttemberg. The Proclamation creating

~68-

‘it pursuant to assumption of supreme authority over Germeny by
the four Allied Powers and the establishment by SMAEF of a
United States Area of Control, provided that éxcept us abrogated,
suspended or modified by the Military Government er the Control”
Council for Germany “the German law in force et the time of the |
occupation shall be applicable in each area of the United states
Zone of occupation." és March 1, 1947 @ further proclemstion

by the American Military Government, after reciting that
democratic constitutions had been adopted by wuerttesbery,
declared that full legislative, executive and judicial power
evisted in that state in accordance with its constitution.

To summarize, the quest for a new domicile proeseded —
on the bases (1) thet the Zeiss Foundation wes e German federel
entity; (2) that Germany, despite its occupation by the four
Allied Powers, remsined a single unitery sovereign state being
administered by the occupants pursuant to Article 43 of the
Bague Regulations; (3) that Article 87 of the German Civil code
authorized the crestion of an additional domicile, or a chenge —
in domicile, for the Foundation, because the Soviet expropriation
made it impossible for it to fulfill its purposes in the Rast by
preventing it from conducting its essential commercial operations:
and (4) that \‘verttemberg, as a member state of the German
federal government, had the power to effectuate such

~69-

implementation of Article 87. On Pebruary 23, 1949 waerttesberg’s:
Minister of State issued a decree smending Section 3 of the |
Foundation's Statute to create a new domicile in Heidenhein

and providing that the effairs of the Foundation should be
administered by Messrs. Bauersfeld, Kueppenbenéer and Bearichs

as the Zeiss Board pursu2nt to Section 114 of the Statute. The
decree recited that it was promulgated pursuant te Article 87

of the German Civil Code and Article 133 of the wuerttenberg

law implementing the Code, A certificate wes thereupon issued

to the Zeiss Board av proof of its authority, which the Board
thereafter used as evidence of i*s legitimacy, appropriate

entries being wade in the Commercial Register of Beidenheina and

The Vuerttembery decree of February 23, 1949 gave
legal recognition to the Zeiss Board's identity ss the official
Board and to its 9 fecto seo and administration of the
Poun@ation’s assets in the West. It provoked no immediate
reaction in the East and would probably have gone unchallenged
indefinitely. if it had not been for a dispute that arose out of
the Jena VEB's use of Zeiss trademerks in its export of products

from Jena for sele in the West. Prior to the Soviet

-70-

expropriation these merks hed been registered in the aeee of...
the Zeiss “firm®, being attached exclusively to its Dasiness,.
end constituted part of the Poundstien's assets. At ® meeting
in October 1949 in Munich attended by the gseiss and Schott
Board menbers (Baversfelé, Kueppenbender, Birech, Schott and .
Menrichs), @ representative of the Jena VEB (Sandsenn), end
Dr. David, legal ainsi the Zeiss Board informed Sanéeenn thet
it was aot willing, in view of the Soviet exprepristien, to
surrender the good will represented by the Zeiss warks, but thet
it would agree to license the VEB to use the marks, to which
Sanémann responded that such an agreement weuld require the
approval of the highest governmental authorities in Bast Berlin.
The consummation of such a license wes further coupliceted by
the widening and Gecisive split between the Bast end West,
reflected in the formation on September 21, 1949 of the Gorman
Federal Republic (west Germany), which wes recognized by the
United States, and the Soviet-sponsored establishnent on Octoher
7, 1949 of the German Demoeretic Republic (Best Germany), which
hes never bem so recognized. .
The October 1945 meeting in mmich wee followed by ¢
letter dated February 17, 1950 from the meubers of the Seise and
_ Sehott Boards in Neidenheim to VVB Optik, ihe Bact’s eesceiation
of stete-cmed VEB enterprises, asserting the Powudatien's

«Jie

ownership of the Zeies and Schott trademrks, claiming the
right to prohibit infringement of them by VVB Optik, and
proposing @ license agreement. Such an agreement would recogni :e
the fact that the establishments in the West were not yet able
to meet the dGemend there and elsewhere for many items in the
Zeiss line which were being manufactured in Jena. Except for
inconclusive negotiations, no action wes taken by the Bast until
the latter part of 1950, when the Zeiss Board in Heidenhein
applied to the newly reorgeni~ed German Patent Office in Munich
‘for registration of Zeiss trademarks in the name of the Zeiss
firm in Heidenheim, which was followed by the threatened seizure
in Mamburg of a shipment of goods from 7eiss VEB in Jena.

Faced with the prospect that VEB-msde products'' bearing
the Zeise marks might be berred from shipment to the West and
other areas of the world, the East groped for a way in which to
create a legsl besis for claiming ownership of the marks thet
would be recognized despite the Soviet's purported confiscation
of them through expropristion, which would not be recognined
outside of Bast Germany. Legel officials of the Ministry of
Machine Construction in East Berlin, as well as the legal
edvisers of the VEBs, took the view that a colorable basis could
be achieved only by reviving the Foundation in Jens, end return-
ing to it its confiscated assets so that it could theresfter be

conducted in accordance with Dr; Abhe’s Statute. fhie proposes...
was unacceptable to the authorities of Bast Gerueny, however, ....
for the reason that it would amount’ to the esteblichment of.a-...-
capitalistic enterprise contrary to the concept’ of commanizced -.
peoples-cwnership that wes the foundation of the anew socialict:;:
erder in the East. Accordingly the decision was‘ taken te attenpt
to “revive* or “werm ig the defunct Poundation in form; but
without essential substance. Since the Ministry of Béscetion
of Thuringia refused to take action in the metter without _...
direction from higher authorities in Rast Serlin (probably —
because it might risk official reprimand for even attempting tec |
restore the form of a capitalistic organization), the VEB’s
legal sd@viser, Dr. Schacht, visited the then heed of the legal .
Gepartment of the Minister of Machine Construction im Bast».
Berlin, Mins B. Richter, Who went to Jens and wes prevailed
upon to lend help in the “warming up” venture.

