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September 17, 1937


The opinion of the court was delivered by: WELSH

This suit was brought by the plaintiff to restrain the defendant from interfering with the sale by the plaintiff in Pennsylvania of beverage wine under the trade mark "Greystone." The facts are complicated and the evidence voluminous, but the circumstances essential to the determination of the issue may be briefly summarized.

Since the repeal of prohibition in December, 1933, the plaintiff corporation and its predecessors, trading under the same name, have been selling "Greystone" wine to the Pennsylvania Liquor Control Board for distribution through its 500 or more state liquor stores, the only agency through which such distribution may be made in this state. The wine so branded includes virtually all types of still wines and is purchased by the plaintiff from Bisceglia Bros., a California partnership of the same name but having no connection or affiliation with the plaintiff corporation. The sales to the board amounted to $338,620.45 in 1934, increasing to $630,229.32 in 1936, and totaling $1,345,707.61 during the three years. Plaintiff has during the same period advertised and promoted the sale of "Greystone" wines by the expenditure of $117,668.28. Ninety per cent. of the plaintiff's business consists of sales to the Pennsylvania Liquor Control Board and it is estimated that about thirty per cent. of the wine sold in the state is the plaintiff's "Greystone" brand. In addition to the adoption of the trade-mark "Greystone" at about the time of repeal, and its continued uninterrupted use thereafter, the plaintiff on February 6, 1936, registered the name under the state law as its trade-mark.

 On January 25, 1937, the defendant, by its counsel, notified the Liquor Control Board by letter that it claimed exclusive right to the trade-mark "Greystone," and that the plaintiff was unlawfully using the same. The board, in order to avoid any possible liability resulting from the purchase and distribution of the plaintiff's product, because of the alleged infringement, discontinued further purchases from the plaintiff until March 5, 1937, when satisfactory indemnity arrangements were made, pending the outcome of the dispute. Defendant on February 5, 1937, also notified the plaintiff of its claim and demanded that the plaintiff cease all further use of the trade-mark. Such notices and demands adversely affected the plaintiff's business between January 25 and March 5, 1937.

 The defendant's claim to the trade-mark arises from the following circumstances: California Wine Association, prior to 1910, purchased the Greystone Winery, a plant which had become a familiar landmark at St. Helena, Napa county, Cal. That association thereafter used the name "Greystone" to identify certain light dry wines which were to some extent peculiar to that district. On January 9, 1911, the California Wine Association secured the registration in the Patent Office of the trade-mark "Greystone" for a hock type wine, claiming the use of the name since 1895. The registration and all other assets of the California Wine Association were thereafter assigned to the defendant, a co-operative association and the registration was renewed in 1931 and held in the defendant's portfolio of trade-marks, pending the advent of repeal.

 Between 1911 and 1914 the California Wine Association had attempted to promote the sale of domestic bottled wine, with little success and with comparatively few sales in Pennsylvania. At that time the greatest volume of wine business was done in bulk goods which were bottled by the purchaser under his own brand, and only a negligible quantity of Greystone was sold prior to prohibition in 1920. After prohibition the defendant contacted the Pennsylvania Liquor Control Board with the view to selling its "Constitution" and "Olympic" brands of wine but making no offer of "Greystone." Defendant, however, declined to sell to the board due to the board's credit terms. It is admitted that the defendant had knowledge early in 1934 of the sale of the plaintiff's "Greystone" wines in Pennsylvania through the state stores.

 The old Greystone Winery had been sold by the defendant in 1925 to Bisceglia Bros., the California partnership, and was used by them until 1933 for storage purposes. Thereafter Bisceglia Bros. used it for production and have since then supplied the plaintiff with bulk wine which has been bottled and sold by the plaintiff under the "Greystone" trade-mark. On September 19, 1933, Bisceglia Bros., the California partnership, registered the trade-mark "Greystone" in the Patent Office. They manufactured and sold wine under that name, and made no objection to the use of the same mark by their customer, the plaintiff, until May or June, 1936. This registration was, however, canceled at the instance of the defendant in an uncontested proceeding before the Patent Commissioner. Defendant also sought to enjoin the use of the trade-mark by the Bisceglia Bros. partnership in an equity proceeding in California, which resulted in an agreement dated October 9, 1936, in which the Bisceglia Bros. partnership gave up to the defendant all their rights to and interest in the trade-mark "Greystone," including the plaintiff's registration of the name in Pennsylvania, despite the fact that they had no interest in such Pennsylvania registration. Prior to that agreement the Bisceglia Bros. partnership had complained to the plaintiff of its use of the trade-mark, but, in a letter dated July 22, 1936, they had acknowledged the prior use by the plaintiff in Pennsylvania, and abandoned to the plaintiff any rights which they had previously claimed in this state.

 The question presented is whether under these circumstances the defendant has the exlusive right to the use of the trade-mark "Greystone" in Pennsylvania, and is lawfully entitled to interfere with the sale of the plaintiff's "Greystone" wines to the Pennsylvania Liquor Control Board. Have the rights of the parties been affected by the extent of the use of the trade-mark; did the conduct of the defendant indicate an abandonment; and is the defendant estopped from asserting its claim to the trade mark in Pennsylvania? These are the issues incidental to the determination of the case, and will be discussed at some length.

