Petition for Writ of Certiorari — Borg-Warner Corp. v. York-Shipley, Inc. (No. 509)

MLR O MSY TA Te wee

etki. ED

“~c°

‘

—" BSP.

pelle JAMES R.B2 Ott

Supreme Court of the United States

OcTOBER TERM, L961.

No. 509

BORG-WARNER CORPORATION,

s

Petitioner,

Us.

YORK-SHIPLEY, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Epwarp A. Haicut

209 South La Salle Street

Chicago 4, Tilinois

Stuart S. Bau

11 South La Salle Street

Chicago 3, Illinois

Attorneys for Petitioner.

Of Counsel:

DonaLp W. BanNER

Joun T. LaNaHANn

200 South Michigan Avenue,

Chicago 4, Illinois

RicHarp J. Ftynn

11 South La Salle Street,

Chicago 3, Illinois

Joon W. Horevpr

209 South I Salle Street,

Chicago 4, Illinois

ne hee

The Scheffer Press, Inc—ANdover 3-6850

INDEX.

PAGE

Petition for Writ of Certiorari ...cccccccccccccccccccccoscscecccs.., 1

I 4

a 2

EAS AR 2

Statutes and Federal Rules Involved oo.ccccccccccccseccccooseses.. 3

I 3

Reasons for Granting The Writ ...ccccccccccccccccccscccscocecescss... i)

RSE ENS SE SU eSe NC a ea 18

APPENDIX A:

SEES a la

Rule 52(a) Federal Rules of Civil Procedure (28

|p A SSESSS SESE Sota nn ea la

APPENDIX B: |

Opinion (U.S.C.A. 7) July 26, 1961 woes. Ba

Judgment of the Court of Appeals for the Seventh

I i csssdeidniascasmmoenceens 17a

Order Denying Petition Of Plaintiff-Appellant for Re-

hearing and Appellee’s Petition for Rehearing and

Clarification, September 13, 1961 oo...ccccceccccccscsceceee, 18a

TABLE oF CasEs.

Bank of Madison v. Graber, 7 Cir., 1946, 158 F.2d 137 12

Federal Glass Co. v. Loshin, D.C. Conn., 1954, 126

Ne ssctemiésnononns 9

il

PAGE

Hubsman v. Louis Kerr Shoe Co., 7 Cir., 1942, 129

EF cs ssnsnmsnsensaiesstdinnewbowianenionstiaubonsneranueianssusccenesacsse i2

Kweskin v. Finkelstein, 7 Cir., 1955, 223 F.2d 677...... 12

Lucien Lelong, Inc. v. Lander, 2 Cir., 1947, 164 F.2d

TT... cscasusenhiinncoubenssasennsnbeinininetnasbadbuniananayaparenenssesendsayanseess 9

Speed-Products Co., Ine. v. Tinnerman Products, Inc.,

S.D. N.Y., 1951, 93 U.S.P.Q. 193. .escesseseseseseeeeeneenenees iW)

Speed-Products Co., Inc. v. Tinnerman Products, Inc.,

2 Cir, 1949, 179 F.2d 778 ..scsesesesssesssssesssrssesesneeeeneeenes 9

Quaker State Oil Refining Co. v. Steinberg, 1937, 325

i I nics cicsassinscotstacarnvvnnerninermnnessbiveninmiuastsnenbecovesanssenesoes 12

Upjohn Co. v. Wm. S. Merrell Chemical Co., 6 Cir.,

1920, 269 Fed.. 209 w.c.scccccsssssesessersseessrssssssesseseensnessensarens 9,11

STATUTES AND AUTHORITIES.

Lanham Trademark Act of 1946, Title 15 U.S.C., See.

COE... ssc vemisasasionnsenndhtedsnneinedeaninnnenatinene tab tmnanias 16

Rule 52(a), Federal Rules of Civil Procedure (28

U.S.C.) ccsccscssssscssececssssecssenssesscsncseensesensenssssvesesssssnenesseseaness 12

1 Nims, Unfair Competition and Trademarks, Secs.

37 and 334 (4th ed, 1947) ...cccccscsseceseeneseeeeseeterseeees 11, 13

Unfair Competition—Secondary Meaning, 150 A.L.R.

TN vscecinsdcssiGisndecctsoenstennaninesnieannedeesioeediiialaniadehtntianesinivictsoocnaseness ‘3

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1961.

—_—__—--

No.

BORG-WARNER CORPORATION,

Petitioner,

vs.

YORK-SHIPLEY, INC,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioner, Borg-Warner Corporation, respectfully

prays that a writ of certiorari issue to review a final

judgment of the United States Court of Appeals for the

Seventh Cireuit modifying the judgment for respond-

ent entered by the United States District Court for the

Northern District of TIlinois.

»)

OPINION BELOW

The Findings of Fact and Conclusions of Law of the

District Court for the Northern District of Illinois, East-

ern Division, (P.A. 348-357)* were not officially reported.

The opinion of the Court of Appeals for the Seventh Cir-

euit. (Op. cicin ) is reported at .......... ee. ensue ,

and a copy thereof is appended hereto (App. B, infra,

pp. 38a-16a).

The judgment of the Court of Appeals and the order

denying petitions for rehearing of petitioner and re-

spondent are printed in Appendix B hereto (App. B,

infra, pp. 17a-18a).

JURISDICTION

The judgment for the Court of Appeals for the Sev-

enth Circuit was entered July 26, 1961. Timely petitions

for rehearing, filed by both parties, were denied on Sep-

tember 13, 1961 (App. B, infra, p. 18a). Jurisdiction of

this Court is invoked under 28 U.S.C. 1254 (1).

QUESTIONS PRESENTED

1. Can trademark rights in a geographic word be

acquired absent proof that such word had acquired a

sceondary meaning identifying the source of specific

products prior to the initial use of such geographic word

on the same products by another user?

2. Where, to establish exclusive trademark rights in

a geographic word, a seller must prove that the word

*The following parts of the record below are referred

to herein as follows;

Plaintiff-Appellant’s Appendix to Court of

Appeals, (P.A.— —-) ;

Defendant-Appellee’s Appendix to Court of

Appeals, (D.A.————-) ;

Exhibit Volume (Ex. Vol. —_ ).

—

had aeqnired the necessary secondary meaning as to a

particular product prior to the use of that word by an-

other seller on a similar product, does Rule 52(a) of the

Federal Rules of Civil Procedure permit a court to grant

the first seller exclusive trademark rights in the coim-

plete absence of any finding that secondary meaning has

been established prior to such use by the other seller?

3. Can use only of a combination trademark estab-

lish monopoly rights in a geographical word which is

merely a component of such trademark?

STATUTES AND FEDERAL RULES INVOLVED

Pertinent portions of the Lanham Trademark Act (15

U.S.C. See. 1127) and Rule 52(a) of the Federal Rules

of Civil Procedure (28 U.S.C.) are set forth in Appen-

dix A hercto.

