Honorable Will I&innRichardson
AaUatant S&retary of State
Austin, Texas
Dear Sir: Cpinion No. O-4173
Re: Corporations -- similarity of
names.
Your request for opinion has been received and care-
fully considered by-this department. We quote from your re-
Guest as follows:
"We have'an application for a charter for
a corpoiiatloii
wishing to uae'.thename @S&Xfe-Wag
Auto Loan Plan, Inc., of Hazston'. The charter
application la in the proper form and Is accom-
panied by the written consent of a corporation
operatiiigln'Dallaa, using the'name 'Safe-Wag
Auto LoariPlan, Inc.'/. We have had a protest .~
filed by another Texas corporation to our grant-
ing of the charter on the grounds that the time
would conflict with the name 'Safewag Stores,
Inc.,'.
"There are only two corporations in Texas
at the present t.imeusing the name 'S&f+ Way'.
You will note that one of them has consented to
the new corporation's use of the name and the
other corporation Is objecting to it. It is the
contetitlonof Safeway Stores, Inc., that even
though;;thegdo a grocery business and even though
they are not doing business in Houston at the
present time they still have the right to protest
our granting the charter to a corporation using
a similar name.
'?iewould apprectate an opinion from your
department as:to whether the fact that a company
is not operating in a certain locality should be
sufficient to render a similar name available for
corporate use in that loc~llty.
"Counsel for both parties have lfidicated
their desire,to submit a brief on the question
Honorable Will Mann Richardson, page 2 o-4173
and the briefs will be forwarded to you for your
consideration in determining this point."
"Supplementing our letter of December 8th
we wish to state that Safeway Stores Inc.; of
Texas was incorporat-edon January 18, 1916, and
that Safeway Auto Loan Plan Inc., was incorporated
on June 19, 1941. 'The'former company has a capl-
tal stock of $100,000.00, whereas the Loan Corn--
pang has a capital stock of $2,000.00.
"When the charter for the loan company was
granted the grocery corporation was not notified
but immediately after the~charter was granted the
grocery corporation protested any further charter
using that name.
"Attorneys for the Safeway Stores Inc., of
Texas have submitted a brief on the subject which
ia attached to this letter for your convenience.'
We have also carefully considered the briefs submitt.eoby the
applicant for charterand by Safeway 'Stores,.Inc., of Texas.
The applicant for charter, states in .lts brief,,after
citing authoritie'a:
"We~~respectf&.lysubmit that under the facts
In the particular controversy the foregoing au-'
thorltles compel a ruling by your Department that
the Secretary of States should grant the requested
&barter. Certainly Is this true when it is real-
ized that the corporations involved are doing
businesa,ln different cities and a different liner
of bus%nesa, and with a pro,posedcorporate name
substantially.and materially.di&ferent from the
existing,,objectingcorporation.
Safeway'Stores, Inc., of Texas, ,statea in its brief,
after citing author:tles.:
"Already Safeway operates more than 160
stores in Texas, stores from El Paso to Texarkana
and fromDenlson South,to Austin. New stores,go
into operation each year in new counties. In the
normal operation and expansion of Safeway's busi-
ness it will develop that small area of South Texas,
not now served by Safeway.
"It is a matter of common knowledge that Safe-
Honorable Will Mann Richardson, page 3 o-4173
way Stores, Inc. of Texas has spent many thousands
of dollars all over the State in advertising to
build up and put Its name before the public. And
that through,:manyyears of merchandising high grade
products has built up an enviable reputation so
that Its trade name 'Safeway' is a valuable enaigna
and symbol of tts reputation and good-will. Through
its conduct and through its advertising it has built
a well established mercantile reputation and its
trade name Is of considerable value to it. Safeway
operates in every section of ,the State and we do
not feel that a corporation whether in the business
of merchandising groceries or in any other type of
business should be allowed to capitalize upon the
well established mercantile reputation built up by
Safeway Stores over many years of fair dealing and
the expenditure of large sums of money for advertising."
