1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-20-1999

Securacomm v. Securacom Inc

Precedential or Non-Precedential:

Docket 97-5794

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Recommended Citation

"Securacomm v. Securacom Inc" (1999). 1999 Decisions. Paper 13.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/13
Filed January 20, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 97-5794 

SECURACOMM CONSULTING INC. 

v. 

SECURACOM INCORPORATED; KUWAM CORPORATION; 

WIRT D. WALKER, III, 

v. 

RONALD S. LIBENGOOD 

SECURACOM INCORPORATED 

v. 

RONALD S. LIBENGOOD; CLIFFORD J. INGBER 

SECURACOM INCORPORATED; KUWAM CORPORATION; 

WIRT D. WALKER, III, 

 Appellants 

ON APPEAL FROM THE UNITED STATES 

DISTRICT COURT 

FOR THE DISTRICT OF NEW JERSEY 

(D.C. Civil No. 95-cv-05393) 

(Senior District Judge: Honorable Dickinson R. Debevoise) 

Argued on June 26, 1998 

Before: GREENBERG, ALITO, and MCKEE, Circuit Judges, 

(Opinion Filed: January 20, 1999) 
 Arthur E. Newbold (ARGUED) 

 Michael Doluisio 

 Dechert, Price & Rhoads 

 4000 Bell Atlantic Tower 

 1717 Arch Street 

 Philadelphia, PA 19103 

 Attorney for Appellants 

 Howard N. Aronson (ARGUED) 

 Robert B. Golden 

 Lackenbach, Siegel, Marzullo, 

 Aronson & Greenspan, P.C. 

 One Chase Road 

 Scarsdale, New York 10583 

 Attorneys for Appellees 

OPINION OF THE COURT 

ALITO, Circuit Judge: 

In this trademark infringement case, we are required to 

consider whether the District Court erred when it awarded 

the plaintiffs a percentage of the profits of the defendant 

corporation and then trebled that award and also assessed 

attorneys' fees. Central to these awards was the District 

Court's finding that the defendant corporation had willfully 

infringed the plaintiff's trademark. Because we conclude 

that the evidence does not support a finding of willful 

infringement, we reverse and remand for further 

proceedings. 

I. 

In 1980, Ronald Libengood lost his job in the 

Westinghouse corporate security department, and he then 

began a small company that he called SecuraComm 

Associates. SecuraComm Associates was a security systems 

consulting firm that consulted with clients, surveyed 

facilities, designed security systems, managed projects, 

reviewed bids and evaluations, developed training 

 2 
programs, and presented security-related workshops. The 

firm deliberately refrained from arranging for the purchase 

and installation of equipment and from providing 

maintenance and technical support. The firm took this 

approach because many clients insisted on the separation 

of consulting from installation and support services so that 

the advice given would not be affected by conflicts of 

interest. Initially, most of SecuraComm Pennsylvania's 

business consisted of work for Westinghouse in Western 

Pennsylvania, but Libengood subsequently developed other 

clients in other areas. 

Libengood formed the SecuraComm name from the terms

"security" and "communications." When he coined this 

name, he was unaware of any other use of the word. All 

brochures, letters, and correspondence of his company bore 

the name SecuraComm Associates. 

After losing Westinghouse as a client in 1992, Libengood 

incorporated his firm as SecuraComm Consulting, Inc. 

hereinafter ("SecuraComm Pennsylvania") and continued to 

do business through the corporation. Libengood was and is 

the president and major shareholder of SecuraComm 

Pennsylvania. After incorporation, the business expanded, 

but SecuraComm Pennsylvania remained a small company, 

with average annual revenues between 1992 and 1996 of 

slightly more than $250,000 per year. Since its inception, 

SecuraComm Pennsylvania has used the SecuraComm 

mark with Libengood's permission, and on January 1,

1995, Libengood and SecuraComm Pennsylvania entered

into a formal licensing agreement. 

In May 1993, Libengood applied for registration of the 

word "Securacomm" without reference to capitalization or 

stylization. Although the application was abandoned for a 

time, Libengood reinstated the application and received a 

registration on May 20, 1997. The registration application 

indicated a first use on January 1, 1980, and afirst use in 

interstate commerce on September 3, 1981. 

The predecessor of the defendant corporation, now called 

Securacom Incorporated, was formed by Sebastian 

Cassetta, and in 1987 this company became affiliated with 

the large engineering firm of Burns & Roe. The company's 

 3 
name was then changed to "Burns & Roe Securacom." In 

that same year, Libengood became aware of Burns & Roe 

Securacom as the result of a chance event at a conference 

in Washington, D.C., Libengood saw Cassetta throw into a 

fish bowl a business card bearing the name "Burns & Roe 

Securacom." Libengood then spoke with Cassetta during 

lunch, and Cassetta told him that he knew about 

Libengood's firm but that his attorneys had informed him 

that the similarity in the companies' names would not 

cause problems. Cassetta said that the use of "Securacom" 

preceded by the well known name "Burns & Roe" was not 

likely to cause confusion. He also noted that the two 

companies served different clienteles, since Burns & Roe 

Securacom engaged in upgrading security at overseas

embassies and performed work in the nuclear field. 

Libengood took no action in response to this encounter. 

