The opinion of the court was delivered by: DUFF
BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE
This case came before this court on C.B. Fleet Co., Inc.'s (Fleet's) motion for a preliminary injunction. This court conducted a hearing without a jury on the motion on January 26, January 31, and February 1, 1990. The court has heard the evidence and has considered the testimony, exhibits, memoranda of law, and arguments of counsel. Now fully advised in this matter, the full hearing having been concluded, the court makes the following findings:
1. Fleet is a corporation organized under the laws of the Commonwealth of Virginia, and has its principal place of business in Virginia.
2. Complete Packaging Corporation (CPC) is an Illinois corporation and has its principal place of business in Illinois.
3. The amount in controversy exceeds $ 50,000.
4. In addition to meeting the criteria for diversity jurisdiction in this court, Fleet has also alleged trademark infringement and unfair competition, trademark dilution, and breach of contract, in violation of the Lanham Act, 15 U.S.C. §§ 1114 and 1125(a) (1988).
5. Accordingly, the court has jurisdiction of this matter.
7. Fleet markets pharmaceutical and cosmetic products, including a variety of feminine hygiene products which it markets under the trademark "Summer's Eve". One of Fleet's "Summer's Eve" products is "Summer's Eve Feminine Powder".
8. This particular controversy is about the right to sell certain product labelled "Summer's Eve Feminine Powder", which CPC manufactured for Fleet.
9. Fleet contracted the production of Summer's Eve Feminine powder to CPC in early 1989.
11. Although the trademark for the powder wasn't registered until May, 1989, the Summer's Eve trademark has been in use on various feminine hygiene products since 1971.
12. In fact, Fleet has three different Federal registrations for use of the Summer's Eve trademark.
13. Fleet promotes its products by means of advertising on television and in magazines, newspapers, circulars, and other publications.
14. Since first using the Summers' Eve name on a product in 1971, Fleet has spent in excess of $ 100 million on advertising for all of the Summer's Eve line of products.
15. To ensure that its products contain the ingredients specified on their labels and that those products will perform adequately, Fleet has established certain quality control procedures.
16. Fleet itself produces certain of the products it markets, and it has certain other products produced for it pursuant to contract.
17. Fleet's quality control procedure for all products it markets, whether those products are produced by Fleet or production is contracted out to another company, includes chemical and microbiological testing of raw materials when they are received in the plant; "in-process analysis", which consists of similar tests on the product in its bulk stage, i.e. before packaging; and "finished product analysis", which consists of chemical and microbiological testing of the product after it has been packaged, but before shipment for sale to consumers.
18. Pursuant to its contract with Fleet, CPC was responsible for testing the chemical raw materials and packaging components for the powder. CPC was also responsible for performing the in-process testing on the product in bulk, before packaging.
19. Fleet itself tested the finished product, after it was packaged, but before it was shipped for final sale.
20. Fleet established the "quality control" procedure by which it conducted the testing of the finished product. Fleet's procedures were established before it entered into the contract with CPC, and required CPC to collect two finished bottles of the powder from the production line every half hour and mark them with the date and time. These samples were then sent to Fleet for finished product testing. After a period of time, Fleet and CPC agreed that samples should be collected every hour, rather than every half hour.
21. It took between two and a half and three hours to produce a batch of powder. Thus, by taking a sample every hour, CPC collected about three samples per batch, and the samples fairly represented the entire batch.
22. According to the results of all this testing, Fleet would accept or reject particular batches of product.
23. Through June, 1989, CPC followed the established procedure, and sent the samples to Fleet via an overnight courier service.
24. Fleet performed a variety of tests on the sample powder, including: a test to determine pH; a test to determine moistness; an assay of the benzethonium choloride ingredient; an assay for calcium, and a ...