6-10.TAFFY [control reqmt. in oral license].rev.doc
TAFFY ORIGINAL DESIGNS, INC., et al.
v.
TAFFY'S, INC.
District Court, N. D. Illinois, E. Div.
No. 65 C 345
Decided Oct. 31, 1966
WILL, District Judge.
This is an action for trademark infringement and unfair competition in which plaintiffs seek compensatory and punitive damages and an injunction. Defendant in turn has moved for the cancellation of the trademark in suit and summary judgment. Plaintiffs have moved to strike the affidavit of defendant's attorney which has been filed in support of the motion for summary judgment. Jurisdiction is claimed under 15 U.S.C. § 1121, 28 U.S.C. § 1338(a) and § 1338(b) and by virtue of the diversity of citizenship of the parties.
Plaintiff, Taffy Original Designs, Inc. (hereinafter "Designs"), and plaintiff, Taffy Shops, Inc. (hereinafter "Shops"), are incorporated under the laws of California. Defendant is an Illinois corporation.
The sole stockholder of Designs is Anne Taffel Lehrer, and the sole stockholder of Shops is Sarah T. Roberts. Mrs. Lehrer and Mrs. Roberts are sisters who in 1937 formed a partnership which entered into the business of designing, manufacturing and the retail selling of women's wearing apparel under the trade name and trademark "Taffy's." The mark "Taffy's" has been in continuous use since approximately September 1, 1938. Under the oral partnership agreement, Mrs. Lehrer generally was responsible for designing and manufacturing and Mrs. Roberts for the retail sales. By written agreement, dated February 28, 1954, the partnership was dissolved.
From February 28, 1954 until April 15, 1955, Mrs. Lehrer operated an individual proprietorship under the trade name "Taffy's Originals." Mrs. Lehrer's business operations continued to be the design and manufacturing of women's apparel. The finished products were sold at wholesale. From the date the partnership was dissolved, Mrs. Robert operated retail women's wear shops in the greater Los Angeles area. The form of Mrs. Robert's business was also an individual proprietorship whose name was "Taffy's."
Plaintiff Designs was incorporated on April 15, 1965 for the purpose of designing and manufacturing women's ready-to-wear clothing, including dresses, blouses and lingerie. Designs used the trade names and marks, "Taffy's of California" and "Exclusively Taffy's of California." All interest in these names and marks held by the individual proprietorship operated by Mrs. Lehrer was assigned to Designs upon its incorporation.
Plaintiff Shops was incorporated on October 14, 1954 for the purpose of operating women's wear retail stores. Merchandise was sold under the following marks and names, "Taffy's of California," "Taffy Original Designs," "Taffy's Originals," "Originally Taffy's," "Exclusively Taffy's," and "Particularly Taffy's." All interest in the names and marks held by Mrs. Roberts' proprietorship was assigned to Shops.
Prior to 1956, no attempt was made to register any of the marks used by either the partnership or the individual proprietorships. On February 7, 1956, Designs applied to the United States Patent Office for registration of the mark "Taffy's." Registration was denied on the ground that the mark "Taffy" had already been registered in the name of a goods manufacturer. Pursuant to the suggestion of the Patent Office Examiner, Designs amended its application and sought registration of the mark "Taffy's of California." The words "of California" were disclaimed. Designs' amended application stated that the amendment "now emphasizes the possessive form of the mark of the applicant," and that the possessive form is "a matter of great significance in the mind of the dress buying public." The Patent Office granted registration *709 of the trademark "Taffy's of California" on October 8, 1957. The alleged infringement at issue herein is of this registered mark.
In March 1958, Designs, through Mrs. Lehrer, its president, announced it was suspending its business activities. Mrs. Lehrer stated that family reasons necessitated the decision. Designs has not resumed its designing and manufacturing operations since the 1958 suspension.
Plaintiff Shops has continued to operate retail stores in the greater Los Angeles area. Through subcontractors, and to some extent on its own, it now also manufactures a portion of the goods it sells. It continues, of course, to purchase from other manufacturers.