STATEMENT

Petitioner, Borg-Warner Corporation, is the successor

to a Pennsylvania partnership, York Manufacturing

Company, formed in 1874, and incorporated in 1895,

under the same name. In 1927, the corporation merged

with certain of its distributors to form York Ice Ma-

chinery Co., and in 1942, changed its name to York Cor-

poration. The business was merged into petitioner in

1956, and since that time has been operated as the York

Division of Borg-Warner Corporation. Through its

York Division, Petitioner manufactures and sells a full!

line of commercial and residential air-conditioning equip-

ment, including warm-air furnaces, sold under the trade-

mark YORK.

Respondent, York-Shipley, Ine., was organized in 1926

as Thomas Shipley, Inec., a holding company. In 1938,

Thomas Shipley, Inc., aequired the stock of York Oil

oes

Burner Co., which was the successor to a partnership

formed in 1922. In 1943, the name of Thomas Shipley,

Inc., was changed to York-Shipley, Ine. Respondent

manufactures and sells heating equipment, including

warm-air furnaces, sold under combination trademarks

within a fanciful design which include the word YORK.

Both petitioner and respondent have carried on their

business from York, Pennsylvania.

Petitioner brought this action against respondent in

1958 charging infringement of petitioner’s trademark

YORK and unfair competition. Respondent counter-

claimed, charging trademark infringement and unfair

competition by reason of petitioner’s use of YORK in

connection with the sale of residential furnaces. The

District Court found in favor of respondent and entered

judgment enjoining petitioner from using the word

YORK in any way in connection with the sale of any

furnace or heat-generating products and awarding re-

spondent damages and an accounting for profits.

The Court of Appeals reversed the District Court’s

award of an accounting, set aside the award of damages

as unsupported by the evidence, and directed that the

injunction be modified to limit its application to hot-air

furnaces and oil conversion burners. The Court of

Appeals stated that petitioner should not be restrained

from employing its trademark on air-conditioning equip-

ment containing heating coils or on other air-conditioning

devices containing heating units such as had been pre-

viously used by petitioner or by the air-conditioning in-

dustry. It further stated that respondent should not be

permitted to advertise its furnaces as YORK air-condi-

tioners. (Op. 14a) The Court of Appeals remanded the

proceeding to the Distriet Court with instructions that it

recompute damages.

ee en

For purposes of this petition, petitioner is not now

challenging the denial of the affirmative relief which it

sought below. Nor is petitioner challenging that part

oi the decision below granting respondent the exclusive

right to use YORK for oil conversion burners.

The sole issue presented by this petition is whether

or not the courts helow properly granted respondent

a monopoly right to the trademark YORK as applied

to hot-air furnaces sold as separate units.

The facts relating to this issue are as follows:

The courts below found that respondent began manu-

facturing and selling furnaces in 1933 (P.A. 363). The

record, however, contains no sales figures for furnaces

prior to 1938 nor did respondent report sales of furnaces

through 1937 in sworn reports of the products which it

sold as required by the State of Pennsylvania. Respondent

did not advertise furnaces at all prior to 1936 and then

only to a very limited extent in trade journals. Respondent

began selling gas-fired furnaces in 1953.

There is no evidence that respondent ever sold furnaces

branded with the single word YORK elthough it used

such word on its oil conversion burners and boiler-burner

units along with the names PRESSURE and LEADER

(P.A. 190). In 1935, respondent adopted the eombi-

nation YORK Yh HEAT vertical design (P.A. 326).

In 1943, respondent registered Yh as its trademark (P.A.

334), and in 1950, secured a registration of the combi-

nation mark YORK Yh HEAT within a fanciful verti-

eal design (P.A. 325). In securing the later registra-

tion, respondent disclaimed the word “Heat”, and. of-

fred to disclaim “York”, stating that “applicant’s trade-

mark is not ‘York’” (P.A. 339).

pa eas

Petitioner, on the other hand, has used the single

word YORK as its trademark and trade name since at

least IS@&. (x. Vol, PX 168-171, 174-183; DX 121). In

1897, petitioner’s predecessor began to specialize in the

manufacture of ice-making and refrigeration equipment

(ix. Vol, PX 169, June, 1920). Such refrigeration

equipment was later put to use for the conditioning of air

for human comfort and by the “late 1920's” (Finding 7,

P.A. 348), air-conditioning apparatus was a regular part

of the “YORK” line (Ex. Vol, DX 172, P.A. 62, 70).

Karly uses of petitioner’s refrigeration equipment for

the conditioning of air included storage rooins, factori¢cs

(1908), hotels (1912), and theatres (1914), all long prior

to 1922, when respondent commenced business (Ex. Vol.,

PX 150, Aug., 1922, Oct., 1922, and Nov., 1922; PX 174,

March, 1931; P.A. 80). The air conditioning of resi-

dences by petitioner goes back as early as 1924 (Ex.

Vol., PX 150, Feb., 1924).

Petitioner’s ice-making, refrigeration, and air-condi-

tioning equipment was all sold under the single name

and trademark YORK (Finding 7, P.A. 348), and peti-

tioner obtained registrations of that single word as its

trademark (Iinding 8, P.A. 349).

Petitioner's sales of YORK trademarked — products

were $46,000,000 from 1922 to 1928, $147,460,000 from

1928 to 1938, and over $900,000,000 from 1989 to 1959.

During the years 1929 through 1937, when respondent

was spending less than $6,500 per year on all of its

advertising, petitioner was spending $179,000 per year.

From 1922 through 1937, petitioner spent $2,400,000

advertising YORK.

Petitioner’s early YORK installations included heat-

ing as well as cooling apparatus (see, e.g., banana-ripen-

Ing room and storage installations, Ex. Vol, PX 172,

PLA. 60, Ob; Rochester bank systems, lex. Vol, PN 150,

July, 1925). Petitioner supplied heat-generating boilers

in connection with theatre air conditioning in the ’20"s

(POA. 71, 72). Beginning in the early 1930's, and con-

tinuing to the present time, petitioner has marketed

combination heating and cooling equipment for stores,

restaurants, theatres, hotels, office buildings, railroad

passenger cars, and private and multiple residences (Ix.

Vol, VX 152, 147, 148, 166, 174, 175, 219). From 1934

to Ted, 249 YORK cooling and heating systems were

installed by petitioner in Woolworth stores throughout

th» country. Many of these YORK installations through.

out the period, included furnaces (Ex. Vol, PX 213).

In 1958, petitioner purchased residential furnaces

Which it resold as separate units and as part of complete

air-conditioning systems under its trademarks YORK and

YORKAIRI (Op. 11a) and eontinued such sales until

World War I] (Op. 11a; D.A. 5). Sales of YORK branded

furnaces Was resumed by petitioner in 1953 (D. A. 27).

Since 15s, when York was acquired by petitioner, it jas

sold furnaces which it manufactured itself (D. A. 27).

Respondent’s officers (e.g, PA. 117) admitted that

prior to the time respondent's predecessor came into

existence in 1922, YORI< had a secondary meaning sig-

nifying petitioner and its) products. This secondary

meaning has persisted (see, e.g., Ex. Vol, PX 3, p. 6;

PLA. 100, 110, 205). One of respondent’s witnesses testi-

fied that even at a time when petitioner was not market-

ing furnaces, members of the public commonly believed

that respondent's furnaces came from petitioner (PLA,

167-168).

