L. P. LARSON, JR., COMPANY
v.
WM. WRIGLEY, JR., COMPANY
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L. P. Larson, Jr., Company sued Wm. Wrigley, Jr., Company for patent infringement based on confusingly similar gum packaging, and the Wrigley Company was ordered to account for net profits from infringing sales. The Supreme Court held that the Wrigley Company should not be permitted to deduct federal income and excess profits taxes from the profits it must disgorge, reasoning that while deductions for actual costs of production are appropriate, allowing tax deductions would improperly permit an infringer to deduct amounts paid for the privilege of committing deliberate wrongdoing. The Court established that the proper remedy for willful infringement requires accounting for profits without federal tax deductions, even though the injured party may incur tax liability upon receipt of those profits.
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Mr. Justice Nolmes delivered the opinion of the Court.-.
. ^ There has been long litigation between the parties in this suit, the last stage of which appears in 20 F. (2d) 830. The Wrigley Company was ordered to account for net profits on sales of its ‘ Doublemint ’ gum in a package dress that infringed the Larson Company’s ‘ Wintermint ’ gum package. During the accounting, questions arose that were decided by the Circuit Court of Appeals. To review one of these questions a writ of certiorari was granted by this Court. That question is whether, as held below with modifications that need not be mentioned, the Wrigley Company should be allowed to deduct the federal income and excess profits taxes from the profits with which it is to be charged.
No doubt there are cases in which such a deduction would be proper. But the question cannot be answered by the merely formal reply that if the Larson Company chooses to make the Wrigley Company its agent or trustee ex maleficio and to demand the profits made by the agent it must take the burden with the benefit and can have no-more than the agent made in fact. To call'the infringer an agent or.trustee is not to state a fact but merely to indicate a mode of approach and an imperfect analogy by which the wrongdoer will be made to hand over the proceeds of his wrong. Circumstances will affect the conclusion, including in them the knowledge and the conduct of the party charged. It would be unjust to charge an infringer with the gross amount of his sales without allowing him for the materials and labor that were necessary to produce the things sold, but it does not follow that he should be allowed what he paid for the chance to do what he knew that he had no right to do. That is the position of the Wrigley Company as we understand the findings in the successive stages of this suit. 253 Fed. Rep. 914, 916. 275 Fed. Rep. 535, 537, 538. 5 F. (2d) 731, 739. 20 F. (2d) 830, 831. Even if the only relief that the Wrigley Company can get is a deduction from gross income when the amount of its liability’ is finally determined, the Larson Company will have to pay a tax on the Wrigley profits when it receives them, and in a case of what has been found to have been one of conscious and deliberate wrongdoing, we think it just that'the further deduction should not be allowed.
Decree as to allowance of federal taxes reversed.
Cases With Similar Vibessemantic neighbors from the corpus
Citator
Cited By (25 total)
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Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390 (U.S. 1940)…lict an unauthorized- penalty. To call the infringer a trustee ex maleficio^ merely indicates “a mode of approach and an imperfect analogy by which the wrongdoer will be made to hand over the [*406] proceeds of his wrong.” Larson Co. v. Wrigley Co., 277 U. S. 97, 99, 100. He is in the position of .one who has confused his own gains with those which belong to another. Westinghouse Co. v. Wagner Co., supra, p. 618. He “must yield the gains begotten of his wrong.” Duplate Corp. v. Triplex Co., 298 U. S. 448, 4…
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Duplate Corp. v. Triplex Safety Glass Co., 298 U.S. 448 (U.S. 1936)…y the Court of Appeals. It will be accepted as a datum here. The account is to be stated on the assumption that the defendants, though infringers, have acted in good faith. Cf. R. S. §§ 4919, 4921; 35 U. S. C. §§ 67, 70; Larson Co. v. Wrigley Co., 277 U. S. 97. The controversy as to the measure of liability divides itself into two branches, one concerned with the defendants’ profits, the other with the complainant’s damages. In reckoning the profits, the master made allowance to the defendants for the co…
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Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45 (2d Cir. 1939)…me taxes paid by the defendants. He allowed them because he thought that the defendants were not deliberate plagiarists; otherwise the case would have fallen within the ruling of the Supreme Court in L. P. Larson, Jr., Co. v. Wm. Wrigley, Jr., Co., 277 U.S. 97, 48 S.Ct. 449, 72 L.Ed. 800; Goodyear Tire & Rubber Co. v. Overman Cushion Tire Co., 6 Cir., 95 F. 2d 978, 985. See, also, Stromberg Motor Devices Co. v. Detroit Trust Co., 7 Cir., 44 F. 2d 958; Stromberg Motor Devices Co. v. Zenith-Detroit Corp., 2…
Previewing 3 of 25 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Galveston Elec. Co. v. City of Galveston, 258 U.S. 388 (U.S. 1922)
- Larson v. Wrigley, 20 F.2d 830 (7th Cir. 1927)
- MacBeth-Evans Glass Co. v. L. E. Smith Glass Co., 23 F.2d 459 (3d Cir. 1927)
- Wrigley v. Larson (N.D. Ill. 1925)
- Lamborn v. Nat'l Bank of Commerce of Norfolk, 273 U.S. 688 (U.S. 1927)
- Max Kaufman & Co., Inc. v. Bowers (S.D.N.Y. 1926)