Ingenuities Corporation of America

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IN THE MATTER OF INGENUITIES CORPORATION OF A~IERICA, GOLDBERG, EQUil1E, LESSEH AND COHEN, INC., AND T. P.

McCUTCHEO~ AND BROTHER, INC.

COMPLAINT, FI~DINGS, AND ORDER 1:-l" REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS Al'PflOYED SEPT, 26, 1914 Doeket 4593. Complaint, Sept. 22, 1941-Dccision, Mar. 13, 1942 Where a corporation, engaged In licensing a patent for the construction of neckties and the use, in connection therewith, of the registered trade-mark "Silkallo" (also lieensed in combinations such as, particularly, "Duo-Silk- Alia"), which (1) paid an agreed perceutage of licen~ees' cost of advertising the ties and furnished them with counter-cards aud labels, on all of which it caused to be displayed the phrase "Duo-Sillc-Allo," (2) designated approved firms for embossing said, trade-marks on tips, and (3) cbarged royalties for nt:>ckti('S made nnd embosser! under Its licPnst:>s- (a) Repres!'nt£>d that the neckties involved were silk through use of phrase "Duo-Silk-Allo" and other similar phrases; and failed to make lt a condition precedent to the issuance of a licens':! that licensee agree to use such phrases only on and in connection with products made entirely from silk, and to determine whether ties were entire£>1y thus made, and to revoke licenses ot those s£>lling, shir•ping, labeling, embossing or advertising such products not thus made; and "'here two of its corporate licensees- ( b) Embo1'!SPd, or caust:>d to be embossed, with words "Duo-Silk-Allo" and sold, thus embossed, rayon and rayon-and-silk ties, with woolen Interlining; and (c) Fail(•<!, In case of one of said Iicem:ees, to disclosf' rayon content of its products, and in other so to do except through placing on ties lnvolv·f'd detachable paper labels reading "Silk and Tiayon," and to designate each constituent fiber of such ties in OJ'd!'r of its predominance by weight, b!'ginning with the largest single one;

The facts being that many of the ties concerned, Including those sold by other of its said licensees and similarly advertised, labeled, embossed nnd sold, were, except for woolen interlining, composed entirely or predominantly ot · rayon which, when made to simulate silk, is practically indistinguishable by the purchasing public from the genuine and long preferred product of the cocoon of the silkworm; and "'here said corporate licensor- ( d) Place>d ln the bands of its' said two corporate licensees afore>said methous of misrepresf'ntlng their respective tips, and participated In the misrepresentation thereof; and 1Vhere said licensor and it!' licensees- ( e) Failed to dlsclos(' and to cause to be disclosed the fact that said products were composed in whole or In part of rayon, except us above set forth; 'With tendency and capacity to misl!'ad purcha,;ers and pt·ospective purchasers of said neckties into the mistaken belief that such representations were true INGENUITIES CORPORATION OF AMERICA ET AL. 839 83S Complaint and that rayon used therein was silk, thereby inducing them to purchase substantial numbers of said ties:

Held, That such acts and practices, under the circumstances set forth, were all to the prpjudicp of the public, and constituted unfaii' and decpptive acts and practices in commerce.

J,fr. Donovan Divet for the Commission.

Munn, Liddy, Olaccum & J(ane and iJ!r. Murray Rosof, of New York City, for respondents.

Complaint Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said act, the .Federal Trade Commission, having reason to believe that Ingenuities Corporation of America, a corporation and Goldberg, Squire, Lesser & Cohen, Inc., a corporation and T. P. McCutcheon & Brother, Inc., a corporation, hereinafter referred to as the respondents, have violated the provisions of said act and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest hereby issues its complaint stating its charges in that respect as follows:

Jl ARAGUAPH 1. Respondent, Ingenuities Corporation of America, is a corporation, organized and existing under and by virtue of the laws of the State of New York and having its principal place of business at 745 Fifth Avenue, in the city of New York, State of New York. Respondent, Goldberg, Sl}uire, Lesser & Cohen, Inc., is a corporation, organized and existil)g under and by virtue of the laws of the State of New York and having its principal place of business at 3 East Twenty-eighth Street, in the city of New York, State of New York.

