In Equity. Suit by the Lincoln Motor Company and others against the Lincoln Automobile Company.

Decree for plaintiffs following an order overruling exceptions to master's report.

The master's report was as follows:

"To the Honorable, the Judges of This Court:

"The undersigned, C.B. Morrison, master in chancery of this court, respectfully represents unto your honors that the above-entitled cause was heretofore referred to him to take and report the evidence therein together with his conclusions of fact and law.

"Pursuant to the reference, the parties appeared before the undersigned on October 3, 1929, and on divers days thereafter, and thereupon certain oral testimony and documentary exhibits were offered and introduced in evidence and other proceedings had and taken as will more fully appear from the transcript of such testimony and proceedings herewith returned into court. After the testimony was completed, oral arguments were made, written briefs were submitted, and the case was taken under advisement by the master.

"The bill of complaint herein was filed August 23, 1929, giving a full description of plaintiffs and their businesses and the development thereof, in particular with regard to the name `Lincoln' as applied to the automobile business, alleging that certain acts of the defendant, principally the adoption and use of the corporate name `Lincoln Automobile Company,' were committed with the intent of unfair and fraudulent competition with plaintiffs, and praying for injunctional relief.

"The defendant filed its answer on September 24, 1929, denying the commission of any unfair acts.

"Findings of Fact.

"The three plaintiffs are all organized under the laws of other states and nonresidents of this state, the Ford Motor Company and the Triangle Automobile Company being licensed to transact business in this state. The defendant is an Illinois corporation with its principal place of business at 2216 South Michigan avenue, Chicago.

"The plaintiff Lincoln Motor Company is, and since 1920 has been, engaged in the manufacture of automobiles designated and known as Lincoln and of parts and accessories therefor and has sold in excess of 55,000 Lincoln automobiles. It was the first company in the automobile business to adopt the name `Lincoln' for the automobile, parts, and accessories manufactured by it and has employed that name continuously since 1920 to designate its products, and no other automobile company uses the name to designate its automobile or parts.

"The Lincoln Motor Company is a subsidiary of the Ford Motor Company, the Lincoln's entire capital stock being owned by the Ford, which has a capital investment therein in excess of $12,000,000. The sales of the cars and parts are made through the Ford Company, the method adopted being for the Lincoln Motor Company to sell its entire output to the Ford Company, which handles the sales through thirty-six branches in different parts of the country, designated as branches of the Ford Motor Company, Lincoln Division, the Chicago branch being located at 2440 South Michigan avenue. The operating expenses of these branches and the moneys spent for advertising are paid by the Ford Company and charged back to the Lincoln business. The branches sell to authorized Lincoln dealers, who in turn sell to the public.

"Among the authorized dealers is the plaintiff Triangle Automobile Company with its principal place of business at 2229 South Michigan avenue, Chicago, this location being in that stretch of Michigan avenue from Fourteenth street south to Twenty-Seventh or Twenty-Ninth street which has been known to the public for a number of years as Automobile Row. The Triangle Company has been an authorized dealer since 1923, sells new and used Lincoln cars, and has a service shop with all the special tools and equipment recommended by the Ford Motor Company, Lincoln Division, and is equipped to furnish complete Lincoln service to the public. It has a substantial investment and maintains a large force of employes. In the last five years it has sold over 1,200 new and over 500 used Lincoln cars, and enjoys a high reputation in the city of Chicago.

"The Ford Motor Company, Lincoln Division, exercises great care in the selection of a dealer authorized to sell Lincoln cars. His experience must have been such as to evidence capability of handling the proposition; he must supply a building at a desirable location that will properly house both the sales and service departments for the Lincoln car, provide a suitable organization, and be properly financed; he must purchase certain special equipment, keep on hand an adequate supply of parts, and employ skilled mechanics — all requirements to give assurance to the Ford Company not only that sales will be made, but that purchasers will have proper service, which includes the intention that the dealer in taking in used cars will properly recondition them and guarantee them. The Ford Company checks up on the dealers rigidly to see that they maintain proper equipment and render adequate service.

