Plaintiff Chanel Industries, Inc. manufactures and plaintiff Chanel Inc. markets eau de cologne known by the trade-mark "Chanel No. 5." Relief by injunction is sought against defendant, a company which admits buying Chanel No. 5 cologne from sellers other than either of the plaintiffs, and admits rebottling it in small vials which in due course reach the counters of retailers.
The Chanel No. 5 cologne which defendant buys is contained in plaintiffs' bottles. The vials into which it is then placed are labelled:
"REBOTTLED CHANEL NO. 5 EAU DE COLOGNE
Rebottled by an independent bottler from the genuine product wholly independent of CHANEL Casa Flora Co. Bloomfield, N.J. 1 Dram"
The first three lines of this label are in capital letters and the type used is larger than that used in the rest of the label.
What is not shown here -- because of a typewriter's limitations -- is a heavier type face and small capitals in the final three lines.
Defendant contends that it is entitled to purchase Chanel No. 5 cologne from anyone who is the legitimate owner of a supply and is willing to make a sale, and that rebottling and distribution by it are not improper if no misrepresentations are made. Defendant goes on and contends that its vials are so labelled as to make clear to anyone who is willing to read that plaintiffs' product has been placed in the vials by the defendant and not by either plaintiff. Plaintiffs assert that defendant should not be permitted to rebottle their product without their permission and, in any event, has not made clear to the public what it is doing. They also claim they are entitled to relief on the basis of R.S. 56:3-1 through 13, as amended, being a group of statutory sections dealing with registration of trade-marks and protection of rights conferred by registration; on the basis of the New Jersey bottle law, R.S. 56:3-14 et seq., as amended, and on the basis of R.S. 56:4-1 et seq., as amended.
Counsel have not been able to cite any New Jersey cases which have dealt with repackaging of a trade-marked product by a business man who has not been given permission to do so by one owning or controlling the mark; and I have not found any. The leading case on the subject is Prestonettes, Inc. v. Coty, 264 U.S. 359, 44 S. Ct. 350, 68 L. Ed. 731 (1924). Coty sued to restrain alleged unlawful uses of registered trade-marks for powder and perfume. Among other things, the proofs showed that Prestonettes, Inc. had been doing what defendant here admits to, namely, buying genuine Coty perfume in larger bottles and selling it in smaller bottles. The District Court ruled that Prestonettes could continue repackaging and selling Coty's products if it used an appropriate label. The Circuit Court of Appeals took a radically different view and enjoined Prestonettes from using the Coty mark or name at all, except on original packages as marked and sold by plaintiff. Then the Supreme
Court, with one dissenting vote, reversed the Circuit Court of Appeals and went back to the judgment of the District Court. Justice Holmes said for the court:
"The defendant of course by virtue of its ownership, had a right to compound or change what it bought, to divide either the original or the modified product, and to sell it so divided. The plaintiff could not prevent or complain of its stating the nature of the component parts and the source from which they were derived if it did not use the trade-mark in doing so. For instance, the defendant could state that a certain percentage of its compound was made at a certain place in Paris, however well known as the plaintiff's factory that place might be. If the compound was worse than the constituent, it might be a misfortune to the plaintiff, but the plaintiff would have no cause of action, as the defendant was exercising the rights of ownership and only telling the truth. The existence of a trade-mark would have no bearing on the question. Then what new rights does the trade-mark confer? It does not confer a right to prohibit the use of the word or words. It is not a copyright. The argument drawn from the ...