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Larson Co. v. Wrigley Co.

U.S.
May 14, 1928
277 U.S. 97 (1928)

Summary

holding that there are some cases which deducting federal income taxes from profits would be proper but given the defendants "conscious and deliberate wrongdoing" that particular deduction was not allowed

Summary of this case from Adidas Am., Inc. v. Skechers USA, Inc.

Opinion

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT.

No. 603.

Argued April 26, 1928. Decided May 14, 1928.

Upon an accounting of net profits derived from sales of goods in packages simulating those of a competitor, the defendant, if the infringement was conscious and deliberate, is not entitled to deduct the federal income and excess profits taxes. P. 99. 20 F.2d 830, reversed.

CERTIORARI, 275 U.S. 521, to a decree of the Circuit Court of Appeals, approving in the main, but remanding for the making of certain deductions, a decree of the District Court for net profits on an accounting in a suit for unfair competition. The only question upon which certiorari was allowed, was whether federal income and excess profits taxes should be deducted. See also 253 F. 914; 275 Id. 535; 5 F.2d 731, 739; 248 U.S. 580.

Messrs. Charles A. Aldrich and George I. Haight, with whom Messrs. Chester D. Kern, Ralph L. Peck, and Charles R. Aldrich were on the brief, for petitioner.

The remedy of the Wrigley Company for the recovery of taxes paid by it is provided by statute and this remedy is exclusive.

The action of the Court of Appeals deprives petitioner of its opportunity to use the special remedies provided by Congress in its system of corrective justice. It is opposed to the statute, the rules and regulations thereunder, and to the holdings of this court.

Income and excess profits taxes are an excise tax upon respondent's doing of corporate business and are not deductible under principles of equitable accounting in determining the profits awarded petitioner.

The action of the Circuit Court of Appeals in deducting the excess profits and income taxes paid by respondent on account of the infringing business, will result in a wrongful double taxation of petitioner, and is otherwise unconscionable and contrary to well-established legal principles.

Mr. Isaac H. Mayer, with whom Mr. Wallace R. Lane was on the brief, for respondent.

In ascertaining the net profits of an infringer, the federal income and excess profits taxes paid by him are deductible like any other expense necessarily incurred in the conduct of the infringing business. Galveston Electric Co. v. Galveston, 258 U.S. 388; Sly Mfg. Co. v. Pangborn Corp'n, 276 F. 971, affirmed, 284 F. 217; MacBeth-Evans Glass Co. v. Smith Glass Co., 23 F.2d 459; Ransome Machinery Co. v. Moody, 282 F. 29; Neeson v. Sangamon County Mining Co., 316 Ill. 397; Kaufman v. Bowers, 11 F.2d 662; Malleable Iron Range Co. v. United States, 62 Ct. Cls. 425, certiorari granted, 273 U.S. 688.

Respondent should be allowed to deduct the amount of federal taxes which it actually paid on the infringing profits.


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 F. 914, 916. 275 F. 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.


Summaries of

Larson Co. v. Wrigley Co.

U.S.
May 14, 1928
277 U.S. 97 (1928)

holding that there are some cases which deducting federal income taxes from profits would be proper but given the defendants "conscious and deliberate wrongdoing" that particular deduction was not allowed

Summary of this case from Adidas Am., Inc. v. Skechers USA, Inc.

holding income tax paid on profits is not deductible where infringement was conscious and deliberate

Summary of this case from Variety Stores, Inc. v. Wal-Mart Stores, Inc.

rejecting deduction of taxes for a willful infringer but holding that deductibility depends on the circumstances

Summary of this case from Malletier v. Dooney Bourke, Inc.

rejecting deduction of taxes for a willful infringer but holding that deductibility depends on circumstances

Summary of this case from New Line Cinema Corporation v. Russ Berrie Co.

In Larson Co. v. Wrigley Co., 277 U.S. 97, 48 S.Ct. 449, 72 L.Ed. 800 (1928), the Supreme Court considered this tax effect in determining the amount which could be recovered as profits in a trademark infringement case.

Summary of this case from Schnadig Corp. v. Gaines Mfg. Co., Inc.

In L.P. Larson Jr. Co. v. Wm. Wrigley Jr. Co., 253 F. 914, this court construed the effect of admissions deliberately made by parties in their pleadings. If the introduction of any novel element into a combination spells invention, which is in substance the position which counsel for appellant Bucyrus-Erie Company takes, then it is not quite clear how validity of either the Downie or the Wagner patents may be denied.

Summary of this case from Northwest Engineering Corp. v. Keystone Driller Co.

In Larson Co. v. Wrigley Co., 277 U.S. 97, 48 S.Ct. 449, 72 L.Ed. 800, such a deduction was denied where a conscious and deliberate wrongdoing was found, and in view of the fact that the injured party would have to pay a tax on the profits of the infringer when it receives them.

Summary of this case from John B. Stetson Co. v. Stephen L. Stetson Co.
Case details for

Larson Co. v. Wrigley Co.

Case Details

Full title:L.P. LARSON, JR., COMPANY v . WM. WRIGLEY, JR., COMPANY

Court:U.S.

Date published: May 14, 1928

Citations

277 U.S. 97 (1928)
48 S. Ct. 449

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