The case of Board of Insurance Commissioners vs. Na",
Mona1 Aid Life (Austin Court of Civil'Appeals) 73 S.W. (2nd)
671, writ of error refused by the Texas Supreme Court, holds:
"1. Trade-marks and trade-names and unfair
competition
"Rule that equity will protect corporation
In use of name applies where subsequent corpora-
tion attempts to use aimllar name to that of ex-
isting corporation.
"2 . Trade-marks and trade-names and unfair
competition
"In absence of statute, administrative agency
granting charters, articles of incorporation, or
permits to carry on business ~111 not permit use
by subsequent corporation of name similar to or so
nearly like that of another as would be likely to
produce confusion.
“3 . Corporations
"Under statute authorizing refusal of permit
to do business to domestic insurance corporation
if name Is 30 similar to existing corporation's as
to be likely to mislead public, which provision
subsequently was made condition upon which foreign
insurance corporations should be permitted to do
business, Board of Insurance Commissioners had
power to refuse permit to foreign insurance cor-
Honorable Will Mann Richardson, page 4 o-4173
poration where name similar to that of another
foreign corporation was likely to cause confusion
(Rev. St. 1925, arts. 4700, 5068).
“4 . Corporations
"Statute authorlzlng refusal of permit to
do business to Insurance corporation with name
similar to 'any other Insurance company' applied
where permit had already been issued to foreign
insurance corporation with similar name and which
was then engaged in business (Rev. St. 1925, arts.
4700, 5068) .
“5 . Trade-marks and trade-names and unfair com-
petition
"There is an unlawful appropriation where one
corporation appropriates and uses distinctive por-
tion of another corporation's name.
“6 . Corporations
"Name 'National Aid Life-'held so similar to
name 'National Aid Life Association'aa to justify
Board of Insurance Commlasionera In refusing permit
tb do business to the 'National Aid Life' on ground
that similarity of names would be likely to mislead
the public in that the dlatinctive portion of,two
names was identical (Rev. St. 1925, arts. 4700,
50.
“7 . Constitutional law
"Statute authorizing Board of Insurance Com-
missioners to refuse permit to do business to ln-
surance corporation with name so similar to that
of existing corporation as to be likely to mislead
public held not unconstitutional as delegation of
arbitrary power (Rev. St. 1925, arts. 4700, 5068).”
We quote from the Court's opinion in said case as fol-
lows :
"Article 4700 vests in the Board of Insurance
Commissioners, whose duty It is to issue permits
to both foreign and domestic life insurance corpora-
tions to carry on such business in this state, the
power to refuse a permi.twhere the name of the sub-
sequent domestic corporation is 'so similar to that
Honorable Will Mann Richardson, Page 5 O-4173
of any other insurance company as to be likely to
mislead the public'. This statute merely adopts
the universal rule that equity will protect a cor-
poration in the use of a name selected and used by
it, which rule likewise applies where a subsequent
corporation attempts to use a similar name to that
of an exist1 corporation. Thompson on Corpora-
7 Vol. 1. pp. 85-87,
tions (3d Rd. tii77; Holloway
v. Memphis;~etc. R. Co., 23 Tex. 465, 76 Am. Dec.
68. The statutes of many states expressly adopt
the rule, and it has been held, even where no such
express statutory provision exists, the court, of-
ficer, or administrative or i%histerlal board whose
duty It is to grant or refuse charters, or articles
of incorporation, or certificates of authority, or
permits to transact or carry on business within a
state, will not permit the use by any subsequent
corporation of a name similar to or ao nearly like
that of another corporation as would be likely to-
produce mistake or confusion. Philadelphia Trust,
etc., Co. v. Philadelphia Trust Co. (C.C.) 123 F.
534; Thompson on Corporations (3a Ea.) vol. 1, p.
80, and cases there cited.
I,
. . . . . . . .
