or practices is entitled to great weight. Under the bill, enforcement of the Federal Trade Commission Act would be wholly through judicial proceedings. So far as this act is concerned, the bill would take away from the Commission all of its quasi-judicial functions and leave to it only the role of prosecutor.

The measure would constitute a reversal of what has become the preferred and accepted method of enforcing regulatory laws. It is generally recognized that this method of enforcement of such types of laws tends to bring about uniformity in the application of the law and avoids the technicalities incident to judicial proceedings, while adequately safeguarding, through judicial review the rights of those subject to regulation.

It is believed that substitution of direct court proceedings for administrative proceedings, as provided by this bill, would weaken the endorsement of the Federal Trade Commission Act. Furthermore, insofar as the Federal Trade Commission Act is applied to conduct which constitutes a violation of the Federal antitrust laws, both this Department and the Federal Trade Commission would be charged with the conduct of proceedings in the district courts directed against the same or similar violations of law. Such parallel enforcement by two separate

agencies of the Government seems undesirable.

It should also be noted that the bill does not modify section 11 of the Clayton Act and it therefore leaves unchanged the Commission's quasi-judicial functions in enforcing sections 2, 3, 7, and 8 of that act.

In view of the foregoing considerations, this Department is unable to recommend the enactment of the bill.

The Director of the Bureau of the Budget has advised that there is no objection to the submission of this report.

Sincerely yours,

PEYTON FORD,

Acting The Assistant to the Attorney General.

STATEMENT OF LESLIE D. TAGGART, NEW YORK, N. Y.

The CHAIRMAN. The first witness will be Mr. Leslie D. Taggart, New York. Mr. Taggart.

Mr. TAGGART. Mr. Chairman and gentlemen of the committee: It is indeed a pleasure to appear before this committee.

My name is Leslie D. Taggart, New York, member of the bar. I am a member of the trade-marks committee of the patents, trademarks and copyright section of the American Bar Association and of the lawyers' advisory committee of the United States Trade-Mark Association.

I am not, however, representing either of those organizations nor am I representing any other organization. I speak as a practicing member of the bar who specializes in trade-mark matters and my work covers large, medium, small, and very small companies, and I feel that my reactions because of this breadth may be of assistance in the consideration of this bill.

I would like to confine my remarks to the trade-mark aspect of this proposed amendment to the Federal Trade Commission Act.

At the present time we have in effect two trade-mark laws in this country: One, the trade-mark law that was developed by the courts first of Great Britain and later of this country, and the other law of trade-marks and unfair competition, which has been developed by the Federal Trade Commission.

In the protection of the trade-mark in the courts, the person who wishes to protect his trade-mark asserts in the court that he has a trade-mark; that somebody is doing something that injures that trademark and that he presents his case to the court, and if by preponderence of the evidence he can establish his rights and the damages to his rights, he is enabled to receive protection of the trade-mark. If a

man is a defendant in a trade-mark suit, that is, somebody says that he is doing something which injures another man's mark he likewise goes into the court. He has the right to be heard; the right to have his witnesses; the right to a determination by an impartial body, namely, the judge, and a decision thereon.

That is the old traditional trade-mark action from the side of the plaintiff and the side of the defendant.

Along side of that we have a very necessary act, namely, the Federal Trade Commission Act, and I do not criticize the basic purpose of the Federal Trade Commission Act in any way. In fact I am completely in agreement with the purposes back of it which are to declare unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce illegal. That is also the function of the law of trade-marks, to have unfair practices, unfair or deceptive acts declared unlawful and for the person owing rights to have those rights protected, and also for the public to be protected by not having deception practiced upon it.

What is the status of a trade-mark that is litigated before the Federal Trade Commission? The Federal Trade Commission is required, by law, not only to be a prosecutor, but to be a judge and jury. The Federal Trade Commission may not act until it has reason to believe that certain acts injurious to the public are committed and that it has a good case. In fact, the act, the Federal Trade Commission Act, requires the Federal Trade Commission, whether they like it or not, to prejudge the case. The Federal Trade Commission then issues its complaint; hearings are had; the hearings are heard not by an outside party, but by an employee of the Federal Trade Commission. These in turn are reported to the Commissioners themselves and a decision is rendered.

Now, you will say that that is practically the same as going before a court; but I am afraid it is not, for this reason: First you have the fact that the prosecutor is the judge and jury of his own case, and I believe that many district attorneys would like to have that power, but for the sake of the community, they do not have that power.