The District Court found that YORIX had aequired a

secondary meaning signifying respondent and its fur-

oe

naces (Findings 27 and 38, P.A. 352, 354) but made no

finding as to when such secondary meaning was acquired.

The District Court concluded:

“Defendant’s (respondent’s) long priority in_ the

use of the name and trademark YORK for furnace

and heating products entitled defendant to the ex-

clusive use of said name and trademark for fur-

nace and heating products” (Cone. No. 3, P.A. 305).

On appeal, petitioner asserted that these findings and

this conelusion were insufficient to sustain the Judgment

in favor of respondent, for the reason that prior use

does not create exclusive trademark rights in a geo-

graphie word such as YORK, and “the record contains

no proof or finding of fact that defendant had acquired

a secondary meaning in the name YORK before plain-

tiff applied that name to its furnace and heating prod-

ucts” (Op. Ga).

The Court of Appeals agreed with petitioner that

prior use alone did not create monopoly rights in a geo-

graphie word but failed to recognize that the secondary

meaning necessary to create such rights in such a word

must be acquired prior to the use thereof by the second

user.

The Court of Appeals held that petitioner is barred

from using its trademark YORK on furnaces and that re-

spondent had exclusive riguts in that mark despite re-

spondent’s failure to prove: (1) That it had established

any rights in that mark before petitioner’s use thereof on

furnaces; and, (2) that it had ever used that mark on

furnaces.

cs va

REASONS FOR GRANTING THE WRIT

1. In the present posture of this- case, respondent

claims exclusive rights to the ggographic word YORK

ax a trademark for furnaces while petitioner claims only

the right to continue to use its trademark YORK for

furnaces.

The decision of the court below sustaining respond-

ent’s claim to exclusive trademark rights in YORK is

squarely in conflict with dedisions of the Court of Ap-

peals for the Second and Sixth Circuits. Upjohn Co. v.

Wm. S. Merrell Chemical Co., 6 Cir., 1920, 269 Fed. 209;

Speed Products Co., Inc. v. Tinnerman Products, Inc.,

2 Cir., 1949, 179 F. 2d 778, 781-82, opinion on remand,

$.D.N.Y., 1951, 93 U.S.P.Q. 193, 199, aff’d, 222 I". 2d 61;

Federal Glass Co. y. Loshin, D.C. Conn., 1954, 126 F.

Supp. 737, 742, aff'd, 2 Cir., 1955, 224 F. 2d 100; Lucien

Lelong, Ine. vy. Lander, 2 Cir., 1947, 164 F.2d 395, 397.

The rule followed by the courts of the Second and

Sixth Circuits in resolving competing claims such as

those stated herein was suceinetly stated in Speed Prod-

ucts Co., Inc. v. Tinnerman Products, Inc., S.D.N.Y.,

1951, 93 U.S.P.Q. 193, 199:*

“When the trade marks in issue consist of deserip-

tive words, priority of use is not controlling, unless

the complaining party can also show that its mark

had aequired a secondary meaning before the al-

leged infringer entered the field.”

Under this rule, respondent to prevail on its claim of

monopoly rights would have to prove not only that it

was the first to use YORK for furnaces, but also that

YORK had acquired a secondary meaning identifying

* Affirmed, 2 Cir. 1955, 222 F. 2d 61. For a prior opinion

remanding the case for consideration uf this precise point,

see 179 F. 2d 778, 781-82.

— 1l0—

furnaces labeled YORK as respondent’s products before

petitioner first used YORK for its furnaces. Absent

such proof, petitioner would be free to continue to use

YORK for its furnaces.

Although the District Court found that YORK had

accuired a secondary meaning identifying respondent’s

furnaces at some time, it made no finding whatsoever

as to when that secondary meaning was acquired (Find-

ines 27, 38, PLA. 352, 354). It based its conclusion that

respondent lad the exelusive right to use YORK for

furnaces solely upon its determination that respondent

had established priority of use (Conel. No. 3, PLA. 350).

The Court of Appeals, in upholding this result, re-

fused to follow the rule adopted in the Seeond and Sixth

Cireuits but held that the District Court’s conclusion,

based on priority of use, coupled with its findings that

YORIX, at some time, had acquired a secondary mean-

ing identifying respondent's products, was sufficient to

sustain respondent's claim to a monopoly right to YORK

for furnaces.

Under this holding, the critical question in resolving such

a ease as this in the Second and Sixth Cireuits—*Did

the trademark in issue have a secondary meaning iden-

tifving the complaining party's goods before the alleged

infringer used the mark?"—is wholly irrelevant in the

Seventh.

The rule adopted by the Court below is supported

neither by reason nor by authority. Unlike coined or

faneiful words, mere use creates no rights in geographie

or other deseriptive words. The law has consistently

protected the publie’s right freely to use sueh words

unless, anc until, such words have aequired a secondary

Ineaning apart from their primary descriptive meaning,

-

identifying the goods of a particular seller to the pur-

chasing public. 1 NIMS, UNFAIR COMPETITION AND

TRADEMARKS, §37 (4th ed., 1947). As the court stated

in Upjohn Co. v. Wm. S. Merrell Chemical Co., 6 Cir.

1920, 269 Fed. 209, at 211, where

‘“. . . imitation relates only to matters as to which

the defendant has, prima facie, a right equal to

plaintiff, there must have been a public acquiescence

in plaintiff’s appropriation of these things for his

product ... sufficient to have created that secondary

meaning whereby they have become to the nublie,

indicia of origin; ... as to those means of identifica-

tion which are descriptive, or which, for any rea-

son, are known and open to all, there is no basis,

in principle or in authority, for the creating of a

title or quasi exclusive right in plaintiff, except the

theory that there has been this publie sanction of

plaintiff’s appropriation, by aequieseence which has

continued long enough and under circumstances suit-

able to raise a presumption that the publie concedes

the right and to make it inequitable thereafter to

dispute it.”

Clearly, as the court further stated (269 Fed. at 212):

“The situation must be judged as it was... when

defendant first came on the market...”

This is necessarily so. The right given to the owner of

a trademark to prevent its use by others is given to pro-

tect his proprietary interest in that mark, and

. there can be no larceny, unless the title or

possessory right of the first holder is better than

that of the seeond taker, and... in this case, until

... (a secondary meaning had been aequired), plain-

tiff’s title... was no better than defendant's” (269

Fed. at 214).

It would be manifestly unjust to deprive a seller of the

right to continue to use a geographie word in his trade,

— oe

which it had every right to use when it began, merely

because another has subsequently acquired some interest

in that word. Quaker State Oil Refining Co. v. Steinberg,

1937, 325 Pa. 273, 189 Atl. 473, 476; Anno., Unfair Com-

petition—Secondary Meaning, 150 A.L.R. 1067, 1086.

Even a casual review of any volume of the reports of

federal decisions discloses that the law of trademarks

and unfair competition constitutes a substantial portion

of the business of the federal courts. The issue upon

which the decision of the court below is in conflict with

that of other Courts of Appeals is of importance to that

law, and the conflict should be resolved by this Court.