Through Richter's efforts East Germny's Minister of
Machine Construction, Ziller, directed the President of Thuringia
to appoint a new “Foundstion* Deputy and new “orgens® of the
so-called “Carl Zeine Stiftung," or Zeiss Fouadation, pointing |
out the urgency cecasioned by threatened litigation by the west.
Following @ ty 19S1 mesting in Jena; the minutes of which noted
that the Minister of machine Construction had decided to mke

ee ET ISI.

We next turn to Gsfenésats' osteppel Gsfence based ca
the decision of the court in Excome Camere Coxe. v. Ramee. 120
U.8.P.Q. 100 (B.B.C. 1998), s£fd., 277 ¥.24 94 (B.C. Cir. 1966).
Defendants contend that plaintiffs here ere estopped fram
questioning Gefendants' right to use the Zeiss tredée seme and
marks in the United States for the reasone thet (1) the iseve
was raised and decided in Brcona in favor of the defendants’
position here, and (2) plaintiffs here, although not parties te
the Broome suit, were in privy with the United States Government,
@ Gefendent in that suit. A review of the Bregue record and
comperisen of it with thet here reveele Gefendants te be wrong
on beth counts, and that their estoppel defense is meriticss.

The Broome suit arose out of a dispute over the
question of whether the Attorney General had acquired omership
of the Zeiss trademarks by virtues of orders purpertim to vest

then under the Prading with the Enemy Act, $0 U.8.C.A. App. §7(¢).
After the Attorney Generel, cloiming such ownership, ettenpted
to step Broons Camera Corp. end Steelaasters, Inc. from inporting
Jena-mede merchanéise hearing the Zeiss marks inate the United
States for sale, the letter brought suit in the United states
District Court for the District of Columbia secking to enjein the
Government from interfering with such importation and claiming
that the Attomey General's vesting was ineffective for the sencen

-147-

that it purported to seize the Zeiss trademrks only, not as
an appurtenance to any business in connection with which they
were used. The Gistrict court so held end was affirmed on appeal.
The defendants base their claim of estoppel on certain issues
raised by affirmative defenses interposed by the Government,
which were expressly left open by the court and never Gecided.
In its anewer the Government in Ercona asserted as an affirmative
Gefense that the Jena-manufactured goods were not entitled te
beer the Zeiss trademark because they were not manufactured by
the Zeiss Foundation, ~hich had been removed from Jena to
Heidenheim; end that Steelmasters and Ercona were bound by
judgments of the courts of West Germany which Gecided that Jena-
manufactured goods were not entitled to bear the zeisse trademarks.
In support of that position the Government introduced the West
German court decisions. In response Erconse (which was repre-
sented by counsel for defendants in the present action) success-
fully ergued thet the issues raised by the Government's affirm-
tive defenses were irrelevant, the issue being limited to the
question of whether the vesting wes velid and effective. Accept-
ing this ergument, the district court, in ruling in favor of
Brooma, made the following finding:
“11. The respective rights, if any, in
the ‘Zeise’ trademerk of the several Cerl Zeiss

firms now located in Bast Germany and in West
Germany, are not in iseve in this case; end the

-148-

SYD OE LRT LE OAL LL OR Ss TE EO I BPO AT ANB AA OR hag

:
:
:

si-5s-Sde,

paar att Se

VED IIR G Gm a tte Pea TO i sit

SR aka Et NT i AM AE A try Be As tn Aare sal Cie WALES ome ats

| |
%
rhs
:
k
et

Court expresses no opinion with respect
thereto. Mor are the decisions rendered

by foreign courts with respect to such rights
relevant here." (120 U.S.P.0. at 108)

Upon appeal the Government did not pursue the matter
but limited itself to the uestion of whether the vesting was
sufficient to confer ovnership rights in 7eiss trademarks. The

limited nature of the issue thus presented on appeal, and the

failure to adjudicate the question of which of the parties, as
betwen Baidenheim and Jena, was the owner of the trademarks,
was confirmed by the Court of Appeals, which stated:

“The Attorney General has undertaken to
bar the importation of zeiss-marked Jena products
solely on the premise that he owns the trademerk
‘Zeiss’ in the United States. We are not required
to consider or Gecide whether “eiss-marked products
produced in East Germany may be berred from the
United States for some other reason. Similarly,
we are not required to consider or decide whether
Optik Jena possesses any rights of ownership in
the merk. Our only question is whether the
Attorney General acquired a sufficient interest
in the United States rights in the trademark by
reason of the various seicures of the mark to
entitle him to bar use of the traijemark in the
United States by others." (277 F.24 at 97)

Although the Government claimed that the Jena-nade
goods were “spurious,* thet question was never litigated,
Ercona‘'s counsel stating it was “not in issue," and the record
is clear thet in referring to such goods as being what the Zeiss

trademark signified, the district court wes concerned only with
the question of whether the goods were manufactured in Germany,

witheut distinguishing between Jena and Heidenhein.
~149-

parthermore, even if Ercona hed made the decision of

iesves attributed to it by the defendants here, the plaintiffs

here weulé not be hound by that decision because they were neither
perties nor privies to that action. The evidence offered in
suppert of defendants’ argument that they knew of the case, were
kept informed of its progress and supplied evidence to the Govern-
ment falle far short of demonstrating the control or participation |
required to establish privity. see Litchfield vy. @oedmov, 123
U.S. S49 (1687); Waited States v. Califomia Bridge Ca., 245 U.S.