It may be remarked that since the statute
against similarity of names has merely adopted the
equity rule aforementioned, cases construing such
rule necessarily control.
43
. . . . . . .
"Nor did the Board abuse its discretion In
concluding that the names of the two corporations
involved were ao similar as to likely mislead the
public dealing with them. The general rule is
that 'there is an unlawful appropriation where one
corporation appropriates and uses the distinctive
portion of another corporation's name'. . . . . .
"It Is clear that the distinctive portion of
,the names ~of the two corporations in the Instant
case Is 'National Aid Life', and the mere omission
of the word 'Association' by appellee to Its name
would not diatlnguLsh it from the other existing
corporation.
0. . . . . . .
Honorable Will Mann Richardson, page 6 o-4173
In the case of The Grand Temple, etc. vs. Independent
Order, K. &.D. of T., 44 S.W. (2nd) 973 (Texas Commission of
Appeals), It was held that the name "Knights and Daughters of
Tabor of the International Order of Twelve" and Independent Order
of Knights and Daughters of Tabor of America", were similar as
a matter of law, entitling the former corporation to injunctive
relief against the latter. This case further holds that a cor-
poration may be enjoined from using a name similar to that of
another corporation or association, regardless of the character
of the corporations. We quote from the Court's opinion in said
cause as follows:
"A corporation cannot lawfully adopt either
the same name as that of an existing corporation
created by or under the laws of the state, or of
an unincorporated association or partnership there-
in, or a name so similar to that of an existing
dorporation or association that Its use is calcu-
lated to deceive the public and result in confu-
sion or unfair and fraudulent competition (14 C.J.
p. 3l2), and may be enjoined from such use, what-
ever may be the character of the corporations, and
whether or not they are formed for profit, to the
aame extent and upon the same principles that ln-
divlduals are protected in the use of trade-marks
and trade-names (14 C.J. p. 326). And there can
be no distinction in prlnclple between taking the
entire name of the prior corporation and taking
so much of it as will mislead Into the belief
that the two concerns are the aame. The mischief
1s of precisely the same character, differing
only In degree. Slmilarlty, and not Identity, Is
the usual recourse where one corporation seeks to
benefit Itself by the name of another. 7 R.C.L.
p. 134."
We quote from the case of Wall vs. Rolls-Royce of
America, 4 F. (2nd) 333, as follows:
II
. . . that by reason of the high standard
of its product and the volume and spread of its
trade the name Rolls-Royce has become associated
all over the world with the excellence of Its
product, and is associated in the public mind
with high-grade work, and gives its owners an
established, distinctive, and valuable business
asset; . . e .
,s it is clear that the purpose of Wall
was to tace'al;duse the good will, fair name, and
Honorable Will Mann Richardson, page 7 o-4173
trade record which the two companies had, through
years of business integrity, given to the name
'Rolls-Royce', and thereby create in the minds of
the public the impression that his mail order tubes
bore some connection with the real Rolls-Royce
companies. Upon no other theory than a purposed
appropriation to himself, and an intentto convey
to the public a false Impression of some supposed
connection with the Rolls-Royce industries, can
Wall's actions and advertisements be explained.
Seeing, then, that by putting his individual busi-
ness under the name 'Rolls-Royce', and utilizing
its trade reputation and earned good will, Wall
could greatly benefit himself, the converse of
the proposition follows: That this veiling of his
business under the name 'Rolls-Royce' might, and
indeed almost surely would, injure the real Rolls-
Royce industries, and substantially detract from
their good will and fair name. It is true those
companies stade.automobFlesand aeroplanea, and
Wall sold radio tubes, and no one could think,
when he bought a radio tube, he was buying an auto-
mobile nor.
an aeroplane. But that Is nct':Chetest
and gist of this case. Electricity Is one of the
vital elements In automobile and aeroplane con-
struction, and, having built up a trade&name and
fame In two articles of which electrical appll-
antes were all Important factors, what would more
naturally come to the mind of a man wlth a radio
tube In his receiving set, on which i?asthe name
'Rolls-Royce', with nothing else to Indicate Its
origin, than for him to suppose that the Rolls-
Royce Company had extended its high grade of elec-
tric product to the new, electric-using radio art
as well. And if this Rolls-Royce radio tube proved
unsatisfactory, it would sow in his mind at once
an undermining and distrust of the excellence of
product which the words 'Rolls-Royce' had hither-
to stood for.
