not see that you should take it away from him now because he was less patriotic than someone else.

The CHAIRMAN. All right.

Mr. CARTER. Next is No. 5. Under this I would hold that where any use of the mark has been wholly within one State, such use should not now be extended interstate. In other words, it should be confined to the State in which there has been use.

Mr. JOHNSON. Right on that question, Mr. Carter is a trade-mark lawyer, and he does nothing else but trade-mark law and he has clients all around the world, and he is an expert on this question, and I want to ask you with reference to that suggestion, I thought that it was interstate.

You say where he has it in one State, what is the law with reference to that? There are some trade-marks that are taken out for one State and not for others?

Mr. CARTER. Yes; the trade-mark rights, as Mr. Holmes pointed out, I think, are acquired by a user under the common law of the States, and so far as the Federal Government is concerned, the only thing it can do is register the mark after it gets into interstate commerce. There may, I do not know if there are, but there may be firms today who are using the red cross legitimately, under the Red Cross Act, but who have never used it in interstate commerce. For instance, there might be someone in Forth Worth, Tex., perhaps a bakery, always has been known as the Red Cross baker, and never goes over the State line.

There is a valid use; he cannot register in the Patent Office because he has no interstate use, but still he is a valid user under the 1905 Act.

Now, I say we might say to that fellow, your use might continue, but you cannot now extend it into interstate commerce as you might have done prior to the passage of the act.

Mr. EATON. Would you discontinue the permission of interstate activities?

Mr. CARTER. I do not think that anyone would like to refer to it as a permission. We still refer to it as a right which has never been taken away. Certainly I would not take away from the interstate user any more than the intrastate user.

Mr. EATON. We have two laws here; one is Federal and one is State, and they use this symbol under a State law for interstate?

Mr. CARTER. No; I do not think that they use it under a State law; they just use it within the State. I assume that the Red Cross Act, without going too deeply into the constitutionality of it, I assume that it prohibits intrastate use, unless that use commenced prior to 1905.

Mr. EATON. Yes, sir.

Mr. CARTER. I do not think that anyone has ever questioned the right of the Congress to do that, not under the interstate commerce clause but under the treaty, and some other clause of the Constitution. Mr. EATON. So that you would continue the prohibition against enlargement of the use in interstate commerce.

Mr. CARTER. I would insert such a prohibition, if he has not gone into interstate commerce up to this time he should not do so.

Mr. JOHNSON. You would restrict his use to the State, and not go beyond the State line.

Mr. CARTER. That is right.

The CHAIRMAN. May I just ask a question? I am confused. When you say the users of any of the red cross prior to 1942, well, supposing that that party did not use that until we will say 1935, would you want to give him the right today notwithstanding the fact that the law says that he must have used it prior to that time?

Mr. CARTER. I am not bringing anyone in who is not already in. The CHAIRMAN. That is prior to 1905.

Mr. CARTER. There is no question about that.

The CHAIRMAN. I wanted to have that understood.

Mr. CARTER. No. 6, I would forbid all use in foreign trade. I think this is an empty clause, because so far as I know there is none. I think it might be in there for what it is worth. I mean as far as our people are concerned, to permit no import or export of red cross goods, I do not think that that would hurt anybody. I have not heard anyone say that they are doing any business outside of the United States. No. 7, I would require use of the word "trade-mark" and perhaps of the claimant's name, in conspicuous letters, in association with the mark. In that way the mark would be distinguished from the redcross emblem. Anybody who saw the mark would immediately know that it was a trade-mark, and not an indication of sponsorship by the Red Cross.

The CHAIRMAN. Nothing be placed on the red cross itself, on the insignia of the cross. I notice that one or more people put something on the red cross. I think that that is absolutely wrong.

Mr. CARTER. I have an opposite view on that. I think anyone who has used any such insignia should be required to continue to use it, as a further distinction from the Red Cross Society.

Mr. JOHNSON. To put the trade-mark on there.

Mr. CARTER. I think Mr. Holmes' client on his mattresses uses the red cross with the initials of the company in the middle of the cross. I think his client might properly be required to continue that as a further indication of trade-mark rather than official usage.

