## Facts

- The Murphy Door Bed Company, Inc. (“Murphy”), a New York manufacturer of fold‑away wall beds, sued Interior Sleep Systems, Inc. (“ISS”), Frank Zarcone, and related entities in the Eastern District of New York under diversity jurisdiction.
- Murphy and ISS entered a written distribution agreement dated December 9, 1981, under which ISS distributed Murphy’s beds and used Murphy’s “Murphy bed” designation in that role.
- Murphy had attempted to obtain federal trademark registration for “Murphy bed,” but the Patent and Trademark Office and the Trademark Trial and Appeal Board concluded the term was generic for a type of wall bed; Murphy nevertheless claimed common‑law trademark rights.
- After the distribution relationship ended, defendants continued using “Murphy bed” and “Murphy” designations and marketed beds of their own manufacture using those terms; Murphy alleged this conduct misrepresented source and traded on Murphy’s name.
- Murphy also claimed defendants failed to pay for goods received; the district court found $6,330 plus interest due for unpaid product.
- The district court found trademark infringement and unfair competition, awarded $801,161 in compensatory damages and $25,000 in punitive damages, and entered a permanent injunction barring defendants from using the Murphy name.
- A stipulation constrained compensatory damages to defendants’ “profits gained from improper use of the Murphy name,” and the district court calculated that award using defendants’ gross profits.
- Defendants appealed the trademark and unfair‑competition rulings and the remedies; Murphy cross‑appealed seeking to extend monetary liability to additional related corporate defendants.

## Issues

1. Whether “Murphy bed” is generic and therefore not protectable as a common‑law trademark, making trademark infringement liability unavailable.
2. Whether defendants could still be liable for breach of the distribution agreement and for unfair competition based on passing off, even if “Murphy bed” is generic.
3. Whether the permanent injunction was supportable on contract and unfair‑competition grounds despite the absence of a valid trademark in “Murphy bed.”
4. Whether the compensatory award, limited by stipulation to defendants’ “profits,” had to be computed as net profits (deducting attributable costs) rather than gross profits, and whether trademark‑based damages could be awarded at all.

## Decision

- Held that “Murphy bed” is a generic term used by the public to name a type of bed, so it is not a protectable trademark.
- Reversed the district court’s trademark infringement determination because a generic term cannot support trademark infringement liability.
- Affirmed the district court’s finding that defendants breached their contractual obligation to refrain from using “Murphy bed” after termination of the distribution agreement, and affirmed the finding of nonpayment for goods received.
- Affirmed the unfair‑competition ruling to the extent it rested on passing off—marketing defendants’ beds as if they were Murphy’s beds.
- Affirmed the entry of permanent injunctive relief prohibiting defendants’ use of “Murphy bed,” grounding the injunction in contract and unfair competition rather than trademark rights.
- Vacated and remanded the compensatory damages award: damages for trademark infringement were not available, and the stipulated “profits” measure for unfair competition required calculation of net profits by deducting all costs attributable to the sales made in violation of Murphy’s rights.

## Legal Principles

- Generic terms—those whose primary meaning to consumers is the product class rather than a single source—are not protectable as trademarks and cannot be the basis for trademark infringement.
- Evidence of genericness may include widespread public usage, dictionary definitions, and prior PTO/TTAB determinations addressing whether the term names a category of goods.
- Even when a term is generic, liability may arise from passing off (palming off): misrepresenting one’s goods as those of another is actionable under unfair‑competition law.
- Contractual restrictions on post‑termination use of a designation may be enforceable as a matter of contract, even if the designation is not a valid trademark.
- When a compensatory award is tied to a defendant’s “profits” from wrongful sales, profits mean net profits: revenues minus costs attributable to the sales at issue, not gross receipts or gross profit.

## Conclusion

The Second Circuit concluded that “Murphy bed” is generic and therefore cannot support trademark infringement, but it upheld liability and injunctive relief based on defendants’ contract breach and passing off; it also required that any compensatory award measured by defendants’ “profits” be recalculated as net profits attributable to the wrongful sales, excluding trademark‑infringement damages.


Murphy Door Bed Co. v. Interior Sleep Sys., Inc., 874 F.2d 95 (2d Cir. 1989)