The second point is this, the only restriction on the evidence-and this restriction comes from the appeal provision-the only restriction on the evidence is that when an injured party or party deeming himself injured appeals from the Federal Trade Commission to the appropriate circuit court of appeals, if the court appeals finds that the findings of the Commission as to the facts are supported by evidence, that shall be conclusive. In other words, we have a situation where not only is the Federal Trade Commission the prosecutor and the judge and jury, but unlike the average court case, the circuit court of appeals, the appellate court, has not the power to inquire into the facts. It must accept the facts as found by the Commission, whether or not those are supported by competent evidence or relative evidence. All that is required is that there be evidence to support the findings.

Now I will say this, that the Federal Trade Commission tries, and is frequently successful, in having evidence, proper evidence, and a proper quantity of evidence, before it issues its findings, but it is not required by law to do that and there are times when many people believe that its findings of fact are made on evidence which would be given no consideration whatsoever by a court, and evidence that would not be probative to a jury.

In this connection I would like to refer to a decision by Judge Swan, of the second circuit in a case called Indian Quartered Oak versus the Federal Trade Commission, where an order of the Federal Trade Commission was up for review. He said:

* *

I reluctantly concur in the result, because the Commission has made findings of deception of the public, which there is some evidence to support, though in my opinion it is greatly outweighed by contrary evidence. * Interference with such commercial usage does not seem to me justifiable, but in view of the Commission's findings, the court is powerless.

Let me give one illustration. This is based on an actual case, but I have purposely changed it slightly, because I think it inappropriate to bring an actual matter before this committee.

Let us assume that a manufacturer is manufacturing and selling cosmetics and he calls them "Buttercup" cosmetics. Let us suppose too, that the Federal Trade Commission believes that that word "Buttercup" used as a trade-mark to sell this man's goods is a deceptive act of some sort--and it might very well be-the Federal Trade Commission acting as complainant can then put on one or more witnesses who will say, and can say, "Well, I believe when I purchased this product that it was made of the essence of buttercups."

Now, this may sound a little bit silly, but I am basing this on an actual case. If one witness comes on and the Commission believes that witness, it can make a finding that "Buttercup" as such is a fraud upon the public, because of the testimony of that witness. I will say this for the Commission, they seldon rely on one witness, but then out of 140,000,000 people in the country it is easy for a powerful branch of the Government to find more than one witness and it is customary for the Commission to have several witnesses.

Now, that is one possible argument, or one possible basis for the finding of fact. It is possible also that a person would testify that he thought that one of the ingredients of "Buttercup" cosmetics was butter, and because it was not butter that person was decieved, and therefore, this matter should be stopped in the public interest.

If that were true, that may be all right, but you see because of the power that the Federal Trade Commission has on either of these two bases, it can enter an order and that order must be sustained by the circuit court of appeals.

Now, you know exactly what a lawyer on cross-examination would do to a witness like that. I rather suspect if it were in the district court, the lawyer would never get a change, the judge would do it himself.

So that we have, as I say, these two systems of determining and deciding trade-mark rights in the United States.

This bill seeks to correct that by requiring the Federal Trade Commission to file a complaint like any other litigant in the district court of the United States for a determination of these valuable rights. I think it is a good idea. It has worked out very well in practice with the Federal Food and Drug Administration. I think the reason for that is this: The Food and Drug Administration does an excellent job of preparing each case. When a lawyer realizes that he has to fight them, he knows that he is going in for a hard battle. However, he has the chance to come in and if he believes that the Food and Drug Administration is wrong, he can prove it, because there is an independ

ent judge determining the matter and there is an appeal from that judge if he should believe that judge to be wrong.

An argument will be made that if all of the Federal Trade Commission matters were brought into the district courts it would clutter up the Federal courts immeasurably. I am sure that some later speaker will go into the figures on that, but from practical experience I doubt very, very much that that will result, because in the great number of Federal Food and Drug cases that are put in the district. courts, many are settled between the assistant United States attorney handling them and the claimant for the goods, and in that way a satisfactory arrangement for both the Government and the citizen is obtained, and I have never heard any complaint from any of the United States Attorneys that they are not in a position to handle those or to handle a difficult trial.