Respondent, T. P. :McCutcheon & Brothers, Inc., is a corporation, organized and existing under and by virtue of the laws of the State of Pennsylvania and having its principal place of business at 1216 Arch Street, in the city of Philadelphia, State of Pennsylvania. PAR. 2. Respondent, Ingenuities Corporation of America, Inc., is now, and for more than 2 years last past has been, engaged in the business of licensing the use of a certain patent for the construction of neckties and the use in connection with nerkties of a rrgistered trade mark "Silkallo," the use of which the said respondent licenses in combination with other words and with hyphens particularly as "Duo-Silk-Allo." The said rpspondent issu£'s said licenses to manufacturers of nf'rkties loeatP<l in various States of the United States and in accordanre with the provisions of the agreements under which Complaint 34F. T. C.

said licenses are issued and in the course and conduct of its said business pays an agreed percentage of the cost of the advertising of said neckties by the individual licensees. In the course and conduct of its said business said respondent also furnishes said licensees with countercards advertising neckties manufactured and labeled in accordance with said licenses, and also supplies them in some cases with labels to be used on said neckties, and also designates embossing firms which emboss the said trade mark on the said neckties upon which neckties respondent receives royalties as hereinafter alleged. Respondent controls the activities of said designated embossing firms to such an extent that such embossing firms refuse to emboss neckties except under conditions not objected to by said respondent. The embossing on said neckties, the said labels~ the said adverti$ements and the said countercards all display the phrase "Duo-Silk-Allo." In accordance.e with the provisions of said licensing agreements and in the course and conduct of its said business, said respondent charges and receives a certain royalty for the neckties manufactured and embossed under said licenses.

The said neckties after being embossed by one of the said des.ignated embossing firms as heretofore alleged, are returned to the licensees from the places of business of said embossing firms to said licensees located in States other than those in which said embossing firms are located; said countercards and the said labels supplied by said respondent are shipped by said respondent from its principal place of business in the State of New York to said licensees in States other than New York and are by said licensees shipped from their respective places of business to persons and firms located in States other than the State in which said licensees are respectively located and from which they make said shipments; the said advertisements paid for in part by said respondent as heretofore alleged are published in newspapers and magazines which are distributed in the various States of the United States; the said neckties after being embossed by one of said designated embossing firms and returned to said licensees as aforesaid are transported with the embossing from the respective places of business of said licensees to purchasers located in States other than those from which shipment was made. PAn. 3. In the course and conduct of its said business and for the purpose of promoting the sale of its said licenses and of the neckties manufactured under said licenses, the said respondent, Ingenuities Corporation of America, in connection with its respective licensees has engaged in the practice of falsely representing the constituent fabric or material of certain of the neckties manufactured by its said licensees by means of false representations appearing in said labels, INGENUITIES CORPORATION OF AMERICA ET AL. 841 838 Complaint countercards, embossed neckties and advertisements in newspapers and magazines and by failing to disclose and to require the disclosure of the myon content of said neckties and has placed in the hands of other persons and companies a means of so misrepresenting said products.

PAR. 4. Among the said neckties manufactured by the licensees of said respond~nt, Ingenuities Corporation of America. nnd shipped, embossed, labeled, nnd advertised as heretofore alleged, are many which contain no silk, but which are made entirely of rayon with woolen interlining and others which are made partly of silk and partly of rayon with a woolen interlining. In the advtrtising, labeling and embossing of said neckties, respondent, Ingenuities Corporation of America, has used and has permitted its licensees to use the phrase "Duo-Silk-Allo," or other phrases of similar import or meaning and has failed to make it a condition precedent to the issuance of a license to use the phrase "Duo-Silk-Allo," or other phrases of similar import or meaning, that said licensees agree to use such phrases only en and in connection with neckties made entirely from silk, and has failed to determine whether said neckties are made entirely of silk and has failed to revoke licenses when the neckties so sold, shipped, labeled, embossed, or advertised as aforesaid were not made entirely of silk. By using and by permitting the use of the phrase "Duo-Silk-Allo" and other phrases of similar import or meaning not herein specifically set forth, the respondent has made and caused to be made the representation that said neckties are composed entirely of silk and has placed in the hands of its licensees a means of making .said representation.

