The word "property" as applied to trade-marks *** is an unanalyzed expression of certain secondary consequences of the primary fact that the law makes some rudimentary requirements of good faith.

Trade-marks, indeed, are the essence of competition, because they make possible a choice between competing articles by enabling the buyer to distinguish one from the other. Trade-marks encourage the maintenance of quality by securing to the producer the benefit of the good reputation which excellence creates. To protect trademarks, therefore, is to protect the public from deceit, to foster fair competition, and to secure to the business community the advantages of reputation and good will by preventing their diversion from those who have created them to those who have not. This is the end to which this bill is directed.

PURPOSES OF THE PRESENT BILL

There are many reasons why there should be a new trade-mark statute. The present act is substantially the act of February 20, 1905. It has been amended from time to time and supplemented by the act of March 19, 1920, which has also been amended in several particulars. The result is a confused situation.

There are many statutes dealing with trade-marks which are widely scattered and difficult of access. There are provisions dealing with trade-marks in tariff acts and other unlikely places. It seems desirable to collect these various statutes and have them in a single enactment.

Moreover, ideas concerning trade-mark protection have changed in the last 40 years and the statutes have not kept pace with the commercial development. In addition the United States has become a party to a number of international conventions dealing with trade-marks, commercial names, and the repression of unfair competition. These conventions have been ratified, but it is a question whether they are self-executing, and whether they do not need to be implemented by appropriate legislation.

Industrialists in this country have been seriously handicapped in securing protection in foreign countries due to our failure to carry out, by statute, our international obligations. There has been no serious attempt fully to secure to nationals of countries signatory to the conventions their trade-mark rights in this country and to protect them against the wrongs for which protection has been guaranteed by the conventions. Naturally under such circumstances foreign governments do not always give to citizens of the United States their convention rights. To remedy this discreditable situation is merely an act of international good faith.

This bill attempts to accomplish these various things:

1. To put all existing trade-mark statutes in a single piece of legislation.

2. To carry out by statute our international commitments to the end that American traders in foreign countries may secure the protection to their marks to which they are entitled. Although it has solemnly pledged at inter-American conventions to do so, the United States has failed adequately to protect owners of trade-marks in the other American countries doing business with this country. As a result of this inaction, our business organizations have not received reciprocal advantages in the other Americas. The bill remedies this matter, eliminates these sources of friction with our Latin-American friends, and will facilitate mutual trade in this hemisphere. These features make this bill of primary importance now.

3. To modernize the trade-mark statutes so that they will conform to legitimate present-day business practice.

4. To remedy constructions of the present acts which have in several instances obscured and perverted their original purpose. These constructions have become so ingrained that the only way to change them is by legislation.

5. Generally to simplify trade-mark practice, to secure trade-mark owners in the goodwill which they have built up, and to protect the public from imposition by the use of counterfeit and imitated marks and false trade descriptions.

The theory once prevailed that protection of trade-marks was entirely a State matter and that the right to a mark was a common-law right. This theory was the basis of previous national trade-mark statutes. Many years ago the Supreme Court held and has recently repeated that there is no Federal common law. It is obvious that the States can change the common law with respect to trade-marks and many of them have, with the possible result that there may be as many different varieties of common law as there are States. A man's rights in his trade-mark in one State may differ widely from the rights which he enjoys in another.

However, trade is no longer local, but is national. Marks used in interstate commerce are properly the subject of Federal regulation. It would seem as if national legislation along national lines securing to the owners of trade-marks in interstate commerce definite rights should be enacted and should be enacted now.

There can be no doubt under the recent decisions of the Supreme Court of the constitutionality of a national act giving substantive as distinguished from merely procedural rights in trade-marks in commerce over which Congress has plenary power, and when it is considered that the protection of trade-marks is merely protection to goodwill, to prevent diversion of trade through misrepresentation, and the protection of the public against deception, a sound public policy requires that trade-marks should receive nationally the greatest protection that can be given them.

Mr. Justice Holmes said in Bourjois & Co. v. Katzel (260 U. S. 689), in speaking of the protection accorded to a trade-mark (692):

It deals with a delicate matter that may be of great value but that easily is destroyed, and therefore should be protected with corresponding care.