There is one very practical matter that I would like to bring to the attention of this committee. If a man comes in to a lawyer's office and says that the Federal Trade Commission has issued a complaint against him, and asks: "What should I do?" The only question that you can ask him is this: "Are you prepared to spend a lot of money to defend your rights and after you have spent a lot of money to defend your rights, you must realize that your chances of success are infinitesimal?"

When a man receives a complaint from the Federal Trade Commission in a trade-mark matter, he knows that he has practically lost his case before he starts. I believe that this bill will remedy that situation and enable trade-mark owners to have their rights to their marks properly defined by courts who have developed the law of unfair competition and trade-marks, so that other manufacturers and the public at large are amply and thoroughly protected. Thank you. Mr. O'HARA. Any questions?

Mr. LEA. Mr. Chairman.

Mr. O'HARA. Mr. Lea.

Mr. LEA. You are particularly interested I take it, as to trade-marks. Mr. TAGGART. That is right, sir.

Mr. LEA. If a controversy arises as to the facts concerned and the case goes to the court, is the decision of the lower court affirmed if there is any evidence or does the law require substantial evidence in support of the decisions?

Mr. TAGGART. Are you referring now to an ordinary court procedure?

Mr. LEA. An ordinary court procedure.

Mr. TAGGART. In an ordinary court procedure the plaintiff must prove, by a preponderance of the evidence in accordance with the ordinary tort rule, one, that it is his mark; two, that the defendant is doing certain actions; three, that these acts are injurious to the plaintiff and as a result he is injured. It is a simple tort action. Mr. LEA. Well that is the rule in the trial court.

Mr. TAGGART. That is the rule in the trial court.

Mr. LEA. Now, when you go to the appellate court, what is the rule? Mr. TAGGART. The appellate court will now retry the findings but they have the power to determine whether or not the lower court did have a preponderance of evidence; so that the plaintiff could be sustained, or if there was a lack of preponderance of evidence, the defendant can be sustained on the appeal.

In trade-mark cases, the appellate courts will not attempt to weigh the testimony of the witnesses, but they will examine the evidence in the same way that they do in any other case to find out whether or not there is sufficient evidence to sustain the decision of the lower court, and to set the findings aside if they are clearly erroneous.

Mr. LEA. Well, at the present time, the general rule is that the verdict must be supported by substantial evidence, or any evidence to support the judge is sustained?

Mr. TAGGART. The courts, you are referring to?

Mr. LEA. The appellate court rule.

Mr. TAGGERT. In passing on matters that come up from a district court?

Mr. LEA. Yes.

Mr. TAGGART. No, it is not a question of substantial evidence. It is a question of a preponderance of the evidence. It is entirely different from the situation where you go up from the Federal Trade Commission. The Federal Trade Commission

Mr. LEA. A preponderance of the evidence as determined by the lower court does not depend upon the quantity but the convincing power of the witnesses. Testimony of one witness might overcome

ten.

Mr. TAGGART. That is right; and the appellate courts do repeatedly say that the lower courts have the opportunity of viewing the witnesses on the stand and judging their creditability, and the appellate courts will not disturb the findings of fact unless there are some real grounds; but you see when you go up from the Federal Trade Commission there is no possible basis for anybody to know anything about a witness. In fact the Federal Trade Commissioners do not see the witnesses. It is the trial examiner who sees them. The trial examiner reports to the Federal Trade Commissioners. They render their report, presumably after reading all of the testimony, and sometimes it is quite voluminous, and a litigant goes up to the circuit court of appeals, all we need to find is that there is some evidence.

The courts rightfully say a scintilla of evidence is not sufficient. Some courts say, I think also rightfully so, a substantial quality of evidence; but many of them say any evidence and the statute says evidence.

Mr. LEA. Where is the language in the bill that would accomplish the purpose that you have in mind?

Mr. TAGGART. This bill says that the Federal Trade Commission would go into the court like any other litigant or like the Food and Drug Administration in a Food and Drug case and it also says that the Federal Trade Commission would be governed by all of the rules applicable to any other litigant. That includes the Federal Rules of Civil Procedure and all of the United States laws, and that includes matters of evidence and matters of procedure; and the Food and Drug Administration seems to be able to do quite well under it, and the antitrust department of the Department of Justice seems to do quite well under it, and I think it is an anomaly that such an important organization with such important functions as the Federal Trade Commission has, and rightfully has, is put in the very embarrassing position of being different from other important agencies of the Government and in the embarrassing position of having too much