2. Rule 52(a) of the Federal Rules of Civil Proce-

dure requires that the trial court make explicit findings

of fact on every material issue. Bank of Madison v.

Graber, 7 Cir., 1946, 158 F. 2d 137, 141. In this case, the

District Court made no finding whatsoever as to when

the geographic word YORK acquired a secondary mean-

ing identifying respondent’s furnaces. This issue was

not only material, it was controlling under the applicable

law.

The District Court’s failure to make any finding on

this issue required that its judgment be reversed. Awes-

kin v. Finkelstein, 7 Cir., 1955, 223 F. 2d 677, 678;

Gindorff v. Prince, 2 Cir., 1951, 189 F. 2d 897, 903-4; ~

Hubshmun v. Louis Kerr Shoe Co., 7 Cir., 1942, 129 F.

2d 137.

This is not a case where the Court of Appeals, on the

basis of the record before it, sustained the judgment of

the District Court by supplying the missing essential

finding. Furthermore, this is not a case where the Court

of Appeal could have done so.

atin

Petitioner first used YORK on its furnaces rot latée——~

than 1938 (Finding 9, P.A. 349). To prevail, respond-

ent had to show that the word YORK signified its fur-

naces prior to that time. Secondary meaning may be

established by direct testimony of consumers or of the

trade, by evidence of “long, extensive and exclusive

use,” and by evidence of the extent of sales and the

extent and manner of advertising. 2 NIMS, UNFAIR

COMPETITION AND TRADE-MARKS, § 334 (4th ed.,

1947).

In this case, respondent offered no direct evidence

of secondary meaning prior to 1938. The only direct

evidence as to the secondary meaning of the word YORK,

including the testimony of respondent’s own officers, was

that YORK identified petitioner and its products (Supra,

p. 7, D.A. 502-510).

Respondent’s only use of YORK for furnaces was as

a part of a combination mark in a fanciful design. Peti-

tioner, not respondent, was the first to use YORK as a

trademark, By the time respondent came into existence,

YORK was firmly established as petitioner's trademark,

and, when respondent first used YORK for furnaces, peti-

tioner had for years been installing YORK air-econdition-

ing systems which included heating az well as cooling,

and continued to do so thereafter. As early as 1934,

petitioner was instaliing furnaces in its YORK air-con-

ditioning system in Woolworth stores.

The record is devoid of any evidence that respondent

actually sold a furnace before 1938; its sworn. state-

ments to the State of Pennsylvania are that it did not.

Its furnace advertising, which did not begin until 1936,

was limited to trade journal advertising, and to very

little of that.

ly

_

"ae

Thus, there is not a scintilla of evidence to show that

YORK identified respondent’s furnaces when petitioner

entered the field. On the present record, a finding that

YORK did identify respondent’s furnaces at that time

would be clearly erroneous.

To permit the court below to sustain a judgment.

where the District Court failed to make the controlling

determination of fact, and where the record would not

permit the essential finding, makes a mockery of the

requirements of Rule 52(a).

3. The decision below awards to respondent exclusive

rights in a geographic term which respondent has not

used as a trademark on furnaces.

The first two questions presented by this petition and

the discussion of them have assumed some use by re-

spondent of the geographical word YORK alone to which

it has been awarded monopoly rights by the courts be-

low. But the record is clear that .cspondent has not

used that word alone as a trademark on furnaces. The

record shows that respondent has repeatedly asserted

that YORK is not its 1 ark, has offered to disclaim that

word, has distinguished a third party’s registration of

that word to secure registration of its own trademark

and has abandoned any rights it may have acquired in

that word.

Respondent has used only its Federally registered coin-

bination design marks YORK Yh HEAT and YORK

GAS HEAT in fanciful design on its furnaces. There

is no showing that respondent ever used the single word

YORK as a trademark on furnaces. Nevertheless, the

Court of Appeals held that “defendant has the exclusive

right to use YORK on... furnaces.” (Op. 13a). This

alone gives rise to the question here presented.

However, the error committed by the courts below

Is more manifest when considered in the further light

of respondent's repeated declarations that it had no

rights to the very word in which it now is given monop-

oly rights.

In December of 1948, respondent emphatically stated

to the Patent Office that ‘tits trademark is not ‘YORK’

but is ‘YORK Yh HEAT’.” (PX 160, p. 8, PLA. 330). In

overcoming a third party’s registration of YORK alone

respondent asserted, in 1948, that “There has been no

confusion in the trade (between YORK and YORK Yh

HMAT) because the trademarks are different, and it is

believed that there is no reasonable likelihood of con-

fusion”,

In its 1954 registration, No. 584,553, respondent stated

that “no claim Is made herein to that part of the mark

consisting of the word ‘YORK’ * * *”

Respondent’s registration No. 520,613 of its combina-

tion trademark is based on use established by the affi-

davit of its president who took oath (PA 325) to “sub-

stantial exclusive and continuous use of the trade-mark”

for a twelve year period preceding the date of the appli-

cation for registration, Respondent’s president had been

an executive and director of petitioner during the time

of petitioner's use of its mark YORK alone on furnaces,

and is chargeable with knowledge of that use. The first

such use by petitioner occurred during the period 1937

through at least the early 1940’s. This was within the

twelve year period referred to in the affidavit. Accord-

ingly, that affidavit is true and factual only if respond-

ent’s president was making claim of use to the fanciful

combination trademark of that registration and nol to

YORK.

i

Moreover, respondent expressly abandoned any right

it might at one time have had to the name YORK. While

there was no use of YORK by respondent on furnaces

there is indication that it had been used on conversion

oil burners by York Oil Burner Company through whom

respondent makes its claim. However, in 1943, when

respondent changed its name to York-Shipley, Inc., it

abandoned all use of the word YORK as a trademark.

In a “history” compiled by respondent for presentation

to the War Contract Renegotiation Board, respondent

declared.

‘The “York” name, originally applied to products

of the York Oil Burner Company, was changed to

“York-Heat” coincidentally with the expansion of the

ecompany- into York-Shipley, and today the “York-

Heat” and “Steam-Pak” registered trademarks are

well-known.’ ”

(PX 2, p. 20, P.A. 315)

The above quoted admission taken together with the

non-use clearly spells out abandonment under Section

45 of the Lanham Trade Mark Act (Title 15 U.S.C.

§1127) of the very mark in which respondent is awarded

monopoly rights by the ccurts below.

The decision of the Court of Appeals is unprecedented

in sustaining a claim to monopoly rights in a geographi-

eal term in which there is not only non-use buf©express

abandonment. The use in combination trademarks of

a geographical term is a common practice in trade and

in industry. The decision below, if allowed .to stand,

will undoubtedly give rise to claims for monopoly rights,

in many of the geographical names so used. If that

decision represents the law of trademarks, present users

of a geographical name, whether such name is used alone

; a

or in a faneiful design, can continue such use only at

their peril and at the risk of suffering damages and

other penalties.

The public is entitled to know the basis on which

words which are public property will be subject to in-

dividual appropriation and exclusive use. The users

of such combination marks and of geographical names

per se, are entitled to know the extent of their rights in

such marks, how such rights may be acquired, and “the

extent to which words in the public domain may be used.

