The Public Service Cup Company, incorporated in New York in 1910 (organized by Hermann Elasas with Henry Nias as president), maker of the “Lily” cup, was one of Dixie’s earliest competitors. The first legal dispute between them concerned a dispute over the development of a patent for a paraffine, pleated drinking cup. A patent filed by Lawrence Luellen, who was being represented by Clifford E. Dunn, was ruled not to interfere with a similar invention of Henry A. House, employed by the Public Service Cup Company, represented by Briesen & Schrenk. The decision was upheld in the Court of Appeals of the District of Columbia in 1918, and in the U.S. Supreme Court in 1919. The testimony of Hugh Moore, Lawrence Luellen, and Alvin Davison are a good source for information about the early history of the paper cup.
The Individual Drinking Cup Company considered a merger with this company around 1920, but instead licensed the Public Cup Service Cup Company in 1925 to make a pleated cup. In a related case, the Individual Drinking Cup Company filed suit against the Tulip Corporation under the Luellen pleated cup patent. The Public Service Cup Company had also filed suit against Tulip for infringement over a manufacturing process.
In the same decade, the Tulip Cup Corporation, makers of “Tulip” paper cups and “Nestrite” containers, paper cans, and other specialties was engaged in litigation with the Ideal Cup Company over alleged infringement of its Tulip Cup pleated cup patent rights. After appeals, the U.S. Supreme Court on a final appeal refused to hear the case and thus upheld a lower court’s decision in favor of the Tulip Corporation. The Public Service Cup Company, the principal stock holders and manufacturers of the “Lily Cup” and “Paktite” paper containers also owned the Ideal Cup Company. The dispute between Tulip and Ideal Cup Co. ended when, in an effort to claim damages, Tulip went after the Public Service Cup Company, which eventually resulted in their merger in 1929, to create the Lily-Tulip Cup Corporation. The former president of Tulip, Simon Bergman, was named chairman of the board, and Henry Nias of the Public Service Cup Corporation became president and general manager.
The issue for Dixie at this point was that it had a licensing agreement which had allowed the Public Service Cup Co. to make pleated cups since 1925, for which Dixie received royalties in the amount of $5,000 a year. At the same time Dixie was preparing a suit against the Tulip Cup Corporation for infringing on Dixie’s pleated cup patent rights with their waxed cups. The makers of the Lily cup would only have to continue paying royalties if Dixie’s rights were upheld. Moore was concerned that the combination of the licensed status of the Public Service Cup Co. with the pending infringement case might adversely affect his company’s rights against Tulip Cup. Moore’s legal team did not consider the new corporation, Lily-Tulip Corporation, a successor or assignee of the Public Service Cup Co. in the matter of the license arrangement between the Individual Drinking Cup Company and the Public Service Cup Company of January 29, 1925. Moore’s attorneys stated that they would hold the new corporation accountable for any infringements as far as the Tulip products were concerned.
After some discussion between all parties, in a letter dated November 17, 1930, Hugh Moore called off the suit against the old Tulip Company and accepted an offer by Nias that Lily-Tulip would make two payments of $12,500.00 on or before January 5, 1931 and July 15, 1931, and thus settle all claims against the Tulip Company and liquidate all further payments under the agreement with the old Public Service Cup Company which were to run until about 1936.
While the issue over the pleated cup agreement seemed settled, the Individual Drinking Cup Co. filed a complaint against the Lily-Tulip Corp. in District Court of the U.S. for the Eastern District of New York citing unfair competition and 26 claims of infringement of the Wessman and Stone machine patent No. 1,766,420 (issued June 24, 1930); the Johnson design patent No. 74,793,(Adam Design); Copyright No. 16,169; and registered trade-mark No. 301,390 for the Chily Bear Design. Lily-Tulip filed a counterclaim over infringement of the Reifsnyder patent. The District court ruled in Brooklyn in June 1937, that six claims were valid, including the infringement of the Wessman & Stone Patent. Lily-Tulip was exonerated of the charge by Dixie of similarity of packaging and dispensing devices, copyright and trade-mark violation, and unfair competition because of alleged similarity of the decorating design (Johnson patent). Lily-Tulip Corporation won an injunction and filed an appeal with the United States Circuit Court of Appeals for the Second Circuit. On appeal Judge Martin T. Manton found no infringement by the defendant (Lily-Tulip) of any claim of the Wessman-Stone patent on March 6, 1938, and upheld the decision of the lower court in holding all other claims invalid. See also the Manton case file in Series I.