215 F.

2d 668

HARTFORD CHARGA-PLATE ASSOCIATES, Incorporated,

Plaintiff-Appellant,
v.
YOUTH CENTRE-CINDERELLA STORES, Inc., DefendantRespondent.
No. 215.
Docket 22994.

United States Court of Appeals Second Circuit.

Argued April 14, 1954.
Decided September 17, 1954.

In holding that the defendant had committed no actionable wrong to the

plaintiff, Judge Smith filed a memorandum of decision reported in
D.C.Conn., 116 F.Supp. 148, together with his findings of fact and
conclusions of law. His findings of fact are as follows:
"1. Plaintiff is a Connecticut corporation without capital stock formed by
five Hartford retail department stores, to which Kennedy's Incorporated, a
Hartford retail men's clothing store was later admitted.
"2. Defendant is a Massachusetts corporation, one of whose retail clothing
stores is located in Hartford.
"3. Plaintiff was formed to carry on for its members a customer
identification and credit system using small tin plates. Plaintiff's members
share the expense of operating plaintiff in proportion to the members' use
of the system.
"4. Each member store from time to time furnishes plaintiff lists of
customers to whom it wishes plates issued. Plaintiff then furnishes each
customer so listed a small tin plate, approximately 1 1 inches, on
which is printed in raised letters the name and address of the customer.
The plates cost plaintiff $32.50 per thousand, the machine for embossing
the customers' names approximately $1,000.00.

"5. The plates and addressing machines in which they are used are
purchased by the plaintiff from the Farrington Company, which
designates its plates Charga-Plates.
"6. The plates when inserted in an addressing machine enable the sales
person or clerk operating the machine to stamp the name and address
contained on the plate upon a sales slip or bill.
"7. The plates issued to customers of all member stores by plaintiff are
exactly the same except for the name and address and except for the
location of a small notch cut into the top of each plate, whose position is
varied to distinguish customers of one store from customers of other
member stores. One plate may be notched for any one or more or all the
member stores. 697,504 plates or notches were provided in the period
1936 to May 31, 1953.
"8. Plaintiff's members extend credit to charge customers using plates
issued or notched at the members' request.
"9. When one of plaintiff's members desires to cease extending credit to a
customer, the member notifies plaintiff, which requests the customer to
return his plate so that it may be replaced by one not notched for the
machines of the member desiring to withdraw credit.
"10. The great majority of the plates issued by plaintiff were furnished
customers without any notice to the customers that plaintiff reserved any
claim of ownership of the plates or restricted their use.
"11. On reissue of plates, and after the dispute with defendant arose, by
newspaper advertisement and by notice on original issue of plates the
plaintiff endeavored to notify the customers of retention of ownership of
the plates in plaintiff and that they were not to be used except in member
stores.
"12. Defendant, which used a somewhat similar identification plate system
in its Springfield stores, had there developed a practice of using some
addressing machines without pins, so that plates not notched for the
Springfield store could be used without damage to the plates.
"13. Defendant purchased machines without pins for the purpose of using
in its Hartford store customers' plates furnished by plaintiff in addressing
defendant's sales slips.
"14. Plaintiff has failed to establish by a fair preponderance of the

evidence that defendant relies upon the credit significance of the plaintiff's
plates in extending credit to defendant's customers.
"15. Defendant has permitted and encouraged the use in its Hartford store
of plates furnished by plaintiff to customers of its members who are also
customers of defendant at a considerable convenience and saving of time
in addressing sales slips, both to defendant and to its customers to whom
plaintiff has issued plates, and at a saving of clerical and bookkeeping cost
to defendant.
"16. Plaintiff has expended large sums of money in purchase of plates and
maintenance of its system, stamping plates and advertising to encourage
customers in their use. The cost of operating plaintiff's office has averaged
between $15,000 and $16,000 per year from 1936 to 1953.
"17. Defendant offered to join plaintiff and share the costs of operation of
the system, which offer plaintiff refused.
"18. Plaintiff has failed to establish by a fair preponderance of the
evidence any passing off of defendant's goods as goods of plaintiff or
plaintiff's members.
"19. Plaintiff has failed to establish by a fair preponderance of the
evidence any damage to its business reputation or that of its members by
reason of the acts of the defendant in relation to its plates."
From this the judge concluded that plaintiff was not entitled to an
injunction and dismissed the action on the merits.
Hector M. Holmes, Boston, Mass. (Fish, Richardson & Neave and S.
Lang Makrauer, Boston, Mass., and Aaron Nassau, Hartford, Conn., on
the brief), for plaintiff-appellant.
M. J. Blumenfeld, Hartford, Conn. (Pelgrift, Blumenfeld & Nair and
Robert E. Cohn, Hartford, Conn., on the brief), for defendant-appellee.
Before CLARK, HINCKS, and HARLAN, Circuit Judges.
CLARK, Circuit Judge.