 The validity of the defendant's registration of the trade-mark "Greystone" for a hock type wine is not questioned, nor is there any evidence of infringement prior to 1920. We may also concede the legality of the plaintiff's registration in Pennsylvania. But the effectiveness of such registrations is dependent upon the use of the names registered and the equities of the respective parties as they may have been affected by such use and the conduct of the claimants. The issue raised is of great importance to both parties and the subject matter of such value that we deem it necessary to review the principles of law and equity pertinent to the facts.

 Trade-marks and the rights of the owners have always been recognized at common law, regardless of the existence or provisions of registration acts. The certificate of registration is proof of adoption but is not intended to be conclusive as to the validity of the mark, and the fact of registration or nonregistration does not affect the jurisdiction of the courts to determine the validity of the act of appropriation. Fraim Lock Co. v. Shimer, 43 Pa.Super. 221. The exclusive right to the use of a trade-mark is founded upon priority of appropriation, McLean v. Fleming, 96 U.S. 245, 24 L. Ed. 828, and the purpose of a trade-mark is to identify the origin or ownership of an article of trade so that purchasers may recognize the goods so marked. Other owners or producers are prohibited from the use of the mark because such use would deprive the marker of the goods of the profit and good will incident to the sale of his product, Hanover Star Milling Co. v. Metcalf (Allen & Wheeler v. Hanover Star Milling Co.), 240 U.S. 403, 36 S. Ct. 357, 60 L. Ed. 713.

 The exclusive ownership of a trade-mark exists only as an appurtenance to a particular business or trade with which it is connected, and is established by the use rather than by its mere adoption or registration. The trade-mark right is not limited by territorial bounds, but this is true only in the sense that wherever the particular trade goes, attended by the use of the mark, the rights of the trade-mark owner will be protected. United Drug Co. v. Theodore Rectanus, 248 U.S. 90, 39 S. Ct. 48, 63 L. Ed. 141. The right frequently extends over a large area, depending upon the character of the business and the manner of use of the mark with the view to attracting customers. Hanover Star Milling Co. v. Metcalf, supra.

 The general rule is that, where two competing parties claim rights to the same trade mark, priority of appropriation determines the question as to who is entitled to the mark. McLean v. Fleming, supra; Amoskeag Mfg. Co. v. Trainer, 101 U.S. 51, 25 L. Ed. 993. The reason for the rule is that purchasers are presumed to have known the mark as an indication of the origin of the goods so that the use of the mark by the competitor amounts to an attempt to sell his goods as those of the original producer. The reason for such rule would not apply, however, where the same trade-mark is employed simultaneously by two manufacturers in different markets, entirely separate and remote from each other, so that the mark means one thing in one market and an entirely different thing in another. Sweet Sixteen Co. v. Sweet "16" Shop, Inc. (C.C.A.) 15 F.2d 920. In such cases the question of prior appropriation is legally unimportant, unless it is shown that the second user of the mark has adopted it with the view to injuring the business of the first user, or to take the benefit of the reputation of his goods. Hanover Star Milling Co. v. Metcalf, supra. But, where they are innocently using the same trade-mark in separate markets, and neither is trading on the good will of the other, there may be no conflict in fact, and therefore no wrong done which would call for legal redress.

 The present circumstances show that the defendant used the trade-mark in question to a limited extent many years ago, and not in Pennsylvania subsequent to 1920, while the plaintiff has extensively distributed its goods in this state continuously since December, 1933. We must therefore determine whether under all the circumstances incident to such facts there has been an abandonment of the trade-mark by the defendant. We affirm at the outset that the disuse of a trade-mark due to a statutory prohibition of the sale of the article to which it is attached is not in itself an abandonment.

 It is well settled that, although trade-mark rights have been created by proper adoption and use, they may also be lost by abandonment, nonuser, laches, or acquiescence, and the claimant may be estopped from asserting such rights. Abandonment rests upon intent, in addition to acts indicating the fact ( Saxlehner v. Eisner & Mendelson Co., 179 U.S. 19, 21 S. Ct. 7, 45 L. Ed. 60; DuPont Cellophane Co. v. Waxed Products Co. (D.C.) 6 F.Supp. 859), and, as to laches and acquiescence, it has been held that, where the defendant acted fraudulently or with knowledge of the plaintiff's right to the name, and the plaintiff delays or acquiesces in the unlawful use, the plaintiff may be entitled to injunctive relief but not to accounting and damage, McLean v. Fleming, supra; Menendez v. Holt, 128 U.S. 514, 9 S. Ct. 143, 32 L. Ed. 526. The averment of abandonment through acquiescence in the use of a trade-mark by others must be established by proving the infringing use and also the existence of elements of an equitable estoppel ( Menendez v. Holt, supra), while laches is based on the inequitable conduct of the trade-mark claimant and the inequity to the other user which would result if the claim were to be enforced. It exists where the party to whom laches is imputed has knowledge of his rights and an ...

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