337 (1917); maxtforé Acc, & Ind. Co. v. Pizst Mat'l Bepk, 281 W.¥.—
162, 167-68 (1939). The alleged “cooperation® on the pert of

plaintiffs with the Government consisted essentially of supplying
copies of the judgments of the vest German courts (because the
State Department route for obtaining them was slow), end employing |
private sounsel to keep them advised from time to tims, but not
with any regularity, as to the progress of the Government
litigation. Although such counsel Giscussed the case from tins

to time with the Government's attorneys and furnished to thes
copies of the West German judgnent., the Government did not
surren@er to them any degree of its control of the litigation.
Citizens mational Trust and savings Ranks of Los Angeles v. United
States, 270 F.24 128 (vth Cir. 1959), cited by Gefendants in

suppert of their position, presented an altogether different

-150- |

oA wa Dede

re Leet ar

HL Pint AREAS reise eee in Dive pe oN) Bae Wheel Orns an alert ae ON.

situation which is clearly distinguishable. Although the court
there made reference to the fact thet the bank hed knowledge of

the action and employed a legal representative to audit the
earlier trial, the existence of privity wes based on the insurers
insured relationship between the bank and the United States with
reepect to a note ruled not valid and enforceable in an earlier
suit by the United states, as well as upon the assignor-essignee
relationship stemming from assignment of the note by the bank to
the United States. Mo such relationships existed here between
plaintiffs and the Government in the Ereona suit.

Defendants’ third argument in support of ite estoppel
Gefense, that plaintiffs are bound by the Broome éecision becsuse
they succeeded to the Attorney General's interest in the stock of
Carl Zeiss, Inc. of Mew York (which they purchaeeé from the
Government) is likewise without merit. Carl Zeiss, Inc. wes not
@ perty to the Ercona action. Although the decision was concerned
with the question of how the vesting of its stock effected the
vesting of the trademarks, that issue is not relevant here. The
ecquisition of the stock of Carl Zeiss, Inc., therefore, does not
result in the Ercona decision binding the pleintiffe with reepect
to an esue mot decided in Broone, namely, the right of Jena<-
manufactured goods to bear the Zeiss marks. Defendants’ estoppel
Gefense may therefore be dismissed as frivelous.

-1$l-

|
:
)

Plaintiff Carl .eiss Stiftung (the “zeiss Foundation")
ie entitled to the sole and exclusive right to use the various
Peiss trademarke and trade names in dispute end plaintiff zeiss
Ikon A.G. of Stuttgart is entitled to the sole and exclusive
right to use the Zeiss Ikon trademark and trade name.

ince at least 1953 defendants V.E.B. Carl Zeiss Jena,
Steelmanters and Ercona here infringed the trademarks of the
plaintiff Carl 7eisn Foundation in the United States and have
unfairly competed with the plaintiffs through the use of the
trade names "Optik", “Carl Zeiss Jena VBB" and “VEB Carl Zeiss
Jena* and trademarks consisting of the words “Carl “eiss Jena"
in a Gistinctive lens frame, the distinctive lens frame alone,
and the letters "C7".

Since in or about 1953 the defendants V.B.B. Carl
7eise Jena, Steelmesters and Ercons have, in violetion of §43(a)
of the Lanham Act, from time to time falsely described and
falsely Gesignated the origin ef goods imported by them into the
United States and sold in United States commerce as being goods
produced by 4 licensee of plaintife Carl zeiss when in fact
such goods were produced by defendant V.E.B. Carl Zeiss Jena,

a netionali:ed Bast Germen concern, which has no legal or other

connection with plaintiff Carl zeiss foundation or any of its

-152<

affiliated firms.

Subject to resolution of the issues raised by
defendants’ antitrust counterclains, trial of whieh has been
Geferred at the parties’ request, each plainti¢® is enuitied
to enforcement of its rights in its marke and trade names
egeinst the defendants and to the relief, including G@rnages and
injunctive relief, demandsd against the defendants, and the
Gefenses asserted by the Gefendants, other than that besed on
alleged violation of the antitrust laws, are diemissed for the
reasons hereinbefore stated.

Review of the legal and factual issues raised by
defendents' antitrust counterclaims, and of the damage issues,
will proceed promptly. Toward that end the parties are directed
(1) to meet together for the purpose of stipulating ell facts
not in dispute, designating, identifying, eané marking exhibits,
listing witnesses to be called, designating portions of
Gepositions to be cZfered, and setting forth any objections
thereto, and (2) to submit to the Court, on or before Decenber
16, 1966, all stipulated facts, exhibits to be offered,
Gesignations of deposition testimony and objections, and trial
briefs.

Pursuent to Rule $2(a), F.R.C.P., the foregoing
shall constitute the Court's findings of fact supplementing

-15§3-

PELE ELL Eee —

ILLS FEN perenne.

ret

as

those simultaneously filed on this date and shall constitute

the Court's conclusions of law.
pending trial and Gisposition of the remining iesues,

a final order and judgment will be deferred.
80 ORDERED.

