Coca-Cola Company v. Dorris
165 U.S.P.Q. (BNA) 225, 311 F. Supp. 287, 1970 U.S. Dist. LEXIS 12337 (1970)
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Rule of Law:
Substituting a non-trademarked product for a trademarked product requested by a customer, without providing explicit oral notification of the substitution, constitutes trademark infringement and unfair competition. A business owner is liable for such infringing acts committed by employees, even if they were instructed not to do so, and passive notices like signs are insufficient to prevent liability.
Facts:
- Ed E. Dorris operated restaurants named Dorris House #1 and Dorris House #2 in Pine Bluff, Arkansas.
- The Coca-Cola Company owns the registered trademarks 'Coca-Cola' and 'Coke'.
- Around May 1965, Dorris stopped selling Coca-Cola products and began serving his own beverage, 'Dorris House Cola'.
- Dorris posted signs in his establishments stating they did not serve Coca-Cola and instead served Dorris House Cola.
- Dorris instructed his employees to verbally inform customers who ordered 'Coke' or 'Coca-Cola' that the product was not available and that they served Dorris House Cola instead.
- Between January 1966 and December 1968, on at least 24 separate occasions, Dorris's employees served Dorris House Cola to investigators who ordered 'Coke' or 'Coca-Cola'.
- During these incidents, the employees did not orally inform the customers of the substitution.
- On some occasions, employees confirmed the order by repeating the trademarked name and wrote 'Coke' on the customer's guest check.
Procedural Posture:
- The Coca-Cola Company filed a complaint against Ed E. Dorris in the U.S. District Court for the Eastern District of Arkansas, Pine Bluff Division.
- The complaint alleged trademark infringement under the Lanham Act and unfair competition, asserting both federal question and diversity jurisdiction.
- Dorris filed an answer denying the allegations.
- Dorris later filed an amended answer and a counterclaim, alleging that Coca-Cola's representatives had harassed him in an effort to force him to sell their product.
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Issue:
Does a business owner commit trademark infringement and unfair competition by allowing employees to serve a different beverage in response to orders for a trademarked product, such as 'Coca-Cola' or 'Coke,' without providing oral notice to the customer, even if the owner has posted signs and instructed employees not to substitute?
Opinions:
Majority - Oren Harris, Chief Judge
Yes, substituting another product for a requested trademarked product without verbal notice is trademark infringement and unfair competition, a practice known as 'passing off' or 'palming off'. The court reasoned that signs placed in the establishment are insufficient to notify customers of a substitution; the law requires the server to orally advise the customer that the requested product is unavailable and to give them the opportunity to accept or reject the substitute. Furthermore, the owner's good faith or instructions to employees are not a defense. A business owner is responsible for the actions of their employees, even if those actions are contrary to direct instructions, under established principles of agency law.
Analysis:
This decision solidifies the legal standard for 'passing off' in the context of retail service, particularly for restaurants and bars. It establishes that active, oral communication is the minimum requirement to avoid trademark infringement when substituting products; passive measures like signage are legally insufficient. The case reinforces the principle of vicarious liability, holding business owners strictly accountable for their employees' infringing actions, regardless of the owner's intent or internal policies. This places a significant burden on owners to ensure their staff is properly trained and compliant to protect trademark holders and prevent consumer deception.
