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STANDARD & POOR'S CORP. v. COMMODITY EXCH.

May 13, 1982;

STANDARD & POOR'S CORPORATION, Plaintiff,
v.
COMMODITY EXCHANGE, INC. Defendant



The opinion of the court was delivered by: POLLACK

DECISION

General Findings of Fact

The plaintiff seeks a preliminary injunction pursuant to Rule 65 Federal Rules of Civil Procedure against defendant's use (or misuse) of plaintiff's carefully calculated 500 equity stock index in respect of futures contracts based thereon and traded on defendant's commodity exchange and against defendant's misuse of plaintiff's trade name, trademarks and reputation.

 The jurisdiction of the Court over the subject matter is based on 15 USC Section 1051 et seq., 28 USC Sections 1331 and 1338. This district is the proper venue for this action, 28 USC Sections 1391 and 1,400, and the Court has personal jurisdiction over the defendant.

 The defendant ("Comex") had unsuccessfully over a long period of time commencing in 1979 sought to obtain a license from the plaintiff (S&P) to use the latter's S&P 500 Stock Index for futures contracts to be traded on defendant's commodity exchange. Its efforts having failed to yield it either an exclusive or non-exclusive license, Comex decided ultimately to attempt to market a "Comex 500 Stock Index" for futures contracts and to link it with plaintiff's name and with the S&P 500 Stock Index without S&P's permission or consent and over S&P's objection.

 On or about December 19, 1980, Comex applied to the Commodities Futures Trading Commission (CFTC) for a designation as a contract market for futures contracts based upon a so-called "Comex 500 Stock Index". In its application, Comex referred interchangeably to the S&P's 500 and the Comex 500 Stock Price Index. Comex further emphasized that the Comex Index would use the same 500 stocks and the same method of computation as the Standard & Poor's 500 Stock Index.

 On learning of this application, S&P promptly filed a lengthy opposition thereto with the CFTC objecting to all reference by Comex to S&P and to its calculated S&P 500 Stock Index. S&P told the Commission that its position was that:

 
"Comex is free to exercise its own initiative in the creation of an index without free-riding on S&P's research, efforts, expense, quality, integrity, name, reputation and trademarks." (Exhibit 35).

 During the pendency of the CFTC application Comex finding itself unable or unwilling to calculate a reliable and acceptable Stock Index, among other reasons, decided to abandon the creation and use of its own 500 stock index. Consequently, it filed an amendment to its application before the CFTC, and issued a brochure in equivocal language but nonetheless linking S&P with Comex stating confusingly that Comex futures contracts were to be quoted in terms of the Comex 500 Stock Index and a settlement thereof to be based upon the Comex 500 Stock Index "at a price equal to that day's closing quotation of the Standard & Poor's 500 Stock Price Index."

 Thereupon, S&P promptly instituted this suit to restrain Comex from trading a futures contract based on the use of S&P's name or the S&P 500 Stock Index. The complaint charged trade name and trademark infringement, likelihood of confusion, misappropriation of property rights, copyright and Lanham Act violations, and sought injunctive relief and damages.

 Knowing that it would be sued, Comex nonetheless on April 27, 1982 published and disseminated in advance of having been designated as a market to trade in futures on a stock index, a large quantity of brochures linking Comex futures contracts with an alleged Comex 500 Stock Index which was nonexistent and adding confusingly that settlement of such contracts was to be based on the S&P 500 Stock Index. The brochures featured S&P's name prominently and repetitively implying to the reasonable reader that there was some tie, some sort of affiliation between Comex and S&P in respect to the subject matter.

 On the following day, April 28, 1982, before any meeting by the CFTC to consider and pass on the Comex application for a designation as a market, the financial press carried full scale advertisements placed by Comex announcing the futures market for trading in the Comex 500 Stock Index. Sometime that morning, the CFTC did take up the Comex application on its calendar and did issue a designation to Comex as a futures market to trade contracts on a Comex 500 Stock Index; it did not authorize trading by Comex of a futures contract based on S&P's 500 Stock Index, the contract described in the Comex brochures and public relations materials.

 S&P applied to this Court for a Temporary Restraining Order against Comex pending a hearing of an application for a preliminary injunction. The TRO was granted and an early trial date was set. The Court found probability of irreparable damage to S&P and likelihood of success or at least substantial questions going to the merits with the balance of the equities favoring S&P. Comex attempted by immediate appeal to obtain an order from the Second Circuit setting aside the TRO; that was denied by the appellate court. The hearings on the preliminary injunction commenced within a week and good cause being shown, the TRO was extended for another ten-day period.