Among the said licensees of respondent, Ingenuities Corporation of America, are the respondents Goldberg, Squire, Lesser & Cohen, Inc., a corporation and T. P. McCutcheon & Brother, Inc., a corporation, each of which said respondents under a license to use said patent, has manufactured or caused to be manufactured certain neckties composed in some cases of rayon with a woolen interlining and in other cases of rayon and silk with a woolen interlining, which neckties each of said respondents has embossed or caused to be embossed with the words "Duo-Silk-Allo" under a license from said respondent, Ingenuities Corporation of America, and which neckties so embossed said respomle:nt licensees have sold in "commerce" as commerce is defined in the Federal Trade Commission Act. The respondent, T. P. McCutcheon & Brother, Inc., in selling its saul neckties as afore said has entirely failed to disclose the rayon content thereof; H, respondent Goldberg, Squire, Lesser & Cohen, Inc., has failed to disclose the rayon content of its said neckties except by placing thereon Complaint 34F.T.C.

a detachable paper label reading "Silk and Rayon," and has failed to designate each constituent fiber of said neckties in t.he order of its predominance by weight beginning with the largest single constituent. The respondent, Ingenuities Corporation· of America, has received a royalty on each of the neckties so manufactured, embossed and sold by the two other respondents and in tile ways and by the methods heretofore alleged has placed in the hands of each of said two respondent licensees a method of misrepresenting their respective neckties and has participated in the misrepresentation thereof. PAR. 5. The said representations of the respondents as heretofore alleged are false and misleading. In truth and in fact many of the neckties sold by each of said respondent licensees, as well as many of the neckties of other licensees of respondent licensor similarly advertised, labeled, embossed and sold in "commerce" as commerce is defined in the Federal Trade Commission Act, are composed of rayon with a woolen interlining, or of rayon and silk with a woolen interlining and with the rayon predominating. PAR. 6. The word "silk" for many years last past has had and still has in the minds of the purchasing and consuming public generally a definite and specific meaning, to wit: the product of the cocoon of the silkworm. Silk products for many years have held and still hold, public esteem for their preeminent qualities and because of such reputation there is a substantial demand on the part of the purchasin:.r public for such products. Rayon is the name of a chemically manufactured fiber or fabric which may be manufactured so as to simulate silk and when so manufactured has the appearance and feel of silk and is practically indistinguishable by the purchasing public from silk. By reason of these qualities rayon, when manufactured to simulate silk, and not designated as rayon, is readily believed to be and is accepted by the purchasing public as being silk, the product of the cocoon of the silkworm. All of the rayon contained in the aforesaid neckties labeled "Duo-Silk-Allo" is manufactured so as to simulate silk and has the appearance and fee] of silk. In the sale and in the offering for !iale of said neckties the rpspondents have failed to disclose and have failed to cause to be disclosed by labels or in any other manner except ns heretofore alleged the fact that said neckties were composed in whole or in part of rayon.

PAR. 7. The usp by the respondents of the aforesaid methods and "t'presPntations nnd the failure to disclose and to cause to he disclosed .i1e rayon content of said neckties has had and has the tentlency and capacity to mislead purchasers and prospective purchasers of fmid neckties into the erroneous and mistaken belief that such repre- INGESUITIES CORPORATION OF AMERICA ET AL. 843 838 I<'iudiugs sentations are true ancl that the rayon fabric and fiber used in the makeup of said neckties is silk and to induce them to purchase substantial numbers of said neckties.