The CHAIRMAN. Not on the cross itself, because if you are going to use the cross, do you think a person should be permitted to use that on the red cross? I show you this advertisement here.

Mr. JOHNSON. He was talking about using the trade-mark on it. The CHAIRMAN. On the cross itself. Do you think it should be on there?

Mr. CARTER. I do not like to see "5 cents" on the red cross.

The CHAIRMAN. Neither do I.

Mr. CARTER. I doubt if he used "5 cents" on the red cross before 1905, and you could stop that under the present act.

The CHAIRMAN. All right.

Mr. CARTER. I would forbid assignment of a red cross claim except as an incident of a bona fide transfer of the whole business, including the entire goodwill thereof.

In other words, I do not think that we should permit any paper assignments, if a fellow comes along and buys up this right, and takes it into a big business, without really taking the little fellow's

goodwill and his entire business, without an actual bona fide sale of that business. It would be rather difficult to prohibit all kinds, because a little fellow might want to incorporate and that involves an assignment from him as an individual to the corporation and one corporation might want to reorganize under the laws of another State and that involves an assignment but I do think that you can restrict this to bona fide assignments that cover the whole business and goodwill.

The ninth point I make was along the lines we had just been discussing, that if any user has been accustomed to use any distinctive verbiage or design or color scheme, that he should be continued and restricted in his use to that particular verbiage, design, or color scheme. In other words, if a man always used a representation of the red cross, with some distinctive word trade-mark, I think that he should be required to always do that, and not eventually remove that trade-mark, or if he always used a trade-mark on a blue field, I think that he should be required to continue so to do, and not to get any nearer the official Red Cross than he is at the present time. No. 10. I would forbid use by anyone on vehicles, outdoor advertising, and buildings, that might give rise to complaint by other signatories.

That matter was pretty fully discussed yesterday and, without looking into the constitutionality of this, it seemed to be rather generally agreed that most users would be willing to abide by such a provision. The CHAIRMAN. You do not exclude newspapers?

Mr. CARTER. No; everything that artillery, bombers, or gunners could see, and I think commercial use might be restricted so that no foreign nation could come along and say, "Well, here, we saw that sign up there, and we did not bomb that building, and now it turns out that it was not a Red Cross post at all but was just a dynamite business, or something."

Mr. EBERHARTER. Could you incorporate in the language there something that would prevent, say, a big store from showing a red cross on one section of its building, where they sell other goods, aside from purely Red Cross legitimately used goods?

The CHAIRMAN. You mean interior?

Mr. EBERHARTER. Yes; a big department store might have a big corner with Red Cross, and have all different kinds of merchandise there.

Mr. CARTER. Isn't it probable, Congressman, that a vigorous prosecution of the present law would stop all of that sort of thing? In other words, there is not any store that ever did that thing before 1905, that is still doing it today and I think under the present act such a thing could be stopped.

Mr. EBERHARTER. You think it could?

Mr. CARTER. Yes, sir; I think so; apparently the act has never been enforced.

Mr. EBERHARTER. I see.

Mr. TINKHAM. About the advertising on billboards and buildings, has not that been eliminated in wartime?

Mr. CARTER. No; it could properly be.

Mr. SHANLEY. You say it has not been enforced; have you any reasons to believe that there is a real reason for not enforcing it? I

mean when a law is not enforced, there are either one or two general

reasons.

Mr. CARTER. No; I can only surmise that perhaps the Department of Justice felt that it would be difficult to obtain convictions under this act, but, personally, I know of no reason why it should be.

Another reason that occurs to me is that since Mr. Hughes indicates that he has sent a good many complaints to the Department of Justice, perhaps many of them have been adjusted without the necessity of prosecution, in other words.

Mr. EATON. Then the American Red Cross itself is averse to appearing in court to enforce this provision.

Mr. CARTER. Exactly.

Mr. EATON. They do not want to appear as a litigant.

Mr. CARTER. I think that that is probably true, too.

The CHAIRMAN. How about the Federal Trade Commission? Have you ever appeared before them?

Mr. CARTER. You anticipate me. That is the last point.