This action, seeking an injunction for alleged unfair competition, was originally
brought in the state court, but was removed by defendant to the court below
because of the diverse citizenship of the parties. The gist of the action is a

claimed improper use by defendant in its addressing machines of identification

plates issued by plaintiff to customers of its six member stores. Since the claim
is not based upon any of the more usual forms of unfair competition, it may be
convenient first to point out what we do not have before us on this appeal from
its dismissal.
2

As is conceded, there is no claim of misrepresentation of plaintiff's goods or of

palming-off defendant's goods as plaintiff's. There is no claim of appropriation
of any concepts or ideas of plaintiff or of confusion of goods; nor does plaintiff
contend that plateholders were under contract as to use of the plates, or seek
relief on the ground of inducement of breach of contract. No infringement of a
patent is claimed; in fact it appears that plaintiff's system and that which
defendant used in its Springfield store, and made adaptable in its Hartford store
to plaintiff's device by eliminating from the addressers the pins gearing them to
certain credit notches on the plates, were made by different and competing
manufacturers. The only approach to any of this was an original contention by
plaintiff's manufacturer, the Farrington Manufacturing Company, that
defendant was violating its registered trade-mark "Charga-Plate." But defendant
thereafter instructed its clerks to use some other term, e. g., "charge plate" or
"credit plate," and no claim of trade-mark infringement is before us.

The contention has to be, therefore, that defendant has wrongfully appropriated
something of value from plaintiff and is taking a "free ride" as against
competitors. We should therefore scan carefully what it is that defendant
actually does. What happens is that when a customer seeks credit for his
purchase at defendant's store and produces his "Charga-Plate" upon the clerk's
inquiry if he has a credit plate, the clerk then puts the proffered plate through
the addresser without obstructing pins which stamps the customer's name
and address upon the sales slip. There is surely nothing wrong in fact it is
usual, as we all know for a store to seek information as to credit extended by
other stores; the only possible claim of actionable wrong is by defendant's use
in its own addressers of plaintiff's plates. And absent patent or contract bar as
against defendant, there surely is nothing wrong in such use of itself. The claim
must therefore be for benefits conferred, as to which the possibilities seem
limited to three: credit information as to the customer, prestige from seeming to
be in plaintiff's favored group, and ease and convenience of making and posting
the charge statement. No other is suggested or apparent.

As to the first, the court refused to find a use of the plates to obtain the benefit
of the credit rating efforts of plaintiff's members. The evidence produced
involved purchases of very small amount or value; and it appeared that the
clerks had discretion to grant credit freely for purchases up to $5, and up to $15

if the customer did not appear in the store's "negative file" of proven bad risks
and that these limits might in practice be increased or doubled in times of
press of business. Even had the evidence been more favorable to the plaintiff, it
is hard to see any misappropriation here in view of the usual sources of credit
information and the lack of secrecy as to them. A showing of a bill from
another store would disclose as much. Or reference to an ordinary telephone
directory! Defendant was of course free to establish its own requirements, or
even absence of any requirement, for granting of credit to its customers.
5

On the second matter, the court below was willing to grant, "although it is
doubtful whether it can be found from the evidence, that a certain amount of
prestige attaches to membership in plaintiff's group," but went on to say:
"Defendant was willing and eager to join plaintiff and share its costs, but was
turned down, as was Lord and Taylor." 116 F.Supp. at page 149. That is an
answer on the equities; but perhaps more legally pertinent is the fact that
defendant did not misrepresent the situation or make any claims of prestige to
which it was not entitled. As appears from this record if it is not generally
known these credit plates are in wide use in many places; and the facts do
not afford basis for any claim of particular credit from their use. If as was
not proven some customers drew deductions which were unjustified in fact,
this would not show an actionable wrong on the part of defendant. Obviously if
or when any misrepresentation by defendant can be shown, then plaintiff or
its members as may be more appropriate will have an adequate remedy, just
as they would on a showing of patent or copyright infringement. The same
principles apply with respect to plaintiff's contention that defendant is now
making wrongful use in its advertising of Judge Smith's favorable decision
below. This post-decision advertising is of course not before us on the record.
But were we in a position to rule upon the contention, we should need to say
again that defendant, so long as it states them truly, is entitled to present the
facts upon which it bases its grants of credit or the methods used in billing its
customers and, particularly because of the challenge to its right, to call attention
to the court decision permitting it to do so. Only if or when it misrepresents can
it be held liable.

The claim must therefore rest upon the ease and facility in account billing
resulting from the use by defendant of plaintiff's plates. We agree with the court
below in finding this an inadequate basis for banning defendant from doing
what would otherwise be quite permissible. If defendant wants to make short
cuts in its bookkeeping, to its own advantage, by using what has been freely
distributed to the general public, there seems neither legal nor equitable basis
for finding that it has done wrong, any more than had it copied names and
addresses from a telephone directory, for example. In the leading and often-