PAR. 8. The aforesaid acts and practices of the respondents as herein alleged are all to the prejudice of the public and constitute unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. REPORT, FINDINGs AS TO THE FACTs, AND Onder Pursuant to the provisions of the Federal Trade Commission Act~ the Federal Trade Commission on September 2~, 11>41, issued, and on September 23, 1941, SE'rved its complaint in this proceeding upon respondents Ingenuities Corporation of America, a corporation, Goldberg, Squire, Lesser & Cohen, Inc., a corporation, and T. P. McCutcheon & Drother, Inc., a corporation, charging them with the use of unfair and deceptiw acts and practices in commerce in violation of the provisions of said act. After the issuance of said complaint, and the filing of respondents' answers, the Commission by orders entered hHein granted respondents' motions for permission to withdraw said answers and to substitute therefor answers admitting all the material allegations of fact set forth in said complaint, and waiving all intervening procedure and further hearing as to said facts, which substitute answers were duly filed in the office of the Commission. Thereafter, this proceeding regularly came on for final hearing before the Commission on said complaint and . substitute answers, and the Commission having duly considered the matter, and being now fully advised in the premises finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion dmwn therefrom: FINDINGS AS TO Tile FACTS PARAGRAPH 1. Respondent, Ingenuities Corporation of America, is a corporation, organized and existing under and by virtue of the laws of the State of New York and having its principal place of business at '145 Fifth Avenue, in the city of New York, State of New York. Respondent, Goldberg, Squire, Lesser & Cohen, Inc., is a corporation, organized and existing under and by virtue of the laws of the State of New York and having its principal place of business at 3 East Twentyeighth Street, in the city of New York, State of New York. Respondent, T. P. McCutcheon & Brother, Inc., is a corporation, organized and existing under and by virtue of the laws of the State of 844 FEDERAL TRADE COlHMIS.SION DECISIONS Findings 34F.T.C.

Pennsylvania and having its principal place of business at 1216 Arch Street, in the city of Philadelphia, State of Pennsylvania. PAR. 2. Respondent, Ingenuities Corporation of America, Inc., is now, and for more than 2 years last past has been, engaged in the business of licensing the use of a certain patent for the construction of neckties and the use in connection .with neckties of a registered trademark "Silkallo," the use of which the said respondent licenses in combination with other words and with hyphens particularly as "Duo- Silk-Allo." The said respondent issues said licenses to manufacturers of neckties located in various States of the United States and in accordance with the provisions of the agreements under which said licenses are issued and in the course and conduct of its said business pays an agreed percentage of the cost Of the advertising of said neckties by the individual licensees. In the course and conduct of its said business, said respondent also furnishes said licensees with counter-cards advertising neckties· manufactured and labeled in accordance with said licenses, and also supplies them, in some cases, with labels to be used on said neckties, and also designates embossing firms which emboss the said trade-mark on the said neckties upon which neckties respondent receives royalties as hereinafter found. Respondent controls the activities of said designated embossing firms to such an extent that such embossing firms refuse to emboss neckties except under conditions not objected to by said respondent. The embossing on said neckties, the said labels, the said advertisements and the said countercards all display the phrase "Duo-Silk-Allo." In accordance with the provisions of said licensing agreements, and in the course and conduct of its said business, said respondent charges and receives a certain royalty for the neckties manufactured and embossed under said licenses. The said neckties after being embossed by one of the said designated embossing firms, as heretofore found, are returned to the licensees from the places of business of said embossing firms to said licensees located in States other than those in which said embossing firms are located; said countercards and the said labels supplied by said respondent are shipped by said respondent from its principal place of business in the State of New York to said licensees in States other than New York and are by said licensees shipped from their r~spective places of business to persons and firms located in States other than the State in which said licensees are respectively located, and from which they make said shipments; the said advertisements paid for in part by said respondent as l1eretofore found are distributed in the various States of the United States; the said neckties after being embossed by one of said designated embossing firms and returned to said licensees as aforesaid are trans- INGENUITIES CORPORATION OF AMERICA ET AL. 845 838 ]findings ported with the embossing from the respective places of business of said licensees to purchasers located in States other than those from which shipment was made.

PAn. 3. In the course and conduct of its said business, and for the purpose of promoting the sale of its said licenses and of the neckties manufactured under said licenses, the said respondent, Ingenuities Corporation of America, in connection with its respective licensees has engaged in the practice of falsely representing the constituent fabric or material of certain of the neckties manufactured by its said licensees by means of false representations appearing in said labels, countercards, embossed neckties and advertisements in newspapers and m11gazines and by failing to disclose and to I'equire the disclosure of the rayon content of said neckties and has placed in the hands of other persons and companies a means of so misrepresenting said products.