U.S .Dd.

pated: November 7, 1968

494

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

-—-—=— == le lee ee x

CARL ZEISS STIFTUNG, doing
business under the name and -
style of CARL ZEISS; and ZEISS
IKON A.Ga,

plaintiffs,

~against~

62 Civ. 850

V.E.Be CARL ZEISS, JENA; Decision with Respect to

STEELMASTERS, INC.; ERCONA Antitrust Misuse Defense
CORPORATION; EXAKTA CAMERA 3
COMPANY, INC.; and CAMERA y

SPECIALTY COMPANY, INC.,

Defendants.

CARL ZEISS, INC.,

Additional Defendant
on Counterclaims.

Milbank, Tweed, Hadley & McCloy
Attorneys for Plaintiffs and Carl Zeiss, Inc.
One Chase Manhattan Plaza
New York, N.Y. 10005
William E. Jackson, Esq., Isaac Shapiro,
Esq., Patrick Owen Burns, Esq.
7
Walter J. Derenberg, Esq. of Von Maltitz,
Derenberg, Kunin & Janssen, New York, N.Y.

Of Counsel.

Harry I. Rand, Esq.

Attorney for Defendants V.E.B. Carl Zeiss
gena, Steelmasters, Inc. and Ercona
Corporation

200 Park Avenue

New York, N.Y. 10017
Donald E. Nawi, Esq., Botein, Hays,
Sklar & Herzberg, of Counsel.

MANSFIELD, D.J.

On November 7, 1968, the Court filed its decision and
findings of fact with respect to plaintiffs‘ elaine against
defendants in the above-entitled action, holding that the
plaintifeé Carl Zeiss Stiftung has the sole and exclusive right
to the use of the Zeiss name and trademarks in dispute and that
plaintiff Zeiss Ikon A.G. has the sole and exclusive right to use
the Zeiss Ikon name and mark. The Court further held that
defendant V.E.B. Carl Zeiss, Jena, Steelmasters, Inc. and Ercona
Corporation have, since at least 1953, infringed plaintifés*
trademarks, unfairly competed with plaintiffs through the use of
various names and marks found to be similar to those owned by
plaintiffs, and, in violation of §43(a) of the Lanham Act, falsely
described and designated the origin of goods imported by them
into the United States. All defenses except the antitrust misuse
defense asserted by defendants were dismissed, and subject to
sesotuston of that defense, the Court held that plaintiffs were
entitled to enforcement of their rights in the marks and trade-

names against defendants.

=Q«

Following a hearing on December 4, 1968, we ordered
trial of the antitrust defense to be severed from trial of the
antitrust counterclaim and damage issues, and on February 25, 26
and 27, 1969, the antitrust misuse defense was separately tried
to the Court. After careful review and appraisal of the testimony
and documentary evidenge seseived by the Court, we conclude that

i

the antitrust misuse defense must be dismissed. MN
As and for their “antitrust misuse" defense, defendants :
assert -that plaintiffs and their American subsidiary corporations,
Carl Zeiss, Inc. (Zeiss, N.Y.) and Zeiss Ikon Voigtlaender of
America, Inc. (ZIV, Inc.) have used their Zeiss trademarks in
various ways to violate the antitrust laws in the United States,
including the following:
(1) Combining with American distributors and
franchise dealers to maintain prices established by
Zeiss, N.Y. and ZIV, Inc. for Zeiss goods;

(2) Restricting sale of Zeiss goods by certain
dealers to limited territories;

(3) Restricting sales of Zeiss goods by dealers
to certain customer classes;

(4) Tying in the sale of certain zeiss goods to
purchase of other Zeiss products;

(5) Unlawful price discrimination;

(6) Precluding distributors from selling
competitive goods;

(7) Submission of artificial bids to govern-
mental agencies; and

(8) Organizing ZIV, Inc. to eliminate
competition in the sale of certain Zeiss Ikon
products.

Defendants further allege that plaintiffs’ antitrust misuse of
the Zeiss trademarks precludes entry of judgment in this action
in favor of plaintiffs.

At the outset it is important to define the material
issues raised by the foregoing antitrust misuse defense, especially
since plaintiffs, prior to trial of that defense, moved pursuant
to Rule 12(f), F.R.C.P., to dismiss the defense as a matter of law.
Plaintifis’ argument in support of that motion goes essentially
as follows: prior to the enactment of the Lanham Act in 1946,
antitrust misuse did not bar enforcement of a valid trademark.

The Lanham Act then provided that ownership of a federally
registered trademark would become incontestable after five years
of registration unless it was subject to certain defenses, includ-
ing misuse of the trademark in violation of the antitrust laws, in
which event such registration would not be deemed conclusive
evidence of ownership. Therefore, argue the plaintiffs, the sole
effect of the antitrust misuse defense is to defeat the incontest-
ability that would otherwise attach to registration of the trade-
marks under the Lanham Act, and the defense cannot be used to
preclude enforcement of the trademarks in the present case for the

reason that plaintiffs have already independently established their

-4-

ownership of the marks to the satisfaction of the Court.

Both the express language of §33(b)(7) of the Lanham
Act and its legislative history reveal strong support for
plaintiffs' contention that the intent and effect of the Act is
merely to make the defense of antitrust misuse available to defeat
the conclusive evidentdary force that vould: othestise attach to a
trademark certificate under the Act. The relevant portion of the

section pravides: . ‘
"The certificate [of trademark registration]

shall be conclusive evidence of the registrant's
exclusive right to use ... except when one of

the following defenses or defects is established:

keer et

“(7) That the mark has been or is being
used to violate the antitrust laws of the
United States." (15 U.S.c. §1115(b) (7))

The principal author of the Act, Representative Lanham,
in explaining the Senate-House Conference Report with respect to
the Act, stated:

"However, section 33(b) contains seven
exceptions to the rule that the certificate
of registration shall be conclusive evidence
of the rights of the registrant even where
the provisions of section 15 have been met.
Some doubt has been expressed on the following
points:

“First. Do these seven exceptions, in-
cluding the amending paragraph (7) with
reference to the violation of the antitrust
laws of the United States, lay down substan-
tive rules of law or substantive defenses

-~5-

which go to the validity and enforceability
of the mark, or do they relate only to the
weight of evidence to be given to the certi-
ficate of registration?

