Opinion ID: 378015
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Heading: Jurisdiction Under the Lanham Trade-Mark Act.

Text: 9 The Lanham Act is a comprehensive statute designed to safeguard both the public and the trademark owner. Among other things, the statute prohibits passing off by a tradesman i. e., selling another's goods as those of the trademark owner, by use of the owner's mark. Franchised Stores of New York, Inc. v. Winter, 394 F.2d 664, 668 (2d Cir. 1968). 10 The major issue in this case is the effective reach of this prohibition. Under the terms of the statute, the prohibited act must occur in commerce. 15 U.S.C. § 1114(1)(a) (1976). 15 U.S.C. § 1127 (1976) explains: 11 The word commerce means all commerce which may lawfully be regulated by Congress. 12 The intent of this chapter is to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce(.) 13 The legislative history of the Lanham Act underlines this intention: (S)ound public policy requires that trade-marks should receive nationally the greatest protection that can be given them. S.Rep. No. 1333, 79th Cong., 2d Sess., reprinted in (1946) U.S.Code Cong.Serv., 1274, 1277. 14 By consistent interpretation, jurisdiction under the Lanham Act encompasses intrastate activity that substantially affects interstate commerce. See, e. g., Iowa Farmers Union v. Farmers' Educational & Coop. Union, 247 F.2d 809, 816 (8th Cir. 1957); Drop Dead Co. v. S. C. Johnson & Son, Inc., 326 F.2d 87, 94 (9th Cir. 1963), cert. denied, 377 U.S. 907, 84 S.Ct. 1167, 12 L.Ed.2d 177 (1964); Franchised Stores of New York, Inc. v. Winter, supra, 394 F.2d at 669. Thus, in commerce refers to the impact that infringement has on interstate use of a trademark; it does not mean that an infringer is immune from prosecution under the statute so long as he keeps his infringement entirely within the confines of a state. World Carpets, Inc. v. Dick Littrell's New World Carpets, 438 F.2d 482, 488 (5th Cir. 1971). A substantial effect on interstate commerce is present when the trademark owner's reputation and good will, built up by use of the mark in interstate commerce, are adversely affected by an intrastate infringement. Franchised Stores of New York, Inc. v. Winter, supra, 394 F.2d at 669 (citations omitted). 15 This broad focus comports fully with the modern scope of the commerce clause. The Supreme Court has many times upheld the application of national legislation to purely local activities. For example, in Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942), a small farmer challenged federal limitations on the amount of wheat that he could grow for consumption on his farm. The Supreme Court observed: 16 (5-7) That appellee's own contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others similarly situated, is far from trivial. (Id. at 127-128, 63 S.Ct. at 90 (citations omitted).) 17 Generally speaking, if a class of activities is within the reach of federal regulation, the courts have no power to excise individual instances as trivial. See, e. g., Perez v. United States, 402 U.S. 146, 154, 91 S.Ct. 1357, 1361, 28 L.Ed.2d 686 (1971). 4 18 In this case, however, the district court found that Coca-Cola Co. had failed to show that appellees' passing off could have had any direct and material effect on (its) national operation; not to mention 'a substantially adverse effect'   . Yet, the affidavits submitted to the district court indicate that over one million gallons of fountain syrup a year were sold by Coca-Cola Co. in metropolitan Kansas City between 1969 and 1972. 5 Coke was widely advertised in the area, and appellant sought to maintain its reputation for high quality products. On a national level, appellant spent over $45,000,000 a year in advertising and marketing of its product. The annual budget of the Trade Research Department in these same years exceeded $350,000. 19 We believe that these allegations, which are not disputed, support an inference that appellees' acts of passing off substantially affected appellant's interstate operations. The appropriate vantage point is that of the trademark holder. So viewed, appellees' actions jeopardized appellant's carefully nurtured reputation and undermined its claim to a distinctive (i. e., nongeneric) trademark. That appellees' acts of infringement, standing alone, may not have cost Coca-Cola Co. a great deal in terms of lost sales does not detract from the fact that they served to misappropriate appellant's valuable goodwill, which rests on the distinctiveness of its federally protected trademark. The acts of these local retailers must be deemed, in the circumstances of this case, to have had a substantial effect on interstate commerce. See Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 120 (9th Cir.), cert. denied, 391 U.S. 966, 88 S.Ct. 2037, 20 L.Ed.2d 879 (1968). 20 Appellees rely chiefly on Application of Bookbinder's Restaurant, 240 F.2d 365, 44 C.C.P.A. 731 (1957), and Peter Pan Restaurants v. Peter Pan Diner, 150 F.Supp. 534 (D.R.I.1957), in support of the district court's holding. Both cases determined that activities of purely local restaurants lie outside the Lanham Act. The Bookbinder's decision, however, reflects the Patent Office's once-narrow view of federal trademark registrability, a view never adopted by the federal courts with respect to infringement actions and one since rejected by the Patent Office itself. See 1 Gilson, Trademark Protection and Practice §§ 8.03(3) and 3.02(5) (1976). The Peter Pan case can be distinguished on its facts; moreover, it and the cases it cites reflect a minority position that has been widely criticized. See, e. g., 1 Gilson, supra, at § 8.03(3). 21 In our view, this case is governed by the holdings in Franchised Stores of New York, Inc. v. Winter, supra; Maier Brewing Co. v. Fleischmann Distilling Corp., supra ; and Pure Foods v. Minute Maid Corp., 214 F.2d 792 (5th Cir.), cert. denied, 348 U.S. 888, 75 S.Ct. 208, 99 L.Ed. 697 (1954). In all three cases the courts found that the potentially adverse effects of infringement on the plaintiff's reputation and goodwill satisfied the substantial effect test. Coca-Cola similarly satisfied the jurisdictional test in the present case. Apart from the clear authority supporting this conclusion, we believe that a contrary holding would seriously undermine the congressional intent behind the Lanham Act namely, to protect the holders of federally registered trademarks. It would imply that local infringers could pirate a national mark with virtual impunity from federal restrictions, inflicting death by a thousand cuts upon the trademark holder. 22 Accordingly, we reverse the judgment of the district court. The cases will be remanded to that court for further proceedings consistent with this opinion. 6