Only this Court can give a final answer which will avoid

the confusion, uncertainty and proliferation of litiga-

tion which will follow the decision of the Court of Ap-

peals in the instant case.

suis

CONCLUSION

It is respectfully submitted that the questions pre-

sented should be decided by this Court. The trademark

law affects every facet of trade and commerce. Trade-

mark rights, their acquisition and their scope are ques-

tions of vital public interest requiring definite and final

answers.

Respectfully subinitted,

Kpwarp A. Haicut

209 South LaSalle Street,

Chicago 4, Illinois

Stuart S. BALL

11 South LaSalle Street,

Chicago 3, Illinois.

Attorneys for Petitioner.

Of Counsel:

DonaLp W. BANNER

Joun T. LANAHAN

200 South Michigan <Ave.,

Chicago 4, Illinois

RicwaArp J. FLYNN

11 South LaSalte Street,

Chicago 3, Illinois

Joun W. Horevpt

209 South LaSalle Street,

Chicago 4, Illinois

—la—

APPENDIX A.

is USL. Bee. N2i

* & &

The term ‘mark’ includes any trade-mark, service

inark, collective mark, or certification mark entitled

to registration under this chapter whether registered

or not.

For the purposes of this chapter a mark shall be

deemed to be used in commerce (a) on goods whet

it is placed in any manner on the goods or thetr

containers or the displays associated therewith or

on the tags or labels affixed thereto and the goods

are sold or transported in) commeree and (b) on

services When it is used or displayed in the sale or

advertising of services and the services are rendered

im commerce.

A ark shall be deemed to be ‘abandoned'’—

(a) When its use has been discontinued. with

intent not to resume, Intent not to resume may be

inferred from circumstances. Nonuse for two con. |

secutive vears shall be prima facie abandonment,

(bh) When any course of conduct of the regis.

trant, including acts of omission as well as comunis-

sion, causes the mark to lose its significance as an

indication of origin.”

Rule S2¢a) Federal Rules of Civil Procedure (28 U.S.C.)

“ta) Effect. In all actions tried upon the facts

Without a jury or with an advisory jury, the court

shall find the facts specially and state separately

its conclusions of law thereon and direct the entry

of the appropriate judgment; and ins granting or

refusing interlocutory injunctions the court shal!

similarly set forth the findings of fact and conclu-

Ys

2)

sions of law which constitute the grounds of its

action. Requests for findings are not necessary for

purposes of review. Findings of fact shall not be

set aside unless clearly erroneous, and due regard

shall be given to the opportunity of the trial court

to judge of the credibility of the witnesses. The

findings of a master, to the extent that the court

adopts them, shall be considered as the findings of

the court. If an opinion or memorandum of. deci-

sion is filed, it will be sufficient if the findings of

fact and conclusions of law appear therein. Find-

ings of fact and conclusions of law are unnecessary

on decisions of motions under Rules 12 or 56 or any

other motion except as provided in Rule 41 (b). As

amended Dee. 27, 1946, eff. March 19, 1948.”

")

a Oa omens

APPENDIX B.

—

In Tua

UNITED STATES COURT OF APPEALS

For Tue Seventy Circuit

No. 13211 SEPTEMBER TERM 1960—ApRIL Session 1961

Borc-Warner Corporation, ) Appeal from the

Plaintiff-Appellant, United States Dis-

y. | trict Court for the

Northern District

York-Suretey, Inc., of Illinois, Eastern

Defendant-Appellee.) Division.

July 26, 1961

Before Hastincs, Chief Judge, Durry and Kyocu, Cir-

cuit Judges.

Durry, Circuit Judge. The complaint herein contains

counts for unfair competition, trademark infringement

and trademark cancellation involving the word YORK used

both as a trademark and a trade name. Plaintiff claims

prior use of the name ond trademark YORK for ice-

making machinery, refrigeration apparatus, air-condition-

ing equipment and furnace and heating products. It al-

leges and offered proof that prior to 1923, the word YORK

had acquired a secondary meaning identifying a wide

range of products as those of plaintiff.

Defendants denied the allegations of the complaint,

urged affirmative defenses such as laches, unclean hands

oe

and narrow rights in YORK, and in addition, counter-

claimed for trademark infringement and unfair competi-

tion. Defendant claims it commenced its use of the name

YORK and trademark YORK for automatic oil burners

for furnaces in 1922. This product often was referred to

at the trial as oil conversion burners.

After a nine-day trial, the District Court dismissed the

complaint. It entered judgment for the defendant on the

counterclaim with damages of $2,280,000 plus an account-

ing of profits, and ordered an injunction against plaintiff

using the word YORK in any way in connection with the

selling of any furnace or heat-generating product.

York Manufacturing Company, a Pennsylvania partner-

ship, was formed in 1874. The business was incorporated

in 1895 as the York Manufacturing Company. The manu-

facturing facilities were located at York, Pennsylvania.

In 1927, it merged with some of its distributors to form

York Ice Machinery Company. In the late 1920s or early

1930s, the plaintiff’s predecessor commenced the manufac-

turing of air-conditioning equipment. Commencing in 1938,

it purchased and resold furnaces under the brand name

YORKAIRE and YORK, but abandoned this effort about

1941. The name of the company was changed in 1942 to

York Corporation. In 1954, plaintiff’s predecessor again

undertook the sale of furnaces purchased from a furnace

manufacturer. At least, some of these were marketed

under the name YORK.

In 1956, plaintiff, Borg-Warner, acquired the business

of York Corporation, and thereafter operated it as its

“York Division.” Prior to 1956, Borg-Warner had manu-

factured and sold furnace and heating products under

the name ‘‘Ingersoll’’ and used the brands “Ingersoll’’

and “Airline.’’

The defendant, York-Shipley, Inc., is also located at

York, Pennsylvania, as were its predecessors. A partner-

ship known as York Oil Burner Company was organized

in 1922, and was incorporated under the same name in

1928. Defendant, organized in 1926 as Thomas Shipley,

—

Ine., acquired the stock of York Oil Burner Company in

1938. The York Oil Burner Company continued to operate |

as a subsidiary of defendant until 1943 when the name of

defendant was changed to York-Shipley, Inc. It continued

the business of the oil burner company under its new

name.

Commencing in late 1922, defendant and its predecessors

have manufactured, sold and serviced heating products.

First, it was oil burners; since 1927, boiler-room units; and

since 1933, warm-air furnaces. These have been for resi-

dential and commercial heating. In the early years of its

operation, defendant’s sales of such products were largely

in Pennsylvania and nearby states. Later, its sales terri-

tory extended throughout various parts of the United

States.

In 1943, plaintiff registered the work YORK as a trade-

mark. It registered this mark in various forms for refrig-

erating machinery and apparatus, and air-conditioning ma-

chinery and apparatus. None of its registrations was for

furnace and heat-generating products.

In 1950, defendant registered as its trademark a design

which included

Y

O

R

iN

Y/H

H

K

A

T >

surrounded by a border. In 1955, defendant registered a

second similar design in which ‘‘GAS” was substituted for

oY /H.”?