Mr. SHANLEY. May I ask one more question? I would hate to think that the Department of Justice was lax in enforcing a policy. I hope that we hear from them, because it has been an intimation. Mr. CARTER. My last point is, to authorize the Federal Trade Commission to enjoin unlawful use subject to the same procedure appeals and penalties as now provided in the case of deceptive acts or practices in commerce by 52 Statutes at Large 11; 15 United States Code 45.

In other words, instead of leaving the enforcing of this act to the Red Cross organization, which has to use the talents which it might devote to other efforts, more profitably, and which is in rather a bad position to enforce a thing of this kind, I would give it to the agency of the Government which is now entrusted with similar things.

Mr. JOHNSON. That would relieve the Red Cross of the responsibility of having to litigate and fix the particular Government departments whose duty it was to enforce it.

The CHAIRMAN. There is one question that I would like to ask you. You have not mentioned it at all, and it seems to me to be very important:

What would you say with reference to the use of the words "red cross" over the radio, for advertising purposes?

Mr. CARTER. I have not given that very much thought, Mr. Chairman. It is obvious that there could have been no such use prior to 1905, and possibly strict construction of the present statute would prohibit it. The trouble is that the present statute is a penal statute and it must be construed, I assume, in favor of the defendant rather than in favor of the Government, and that is not the trade-mark use itself, it is an advertisement of the legitimate trade-mark use.

The same question comes up with these matches, that I think have been displayed here, they merely advertise cough drops, and the use on cough drops is a legitimate use.

Now, to what extent you may curtail advertising of a legitimate use, I do not know. It is a pretty knotty problem.

Mr. VORYS. Mr. Carter, I know that you have had vast experience in this field, and I wondered if you could give us any examples of where a value has been placed on a trade-mark in court by an infringement

suit, or some sort of an action, or values that have been placed in tax matters, if you could give us any examples of where a monetary value has been placed, not just by the owner of a trade-mark but by a court or by an owner when he was acting against his own interests, such as in making a tax return, or something like that, that is where it was important for him to be accurate in placing the value on it?

Mr. CARTER. I do not have any exact citation at the moment, Congressman, but of course you appreciate that the trade-mark is indivisible from the goodwill of the business; it is merely an emblem that signifies that goodwill, that carries that goodwill, so that the value of the trade-mark is approximately the same as the value of the goodwill of the business.

In the case of the Red Cross shoes, the business has a tremendous goodwill. That goodwill is wrapped up in the trade-mark, Red Cross, because that enables the customer to identify the shoe which has been advertised, and which has had such good quality and so forth, and it is that identification.

Now, if you take that identification away from them, you substantially wipe out its goodwill. He has got to start out all over again and build up his goodwill under another name, so that the goodwill of these businesses, some of them, is carried at $1, and others are carried at millions of dollars. It has been frankly said that Kodak and Nabisco are worth a million dollars a letter. I do not think that you could buy Coca-Cola for a million dollars a letter.

Mr. VORYS. What I had in mind was that one thing that we must consider is the value of the Red Cross symbol, and those words, if we have to determine the relative interference of the use of the symbol for commercial purposes at a time like this.

Now, it has been discussed here, that you cannot deprive a person of property without due process of law. One thing that we ought to get light on is the value of that property and that would mean the value of similar properties where it has been assessed, not by the owner but by third parties. The fact that it is difficult makes it all the more important that we should attempt to see how it has been done when it had to be done.

For instance, this statement that the trade-mark is involved with goodwill is accurate, that the trade-mark carries the entire goodwill and that the goodwill, to stop the use of a trade-mark means that a business that is worth millions of dollars a year is worth zero; that is not quite accurate.

Mr. CARTER. Not zero; no.

Mr. VORYS. It is not helpful merely to see how difficult it is, and how much it is tied up together. What might be helpful would be if we could know of instances where a division had to be made, as to the value of the particular trade-mark.

Mr. CARTER. Well, there are court decisions, I think, that would be of assistance on that point.

Mr. VORYS. Do you remember any of them offhand?

Mr. CARTER. Not offhand; I do not. I would think that the value of any trade-mark has a fairly definite relation to the annual sales of the product. I do not know that that would be a final arbiter but I would think that that would be a fairly easy way to approximate value, because the sales are the fruition of the goodwill.