P.an. 4. Among the said neckties manufactured by the licensees of said respondent, ingenuities Corporation of America, and shipped, embossed, labeled and advertised as heretofore found, are many which contain no silk, but which are made entirely of rayon with woolen interlining and others which are made partly of silk and party of rayon with a woolen interlining. In the advertising, labeling and embossing of said neckties, respondent, Ingenuities Corporation of America, has used and has permitted its licensees to use the phrase "Duo-Silk-Allo," or other phrases of similar import or meaning and has failed to make it a condition precedent to the issuance of a license to use the phrase "Duo-Silk-Allo," or other phrases of similar import or meaning, that said lieensees agree to use such phrases only on and in connection with neckties made entirely from silk, and has failed to determine whether said neckties are made entirely of silk and has failed to revoke licenses when the neckties so sold, shipped, labeled, embossed, or advertised as aforesaid were not ma<le entirely of silk. By using and by permitting the use of the phrase ''Duo-Silk-Allo" and other phrases of similar import or meaning not herein specifically set forth, the respondent has made and caused to be made the representation that said neckties are composed entirely of silk and has placed in the hands of its licensees a means of making said repr.esentation.

Among the said licensees of respondent, Ingenuities Corporation of America, are the respondents, Goldberg, Squire, Lesser & Cohen, Inc., a corporation, and T. P. McCutcheon & Brother, Inc., a corporation, each of which said respondents, under a license to use said patent, has manufactured or caused to be manufactured certain neck- Findlngs 34F. 1'. C.

ties composed in some cases of rayon with a woolen interlining and in other cases of rayon with silk with a woolen interlining, which neckties each of said respondents has embossed or caused to be embossed with the words "Duo-Silk-Allo" under a license from said respondent, Ingeimities Corporation of America, and which neckties FO embossed said respondent licensees have sold in commerce, as "commerce" is defined in the Fetleral Trade Commission Ac;t. The respondent T. P. McCutcheon & Brother, Inc., in selling its said neckties as aforesaid has entirely failed to disdose the rayon content thereof; the respondent, Goldberg, Squire, Lesser & Cohen, Inc., has failed to disclose the rayon content of its said neckties except by placing thereon a detachable paper label reading "Silk and Rayon," and has failed to designate each constituent fiber of said neckties in the order of its predominance by weight beginning with the largest single constituent. The respondent, Ingenuities Corporation of America, has received a royalty on each of the neckties so manufactured, embossed and sold by the two other respondents, and in the ways and by the methods heretofore found, has placed in the hands of each of said two respondent licensees a method of misrepresenting their respective neckties and has participated in the misrepresentation thereof.

PAR. 5. The said representations of the respondents as heretofore found are false and misleading. In truth and in fact many of the neckties sold by each of said respondent licensees, as well as many of the neckties of ·other licensees of respondent licensor similarly ad vertised, labeled, embossed and sold in commerce, as "commerce" is defined in the Federal Trade Commission Act, are composed of rayon with a woolen interlining, or of rayon and silk with a woolen interlining, and with the rayon predominating. PAR. 6. The word "silk" for many years last past has had and still has in the minds of the purchasing and consuming public generally a. definite and specific meaning, to wit: the product of the cocoon of the silkworm. Silk products for many years have held and still hold public esteem for their preeminent qualities and because of such reputation there is a substantial demand on the part of the purchasing public for such products. Rayon is the name of a chemically manufactured fiber or fabric which may be manufactured so as to l';imulate f'ilk and when so manufactured has the appearance and feel of silk and is practicaHy indistinguishable by the purchasing public from Rilk. By reason of these qualities rayon, wlwn manufactured to simulate silk, and not designated as rayon, is readily believed to be and is accepted by the purchasing public as being silk, the product of INGENUITIES CORPORATION OF AMERICA ET AL. 847 838 Order the cocoon of the silkworm. All of the rayon contained in the afore· said neckties labeled "Duo-Silk-Allo" is manufactured so as to simulate silk and has the appearance and feel of silk. In the sale an'd in the offering for sale of said neckties, the respondents have failed to disclose und have failed to cause to be disclosed by labels or in any other manner except as heretofore found the fact that said neckties were composed in whole or in part of rayon. PAn. 7. The use by the respondents of the aforesaid methods and representations and the failure to disclose and to cause to be dis.closed the rayon content of said neckties has had, and has, the tendency and capacity to mislead. purchasers and prospective purchas~rs of said neckties into the erroneous and mistaken belief that such representations are true and that the rayon fabric and fiber used in the makeup of said neckties is silk and to induce them to purchase substantial numbers of said neckties.