Plaintiff and its predecessors, and defendant and its

predecessors each have been doing »usiness with head-

‘The term plaintiff includes its predecessors unless other-

wise indicated.

ow §@ =

quarters in York, Pennsylvania, for more than 35 years

prior to the commencement of this action. For many

years, one of defendant’s predecessors was located across

the street from the main entrance to the general offices

of plaintiff’s predecessor. The parties and their prede-

eessors had many dealings and transactions with each

other.

In 1958, plaintiff completed the amalgamation of its

Ingersoll furnace business into its York Division, and

commenced the manufacture and sale of a line of York

furnaces and heating products. In the same year, plain-

tiff announced to the trade and public in large advertise-

ments, “York invades the heating market,” and com-

menced a large scale intensive advertising campaign. Some

of these advertisements apparently directed to plaintiff’s

distributors or dealers, stated: “Now take charge of the

compiete market for both heating and air-conditioning

with York.’’ Until shortly before it commenced this action,

neither the plaintiff nor its predecessors had ever objected

to defendant’s use of YORK for its furnace and heating

products business.

Plaintiff strongly urges that the record contains no

proof of finding of fact that defendant had acquired a

secondary meaning in the name YORK before plaintiff

applied that name to its furnace and heating products.

Plaintiff refers to Conclusion of Law No. 3 which states

defendant’s long priority of use of the name and trade-

mark YORK for furnace and heating products entitles

defendant to the exclusive use of the name and trademark

for furnace and heating products. Plaintiff argues that

prior use is not sufficient and secondary meaning is not

mentioned. We agree that where a geographical or de-

scriptive word is at issue, prior use alone is not sufficient.

Finding of Fact No. 27 states:

“As a result of the sales and advertising of YORK

furnace and heating products and services by defend-

ant and its predecessors since 1922, defendant’s name

and trademark YORK had been and is known, by

— 18, —

the trade and public, as the means of identifying the

furnace and heating products and services of defend-

ant, and said name and trademark YORK has acquired

a distinctiveness and secondary meaning signifying

defendant and its furnace and heating products and

services, and defendant and its predecessors have

developed, and defendant now has, a valuable business

and good will which is represented and symbolized by

the name and trademark YORK.”

Finding of Fact No. 38 is as follows:

‘‘Plaintiff’s advertising and use of YORK for fur-

nace and heating products dilutes the distinctive

quality of defendant’s name and trademark YORK,

pre-empts and irreparably damages defendant’s good

will therein, and irreparably damages the secondary

meaning thereof indicating defendant, its services and

products.”’

Although Finding No. 38 is directed principally to the

Illinois statute, we think this Finding, together with

Finding No. 27 is a sufficient finding as to secondary mean-

ing. We do not think it fatal to defendant’s cause on its

counterclaim that the words “secondary meaning” were

not repeated in Conclusion of Law No. 3.

The name YORK is a geographical term. Cenerally

speaking, trademarks in a geographical name are narrow

in scope. Elgin National Watch Co. v. Illinois Watch Case

Co., 179 U.S. 665, 673. Neither plaintiff nor defendant

may monopolize the use of YORK for all manner of

products.

In French Republic vy. Saratoga Vichy Spring Co., 191

U.S. 427, 435, the Supreme Court said:

“True the name is geographical; but geographical

names often acquire a secondary signification...

which enables the owner to assert an exclusive right

to such name as against every one not doing business

within the same geographical limits; and even as

against them, if the name be used fraudulently for the

— on

purpose of misleading buyers as to the actual origin

of the thing produced, or of palming off the produe-

tions of one person as those of another.’’

Under the federal trademark registration sta te (15

U.S.C. $1051, et seq.) plaintiff’s and defendant's rs ristra-

tions containing the name YORK are limited w “the

coods or services specified in the certificate.’’ 15 U.S.C.

§1057 (b).

Assuming plaintiff has made a sufficient showing to en-

title it to the exclusive use of YORK as to ice-making and

refrigeration machinery and apparatus, and also as to air-

conditioning apparatus, this does not determine the ques-

tion as to its claim of exclusive use of YORK in connec-

tion with furnaces and heating products or equipment used

in connection therewith.

Much of the difficulty in this case arises because of the

claims of the parties that each is entitled to the exclusive

use of YORK to designate “heat-generating products” or

“heat-generating devices.’? The judgment of the District

Court enjoins the plaintiff from manufacturing and selling

any furnace or heat-generating products in connection with

any business which includes the name YORK.

Before the incorporation of York Manufacturing Com-

pany in 1895, it was selling steam engines and _ boilers.

Plaintiff now argues that such products were “heat-gen-

erating devices.” These products were manufactured and

sold by plaintiff’s predecessor long prior to the date of

defendant’s manufacture and sale of oil conversion units

in 1922. Also, plaintiff says that in the early 1930s, when

its predecessor was manufacturing and selling air-condi-

tioning systems for stores, theaters, hotels and other

buildings, heating coils were included with some of these

installations.

The District Court was entitled to consider various

statements and advertisements of the plaintiff's prede-

eessor which would indicate that the early references to

‘‘air-conditioning’’ referred to refrigeration and ice-making

machinery. To illustrate, in February 1915, plaintiff’s ad-

—

vertisements emphasized that it was devoted erclusively’

to the manufacture of ice-making and refrigeration ma-

chines. In April 1920, the previous advertisement was

changed slightly in wording to claim that York Manufac-

turing Company made “Iee Making and Refrigerating

Machinery E-rclusively.’" This advertisement was used

throughout 1920-1923. By 1925, the advertisement of plain-

tiff’s predecessor proclaimed ‘‘The York Organization is

the largest in the world, devoted erclusively? to the manu-

facture of Ice Making and: Refrigerating Machinery.” This

claim was repeated as late as 1926. These advertisements

belie plaintiff’s present claim, that prior to 1923 a see-

ondary meaning attached to its use of YORK as to heat-

generating products or air-conditioning products as those

terms are generally understood.

It is clear that plaintiff was the first to use the term

YORK to refer to itself and its products; yet, in 1922-

1923, plaintiff's principal products were ice-making and ~

_ refrigerating machinery. The June 1922 issue of the house

organ publication of plaintiff’s predecessor stated, “The

idea of the York Manufacturing Company was to devote

itself entirely to the development of the highest type of

refrigerating. machine. . . .” This publication also listed

plaintiff’s 1922 products as various items and_ parts,

“needed to equip a complete ice-making or refrigerating

plant.’’ It is important to note that no mention was made

of any heating or air-conditioning products.

Under the related goods doctrine, plaintiff claims it

sheuld be protected as to YORK because the first user of

a name has rights in that name even as to goods to which

it had not applied the name or trademark, We do not

think that in 1922-1923, conversion oil burners produced

by defendant were so related in their common function

as to be likely to cause confusion with the use by York

Manufacturing Company of the term YORK on ice-anaking

or refrigerating machinery. As hereinbefore stated, neither

party was entitled to monopolize the geographical naine

YORK for all manner of products.

* Emphasis supplied.