"In addition to what has been said, it Is
quite possible that the use of such a name might
lead'third parties to credit the plaintiff's bual-
ness, on account of Its name of 'Rolls-Royce',
with an unwarranted financial reliability, and if
such assumptions eventually prove unfounded the
name of 'Rolls-Royce' would suffer accordingl.y.
Indeed, from the atandpolnt of comme??clalintegrity,
fair business, and'trade equity, we feel the court
below, sitting in equity, was justified in pre-
Honorable Will Mann Richardson, page 8 o-4173
venting the defendant from veiling his business
under the name of 'Rolls-Royce', for he had, and
could have had, but one object in view, namely,
to commercially use as his own a commercial asset
that belonged to others, the continued use and
abstraction of which is so fraught with such pos-
sibilities of irremediable injury that the only
way to remedy It la to stop It at the start."
In the case of L. E. Waterman Co. vs. Gordon, 72.Fed.
(2nd) 272, the owner of a trade name "Waterman" who manufactured
fountain pens and pencils was allowed to enjoin the junior use
of the same name by a corporation manufacturing electric razors.
In the case of Armour.& Company vs. MasterTire and
Rubber Company, 34 Fed. (2nd) 201, it was held that a meat
packer was entitled to enjoin the Uefendant'a use of the word
"Armour" as a trade name in the business of manufacturing and
selling tires. The Court held In this case that in a suit for
injunction based on unfair competition in using a trade name,
direct competition In plaintiff's field is not a necessary
element. We quote from said case as follows:
,I
........ The Armour family, through various
and successive representatives thereof, was con-
tlnuously identified with the business, and through
the successive years large sums of money were ex-
pended for thenbuilding up of the good will and
reputation of the company's products. . . . .
'Defendants claim the selection of the word
'Armour' was for the purpose of signifying the
tough, stable, and hardy aharacter of the automo-
bile tires; that is, that the product was in some
unaccountable way 'armoured', and was calculated
to In some way create the Impression of strength.
The reasonableness of this contention la not‘suf-
ficlently persuasive to even require comment.
"The inescapable conclusion, drawn from the
tenor of the entire record, la that the use of
.the word 'Armour' In the corporate name of the aell-
ing company, and as a brand and trade-name to the
product, was selected for the purpose of taking
advantage of the business reputation of the plain-
tiff company, the family name of the organizer,
and of those prominently Interested in that com-
pany throughout Its existence, In the good will
of that company gained by years of ingenims ad-
vertising and the expenditure of vast sums of money
Honorable Will Mann Richardson, page 9 O-4173
therefor, and for the purpose of confusing the
public and leading defendant's patrons to believe
by the use of the word 'Armour'; that its product
was of a superior standard and quality, and to
induce other members of the public to become patrons
under such a belief. Fraud, or the attempt at
fraud, Is discernible as the underlying and appeal-
In conclusion.
II
. . . . . . .
"And the court furthermore says:
"'With a practically unlimited field of dis-
tinctive names open to It for choice, when the de-
fendant lately entered the automobile industry,
the fact that it chose to take a name that had no
connection or association with the automobile trade,
except the good will and association which the plaln-
tiff had given it, shows conclusively that the name
was given to this new venture in the automobile
field because of its established high regard in
that industry, which had been given It by the
plaintiff.'
II
. . . . . .,,
In the case of Alfred Dunhill of London, Inc. vs.
Dunhill Shirt Shop, 3 F. 3. 487, a corporation making pipes and
smoker's supplies was allowed to enjoin a corporation selling
shirts from using the same name.