"The Ford and Lincoln Motor Companies do not sell direct to the public, except that in Boston, Mass., the Ford Company conducts the retail sales of new and used Lincoln cars and that the various branches over the country sell used demonstrator and official cars and to that extent deal in used cars, the Chicago branch selling approximately eight or nine a year. All other sales of new cars are made through the authorized Lincoln dealers who also sell used Lincolns. The used cars are usually those taken in exchange in the sale of new cars, though the dealers sometimes acquire these used cars by purchase from each other and from outside dealers. In fact, up until the time the defendant began to deal extensively in used Lincoln cars and to bring them in from other territory, the plaintiff Triangle Automobile Company made it a practice to buy up Lincoln used cars in the Chicago territory and still does to a limited extent.

"New Lincoln cars are sold with a guaranty as to defective workmanship and with free service for four months. In order to give this service and also for the purpose of furnishing repair work to Lincoln cars, each dealer is required to maintain a service department. It is the policy of the Ford Motor Company, Lincoln Division, to recommend to its dealers that they recondition the used Lincoln cars that come into their possession and sell them with a new car guaranty if not over three to four years old. While there is no specific contract requiring dealers to do this reconditioning work or that the used car be sold with a guaranty and it might be said it is discretionary with them, the fact is the dealers actually follow the policies of the Ford Company, and, as heretofore stated, the requirements to be met before a dealer is accepted are so strict as to insure high class men who will recognize the wisdom of such policies.

"The Ford Company sees that the guaranty on reconditioned cars is made good either by compelling the dealer to fulfill it or by taking care at the service stations maintained at the branches of customers who may not be satisfied by dealers and by sending out representatives who check carefully the condition in which dealers keep their places, the tools, supply of parts, and the character of work being done. The dealers are required to employ skilled mechanics for servicing and reconditioning work, and to insure that this is done the Ford Company has the mechanics from the different dealers attend schools maintained at the branches where they must pass an oral and written examination. In case of failure to pass, it is recommended to the dealer that the man be discharged or transferred to other work.

"The plaintiff dealer Triangle Automobile Company follows the above recommendation and guarantees all rebuilt cars for ninety days to four months to be free from defective workmanship and material and to furnish the same service as to a new car for that period.

"In carrying on repair and reconditioning work, some special tools are required for best results on the Lincoln cars, and some classes of work cannot be done without using these tools, such as grinding valves and work requiring the use of a gear puller. Part of these tools are manufactured by the Lincoln Motor Company and are sold only to its authorized dealers. Some of the tools are made by outside manufacturers and are shipped by them direct to the dealers on orders evidently placed through the Ford Company, Lincoln Division. It is the policy of the Ford Company to have the dealers keep these tools in such a way as to insure they do not get in the hands of outsiders. While it was suggested there was nothing to keep a dealer from selling such tools to outsiders, the fact remains that he knows it would not be in accord with the plan of the Lincoln and Ford Companies and he does not do it. A few instances were given where the defendant borrowed special tools from authorized dealers, a strong argument that these tools were not otherwise procurable. The witness testifying on this point had been a mechanic in the employ of the service departments of authorized dealers, and his procuring of the tools was due to a personal courtesy extended to him because of acquaintanceship formed by him with other service employes. This borrowing was done without knowledge of the heads of the dealer companies and with knowledge by the witness that the men were not supposed to let the tools go out and were disobeying instructions. The instances given were all before the organization of the defendant company and while its predecessor, the Trainor Motor Sales, was conducting the business.

"Owners of Lincoln cars having repair work done by authorized dealers obtain the advantage of the exchange policy of the Ford Company, Lincoln Division, which is to furnish certain new parts for parts worn under ordinary use or under other stated conditions at prices much below list price, which list price would have to be paid by an outside dealer just as he must pay list price for any Lincoln parts he purchases. Another practice followed by the Ford Company, Lincoln Division, is to replace without cost defective original or replaced parts in Lincoln cars while in the hands of the original purchaser. This does not hold good in cases where repairs or replacements are made by an outside shop even though the replacement was bought of an authorized dealer.

"The foregoing subject has been gone into in detail to show the service the public has come to rely on as coming from dealing with authorized Lincoln dealers.