— 10a —

In Consumers Petroleum Company v. Consumers Co. of

Illinois, 7 Cir., 169 F.2d 153, this Court decided a case

wherein the facts were somewhat similar to the facts in

the case at bar. The action was brought by Consumers

Petroleum Company to enjoin the defendant from using

the name “Consumers” in the business of marketing fuel

oils. Plaintiff had been incorporated in 1925: defendant

was incorporated in 1937 as a result of a reorganization

of a corporation established in 1913. Defendant’s prede-

cessor was authorized by its articles to deal in coal, coke,

wood and other fuels of all kinds. However, in 1925, when

plaintiff was incorporated, defendant was not selling fuel

oils.

Defendant did start to sell fuel oil in 1927, but did so

under various trade names and not its own. In 1938, how-

ever, defendant changed its method and commenced selling

fuel oil on its own account. The parties agreed that no

confusion existed in the mind of the public prior to 1938.

Defendant argued that plaintiff was charged with the

knowledge that defendant might, at any time, commence

to sell fuel oil in addition to other fuels.

This Court first decided that the solid fuels sold by

defendant were not in the same deseriptive class as fuel

oil. We held that even though defendant might decide to

sell fuel oil as part of its corporate business, it did not

follow that it had a right to engage in the sale of such oil

under a name, even its own name, which had been pre-

viously put to use by a competitor in the sale of such

commodity.

In Consumers, this Court stated, 169 F.2d at page 161:

“From these authorities and others which could be

cited, it appears to be an established principle that a

person or corporation can acquire a property right

in a trade mark or trade name only by use of such

mark or name in connection with goods of the same

descriptive class. Applying this principle, we are of

the view that the defendant acquired no property

right in the trade name ‘Consumers’, as applied to

—lla—

fuel oil, for the reason that it did not use such name

in that connection until 1938, and long prior to that

time the trade name had been appropriated and used

by the plaintiff in connection with such business. As a

corollary, plaintiff in 1925 had a right to appropriate

and use the name in connection with fuel oil.”’

Plaintiff argues that defendant has proved no sales of

furnaces prior to 1938, whereas plaintiff’s predecessor sold

furnaces under the YORK trademark and name in 1937.

There is credible evidence to prove plaintiff's sale of

furnaces in 1937. However, there is also credible evidence

that defendant sold warm air furnaces under the name

YORK as early as 1933, and such evidence sustains the

findings of the District Court in this respect.

In 1938, plaintiff’s predecessor undertook the purchase

and resale of some furnaces under the brands YORK-

AIRE and YORK. Edward R. Walsh, a man with heating

experience, was employed to organize a furnace and heat-

ing department. In 1941, the venture of selling furnaces

was abandoned. The heating equipment on hand was liqui-

dated. An attempt was made to sell some of it to defend-

ant. A former official of plaintiff’s predecessor attributed

the failure of the heating venture in the following man-

ner: “Well, our marketing was through our own dealers

and branch offices who were unfamiliar with the heating

field. They didn’t have any contract with the home builder

end the residential market. ... And the dealers wercn't

ioo enthused about getting into this new field... .’* On

the other hand, there were some dealers of plaintiff who

were already handling established furnace lines including

defendant’s furnaces,

In 1943, when York Ice Machinery Corporation obtained

its federal registration for YORK (Reg. No. 403,923), it

disavowed any use of YORK for furnaces and heating

products, and stated a furnace is for “heating purposes

and is widely different from air-conditioning apparatus,”

and that “any possibility of confusion is non-existent.”

The manufacture and sale by plaintiff of steam engines

and boilers as well as heating coils in connection with some

— 12a —

air-conditioning devices, under the name of YORK, and

all prior to 1933, the date when defendant commenced the

manufacture of warm air furnaces, does not provide a

sufficient basis for granting judgment to the plaintiff.

Another reason why plaintiff should not be granted the

relief requested is that it is guilty of laches. Plaintiff's

predecessor, although a much larger company, was fully

aware that defendant’s predecessor had applied the name

YORK to its conversion burners which were used in fur-

naces since 1922. It knew that defendant’s furnaces were

advertised and sold under the name YORK since 1933.

The manufacturing plants of plaintiff and defendant were

located in close proximity to each other. Commencing

as early as 1927, a number of plaintiff’s high officers and

officials caused defendant’s oil conversion units to be in-

stalled in furnaces in their homes. Yet, the record does

not disclose a single objection by any of plaintiff’s prede-

eessors to defendant’s use of YORK over a period of at

least thirty to thirty-five years.

The friendly and cordial relationship between plaintiff's

and defendant’s predecessor for several decades may have

cooled somewhat in 1954 when defendant refused to sell

out to its larger neighbor, but that does not change the

applicable law.

This Court recently held in Seven-Up Company v. O-So-

Grape Co., 283 F.2d 103, that prolonged and inexcusable

laches bars injunctive relief in trademark cases. We stated,

at page 106: “Laches does not necessarily constitute a

conclusive and automatic bar to injunctive relief in trade-

mark actions. However, in many instances, the delay may

be so prolonged and inexcusable that it would be inequit-

able to permit the plaintiff to seek injunctive relief as to

future activities.’’ In the case at bar, we hold it would he

inequitable for plaintiff to be awarded an injunction as to

defendant’s use of the word YORK on oil conversion

units and furnaces.

We now pass to consideration of the judgment rendered

in favor of the defendant on its counterclaim. It should

—13a—

be noted that defendant never registered the name YORK

alone as to any of its products, In the 1950 registration,

the words YORK and HEAT appear, the Ictters thereof

arranged vertically. The words YORK and HEAT were

separated by the letters Y/H. The design of the 1909 reg-

istration was the same excepting the word “GAS” was

substituted for “Y/H."’

Defendant's competitive conduct has not been entirely

blameless. As an illustration, in 1936, when plaintiff had

widely advertised ‘YORK leadership”’ in “air condition-

ing’, defendant followed shortly thereafter with an adver-

tisement asserting that “it remained for YORK to lead

the industry’? with its “Winter Air Conditioner.”

Defendant's advertising copied terms and phrases used

in plaintiff’s advertising. Plaintiff had frequently adver-

tised YORK quality. Thereafter, defendant advertised

with reference to its products, “There is no substitute for

YORK quality.’’ Since 1931, plaintiff had consistently ad-

vertised “York Experience.” Thereafter, defendant ad.

vertised as to its products, * York’s Experience.’’

Nevertheless, the record supports the District Court’s

findings and holding that defendant has the exclusive right

to use YORK on oil conversion burners and furnaces.

Plaintiff‘s crash program of entering the heating markct

by the sale of furnaces under the name of YORK did

cause damage to the defendant.

A complication, difficult of solution, is that in recent

vears the air-conditioning industry and the heating indus-

trv have come together to the extent that a unit is now

manufactured which, in its capacity as a furnace, heats

a home or other building in cool weather, while in warm

weather, the same unit in its capacity as an air-conditioner,

can cause cool air to pass through the ducts to the rooms

of the building. Defendant has advertised that its furnaces

are adapted to receive and utilize cooling units.

