Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Walter C. Lindley, Judge.
Before SPARKS, FITZHENRY, and PAGE, Circuit Judges.
FITZHENRY, Circuit Judge.
This is an appeal from a decree in favor of appellee in an action commenced by it for trade-mark infringement, and for unfair competition. It confirms the report of the special master enjoining appellants Jackson and Continental Corporation from using the trade-name "National Tube Mfg. Co." and from using the word "National" as a trade-work on radio tubes. It also dismissed the cross-complaint of appellants.
The bill for trade-mark infringement and for unfair competition was filed August 27, 1931. Appellants answered and filed their cross-complaint. When issues were joined the cause was referred to a special master to take evidence and make findings and recommendations. After hearings the special master prepared his report. Upon exceptions to the master's report and after further argument, the special master made some few changes in his findings and conclusions of law. The final report was filed; appellants filed their exceptions to it, and upon a hearing by the court the findings and holdings of the special master were adopted and appellants' exceptions overruled. A final decree was entered.
The special master's findings of fact were very minute and carefully made. The gist of the findings is that appellants boughtradio tubes in the open market wherever they got the best prices, graded them themselves as firsts and seconds; the highest types were graded "A," or, "Firsts"; the second grade was "B"; and the poorer qualities given other grades; that "National" was the grade-mark used by appellants on second grade, "B," tubes. In other words, that with appellants the word "National" was a grade-mark and not a trade-mark; that their advertising and methods of doing business were unfair and appellants were guilty of unfair competition, as charged in appellee's bill of complaint.
Respecting the trade-mark infringement, appellants admit that the radio tubes manufactured by appellee are sold under the trade-mark of "National Union" with "National" marked in prominent type or design and "Union" in minor type or design, and its tubes are generally known among jobbers, distributors, set manufacturers, and radio set users as "National" tubes. That the trade-mark is affixed to all radio tubes and packages containing appellee's products; that the trade-marks "National" and "National Union" are an arbitrary designation and were selected and adopted by appellee and its predecessor in interest in or about the year 1926 to designate the goods marketed by appellee and its predecessors; that these trade-marks have been continuously used by appellee and its predecessor from the beginning; that appellee and its predecessors have sold millions of dollars' worth of radio tubes bearing the trade-marks "National" and "National Union" in the city of Chicago and elsewhere throughout the United States; that the trade-mark "National Union" was officially recognized by the granting by the United States Patent Office of a trade-mark bearing said words on August 4, 1931.
Appellants do not deny any of the allegations of paragraphs 10, 11, 12, and 13 of the bill showing appellee was capitalized for 1,000,000 shares at no par value, which were offered and sold to the public at $40 per share; that said capital stock is listed upon the Chicago Stock Exchange and New York Curb Exchange, and the company is one of the leading tube manufacturers, both financially and in volume of business; that by reason of the high standard of merit, quality, and excellence of appellee's tubes, it has become one of the leading manufacturers of radio tubes in the United States and throughout the world, and has built a large and valuable business and good will throughout the United States and foreign countries.
That by reason of the superior quality and workmanship of appellee's radio tubes sold under the trade-mark "National" and "National Union," numerous radio set manufacturers have adopted said tubes exclusively for their radio sets and that all radio tubes are manufactured and distributed under a license granted by the Radio Corporation of America and pursuant to the patents owned and controlled by said corporation; that not only has appellee spent hundreds of thousands of dollars in advertising "National" and "National Union" tubes in the United States and elsewhere, but that many of its jobbers, distributors, etc., have spent sums aggregating in excess of a million dollars, so that the public has come to look upon "National Union" and "National" tubes as the outstanding independent radio tube manufactured in the world.
The bill alleges that as of July 21, 1931, appellee for the first time had any knowledge that the National Tube Mfg. Co. was advertising and selling a radio tube under the name of "National" and immediately gave written notice of infringement and of violation of its rights and that appellants refused to desist from using said trade-mark "National."
Allegations respecting unfair competition are to the effect that appellants were falsely palming off their goods as and for appellee's; unfairly relying upon the reputation of and demand for appellee's tubes by the public; selling "National" tubes at twenty-five cents each, which was less than cost of appellee's tubes, and advertising in such a way as to cause the public generally to be deceived, thus working irreparable injury to the commercial and financial standing of appellee. These allegations were denied.
All of appellee's allegations contained in its bill and many more facts respecting unfair competition which were unknown to appellee at the time the bill was drawn were conclusively proved to the satisfaction of the special master, as is shown by the findings of fact contained in his report.
The counterclaim and cross-complaint for alleged trade-mark infringement on the part of appellee claims damages of $500,000. It sets forth innumerable allegations of fraud, deceit, slander, and libel on the part of appellee respecting which no evidence was offered before the special master although these allegations were verified by appellant Purvis D. Jackson.
On the best information and belief available, appellee alleged that Purvis D. Jackson and Continental Corporation, an Illinois corporation, were doing business under the firm name and style of National Tube ...