The case of Great Atlantic & Pacific Tea Co. vs. A. &
P. Radio Stores, 20 Fed. Supp. 703, held that the owner of a
nationally known and valuable trade-name could restrain third
party use of trade-name in connection with a noncompeting busi-
ness even though custom and trade was not divided by such use,
since the owner's reputation mlnht be tarnished thereby. We
quote from said case,.asfollows:
"The plaintiff seeks to restrain the de-
fendant from using its trade-name 'A &~P' in con-
nection with Its business of selling radios, waah-
ing machines, and electric refrigerators. None
of these articles is sold by the.plaintiff. Con-
sequently the first question presented is whether
the owner of a nationally known and valuable trade-
name may restrain its use by a third party in con-
nection with a noncompeting business. It is quite
clear that in such a case the defendant is not ac-
Honorable Will Mann Richardson, page 10 o-4173
tually diverting custom and trade from the plaln-
tiff. Such an injury, however, Is not the only
one which may result. As was said by Mr. Justice
Shientag In Philadelphia Storage Battery Co. v.
Mlndlln, 163 Misc. 52, 296 N.Y.S. 176, 178: 'The
normal potential expansion of the plaintiff's
business may be forestalled. * * * His remtation
may be tarnished by the use"of his mark upon an
inferior DrOdUCt. * + * A false imoreasion of a
trade connection between the parties mav be created,
possibly subjecting the plaintiff to liability or
to the embarrassments of litigation, or causing
Fniury to his credit and financial standing.'
"The underlying prlnclple involved in these
cases was well put by Circuit Judge Learned Hand
in Yale Electric Corporation v. Robertson (C.C.A.)
26 F:(2d) 972, 974, as follows: -'However,It has
of recent years been recognized that a merchant
may have a sufficient economic interest in the use
of his mark outside the field of his own exploita-
tion to justify Interposition by a court. His
mark is his authentic seal; by it he vouches for
thedgoods which bear it; it carries his name for
good or ill. If another uses It, he borrows the
owner's reputation, whose quality no longer lies
within his own control. This is an injury, even
though the borrower does not tarnish it, or divert
any sales by its use; for a reputation, like a
face, is the symbol of Its possessor and creator,
and another can use it only as a mask.'
"It Is on the basisof this developing concep-
tion of unfair competition that the courts have
repeatedly restrained the use of similar trade-
marks on noncompeting goods. See Walter v. Ashton,
1902, 2 Ch. 282; Aunt Jemina Mills Co. v. Rlgney
zezt".&C.A.) 247 F. 407, L.R.A. lg18C, 1039,
245 U.S. 672, 38 3. Ct. 222; 62 L. Ed.
540;'Alum;num Cooking Utensil Co. v. Sargoy Bros.
& Co. (D.C.) 276 F. 447; Vogue Co.'v. Thompson-
Hudson Co. (C.C~;A.)300 F. 509; Wall v. Rolls-
Royce of America (C.C.A.) 4 F. (2d) 333; Hudson
Motor Car Co. v. Hudson Tire Co. (D.C.) 21 F. (2d)
453; Duro Co. v. Duro Co. (C.C.A.) 27 F. (2d) 339;
Standard Oil Co. v. California Peachy& Fig Growers
(D.C.) 28 F. (26) 283; Del Monte Special Food Co.
v. California Packing Corporation (C.C.A.) 34 F.