In the injunction below, plaintiff was enjoined from

selling any “heat generating products”’ in connection with

any business which includes the name YORK. As hereto-

—l4a—

fore pointed out, ‘‘heat generating products”’ is a broad

designation. Plaintiff should not be restrained from using

heating eoils or units in its air-conditioning devices such

as have previously been used by plaintiff or the air-condi-

tioning industry. On the other hand, defendant should

not be permitted to advertise its furnaces as air condi-

tioners under the name YORK.

The provisions of the decree pertaining to damages can-

not be sustained in the form entered in the District Court.

The judgment provides plaintiff shall pay defendant $2.-

280,000 for the amount of damages sustained by defend-

ant resulting from plaintiff’s use of YORK for furnace

and heating products. It also provides plaintiff shall

account for and pay over to defendant all profits derived

from plaintiff’s sale of furnace and heating products

under the name and trademark YORK.

It is not clear what part of the $2,280,000 allowed as

damages is for defendant’s lost profits. The theory upon

which this sum was determined was based on lost profits

from lost sales. Plaintiff insists an award of both damages

plus plaintiff’s profits permits a doubie or duplicate re-

covery and is improper. Century Distilling Co. v. Contt-

nental Distilling Corp., 3 Cir., 205 F.2d 140.

Defendant has the burden of proving by competent evi-

dence what its actual damages were. On the other hand,

damages are not rendered uncertain because they cannot

be caleulated with absolute exactness. It is sufficient if a

reasonable basis of computation is afforded. Eastman

Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359,

379.

When defendant made its calculations as to damages,

it gave no consideration as to the great proportionate in-

crease in the sale of gas-fired furnaces. From 1948 to

1959, the period under consideration, sales of gas-fired

units rapidly increased, while the sale of oil-fired furnaces

remained relatively stable. In 1948, there were sold 143,075

oil units and 218,900 gas units. In 1958, there were 190,223

sales of oil units, but during the same period, 975,900 gas

units were sold.

— 15a —

Without any evidence as to how many gas-fired units it

sold after 1953, defendant says it is entitled to estimate

its sales at 1.69 of the combined national oil and gas —

unit sales, because this is the share of the national market -

defendant held in the pre-infringement period. Defend-

ant’s calculations and the judgment below fail to make any

allowance or adjustment for the fact that the national

market in 1959 was a different market than it was in the

pre-infringement period. It is not reasonable for defend-

ant to assume it was entitled to 1.66 cf a national

market wherein the emphasis had shifted from a product

pioneered by the defendant to a product to which it was a

newcomer.

There is also in the record, evidence of several inter-

vening causes of defendant’s decline in business in 1953

aitributable to defendant or to causes other than plaintiff.

Consideration xhould be given to these factors.

As stated, the District Court was correct in awarding

judgment in favor of the defendant on its counterclain.

However, the remedy devised wes improper under the

circumstances of this case. The injunction was too broad

in its scope and should be revised to incorporate the sug-

zestions previously considered in this opinion. The de-

fendant’s damages must be recomputed in the light of the

shift in consumer demand from oil-fired to gas-fired fur-

naces, and any intervening causes responsible for the de-

cline in defendant’s business. The defendant is not en-

titled to an accounting to recover the plaintiff's profits.

An accounting for an infringer’s profits is an cquitable

remedy. The federal statute provides that the trademark

owner’s right to recover damages, profits and costs is

“subject to the principles of equity.”? 15 U.S.C. C1117. A

finding of infringement does not, as a matter of right, en-

title the owner to recover the infringer’s profits. William-

son-Dickie Mfg. Co. v. Davis Mfg. Co., 3 Cir. 251 F.2d

924: Morgenstern Chemical Co. v. G.D. Searle &P€0., 3

Cir., 253 F.2d 390.

— 16a —

We have previously considered the fact that the de-

fendant’s conduct has not been entirely blameless. Under

the circumstances of this case, we feel that complete justice

will be accomplished by limiting defendant’s remedy to an

injunction and recovery of its actual damages. This case

is, therefore, remanded to the District Court with instruc-

tions to revise the injunction and recompute the damages

on a reasonable basis in the light of this opinion. Tax-

able attorney fees shall not be allowed.

JUDGMENT for defendant is modified and

the cause remanded for a

recomputation of damages.

—lja—

Unitep States Court or APppPEALs

For The Seventh Circuit

Chicago 10, Illinois

Wednesday, July 26, 1961

Before

Hon. John S. Hastings, Chief Judge

Hon. F. Ryan Duffy, Cireuit Judge

Hon. Win G. Knoch, Circuit Judge

BORG-WARNER CORPORA-)

Appeal from the

— a United States Dis.

. 9 Plaintift-Appellant, trict Court for the

ails si > Northern District

of illinois, Eastern

Division

YORK-SH IPLEY, INC.,

Defendant-Appellee. }

This cause came on to be heard on the transcript of the

record from the United States District Court for the —

Northern District of Illinois, Eastern Division, and was

argued by counsel.

On consideration whereof, it is ordered and adjudged

by this court that the judgment of the said District Court

in this cause appealed from be modified, and that this

cause be and it is hereby, remanded to the said District

Court with instructions to revise the injunction and _ re-

compute the damages on a reasonable basis in the light

of the opinion of this Court filed this day. Taxable at-

torney fees shall not be allowed.

It is further ordered and adjudged by this Court that

the costs on appeal be equally divided between the parties.

=

Unitep States, Court or APPEALS

For The Seventh Circuit

Chicago 10, Illinois

Wednesday, September 13, 1961

Before

Hon. John S. Hastings, Chief Judge

Hon. F. Ryan Duffy, Cireuit Judge

Hon. Win G. Knoch, Circuit Judge

BORG-WARNER CORPORA-) Appeal from the

TION é;

: ee United States Dis-

Plaintiff-Appellant, trict Court for the

No. 13211 - Northern District

vs. weet :

YORK-SHIPLEY, INC., a.

Defendant-Appellee. }

It Is Ordered by the Court that plaintiff-appellant’s

petition for rehearing be, and the same is hereby, denied.

It Is Further Ordered by the Court that defendant-

appellee’s petition for rehearing and clarification be, and

the same is hereby, denied; no taxable attorney fees

~~ shall be iaxed into this Court or in the District Court.

— 19a —

Unitep States Court or APPEALS

For The Seventh Circuit

Chieago 10, Illinois

I, Kenneth J. Carrick, Clerk of the United States Court

of Appeals for the Seventh Circuit, do hereby certify

that the foregoing ........ pages contain a true copy of the

Opinion, filed July 26, 1961; Judgment, entered July 26,

1961; Order denying petition for rehearing, entered Sep-

tember 13, 1961 in:

Cause No. 13211

BORG-WARNER CORPORATION,

Plaintiff-Appellant,

Vs.

YORK-SHIPLEY, INC.,

Defendant-Appellee.

-

as the same remains upon the files and records of the

United States Court of Appeals for the Seventh Circuit.

In Testimony Whereof I hereunto subscribe iny name

and affix the seal of said United States Court of Appeals

for the Seventh Cireuit, at the City of Chicago, this

eleventh day of October A.D. 1961.

(Seal)

/s/ Kenneth J. Carrick

Clerk of the United States Court of Appeals

for the Seventh Circuit.

nA