 On the basis of the evidence adduced, including the demeanor evidence and resolving the issues of credibility presented, the Court finds and decides that:

 Plaintiff has established by a preponderance of the evidence worthy of belief and the reasonable inferences therefrom that the defendant intended improperly (i) to link S&P with Comex as a commercial prop for futures contracts based on a 500 stock index; (ii) to misappropriate the property of the plaintiff and to trade directly on plaintiff's name and the S&P 500 Stock Index; that this was without authority from S&P and over its objection; that defendant's acts have caused and will, unless restrained, continue to cause irreparable injury to plaintiff in the sense that it may not be fully or fairly compensable in damages; that defendant's acts involve a high probability of confusion of what Comex is offering or has proposed to offer to the public and traders in futures as well as a high probability of confusion of the relationship (or lack of it) between the parties and of the source of the 500 stock index tied to the futures contract offered by Comex; and that defendant's acts will result in dilution of plaintiff's name and reputation and involve infringement on plaintiff's trade name and trademarks.

 The evidence establishes that defendant has used and intends to use the S&P 500 Stock Index and the S&P name and reputation in a manner to produce a high probability of confusion as to the source of the 500 stock index and S&P's affiliation therewith and with Comex among persons using ordinary care and prudence in entering into futures contracts based on a 500 stock index. Ordinary traders exercising ordinary care would be likely to enter into a Comex futures contract in the belief that it was linked with and backed by S&P and the highly probable consequences of the repetitive references to S&P in the selling materials issued by Comex and the use of S&P's 500 Stock Index and the S&P name, complained of, in all reasonable probability would be to confuse the public and traders as to the source, sponsorship, approval or affiliation of the S&P 500 Stock Index and S&P with Comex.

 It has been admitted by defendant's expert that there is no impediment or reason why Comex could not immediately trade in futures contracts based on a stock index without the use of the name of S&P or reference to S&P's 500 Stock Index. The fact that the index could be focused solely on the figure thereof appearing on the settlement date of the contract by careful or discriminating traders is not enough to lead the Court to conclude that there is no likelihood of confusion of linkage or affiliation.

 The Findings in More Detail

 Plaintiff, Standard & Poor's Corporation, Inc., ("S&P") is a corporation organized under the laws of the State of New York, and is a wholly owned subsidiary of McGraw Hill, Inc. (Herenstein TR. 88.)* S&P is engaged inter alia in the business of preparing, selling and providing information services to and for the financial community. (PX 5-16).**

 S&P and its predecessor companies have been engaged in this business since 1860 (PX 1-3). During the period from 1860 to present, S&P has developed a reputation in the financial community for reliability and veracity (PX 1-4).

 Defendant Commodity Exchange, Inc. ("Comex") is a not-for-profit membership corporation organized under the laws of the State of New York. Comex was organized under the laws of the State of New York. Comex was organized in 1933 to provide, and does now provide a centralized marketplace for the trading of various Commodity Futures Trading Commission ("CFTC") granted Comex's application for designation as a contract market for the Comex 500 Stock Index future contract ("Comex 500") (PX 32)."

 The CFTC stated that the grant "should not be viewed as a legal determination by the Commission with respect to the validity of any copyrighted or related claims."

 Plaintiff has registered "The Standard '500'," "Standard & Poor's Dairy Stock Prices Indexes," and "Standard & Poor's Hourly Stock Price Indexes" in the United States Patent and Trademark Office as trademarks. (Herenstein Tr. 144, PX 43, 44, 45). S&P was not required to disclaim "500" in its registration number 756,133 of THE STANDARD "500". Although plaintiff has not registered the terms "500 "and "500 Index" by themselves, these terms as used herein by S&P and Comex have acquired trademark significance indicative of S&P in the market-place and among the investing public (i.e., secondary meaning). (Herenstein, Tr. 97-98, 178; PX 18). Comex's own brochure (PX 42) notes that "The Standard & Poor's 500" is an S&P trademark. Likewise, Comex internal correspondence uses "S&P 500" (PX 60. p. 5 et seq.) and "500 Stock Index" (PX 51, p. 2) to refer to the S&P 500 Stock Index. The S&P 500 is the only stock index which uses 500 stocks and which includes the numeral "500" in its name. People familiar with stock indexes would know that "the 500" refers to the S&P 500. (Margolis Tr. 639).

 Plaintiff has protected its publications which disseminate the S&P 500 Index data (PX 6-15) by applying copyright notices thereto, and by registering such publications with the United States Copyright Office (Herenstein Tr. 144, PX 46-50).

 In 1923, S&P pioneered the issuance of a scientifically constructed stock price index. In 1957 the index was revised to be based on the prices of 500 common stocks and a base period of 1941-43 was adopted. (PX 6 pg. 3) Since that time the index has been known to the industry as the 500 index (Herenstein, Tr. 97-98; PX 18). The S&P 500 Stock Price index is a broad-based, weighted, composite index based on the prices of 500 selected stocks (PX 28). The index is designed to accurately portray a pattern of common stock price movement (PX 6, p. 3). Due to its broad base, the 500 Index is less susceptible to manipulation than an index based on a small number of stocks, and it also provides a more accurate barometer of market performance. Of the broad-based stock indexes, the S&P 500 is the best known, the ...


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