"The Lincoln automobile has been extensively advertised, the Lincoln Motor Company having spent approximately two and one quarter million dollars in the last five years in publications of national distribution, in newspapers, direct mail, and in booklets and folders sent to the dealers for distribution. More than $400,000 had been spent in 1929 up to October 1st, and commitments would bring the amount up to about $650,000 for the year. Part of this was for newspaper advertising in three principal cities, of which Chicago's share was $40,000 in 1929 up to October, and $25,000 was spent in Chicago in 1928. Used car ads were run in the Chicago Tribune from January to July, 1929, at a cost of over $3,700. In addition to the advertising paid for by the company, suggested advertisements are supplied to the dealers and are run and paid for by them in their local newspapers. Plaintiffs' Exhibits 4, 5. The Triangle Automobile Company has run these ads, spending about $25,000 a year in used car advertising, which includes some general advertisements on used cars covering other than Lincolns. Some of the Lincoln used car advertising was run in conjunction with other authorized Lincoln dealers in Chicago at an expense in 1929 of $5,600, of which the Triangle's proportion was 20 to 25 per cent. This advertising was educational and to create a demand for used Lincolns, particularly as sold by authorized dealers, and did not bear the name of any dealer. Plaintiffs' Exhibits 22 to 50.

"Since the beginning of 1929, the national advertising of the Lincoln Motor Company has featured the name `Lincoln' and has not shown the name of the manufacturing or selling company. All of the advertising, including that put out by the individual dealers, stresses the high quality and workmanship of the Lincoln car, including its lasting quality and the fact that it does not become obsolete, and is calculated to build up good will for the car under the name `Lincoln.' An attempt to classify this advertising as intended for the benefit of new Lincolns or used Lincolns shows no such division can be made. In its very nature what might be roughly termed new car advertising creates prestige for used Lincolns and the advertisements and pamphlets that are specifically intended to create a demand for used Lincolns go back to the quality of the car as it is manufactured and comes from the factory.

"The Lincoln automobile, the product of the Lincoln Motor Company, both as a new and a used car, has come to have a high reputation in the trade and with the general public and is understood to be a product of the Ford Motor Company or one of its subsidiaries; the connection of the Ford Company being shown in some of the advertisements. The Ford Company has a high standing, and its connection with the Lincoln car adds substantially to the reputation of that car. The general public in Chicago understands the best place to buy a used Lincoln car is from an authorized dealer and such used Lincoln is considered an excellent car to buy.

"The word `Lincoln' in connection with automobiles and parts has acquired a secondary meaning with the trade and public generally as designating products of the Lincoln Motor Company, subsidiary of the Ford Motor Company, and where used in connection with service stations is understood as indicating the service and repair station of an authorized dealer in Lincoln cars.

"The Ford Motor Company, Lincoln Division, has been diligent for many years in seeking to protect the name `Lincoln' and prevent the use of that name as a trade-mark and trade-name and as descriptive of sales and service by others than authorized Lincoln dealers. The authorized dealers themselves are not permitted to use the name as a part of their firm, trade, or corporate names, and each dealer so agrees in the sales agreement he signs with the Ford Company, and further that he will remove Lincoln signs from his place of business and discontinue Lincoln advertising when the agreement is canceled or terminated. Each dealer agrees to display the fact that he is an authorized dealer. They use the name `Lincoln' freely and in large characters to indicate they are dealing in Lincoln cars, but always do business under their own names. Authorized dealers throughout the country have used such words and phrases on display in and about their places of business as Lincoln, Lincoln Motor Service, Lincoln Automobiles, Lincoln Cars, Lincoln Dealer, Lincoln Service, Lincoln Parts, Lincoln Specialties, Lincoln Accessories, and Lincoln Shop.

"The plaintiff Triangle Automobile Company has the appellation `Lincoln Motor Cars' in large letters conspicuously across the stone work above the first floor show windows at its place of business and the name `Lincoln' in large letters on the show window on each side of the central door with the words `Motor Cars' in small letters beneath, and on the door is the name `Triangle Automobile Company, authorized dealer,' the name `Lincoln' being given the conspicuous display rather than the Triangle's name so as to catch the eye of the passerby, the public looking for the car the dealer represents rather than for the dealer by name.

"The defendant, Lincoln Automobile Company, was incorporated in July, 1929, with its place of business at 2216 South Michigan avenue, Chicago, which is diagonally across the street from the place of business of the plaintiff Triangle Automobile Company. It is engaged in the used car business and specializing in used Lincolns, having succeeded to and taken over the used car business which Edward Trainor had been conducting for over four years at the same address under the name Trainor Motor Sales, Trainor having begun specializing in used Lincolns in the fall of 1928, having sold as his leader prior to that time used Wills St. Clair cars which went off the market about that time.

