Michel Cosmetics, Inc. v. Tsirkas

The plaintiff corporation is engaged in the business of manufacturing and selling lipsticks. These lipsticks are made in accordance with secret formulas and secret processes owned by it. The defendant Aristides G. Tsirkas was an employee of the plaintiff corporation, and in the course of his employment he learned the secret formulas and processes used by the plaintiff in its business. Then he left the plaintiff’s employ and formed the defendant corporation. The individual defendants manage and control the

After trial of the issues, an interlocutory judgment in favor of the plaintiff was entered which decreed, among other things, that the defendants be enjoined from manufacturing, selling or offering for sale any lipsticks, “ made by the secret formula or secret processes which belong to the plaintiff;” that they be restrained from selling lipsticks “ in containers which resemble those heretofore used by them or any containers used by plaintiff,” and that they “ account to plaintiff for all profits which plaintiff would have made on the lipsticks manufactured and sold by defendants from November 1, 1934, up to the present time if said lipsticks had been manufactured and sold by plaintiff.”

The evidence showed that the defendants sold large size lipsticks in black and gold containers and other lipsticks in red and pink containers. The Appellate Division, upon appeal from the interlocutory judgment, made a new findiug

The accounting has been held before an official referee and final judgment awarding to the plaintiff damages in the sum of $19,726.76 has been entered and unanimously affirmed by the Appellate Division. Upon the appeal to this court from the final judgment, the defendants do not challenge the injunctive provisions of the judgment, but they urge that the award of damages is not justified by the evidence. The defendants have wronged the plaintiff. They must pay to the plaintiff the damages they have caused the plaintiff by that wrong. A wrongdoer who has imitated the containers of the plaintiff and has used the secret formulas and processes belonging to the plaintiff might be compelled to “ yield up his gains to the true owner, upon a principle analogous to that which charges a trustee with the profits acquired by wrongful use of the property of the cestui que trust.” (Hamilton-Brown Shoe Co. v. Wolf Brothers & Co., 240 U. S. 251 , 2:59.) Here it does not appear that the defendants acquired any profits, but they must compensate the plaintiff for any damages they may have inflicted upon the plaintiff even though they failed to realize the profit which they anticipated would accrue to them from the wrong. (Westcott Chuck Co. v. Oneida Nat. Chuck Co., 199 N. Y. 247 ; Hamilton-Brown Shoe Co. v. Wolf Brothers & Co., supra; Platinum Products Corp. v. Berthold, 280 N. Y. 752 ; Faber v. Hovey, 73 N. Y. 592 .) The problem presented upon this appeal is whether upon the evidence here presented the court has properly applied the correct measure of damages.

The number of lipsticks manufactured in accordance with the secret formulas of the plaintiff, and sold by the defendants; the size of the containers used; and the persons to whom the sales were made, were shown by the books of the defendants. The costs and expenses of the plaintiff in manufacturing and selling its lipsticks; the countries where sales were made; and the prices obtained were shown by the plaintiff’s books. Some of the containers used by the defendants were larger than the containers used by the plaintiff. The plaintiff’s recovery was measured by the difference between the price which the plaintiff would have received upon the sale of the number of lipsticks it could have manufactured from the materials used by the defendants and the estimated costs and expenses which the plaintiff would have incurred in manufacturing and selling that number in addition to the lipsticks it actually manufactured and sold. It does not appear that the defendants’ lipsticks were sold to plaintiff’s customers; on the contrary, it appears that some of the defendants’ lipsticks were sold in countries in which the plaintiff was not attempting to

The defendants challenge the manner in which the courts below have calculated the costs and expenses which the plaintiff would have incurred if it, rather than the defendants, had sold the lipsticks, in fact sold by the defendants. We do not reach the question of whether profits which the plaintiff might have made upon sales not actually made by it were correctly estimated unless we first determine that upon this record the plaintiff is entitled to recover any estimated profits upon such sales. We are told that the interlocutory judgment provides that the plaintiff is entitled to damages measured by such profit and that the defendants did not upon the appeal to the Appellate Division object to the form of the judgment. The language of the interlocutory judgment is not entirely clear upon that point and the learned referee held that under its terms further proof was not required to establish that the defendants’ wrong had deprived the plaintiff of such profits. Assuming though not deciding that such construction is correct, then we must determine whether the court could properly insert in the interlocutory judgment the provision relied upon. The injunctive provisions of the interlocutory judgment were, as we have said, modified very sub

The defendants have competed with the plaintiff and their competition has been wrongful. Estimated profits which the plaintiff might have derived from sales actually made by- the defendants in competition with the plaintiff do not “ measure the damages except as they are shown to represent loss to the plaintiff by a corresponding decrease of profits in his own business occasioned by such competition.” (4 Sutherland on the Law of Damages [4th ed.], p. 4492.) “ When a plaintiff in a trade-mark or unfair competition case seeks to recover damages, the burden is on him to prove by competent and sufficient evidence his lost sales, or that he was compelled to reduce prices as the result of his competitor’s wrongful conduct. There is no presumption of law or of fact that a plaintiff would have made the sales that the defendant made.” (Dickinson v. Thum Co., 8 Fed. Rep. [2d] 570, 575.)

In every case where damages have been recovered, measured by profits which the plaintiff would have derived from sales made by a defendant if the plaintiff had made those sales, there has been some evidence tending to show that the defendant’s wrongful acts have caused the plaintiff to suffer a commensurate decrease of profits. That is true in all the cases relied upon by the respondent upon this appeal. Thus, in Conviser v. Brownstone & Co. ( 209 App. Div. 584 ) the defendant’s sales were made to plaintiff’s own customers. In Champlin v. Stoddard ( 34 Hun, 109 , 110) it was pointed out that “ the referee found, upon sufficient evidence, that the plaintiffs were prepared and able to have sold the same quantity, in addition to what they did sell, during the same period. The evidence shows very clearly that the defendant’s sales were made largely in places where the plaintiffs had an established market which they had built up by extensive advertising, the defendant’s sales being at a reduced price, and in great

It is true that the proof in these cases was often far from conclusive. Such proof is not required. The defendants are wanton wrongdoers and in such case “ every doubt and difficulty should be resolved against them.” (Rubber Co. v. Goodyear, 9 Wall. [U. S.] 788, 803.) “ All that is necessary in order to prove actual damages is to furnish some reasonable basis or data on which to calculate them, and whenever the evidence is sufficiently definite to show the pecuniary loss suffered by the complainant, he is entitled to be reimbursed, no matter whether the infringer gained anything by the infringement or not.” (Creamer v. Bowers, 35 Fed. Rep. 206 , 208.)

The judgments should be reversed, and a new trial granted to determine the plaintiff’s damages, in accordance with this opinion, with costs to the appellants to abide the event.

Loughran, Finch, Rippey, Sears, Lewis and Conway, JJ., concur.

Judgment accordingly.