*** [Defendant was incorporated in 1963 and operates one bridal salon, under the name “Taffy’s.” Clothing sold there either bears the manufacturers’ labels or no labels at all.]
Cancellation of the Trademark
[6] Defendant contends that the affidavit of continuous use filed on behalf of Designs by Mrs. Lehrer in 1963 was false since Designs was not in business after 1958 and the oral license agreement between Designs and Shops does not obviate the conclusion that the trademark has been abandoned by Designs. Specifically, defendant claims that the license agreement does not provide for the requisite supervision and control over the business activities and merchandise of Shops under the license. There is no dispute that the law requires control by the licensor over the application of its trademark by its licensee. Naked license agreements are prohibited. Du Pont v. Celanese Corp., 167 F.2d 484, 489, 77 USPQ 364, 368 (CCPA 1948), Susser v. Carvel, 206 F.Supp. 636, 641 (S.D. N.Y. 1962).
Control by the licensor is essential if the public is to be protected.
"If the licensor is not compelled to take reasonable steps to prevent misuses of his trademark in the hands of others the public will be deprived of its most effective protection against misleading uses of a trademark." Dawn Donut Co. v. Hart's Food Stores, 267 F.2d 358, 367, 121 USPQ 430, 437 (2 Cir. 1959).
The record is quite clear as to the degree of supervision and control exercised herein by the licensor, Designs. The question presented is whether that control is legally sufficient. Applying the facts and the rationale for the control requirement, we conclude that a reasonable degree of control is being exercised by Designs.
The sisters were in business together from 1937 to 1954, one being in charge of design and manufacturing, the other in charge of retail sales. When two separate corporations were organized, the work of the sisters remained the same as did their close business relationship. Now Shops is the only active corporation. It sells at retail and also contracts out for the manufacture of some garments. Shops uses labels bearing the registered mark in suit. Mrs. Lehrer, president of Designs, admits that there is no formal control agreement, but states that there is no need for formalism. She contends that Mrs. Roberts' stores are a continuation of the business started by both sisters and that the plans originally conceived by both of them are being followed today. From time to time Mrs. Lehrer visits the stores, and she has stated that she is quite satisfied with the quality of merchandise bearing the registered mark.
Under these circumstances, we find that the public is adequately protected against misuse of a registered mark. The same standard of quality associated with the licensor is being kept up by the licensee. The necessary degree of control must vary from situation to situation, from product to product. The informal control exercised here is sufficient to protect the public.
An appropriate order will enter granting the motion for summary judgment on plaintiffs' claims, dismissing the complaint, and denying the motion for cancellation of the trademark.
FN1 28 U.S.C. § 1338(b) reads as follows: "The district courts shall have original jurisdiction of any civil action asserting a claim of unfair competition when joined with a substantial and related claim under the copyright, patent or trademark laws."
FN2 See 1 Moore, Federal Practice P 0.60 [8.7] (2d Ed. 1964)
FN3 376 U.S. at pages 227, 228, 140 USPQ at 526.
FN4 15 U.S.C. § 1114(1)(a) reads: "Any person who shall, without the consent of the registrant--(a) use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use likely to cause confusion, or to cause mistake or to deceive; or"
FN5 The breakdown of the fifty shipments to areas outside of a forty mile radius from defendant's store is as follows: (1) Shipments in the midwest-- Ohio, 4; Indiana, 2; Wisconsin, 4; Iowa, 4; Missouri, 2; Minnesota, 7; downstate Illinois, 2; Total, 25. (2) Shipments to the east--New York, 9; Maryland, 2; District of Columbia, 1; Total, 12, (3) Shipments to the plains states--Kansas, 2; Oklahoma, 1; Nebraska, 1; Total, 4, (4) Shipments to the south--Georgia, 1; Kentucky, 1; Total, 2, (5) Shipments to the west--California, 7.
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Seg. 6, item 10 (2007)