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Duro Co. v. Duro Co.

February 4, 1932


Appeal from the District Court of the United States for the District of New Jersey.

Author: Thomson

Before BUFFINGTON and THOMPSON, Circuit Judges, and THOMSON, District Judge.

THOMSON, District Judge.

The Duro Company, complainant, is a corporation of the state of Ohio, and the Duro Company, now Doering Spark Plug Company, is a corporation of the state of New Jersey.

This appeal arises from an accounting in a trade-mark case. The accounting was ordered by a decree which was entered pursuant to the opinion and mandate of this court at 27 F.2d 339. The decree was entered July 24, 1928, wherein it was adjudged that the word "Duro" applied to mechanical and electrical apparatus of the plaintiff is a valid trade-mark, and has been, and is now, the sole and exclusive property of the plaintiff herein. It was further decreed that the defendant has infringed the said trade-mark "Duro," and has violated plaintiff's rights by selling spark plugs under the trade-mark "Duro" in cartons and packages bearing that name. The defendant, its successors and assigns, were perpetually enjoined from using the word "Duro" on the products which it manufactures and sells, and particularly upon electrical equipment, such as spark plugs or any similar article.

The matter was referred to Alexander T. Schenck, Esq., as master, to take the usual accounting and report to the court the defendant's profits, by reason of the infringement or damages caused by its wrongful acts. It was further adjudged that plaintiff recover from the defendant its taxable cost herein. The accounting period extended from June 26, 1926, and ended July 28, 1928. The special master filed a final report in the District Court on March 7, 1930. He reported that defendant had realized a profit of $3,299.34 during the accounting period; and upon the insistence of plaintiff's counsel that plaintiff was also entitled to an award of damages, the master recommended an award of damages, based on a royalty of defendant's net sales, amounting to $4,827.23, such royalty to cover both damages and profits.

Both parties filed exceptions to the master's report, to which, after argument, the District Judge requested the master to file a supplemental report. On April 14, 1931, a final decree was entered in the District Court, overruling all of plaintiff's exceptions, allowing two, and denying the remainder of defendant's exceptions. The decree awarded no profits and no damages to the plaintiff, and ordered that each party pay its own costs. Plaintiff filed its appeal on July 3, 1931, and on July 13, 1931, defendant filed its appeal. The two appeals have been consolidated and one record has been printed for both appeals, pursuant to the order of this court.

It appears that the plaintiff, Duro Company, of Ohio, used its mark on internal combustion engines, and defendant, the Duro Company, of New Jersey, used the mark on spark plugs. The accounting is somewhat more complicated, from the fact that the defendant was engaged in the manufacture of three kinds of products: Spark plugs, cylinder rings, and an automatic linker, a sausage machine for Automatic Linker, Inc. The first of these, the spark plugs, was an infringing product, while the other two were not. In the accounting, therefore, it became necessary to segregate the sales receipts and expenses for the spark plug business from the piston ring and automatic linker business. The accounting here is rendered more difficult, because of the fact that the judge in the court below filed no opinion, and we are thus deprived of the benefit of his discussion of the evidence and the conclusions which he reached on the various matters involved. We are aided, however, by the light which is thrown by the acts of Congress. The Trade-Mark Statute, section 19 of the Act of 1905 (15 USCA ยง 99), provides that: "Upon a decree being rendered for wrongful use of a trade-mark the complainant shall be entitled to recover, in addition to the profits to be accounted for by the defendant, the damages the complainant has sustained thereby, and the court shall assess the same or cause the same to be assessed under its direction. The court shall have the same power to increase such damages, in its discretion, as is given by section 96 of this chapter for increasing damages found by verdict in actions of law; and in assessing profits the plaintiff shall be required to prove defendant's sales only; defendant must prove all elements of cost which are claimed."

Under the act of Congress, therefore, it is clear that in assessing profits, the plaintiff is only required to prove defendant's sales; defendant must prove all elements of cost which are claimed.

How, then, does the record stand on the question of the sales shown and the expenses which are claimed by defendant, against the amount of such sales? The treasurer, Robert M. Perkins, called as a witness by the defendant, shows a loss from the spark plug business, during the accounting period, of $22,320.72. Defendant also called an accountant, James J. Hastings, who made a report showing a loss by defendant on the spark plug business of $20,950. On the other hand, Roy F. Miller, called by the plaintiff, testified that if certain changes in the accounts were made, the business would show a profit of $7,300. By rejecting certain of the items of expense claimed in the accounts by defendant, the master found that defendant had realized a profit from the spark plug business of $3,299.34. Or in lieu thereof, damages on an arbitrary royalty of 3 per cent., amounting to $4,827.23. The learned judge, on the other hand, by allowing certain items of expense, which the master had rejected, concluded and decreed accordingly, that plaintiff was entitled to no profits and to no damages.

As there appears to be no question that the amount of the sales was $160,907.73, it is entirely evident, from these conflicting results, that the elements of disagreement are to be found in the costs or items of expense allowed to the defendant.

It can be fairly said that large items of attempted charges against profits and large items of alleged depreciation should be itemized and should not be excepted, if generalized. To illustrate: The item of expense entitled "office material," amounting to $4,771.65, claimed by defendant which the master refused to allow because it included the salary of the defendant's treasurer, the court allowed.

Mr. Hastings attempted to establish items of depreciation on display stands, viz.: $3,389.89, $3,496.65, and $1,984.00, being for the years 1926, 1927, and 1928, respectively, aggregating $8,860.54, or 88 per cent. of the cost of the stand during the accounting period. These items were disallowed by the master, because they should have been capitalized and depreciated over a period of years. The master later allowed these items "in the absence of any other evidence as to how long the display stands would last."

Under the item, "general expense," defendant claimed the aggregate amount of $4,560.42. The master held that this was too indefinite and not satisfactorily proven. In this item, the general expense for 1926 is given as $1,496.10, one-half of which was charged to plugs, and one-half to rings, which was purely an arbitrary proration.

The master allowed the item for experimenting on plugs, which was apparently not allowable under Coffield Motor Washer Co. v. Wayne Mfg. Co. (C.C.A.) 255 F. 558. The defendant claimed as a credit "bad debts," amounting to $2,755.55, charging the whole of this item against spark plugs, although the company did a net business in rings, of $12,906.35, during the accounting period. Nor did they apply any bad debts against linkers, ...

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