Of a trade-mark, he said:

It stakes the reputation of the plaintiff upon the character of the goods. Whenever there was a hearing before any committee on the trade-mark bill, sooner or later there appeared zealous men from the Department of Justice who raised all manner of objections. They asserted that trade-marks are monopolistic and any statutory protection of them plays into the hands of big business and should be discouraged. In vain it was pointed out that what is now big business started as little business-that trade-marks are not, like patents and copyrights, a government grant of an exclusive right, that trade-marks are visible reputation and symbols of good will, that trade-marks are the antithesis of monopoly, and that to protect them is to insure the one whose goods or services they distinguish against fraud and misrepresentation.

No progress seemed to be made with the Department's representatives, who were against not only the protection of trade-marks but trade-marks as an institution. The result of this opposition was the insertion of a provision granting to "Hearings before the Senate Committee on H.R. 5461, 78th Cong., 1st. Sess. (1943).

any government agency the right to cancel any registration. Senator O'Mahoney was very much in favor of this or an equivalent, subscribing to the general doctrine that trade-marks are objectionable and monopolistic.

The provision of Section 14 that any government agency might apply to cancel any trade-mark finally went to conference, where it was suggested that if any agency were to be given authority it should be the Federal Trade Commission, and that there should be limitations placed on the authority. The senators then agreed to the present provisions of Section 14. Senator O'Mahoney proposed further to amend the bill to provide that when a trade-mark is or has been used in violation of the antitrust laws, the mark should be forfeited. After much discussion, the amendment was drafted to read "when the mark has been or is being used to violate the antitrust laws" certain rights in it are lost. Making the provision apply to past conduct, however remote, apparently overrules the established law that the defense of unclean hands (and this is such a defense) applies only to the conditions existing when the complaint was filed and not to a different situation and an earlier date.8

I suggest that these provisions have no place in a statute designed to protect trade-marks. The general powers of a court of equity are ample to prevent abuse. A bill was introduced in the Eightieth Congress designed to eliminate the authority of the Federal Trade Commission to cancel registrations and the reference to the antitrust laws. There is general unanimity of opinion that these provisions are unwise, unnecessary, and unworkable.10 These provisions are the result of the neurosis of certain senators and of the Department of Justice according to which the antitrust laws take precedence over everything else. I suggest that this attitude springs from a complete ignorance of trade-marks, their history, and their social values. It almost makes one wish for a return to "good King George's glorious days,"

When noble statesmen did not itch

To interfere in matters which

They do not understand.

Sec. 33(b) (7), 60 STAT. 438, 15 U.S.C. § 1115(b)(7) (1946).

The Coca-Cola Company v. The Koke Company, 254 U. S. 143 (1920).

S. 1919, 80th Cong., 1st Sess. (1947).

10 For a detailed discussion, see DAPHNE ROBERT, THE NEW TRADE-MARK MANUAL 294-297 (1947).

TRADE-MARK INFRINGEMENT AND UNFAIR

COMPETITION

RUDOLF CALLMANN*

I

METHODS OF INFRINGEMENT

Anomalous though it may seem, no act can be labeled a trade-mark infringement without more. Whether or not the court will recognize an infringement depends upon the scope of protection to which the trade-mark is entitled under common and statutory law, and is ultimately determined by the singular approach of the immediate tribunal.

An acid test of infringement could be distilled out of a formula which recognizes that the trade-mark serves three distinct and separate purposes: (1) It identifies the product and its origin, (2) it guarantees the product's unchanged quality, and (3) it advertises the product. Injury to the trade-mark in any of its capacities as an identifying, guaranteeing, or advertising device should suffice to constitute an infringement thereof. These three functions-of different importance at different times, in different lines of business, and for different articles-are correlative. The classical function, that of identification, has molded the law of trade-marks. The importance of the guarantee function has been somewhat overestimated, while the function of advertisement still awaits full recognition and an adequate place in the law.1