"Second. What is the meaning of the
words ‘used to violate the antitrust laws,'
as found in paragtaph (7) of paragraph (b)
of section 33?

"It is clear from the language of the
act and from the congressional history of
the act as it is found in the hearings and
reports that the seven ‘defenses or defects‘
listed under paragraph (b) of section 33 are
intended to relate to and to affect the weight

of the evidence to be given to the certificate *s

of registration where the owner claims the
benefit of the incontestable rule ... but these

seven ragraphs are not intended to enlarge,
restrict, amend, or modify the substantive law

of trademarks either as set out in other sections =
of the act or as heretofore applied by the courts

under prior laws. A trade-mark registrant who is
shown to have used his mark to violate the anti-~

trust laws is denied the benefit of the rule that

his certificate of registration is conclusive
evidence of his right of ownership and his

right to the exclusive use of the mark. Under
these circumstances, his certificate of registra-

tion is only prima facie evidence of his right
and he must be prepared to carry the additional
burden of proof as is necessary under the laws
and statutes as they existed prior to the passage
of this act. One of the valuable new rights
created by the act is the incontestable right
after 5 years’ use of the mark and the corollary
thereto that the certificate of registration is
conclusive evidence of ownership and the right to
the exclusive use of the mark. This new and

valuable r s denied to a trad k
str Ww. sh to have used his
Vv antitrust laws
vision s is not intended to Vv

. Ehe registrant of any rights he would possess
or enjoy if this act were not enacted into law.

-6-

Stated in other terms, proof of violation of
the antitrust of t United

registrant in the use of his mark does not

under this act dest e val t

right of the. istrant to continue

mark, but it places on him a burden of proof

in the event of litigation which others do not
have to carry, by diluting the weight the court
is to give to his certificate of registration

as evidence of ownership and the right to use
the mark. This is the intent and effect and the
only intent and effect of the seven subparagraphs

of paragraph (b) of section 33." (Emphasis
added) (92 Cong. Rec. 7524)

Pee eT NS tee ee

The same views were expressed by the managers of the

bill in presenting the Senate-House Conference Report with respect

to the bill.

Senator Hawkes, one of the three Senate conferees,

and Representative Lanham, one of the three House conferees, both

read the following statement drafted by the managers of the bill

in the House:

“Amendment No. 28: This amendment pro-
vides that the use of a registered mark in
violation of the antitrust laws shall constitute
a defense to a suit by the registrant. The
House recedes with an amendment substituting
the words ‘to violate’ for the words ‘in
violation of.' This amendment provides an
additional defense to the conclusive evidence
rule of a certificate of registration of a
mark which has become incontestable under
section 15. It does not and is not intended
to enlarge, restrict, amend, or modify the
substantive law of trade-marks either as set
out in other sections of this Act or as ——

fore mg Hg by the ee

If it is established that a registrant has

used or is using his registered mark, which
has become incontestable, as the legal,

causal, and efficient instrumentality to
violate the antitrust laws of the United
States, such registrant is denied the benefit
of the rule that the certificate of registra-
tion is conclusive evidence of his exclusive
right to use the mark. Under such circumstances,
the certificate is only prima facie evidence of
his exclusive right.to use and he must be
prepared to carry the additional burden of
proof as though his mark had not become
incontestable." (Emphasis added) (92 Cong.
Rec. 7523)

The foregoing statements as to the scope and intent of the
various defense provisions of the Lanham Act were affirmed by
another conferee, Senator Pepper, upon sitmiesten of the Conference
Report to the Senate, and the intent expressed by the authors
has since been accepted by commentators. Note, The Besmirched
Plaintiff and the Confused Public: Unclean Hands in Trademark
_Infringement, 65 Colum. L. Rev. 109, 114-115 (1965); Steed and
Hunter, Trademarks Assignments and Restraints. of Trade: The
Maola Ice Cream Case, 45 T.M.R. 886 (1955); but see Handler,
Trademarks and Antitrust Laws, 38 T.M.R. 387, 394-395 (1948).

It is true that Senator Hawkes when commenting upon the
Conference Report with which he expressed digreenent added the
following qualification with respect to §33(b) (7):

"I- should like to add that the exception

is that when the trade-mark is used to violate
the antitrust laws, then such violation of the
laws can be used as a defense against one who

sues for infringement.