cited case of RCA Mfg. Co. v. Whiteman, 2 Cir., 114 F.2d 86, certiorari denied
311 U.S. 712, 61 S.Ct. 393, 85 L.Ed. 463 reaffirmed as recently as Granz v.
Harris, 2 Cir., 198 F.2d 585, 587 the court, per L. Hand, J., refused to hold
that records produced by Paul Whiteman and his orchestra could be "clogged
with a servitude" so that their broadcasting by a broadcasting corporation could
be enjoined. Judge Hand went on to say: "Restrictions upon the uses of chattels
once absolutely sold are at least prima facie invalid; they must be justified for
some exceptional reason, normally they are `repugnant' to the transfer of title.
If `the common-law property' in the rendition be gone, then anyone may copy it
who chances to hear it, and may use it as he pleases." RCA Mfg. Co. v.
Whiteman, supra, 2 Cir., 114 F.2d at pages 88, 89. Here likewise the plaintiff,
having relinquished its plates freely to its customers, could no longer burden
them with an inconsistent servitude passing with their transfer and binding upon
strangers. Plaintiff's attempted distinctions that in the Whiteman case the
records had been sold and were moving in commerce after the sale and that
there common-law copyright rights had been relinquished by publication are
clearly inadequate to indicate "some exceptional reason" for the servitude here.
For plaintiff's belated attempt to preserve ownership and restriction upon the
use of the plates shows no differentiation of practical substance or significance
in this setting from the situation of admitted sale or gift of the plates. And, as
we have seen, no violation of patent or trade-mark is here now suggested. There
seems in fact more reason to uphold a servitude if ever in the Whiteman
case, where the real subject matter was an artistic performance by long trained
and skilled musicians, than here, where involved is only a bookkeeping
convenience.
7

Plaintiff has no exact precedent in its favor, but relies on the analogy of
International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63
L.Ed. 211, 2 A.L.R. 293, where the Court held International guilty of unfair
competition in that it misappropriated and sold as its own the news
accumulated at great expense by the A. P. Here there was no such competition,
and, indeed, no competition in selling at all, between the plaintiff and the
defendant. True, defendant was in retail competition with plaintiff's members;
but it was not appropriating and selling as its own the very products vended by
its competitors. Defendant was not in competition in selling either a credit
system or its paraphernalia or credit information. In fact, as freely conceded,
defendant was at liberty to duplicate and use a system like plaintiff's; the only
attempted ban was by way of servitude upon a use otherwise freely possible of
plaintiff's plates in defendant's addresser. We do not think the precedent will
therefore bear the burden thus laid upon it, even if we do not follow the
repeated trend in this court, noted as lately as G. Ricordi & Co. v. Haendler, 2
Cir., 194 F.2d 914, to confine that decision strictly to the facts then at bar.1

The other and earlier cases cited by plaintiff appear to have even less
pertinence. In the cases involving the refilling of Prest-O-Lite tanks with
acetylene gas by others without removing the original label and trade-mark, it
was this misuse of a business symbol which alone was held unfair, the
defendants being left "at liberty to establish and conduct an independent and
competitive system of service." Searchlight Gas Co. v. Prest-O-Lite Co., 7 Cir.,
215 F. 692, 695, with companion cases cited at pages 693, 694; Prest-O-Lite
Co. v. Heiden, 8 Cir., 219 F. 845, L.R.A.1915F, 945. So in the trading-stamp
cases, Sperry & Hutchinson Co. v. Mechanics' Clothing Co., C.C.R.I., 135 F.
833; Sperry & Hutchinson Co. v. Temple, C.C.Mass., 137 F. 992, plaintiff had
agreed with the merchants purchasing products from it to honor with premiums
its trading stamps issued by the merchants to their customers; but defendant, a
competing merchant, attempted a direct interference with this special contract
by obtaining a supply of such stamps from collectors and passing them on to its
own customers. Such a deliberate fraud was properly enjoined. See Harvey
Hubbell, Inc. v. General Electric Co., D.C.S.D.N. Y., 262 F. 155, 161.

Affirmed.

Notes:
1

See Judge L. Hand's discussion of the International News case in RCA Mfg.
Co. v. Whiteman, supra, 2 Cir., 114 F.2d 86, 90: "That much discussed decision
really held no more than that a western newspaper might not take advantage of
the fact that it was published some hours later than papers in the east, to copy
the news which the plaintiff had collected at its own expense. In spite of some
general language it must be confined to that situation (Cheney Bros. v. Doris
Silk Corp., 2 Cir., 35 F.2d 279, 281); certainly it cannot be used as a cover to
prevent competitors from ever appropriating the results of the industry, skill,
and expense of others. `Property' is a historical concept; one may bestow much
labor and ingenuity which inures only to the public benefit; `ideas', for instance,
though upon them all civilization is built, may never be `owned.' The law does
not protect them at all, but only their expression; and how far that protection
shall go is a question of more or less; an author has no `natural right' even so
far, and is not free to make his own terms with the public. In the case at bar if
Whiteman and RCA Manufacturing Company, Inc., cannot bring themselves
within the law of common-law copyright [or, as we might here add, trademark], there is nothing to justify a priori any continuance of their control over
the activities of the public to which they have seen fit to dedicate the larger part
of their contribution."

Of course here we are not dealing with anything so nearly approaching

"property" as an author's expression of ideas. See also Millinery Creators' Guild
v. FTC, 2 Cir., 109 F.2d 175, 177, affirmed 312 U.S. 469, 61 S.Ct. 708, 85
L.Ed. 955.