"The business conducted by the defendant company is the same business as originally conducted by the Trainor Motor Sales, Trainor controlling and managing the defendant's business and the change being colorable only. The explanation of the reason for adopting the name `Lincoln Automobile Company' advanced by defendant is that when they, meaning the Trainor Motor Sales, began to handle so many Lincolns, they wished the general public to know they had Lincolns. It would not have been necessary to make the name `Lincoln' a part of its corporate name to do this, just as it had not been necessary for Trainor to include `Wills St. Clair' in the name under which he was doing business when specializing in the sale of that car. Defendant is also dealing in other used cars. It is significant that defendant is almost directly across the street from the plaintiff Triangle Automobile Company, an authorized Lincoln dealer, and only about two blocks from the Chicago branch of the Ford Motor Company, Lincoln Division.

"The master finds the incorporation of the defendant was in order to adopt the name `Lincoln' as a part of the corporate name with the purpose of taking advantage of the advertising and good will of the plaintiffs and of obtaining prospective customers desiring to do business with an authorized Lincoln dealer.

"Before this action was brought, defendant was asked to cease using `Lincoln' in its corporate name but refused to do so and plaintiffs immediately began this suit.

"It will be seen that in selling used Lincolns defendant is in direct competition with plaintiff Triangle Automobile Company and other authorized Chicago Lincoln dealers and also with the Chicago branch of the Ford Motor Company, Lincoln Division, which sells used demonstrator and official cars. It is contended that in making sales to the dealers the Ford and Lincoln Motor Companies part with title to the automobiles and that the dealers also own the used Lincoln cars, and that, therefore, defendant in competing with dealers does not compete with the plaintiffs Ford and Lincoln Motor Companies. This is a specious form of argument. While the dealer may be said to purchase the Lincoln cars outright and the Ford and Lincoln Motor Companies part with the legal title thereto and also the dealer acquires, reconditions, and sells used Lincoln cars in his own right, he in reality is not an independent party in these acts because the Ford Company retains, and the dealer recognizes that fact, the right to direct the policies of its various dealers so that there will be a uniform course of dealing, recognized by the public as the policy of the Ford and Lincoln Motor Companies, and is vitally interested in the sales made by the dealer. It might be said that the companies and the dealers are parts of one large organization working to one end and with one common purpose — to sell Lincoln cars — and as a means to that end to build up a good will and a reputation on which the public will rely. No one element can be separated from the organization without defeating the intention of the whole. The successful sales by the dealers mean the life of the companies and the dealers could not continue without the co-operation of the companies.

"The evidence shows some confusion in mail and in telephone calls. To find and prove specific instances where the public has been misled, which is one way of proving injury to a plaintiff, is a difficult matter; but this is unnecessary where the facts and circumstances are such as to cause one to be reasonably satisfied that confusion resulting in damage to plaintiff is likely to occur. In the master's opinion this would be the inevitable consequence if defendant is permitted to continue the use of the name `Lincoln' as a part of its corporate name, as this use is manifestly likely to lead ordinary persons to believe defendant represents or is connected with plaintiffs in some way. The adoption of `Lincoln' as a part of its corporate name is about the strongest means defendant could adopt to cause confusion, as the public cannot be expected to differentiate between Lincoln Motor Company and Lincoln Automobile Company. There is no quarrel with defendant's sale of used Lincoln cars as such, but with the fact that when defendant sells such car under the corporate name it has adopted it does not, so far as the public is concerned, sell it as its car, but rather as the property of the Lincoln Motor Company or of its authorized dealer, from whom the public has come to expect certain things and back of whom the public sees the Lincoln Motor Company.

"Many of the customers coming to the place of business of plaintiff Triangle Automobile Company look for the name `Lincoln,' that is, for the name of the car the dealer handles, rather than the name of the dealer, and they would be likely to be attracted to the place of the defendant where its name `Lincoln Automobile Company' is prominently displayed on its show window.