-8-

"I should like to read this statement:
“This exception means, and should mean,
that a trademark owner who sues another user
for infringement must come into court with
clean hands, and if he is using the mark to
violate the antitrust law he is subject to be
contested and to have his violation used as a
defense." (92 Cong. Rec. 7636)
There are, furthermore, general statements by Senator O'Mahoney
upon the floor of the Senate, 92 Cong. Rec. 7872, 7873, and by
the Senate Committee on Patents, Sen. Rep. No. 1333, 79th Cong.,
2a Sess., ws 2 to the effect that the use of a trademark to
violate the antitrust laws is, by virtue of $33(b) (7), a defense
in an infringement suit. at best, however, these statements,
while seemingly contrary to the more detailed written statements
previously cited, are ambiguous as to the precise scope of the
defense. in view of the plain language of the Act and the
detailed and explicit statements of those primarily responsible
for drafting it and managing its passage, we cannot accept the
ambiguous and general statements of Senator Hawkes, who expressly
indicated his agreement with the more explicit statément of the
House managers, Senator O*Mahoney and the Senate Committee on
Patents as altering or enlarging in any way the intent and effect
of the relevant provisions of the Act. :
Insofar as defendants here rest their antitrust misuse

defense upon §33(b)(7) of the Lanham Act, therefore, the defense

must be rejected. However, the limited purpose for which the
defense may be invoked under §33(b)(7) does not automatically
call for dismissal of the defense in this case. Although the
issue is not free from doubt, we believe that a court, in the
exercise of its equity powers, may deny enforcement of a trademark
on the part of one who. has used that trademark in violation of the
antitrust laws. We recognize that the forces favoring exercise
of such power in a trademark suit are much weaker than those
calling for its exercise in patent litigation, and that decisions
upholding an antitrust misuse defense in the latter are not

necessarily authoritative in the trademark field. See, for

example, Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488
(1942). The distinction arises from the fact that a patent repre-

sents a grant of a limited monopoly that in most instances would,
absent its legalization by Congress, constitute an unlawful
restraint of trade. The limited monopoly is granted in exchange
for disclosure of the patented invention to the public so that it
may be utilized in free competition upon expiration of the patent.
A valid trademark, on the other hand, merely enables the owner to
bar others from use of the mark, as distinguished from competitive
manufacture and sale of identical goods bearing another mark, or
even no mark at all, since the purpose of trademark enforcement

is to avoid public confusion that might result from imitation or

similar unfair competitive practices rather than to authorize

restraints upon trade.

Thus, although misuse of a patent almost inevitably is
accompanied by unlawful restraints, the opportunity for effective .
antitrust misuse of a trademark, as distinguished from collateral
anti-competitive activities on the part of the manufacturer or
seller of the goods himietne the mark, is so limited that it poses
a far less serious threat to the economic health of the nation.
As a result, it has been recognized that a sharp distinction must

be drawn between the antitrust misuse defense in patent infringement

suits, on the one hand, and its use in trademark suits, on the

other. See Waco-Porter Corp. v. Tubular Structures Corp. of
America, 222 F. Supp. 332 (S.D. Calif. 1963). Although we do not.
accept the view that the defense should be unavailable as a matter

of law, see, e.g., Folmer Graflex Corp. v. Graphic Photo Service,

41 F. Supp. 319, 320 (D. Mass. 1941), it is significant that in
almost every reported instance where the antitrust misuse of a
trademark has been raised as a defense, it has been rejected. In
the great majority of such cases the evidence revealed the
antitrust activities to be collateral and did not demonstrate that
the trademark, as distinguished from collateral activities with
respect to goods bearing the trademark, was itself being used as

the prime and effective instrument to effectuate-the antitrust

activity. E.g., 0. & W. Thum Co. v. Dickinson, 245 Fed. 609, 622-

623 (6th Cir. 1°17), cert. denied, 246 U.S. 664 (1918); Searchlight

Gas Co. v. Prest-O-Lite Co., 215 Fed. 692, 697 (7th Cir. 1914);

Prest-O-Lite Co. v. Davis, 215 Fed. 349,.351 (6th Cir. 1914);
Coca-Cola Co. v. Gay~Ola Co., 200 Fed. 720, 726 (6th Cir. 1912),
cert. denied, 229 U.S. 613 (1913); Coca-Cola Co. v. Deacon Brown

Bottling Co., 200 Fed. 105 (N.D. Ala. 1912); Weyman-Burton Co. v.
Old Indian Snuff Mills, 197 Fed. 1015 (S.D.N.Y. 1912); dent

Baking Powder Co. v. Boorman, 130 Fed. 726 (D.N.J. 1904).

"The difficulty, however, is that defendant
does not allege that the mark is being used in
violation of the anti-trust laws. Instead, it
charges the plaintiff with a boycott, with con-
spiring to establish retail price control, and
with various other matters, which taken together
constitute a claim that the plaintiff is violating
the anti-trust laws in certain respects, but not
that it is using the trade-mark to do so. Such a
defense is insufficient in a trade-mark infringement
case. See Vitagraph, Inc. v. Grobaski, D.C.W.D.
Mich. 1951, 46 F.2d 813, 814; cf. 15 U.S.C.A.
§1115." (Forstmann Woolen Co. v. Murray. Spices
Corp., 10 F.R.D. 367, 370 (S.D.N.Y¥. 1950))

Since denial of a plaintiff's exclusive right to the
use of his trademark is not essential to the restoration of
competition, it is not enough merely to prove that merchandise

bearing a trademark, however valuable the trademark, has been
‘teed in furtherance of pennant violations. If this is all that
were required, any antitrust violation in the distribution of

such merchandise would result in a forfeiture of the trademark

=~12<

ete hae aS

with a consequent unnecessary frustration of the policy underlying

trademark enforcement. An essential element of the antitrust -
misuse defense in a trademark case is proof that the mark itself
has been the basic and fundamental vehicle required and used to
accomplish the violation. Although the burden of establishing

such a direct misuse is a heavy one, it is not insuperable. For

instance, in Phi Delta Theta Fraternity v. J. A. Buchroeder & Co.,

a Se Supp. 968 (W.D. Mo. 1966), it was claimed that after a

conspiracy between fraternities and others to monopolize the
market in fraternity jewelry had failed, and the conspiracy could
not be enforced against independent jewelry manufacturers and
dealers, the fraternities began to register their insignia as
trademarks for the very purpose of eliminating independent
competition, and the court quite properly and understandably
concluded that, if these allegations were proven, the trademarks
were used as a causal i:.strumentality to violate the antitrust ©
laws.