(2d) 774; Waterman Co. v. Gordon (C.C.A.) 72 F. 272';
Alfred Dunhill of London vi Dunhill Shirt Shop
Honorable Will Mann Richardson, page 11 O-4173
(;,z.&o3 z. Supp. 487; Great Atlantic & Pacific
A. & P. Cleaners &Dryers (D.C.) 10
F. Supp: 450.
81
. . . . . . . " (Underlining ours)
In the case of Sweet Sixteen Co. vs. Sweet"l6" Shop,
15 Fed. (2nd) 920, the plaintiff In 1916 opened a dress shop
using the name "Sweet Sixteen" in San Francisco and by 1921 had
five stores in states touching the Pacific ocean. In 1923 the
defendant started a dress shop in Salt Lake City, Utah, using
the name "Sweet 16" despite the protest of plaintiff. The
evidence in this case also showed that Utah was the natural
sphere of expansion for plaintiff. The Court held that the
plaintiff was entitled to enjoin the defendant from using the
name "Sweet 16" even though the plaintiff did not have any
&res in Utah. We quote from said case as follows:
"'It may be suggested whether, In these days
of rapid and constant intercommunication and ex-
tended commerce between nations;any narrow line
of demarkation should be established, on the one
side of which should stand moral wrong with legal
liability, and upon the other moral wrong with
legal immunity. If, however, the courts of a par-
ticular government can, with respect to the subject
In hand, take cognizance only of wrongs committed
within the geographical boundaries of the country,
it is still not necessary, In our judgment, that
a trade in an article should be fully established,
in the sense that the article be widely known,
before the proprietor of its trade-mark or trade-
name may be entitled to the protection of 'equity
for the preservation of his rights. Otherwlae.it
might be impossible, with respect to a valuable
and desirable article or product of manufacture,
designated by a particular brand or in a partlcu-
lar manner, ever to establish a trade. Craft and
cunning, discerning the value of the product, and
the profit to be acquired, would, at the inception
of the business, flood the market with spurious
and cheaper articles or preparations of the simlll-
tude of the genuine, and strangle the trade in the
genuine at Its birth. It is enough, we think, If
the article with the adopted brand upon it is ac-
tually a vendible article in the market, with in-
tent by the proprietor to.continue its production
and sale. It is not essential that Its use has
been long continued, or that the article should
be widely known, or should have attained great
.
Honorable WI11 Mann Richardson, page 12 O-4173
reputation. The wrong done by piracy of the trade-
mark la the same in such case as in that of an
article of high and general reputation, and of
long-continued use. The difference is but one
of degree, and in the quantum of injury. A pro-
prietor is entitled to protection from the time
of commencing the user of the trade-mark."'
We quote from the case of United Brotherhood, etc. vs.
Carpenters and Joiners, etc., 110 S.W. (2nd) 1209, aa follows:
"We are impressed with the language of the
Court in Barton vs. Rex-011 Company;.C.C.A. 2 F.
(2nd) 402, 40 A.L.R. 424: Why with all the words
of the English Language at Its disposal (appellee
here) it should adhere to these particular words?"
The distinctive portFon,,ofthe name of Safeway Stores,
Inc. of Texas 1s clearly "Safewag . It is undoubted~lytrue, as
represented in the brief for Safeway Stores, Inc., that it has
expended large sums of money for advertising and now has built
up a splendid and honorable business reputation and that Houston
is undoubtedly within its normal sphere of business expansion.
On the other hand, applicant for charter, has never used the
naine "Safeway", has never created any good will for or added any
luatre to the name "Safeway". We pose this question: "Why it
is, with thousands of other words in the English Language at
applicant's disposal, It should determine on the use of the word
"Safe-way" (which Is idems sonans with "Safeway") in its pro-
posed corporation?"
You are, therefore, respectfully advised that It is
the opinion,of this department that your question should be
answered in the negative. It is our further opinion that under
the facts related the Secretary of State in the exercise of his
discretion would be justified In refusing to allow the applicant
touse the name "Safe-way" in Its charter.
Very truly yours
ATTORNEYGENERAL OF TEXAS
By s/Wm. J. Fanning
WJF:mp:wc Wm. J. Fanning
Assistant
APPROVED JAN 23, 1942
s/Grover Sellers
FIRST ASSISTANT
ATTORNEYGENERAL
Approved Opinion Committee By s/BWB Chairman
Untitled Texas Attorney General Opinion
Combined Opinion