"The bulk of the Lincoln used car advertising appears in the Sunday Chicago Tribune, its drawing power being strongest at the beginning and tapering off toward the latter part of the week. At the time the evidence was taken and the arguments made before the master, no telephone directory had come out after defendant was incorporated, so the name `Lincoln Automobile Company' was not listed therein, though plaintiffs' counsel argued that a new directory would soon issue, and the master takes cognizance of the fact that such directory has now issued and defendant's name appears in the alphabetical list therein. The evidence is that the telephone operator of the Ford Motor Company, Lincoln Division, receives one to four inquiries a day for used Lincoln cars, and some inquiries are made in person by people asking for used Lincolns at the branch and then to be directed to the nearest authorized dealer, the latter being directed to the Triangle Automobile Company. It is a fair inference that many of the telephone calls are intended for the Triangle, but because of the way the used car advertising is handled the calls go to the factory branch, the customer remembering the name of the car he desires rather than the name of the dealer. With the defendant's name appearing in the telephone directory it is likely that many calls intended for an authorized Lincoln dealer or the factory branch will go to the defendant.

"Findings of Law.

"The necessary facts to give a federal court jurisdiction have been established.

"This case comes under that branch of the law known as `unfair competition' which has been generally defined as meaning the selling of one man's goods as those of another. The word `competition' is somewhat misleading. Although originally some of the cases may have given a rather strict interpretation to the term when trade was limited in scope and most of the cases were of actual market competition between like products, as trade has developed and commercial changes have come about the law has expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. As it has come to be understood that a secondary meaning may be established in a name or word as designating the product of a particular manufacturer and a good will built up under the name by length of use, fair dealing, the intrinsic merit of the product, and expenditures of large sums for advertising to familiarize the public therewith, so it has also been recognized that the owner of that name has a property right in which he is entitled to protection, since there is damage to him from confusion of reputation or good will in the minds of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud. British American Tobacco Co. v. British-American Cigar Stores Co. (C.C.A.) 211 F. 933, Ann. Cas. 1915B, 363; Akron-Overland Tire Co. v. Willys-Overland Co. (C.C.A.) 273 F. 674; Wall v. Rolls-Royce (C.C.A.) 4 F.2d 333; Dodge Bros. v. East (D.C.) 8 F.2d 872; Vogue Co. v. Thompson-Hudson Co. (C.C.A.) 300 F. 509, and cases cited; Buckspan v. Hudson's Bay Co. (C.C.A.) 22 F.2d 721; Armour Co. v. Master Tire Rubber Co. (D.C.) 34 F.2d 301; American Insulation Co. v. Eternit Roofing Corp. (D.C.) 14 F.2d 235. All of these cases except the Dodge and Vogue are cases in which defendant adopted plaintiff's name as part of its corporate name and was restrained in such use.

"Where, in an action against unfair competition, it is a reasonable presumption that confusion will result with injury to plaintiff, it is not necessary to show actual confusion or damage. All of the cases cited above, although possibly not stating this rule as an abstract principle, discuss the idea fully and are based on the assumption that it is an established principle. See, also, Rice Hutchins v. Vera Shoe Co. (C.C.A.) 290 F. 124; Florence Mfg. Co. v. J.C. Dowd Co. (C.C.A.) 178 F. 73.

"The defendant contends that where there is no evidence any one has in fact been deceived, the inference is they have not. Among the cases cited in support of this proposition are two Supreme Court cases, Goodyear's Rubber Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598, 9 S. Ct. 166, 32 L. Ed. 535, and Howe Scale Co. of 1886 v. Wyckoff, 198 U.S. 118, 25 S. Ct. 609, 49 L. Ed. 972. These two cases do not uphold the contention. They state the principle that relief in a case of unfair competition is granted only where the defendant in some way palms off his goods as those of plaintiff. Relief was not denied because specific acts of deception were not proved, but on the ground that in the circumstances of those cases plaintiff did not have the right to the exclusive use of the name attempted to be enjoined and the unfair acts complained of all had to do with the use of that name.

"These two cases have been singled out for comment because they are United States Supreme Court cases. All of the cases cited by defendant have been considered and are believed to either be not in point on the facts of this case or overcome by the weight of authority.