When the evidence in the present case is ponsidered in
the light of the foregoing principles, it reveals a complete
failure to establish that plaintiffs used the zeiss trademarks
to violate the antitrust laws. The deficiency in proof lay in
defendants* erroneous assumption that if they could show that the

zeiss trademarks were considered a valuable asset by dealers in

=) 3%

Zeiss~manufactured products, and that merchandise bearing the

zeiss trademarks had. been used in furtherance of collateral
antitrust violations, the antitrust misuse defense would be
established. As we have already noted, however, the law is to
the contrary, and it requires more than proof of a collateral
violation.

Unquestionably the Zeiss trademarks, when affixed to
merchandise of the type manufactured by plaintiffs, have value
because they identify the merchandise to dealers and retail
customers as manufactured by Zeiss in West Germany according to
its high quality standards, and we have already found that these
various Zeiss trademarks have considerable value (page 3, decision
filed Nov. 7, 1968). When defendants further offered to prove
that the merchandise to which the marks were affixed was the
subject of various collateral anti-competitive activities of the
type alleged in the affirmative defense (all of which were
vigorously denied by plaintiffs) and it appeared that proof with
respect to such activities would be voluminous and necessitate a
long trial, we, in the exercise of our discretion, directed
defendants first to adduce the proof relied upon by them (1) to
establish the alleged antitrust misuse of the zeiss trademarks,
as distinguished from collateral antitrust violations involving

use of merchandise bearing the marks, and (2) to show that the

-14-

plaintiffs should be held responsible for the alleged antitrust

activities of Zeiss, N.Y. and ZIV, Inc. Defendants were not :
precluded, however, from offering any proof with respect Ha alleged
antitrust activities that appeared relevant to these two basic |
threshold issues.

The proof offered by defendants convinces us that dealers
in Zeiss-manufactured merchandise have valued the opportunity to
sell such merchandise not because of the trademarks all source
of the reputation of the manufacturer. Viewing the evidence as a
whole, including defendants’ offers of proof, we do not find that
the trademarks were a competent producing cause which made uate
the alleged antitrust violations. There was no credible evidence,
for instance, to the effect that if the Zeiss trademarks had been
removed from the merchandise and some other identification affixed
Which would show its origin (such as a mark reading "Made by
Zeiss, West Germany"), sales would decline or dealers and purchasers
would refuse to buy the merchandise. Nor was there any proof
that plaintiffs ever did deny, or threatened to deny, a dealer the
right to use the Zeiss trademarks unless he consented to engage
in the alleged antitrust activities, or any proof that dotentents
sought to tie in the use of the Zeiss trademarks with such

activities. See, e.g., Morton Salt Co. v. G. S. Suppiger Con,

314 U.S. 488 (1942). Nor was there any attempt to show that the

trademarks were used as an instrument of unlawful price dis-

crimination, such as by charging a different price for branded
and unbranded instruments of like grade and quality. Fic v.
Borden Milk Co., 383 U.S. 637 (1966). ‘There was no proof that
the trademarks, as distinguished from the merchandise manufactured
by plaintiffs, were ever even the subject of discussion with
dealers, customers or anyone else. For instance, plaintiffs never
threatened to withhold the right to use the trademarks from a
dealer or di.tributor unless he assisted in anti-competitive
activities. In édnticnnt*to the complete absence of evidence that
the trademarks were used as a causal instrumentality in the
perpetration of any antitrust activities, there was proof that
@uring some of the years when defendant Ercona was denied the use
of the Zeiss trademarks (at the instance of the Office of Alien
Property) fa “eahttee East German merchandise in the United States,
its annual sales were higher than during earlier years when it
used the Zeiss trademarks.

Some idea of the paucity and unconvincing nature of
the proof offered by defendants is their heavy reliance on the
testimony of Ben Rosenberg, an operator of a very small curiosity
shop in Manhattan, who deals, among hundreds of other unrelated
items, in used microscopes, cameras and telescopes. In response

to a question from the Court, he testified that unless he could be

-16-

assured of the Zeiss trademarks, he would not accept a Zeiss

dealership. However, after observing his demeanor and giving.
careful consideration to his han testimony, we believe that it
is virtually worthless on the fundamental issue. He is essentially
a dealer in used merchandise (all but 2% of his sales are used
goods) and as such would, of course, be more interested in proof
of identification of ¢ used item as zeiss-made than would be an
authorized Zeiss dealer who is recognized by the public and has
the right ba advertise himself as such. Furthermore, his testimony
is at best speculation, since he has never been a zeiss dealer and
hardly appears to enjoy any prospect of becoming one, since he is
essentially engaged in an unrelated business, namely the sale of
; used art goods, bric-a-brac, paintings and the like (amounting to
only $50,000 annually, of which only a small percentage consists
of used equipment of the type manufactured by Zeiss).