CONCLUSION The aforesaid acts and practices of the respondents as herein found are all to the prejudice of the public and constitute unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commissi()n and the answers of . the respondents, in which answers respondents admit all of the material allegations of fact set forth in said complaint, 'and state that they waive all interv('ning procedure, and further hearing as to said facts, and the Commission having made its findings as to the facts and conclusion that said respondents have violated the provisions of the Federal Trade Commission Act. It is m·dered, That the respondent Ingenuities Corporation of America, a corporation, its officers, representatives, agents and employees, directly or through any corporate or other device, in connection with the use of or the licensing of the use of the trade mark "Silkallo" or the use of any other word or words of similar import or meaning indicative of silk for use in designating neckties, fabrics or any other similar products offer('d for sale, sold or distribute>d in rommerce as "commerce" is defined in the Fed.eral Trade Commission Act, do forthwith cease and desist from:

1. Using or authorizing the use of th~ unqualified term "silk" or any other term or terms of similar import or meaning indicative of Order 34F.T.C.

silk to describe or designate any fabric or product which is not com-. posed wholly of silk, the product of the cocoon of the silkworm; pro;ided, however, that in the case of a fabric or product composed in part of silk and in part of materials other than silk such term or terms may be used as descriptive of the silk content if there are used in immediate connection or conjunction therewith in letters of at least equal size and conspicuousness words truthfully describing and designating each constituent fiber thereof. 2. Using or authorizing the use of the term "Duo-Silk-Allo" or any other term of similar import or meaning to describe, designate or refer to. any fabric or product. which is not composed wholly of silk, the product of the cocoon of the silkworm. It is further ordel•ed, That the respondents, Goldberg, Squire, Lesser & Cohen, Inc., a corporation, and T. P. McCutcheon & Drother, Inc., a corporation, their officers, representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of neckties and other similar merchandise in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Using the unqualified term "silk," or any other term or terms of similar import or meaning indicative of silk, to describe or designate any fabric or prqduct which is not composed wholly of silk, the product of the cocoon of the silkworm: Provided, however, That in the case of a fabric o~ product composed in part of silk and in part of materials other than silk, such term or similar terms may be used as descriptive of the silk content, if there are used in immediate connection and conjunction therewith in letters of at least equal size and conspicuousness words truthfully describing and designating each constituent fiber thereof.

2. Using the tei·m "Duo-Silk-Allo," or any other term of similar import or meaning, on labels or otherwise to describe, designate or refer to any fabric or product which is not composed wholly of silk, the product of the cocoon of the silkworm.

3. Advertising, offering for sale, or selling neckties or other products composed in whole or in part of rayon without clearly disclosing the fact that such fabrics or products are composed of rayon, and when such fabrics or products are composed in part of rayon and in part of other filers or materials, such fibers or materials, including rayon, shah be named in letters of equal size and conspicuousness by words truthfully describing and designating each constituent fiber and material thereof; and such disclosure of the fiber content of such INGENUITIES CORPORATION OF AMERICA ET AL. 849 838 Order fabrics or products shall be made by accurately designating and naming each constituent fiber thereof in the order of its predominance by weight, beginning with the largest single constituent. It is further ordered, That the respondents shall within 60 days after the service upon them of this order file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with this order .

• 466G06m--42--vol. 34----54 Syllabus 34F.T.O.