"The fact that the plaintiffs Lincoln Motor Company and Ford Motor Company have no direct financial interest in the purchase and sale of used Lincoln cars on the open, competitive market does not preclude them from relief in the protection of the name `Lincoln.' As shown by the findings of fact, there is an intimate connection between them and their dealers, and their interest in the sale of Lincoln used cars is not only that dealers will thereby purchase more new cars, but also that the good will established for the car shall be maintained with the public. There is competition with defendant in its broader sense, and the narrow view urged by defendant cannot be accepted. Dodge Bros. v. East (D.C.) 8 F.2d 872, 875; Buckspan v. Hudson's Bay Co. (C.C.A.) 22 F.2d 721; Ward Baking Co. v. Potter (C.C.A.) 298 F. 398. Also it would be too narrow a view to adopt to say that because defendant is selling genuine used Lincoln cars there can be no unfair competition. Ford Motor Co. v. Boone (C.C.A.) 244 F. 335; Dodge Bros. v. East (D.C.) 8 F.2d 872.

"It is urged that others in Chicago connected in some way with the automobile industry have made use of the name `Lincoln.' This is not regarded as in any way affecting the questions involved here. The fact that others may have been guilty of similar violations of the law furnishes no excuse for the defendant.

"In conclusion it is found that the name `Lincoln' having acquired a secondary meaning in the automobile trade as designating the products of the Lincoln Motor Company, subsidiary of the Ford Motor Company, and a valuable property right having been established in such name through long use, the intrinsic worth of the product it is applied to, and by intensive advertising, plaintiffs are entitled to protection in the use of the name.

"It is recommended that a decree be entered finding that the plaintiff Lincoln Motor Company is entitled to the exclusive use of the name `Lincoln' in connection with the manufacture and sale of automobiles, accessories, and parts therefor, and granting to plaintiffs an injunction restraining defendant from using the name `Lincoln' in its corporate name or in any other manner that may tend to cause the public to believe that defendant is in any way connected with the plaintiffs."

WILKERSON, District Judge.

This cause coming on to be heard upon motion of plaintiffs for the entry of a decree herein, this matter having heretofore been submitted to the court, upon the bill of complaint, answer of defendant, report of C.B. Morrison, master in chancery to whom said cause was referred to take and report the evidence, together with his conclusions of fact and law, upon the exceptions of the defendant to the master's report, and an order having been heretofore entered herein approving the master's report and overruling the exceptions of the defendant thereto, and the court having heard arguments of counsel, and being fully advised in the premises, it is ordered, adjudged, and decreed as follows:

1. That the court has jurisdiction of the subject-matter and all the parties hereto, and that the equities are with the plaintiffs, and the material allegations of plaintiffs' bill of complaint have been proved and are true.

2. That an injunction be issued in this case in favor of the plaintiffs, restraining the defendant, Lincoln Automobile Company, its agents, servants, officers, employees, attorneys, and successors, and all holding by, from, or under them, from:

(a) Doing business under the name "Lincoln Automobile Company."

(b) Making use of the name "Lincoln Automobile Company" or the word "Lincoln," or any other name or names of like import or character, indicating or implying that defendant has any connection whatever with the plaintiffs or any of them or in any way tending to cause the public to believe that defendant is in any way connected with the plaintiffs or any of them.

(c) Displaying by advertisements or signs in and about its place of business the word "Lincoln" alone or with any other words or expressions in such manner as to imply that defendant is an authorized dealer, agent, distributor, or representative of the plaintiffs or any of them.

(d) That the said defendant be and it is hereby required and compelled to at once obliterate or otherwise remove the name "Lincoln Automobile Company" from all signs and show windows in or about its place of business, and from all stationery, letterheads, billheads, and other office supplies.

(e) From inserting, or causing or allowing to be inserted, the words "Lincoln Automobile Company" or any colorable names implying that defendant is in any way connected with any of the plaintiffs in any subsequent issues of any and all telephone directories, alphabetical and/or classified, circulated in the city of Chicago, or any similar publications; and from maintaining any telephone under the name "Lincoln Automobile Company." And the court retains jurisdiction for the purpose of making such further order as may be necessary to protect the plaintiffs against any misuse of the telephones now listed under such name.

That the plaintiffs recover of the defendant their costs in this suit to be taxed, including the sum of $319 on account of plaintiffs' costs before the master in chancery.