A court may proceed upon any one of several acceptable grounds in granting trade-mark protection. First, a trade-mark may be protected because of the trademark statute under which it is registered. Second, a trade-mark may be protected on the theory of unfair competition if the plaintiff and the defendant are in fact competitors. Third, where the litigants are not in factual competition with each other, the court may grant protection on the theory of "unfair dealing." And, fourth, protection may always be predicated on the theory which treats the mark as property. Federal statutory protection is confined to the registered trade-mark; it will protect the plaintiff against a defendant's use of his mark, or an imitation thereof, in interstate commerce if such use is likely to cause confusion or mistake or to deceive purchasers. Under the theory of unfair competition, any trade-mark

* LL.B. 1939, and Research Fellow, Harvard Law School. Member of the New York bar. Author, THE LAW OF UNFAIR COMPETITION AND TRADE MARKS (1945, with cumulative supplement 1947). Contributor to legal periodicals.

1

1Cf. Brown, Advertising and the Public Interest: Legal Protection of Trade Symbols, 57 Yale L. J. 1166, 1189 n.98 (1948).

'Cf. Vogue Co. v. Thompson-Hudson Co., 300 Fed. 509, 512 (C.C.A. 6th 1924). 'Trade-Mark Act of July 5, 1946, 60 Stat. 428, 437, 15 U.S.C. §§ 1052(d), 1114(1) (1946).

or similar device adopted by the plaintiff, registered or not, will be protected against simulation attempted by a competitor which violates the rules of fair competition and does injury to the plaintiff. The theory of unfair dealing would protect all trade-marks against injury, even if wrought by the conduct of a non-competitor, if such conduct can be characterized as a breach of the usages or ethical standards of fair dealing.*

Under the theory which recognizes the trade-mark as a property right distinct unto itself, the interest of any plaintiff in his property could be accorded protection.

Many decisions may be cited in support of each theory, but the courts have not always drawn the line precisely, and such terms as "unfair competition" and "confusion" have been loosely bandied about in opinions involving neither competition nor confusion within the meaning of those terms under the Trade-Mark Act of 1905.5 Dilution might have been a more appropriate operative term. Modern decisions do, however, evidence a trend that gives impetus to a certain modest optimism that our courts will, in the future, do more justice to the nature of a trademark, even though there is little reason to anticipate any greater judicial willingness to accept theoretical exactitude.

A. Confusion of Origin

The usual result of trade-mark infringement is that of passing off the goods of one as those of another. This may be effected because of two types of confusion. There may be a confusion of goods, in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing another. The defendant's goods are then bought as the plaintiff's, and their poorer quality reflects adversely on the plaintiff's reputation. The mark that generally identifies the source of the goods need not bear the name of, or otherwise identify, the seller; indeed, the purchasing public does not normally know the source of the article. It suffices that the public normally assumes that articles bear

This doctrine puts greater emphasis upon the so-called unfairness than upon competition. It tacitly assumes, of course, that certain rules of fair dealing are applicable to all, and it does not depend upon proof of a relationship between the disputants which justifies judicial action. By hypothesis, this approach has a general applicability; it is, for instance, always "unfair" to conduct one's business in violation of the ordinary law of torts. In Continental law, the entire corpus of the law of torts is founded upon a general provision against "unfair dealing" (see, for instance, Art. 1382, French Civil Code; §826 German Civil Code). The concept of unfairness, however, is chameleon-like; its meaning varies with the many different spheres of life to which it is applicable. Standards of fairness are difficult enough to evolve where the parties are related to each other as landlord and tenant, vendor and vendee, principal and agent, trustee and beneficiary, husband and wife. For the competitive relationship, this author has sought to develop some maxims of ethics peculiarly germane to the nature of that relationship. See I CALLMANN, THE LAW OF UNFAIR COMPETITION AND TRADE-MARKS §8 (1945). Absent any relationship between plaintiff and defendant, it becomes even more difficult to establish standards of fairness. It is, therefore, entirely understandable that the courts have had great difficulty in trade-mark cases involving litigants who are not in any competitive relationship. It is probable that the courts would not have resorted to the theory of unfair dealing had they been courageous enough to treat the mark as a property right entitled to protection as such; the latter concept has the advantage of analytical clarity and would eliminate the necessity of passing upon the morality of the defendant.

33 STAT. 724 (1905), as amended, 15 U.S.C. §81 et seq. (1946).