Defendants’ sateen on various Aimuente containing
the word "ZEISS" (such as dealership agreements alleged to contain
anti-competitive terms) as evidence of antitrust misuse, is
misplaced. The term "Zeiss" was used in such documents to identify
the manufacturer of the merchandise, and not to denote the
trademark. :

Defendants’ antitrust. misuse defense also suffers from

another fatal defect: failure to connect plaintiffs sufficiently

=l7=

with the alleged antitrust activities to establish their legal

responsibility for such activities. The activities relied on by
defendants were entirely conducted by officers and employees of
two New York corporations, Zeiss, N.Y. and ZIV, Inc., neither of
which is a plaintiff. Zeiss, N.Y. is a wholly-owned subsidiary
of plaintiff Carl Zeiss Stiftung, and ZIV, Inc. is indirectly a
subsidiary, 80% of its stock being owned by Zeiss, N.Y., 10% by |
Zeiss Ikon, A.G., and 10% by Voigtlaender of Germany. Although the
existence of a parent-subsidiary relationship is entitled to
considerable weight in determining whether the parent is legally
responsible for antitrust misconduct of its subsidiary, the
separate corporate entities will not be disregarded unless it

appears that the subsidiary is independent of the parent in form

only, National Dairy Products Corp. v. United States, 350 F.2d 321
(8th Cir. 1965), vacated on other grounds, 384 U.S. 883 (1966), with
the result that the subsidiary is “merely the alter ego of the
parent," Baim & Blank, Inc. v. Philco Corp., 148 F. Supp. 541, 544

(S.D.N.Y¥. 1957) (wholly owned distributing subsidiary held
independent). For instance, in the Nationa i cts case
the court found: |
“Chapman [the subsidiary] received National's
approval before making capital investments;
Chapman's personnel policies were established by

National; Chapman's key employees had stock option
plans to purchase National stock; Wise, a National

-18-—

official, had : Chapman's ...
president ...; Wise was kept informed on all
- G@ecisions made by Chapman's president; Chapman's

products were sold under the Sealtest name
{National's trademark]; Wise spent many months —

in Kansas City (where Chapman Dairy was located) ;
Chapman's production reports were submitted to

National for approval and National's officials

often conducted the monthly sales department

meetings where prices, market conditions, costs

and competitors’ prices were discussed." (Emphasis
added) (350 F.2q at 326)

In contrast to the control exercised by the parent over
its subsidiary's activities in National Dairy Products Corp., the
proof here reveals that the operations and activities of Zeiss, N.Y.
and ZIV, Inc. were conducted independently by them and not directed
or controlled by plaintiffs. Although one of the five directors
of Zeiss, N.Y. has been a member of the Board of Management of the
Stiftung, and two others were formerly employed by it, Zeiss, N.Y.
purchases instruments from plaintiffs for its own account at the
same prices charged to distributors throughout the rest of the
world, including those not affiliated with plaintiffs, and it
resells the instruments to dealers and other purchasers in the
United States in accordance with terms established by it, not the
plaintiffs. Although most of its stock in trade consists of.
merchandise purchased from the Stiftung, it also sells merchandise
manufactured by other firms bearing trademarks other than the
Zeiss marks. Purthermore, certain instruments bearing the Zeiss

trademarks are distributed in the United States by Keuffel « Esser,

Inc. and Transcontinental Corp., in which neither Zeiss, N.Y. nor
the Stiftung has any interest.

In the case of ZIV, Inc. none of its officers or
directors are officers or directors of either of the plaintiffs,
except that one member of its Board is an officer of plaintiff
Zeiss Ikon. Like Zeiss, N.Y., ZIV, Inc. mii cameras and other
photographic equipment from Voigtlaender of Germany for its own
account and resells to dealers.

The independence of the operations of Zeiss, N.Y. and
ZIV, Inc. is further evidenced by proof that their employees are
hired and paid by them and not by plaintiffs. Zeiss, N.Y. and
ZIV, Inc. also keep their own separate books and records in New
York, prepare their own financial statements and tax returns, pay:
their own operating expenses, have their own pension and health
insurance plans, and their own bank accounts in New York. It is
particularly significant that neither Zeiss, N.Y. nor ZIV, Inc.
has consulted with either of the plaintiffs, Voigtlaender or with
any other affiliate of plaintiffs, with respect to appointment or
termination of dealers, establishment of prices to customers in
the United States or determination of discounts or bids on waht te
contracts in the United States. Although Zeiss, N.Y. and ZIV, Inc.
from time to time make written and oral reports to the Stiftung

and to suppliers in Germany with respect to the results of the

company's operations in the united States and conditions in the
United States market, including competitive and price conditions,
there is no proof that the competitive practices, prices or other
distribution activities of Zeiss, N.Y. or ZIV, Inc. were directed
or controlled by either of the plaintiffs.

Viewing the circumstances in their entirety, including
the parent-subsidiary piknihendhhin. the limited inter-locking
directorates, and the periodic reports as to operations, we con-
clude that defendants have failed to establish by a fair preponder-
ance of the evidence the degree of dominion and control required
to disregard the separate corporate entities. See Baim & Blank,
Inc. v. Philco Corp., 148 F. Supp. 541 (E.D.N.Y. 1957).

For the foregoing reasons it is unnecessary to determine
whether the parties engaged in any of the alleged violations of the
antitrust laws. The antitrust misuse defense is stricken and
judgment may be entered in favor of plaintiffs in accordance with
the Court's decision filed on November 7, 1968.

The foregoing shall, in accordance with Rule 52(a),

F.R.CeP., constitute the findings of fact and conclusions of law

supplementing the separate findings of fact’ filed with respect to

a

March-12, 1969. U.S.QT/)

the antitrust misuse defense.

Settle order.

2!

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385605_1121%3A1. Public record. Not legal advice.