In 1992, Burns & Roe Securacom hired Ronald Thomas 

as its chief executive officer, and within two days of 

Thomas's employment, Cassetta was fired. After Cassetta 

left, the company he had founded became independent of 

Burns & Roe when it received a substantial investment 

from entities including KuwAm Corporation, a venture 

capital firm of which defendant Wirt D. Walker, III, is a 

shareholder and officer. The new, independent company 

expanded its activities into the full range of security 

services. 

In October 1992, a certificate of amendment wasfiled in 

the Delaware Secretary of State's Office, indicating that 

Burns & Roe Securacom had changed its name to 

Securacom Incorporated (hereinafter "Securacom New 

Jersey"). In November 1992, Securacom New Jerseyfiled a 

trademark application with the Patent and Trademark

Office for the term "Securacom, Incorporated" for goods 

and/or services consisting of "large-scale security and 

facility management for businesses and government." This 

application alleged that the first use was in November 

1992. Securacom New Jersey was denied federal 

registration because two other companies -- neither of 

which was SecuraComm Pennsylvania -- had filed 

applications to register names similar to "Securacom." 

 4 
In January 1993, Libengood learned about Securacom 

New Jersey's name change, as well as its expanded 

business base. After consulting with an attorney, Libengood 

mailed Securacom New Jersey a cease and desist letter. 

Libengood and Thomas attempted to settle the controversy. 

Libengood proposed that Securacom New Jersey either (1) 

change its name and compensate SecuraComm 

Pennsylvania for the use of its mark, (2) purchase the 

Securacom mark from SecuraComm Pennsylvania, or (3)

license the name from SecuraComm Pennsylvania. These 

negotiations continued for approximately one and one-half 

years until Libengood set a deadline of the end of 1994. 

In November 1994, Libengood asked Thomas to share in 

the cost for appraising the Securacom mark. Thomas did 

not respond, and Libengood then went forward on his own. 

The appraiser estimated that the value of SecuraComm 

Pennsylvania's mark, together with the cost of changing its 

name, was $275,000. Libengood provided this appraisal to 

Thomas in May 1995. 

In June 1995, Libengood informed Thomas that, since he 

had received no response from Securacom New Jersey, he 

would institute legal proceedings after 30 days. After some 

time, Thomas informed Libengood that he would have to 

deal with Walker, then the chairman of the board of

Securacom New Jersey. When Libengood spoke with 

Walker, Walker became abusive and told Libengood that if 

he filed suit Walker would bury him financially and take 

everything he had. 

Libengood filed suit against Securacom New Jersey in 

October 1995, alleging (1) service mark infringement, in 

violation of the Lanham Act, 15 U.S.C. S 1125; (2) false 

designation of origin, false description, and unfair 

competition, in violation of the Lanham Act, 15 U.S.C. 

S 1125; (3) common law infringement and unfair 

competition; and (4) appropriation of name, good will, and 

reputation, in violation of N.J.S.A. S 56:4-1, 2. In November 

1995, Securacom New Jersey filed an answer and a thirdparty complaint against Libengood, and in December 1995, 

Libengood filed a third-party answer, defenses, and thirdparty counterclaims. These counterclaims included the 

 5 
same four causes of action that SecuraComm Pennsylvania 

had asserted, plus a fifth count for libel. 

At the same time, Securacom New Jersey's directors 

signed a document stating that Libengood's suit was

meritless. The document specifically stated that Libengood 

was attempting to extort a payment of $275,000 from

Securacom New Jersey. In November 1995, Walker signed 

a letter directing Securacom New Jersey's attorneys (1) to 

seek summary judgment and Rule 11 sanctions against

Libengood and his attorneys; (2) to file suit against 

Libengood and his attorneys for extortion and RICO 

violations; and (3) to file complaints with various bar 

associations against Libengood's attorneys for unethical 

behavior in filing suit against Securacom New Jersey. 

Walker sent a copy of this letter to Libengood and his 

attorneys. 

Securacom New Jersey's attorneys filed suit against

Libengood and his attorney in New Jersey Superior Court in 

April 1996. This suit was removed to federal court and 

consolidated with Libengood's trademark infringement case, 

and the District Court dismissed the suit as frivolous. 

Securacom New Jersey also filed a service mark 

infringement suit against SecuraComm Pennsylvania in the 

District of Columbia Superior Court, but the District Court 

in New Jersey enjoined that action. Finally, the District 

Court stayed Securacom New Jersey's petition to cancel 

Libengood's trademark. 

In May 1996, SecuraComm Pennsylvania and Libengood 

amended their complaints to add KuwAm Corporation and 

Walker as defendants. In July 1996, SecuraComm 

Pennsylvania added a libel count to its complaint. In 

August 1996, the new defendants filed an amended answer, 

counterclaims, and a third-party complaint. In addition to 

alleging various Lanham Act violations against 

SecuraComm Pennsylvania, the third-party complaint 

requested cancellation of Libengood's trademark 

registration if such registration occurred. 

In October 1997, this case was tried before the District 

Court. At the close of trial, the Court enjoined Securacom 

New Jersey's use of the word "Securacom." The Court found 

 6 
that confusion was likely because of the slight difference 

between the companies' businesses, 984 F. Supp. at 298- 

301, and the Court noted that this confusion was 

particularly problematic because it was crucial to 

SecuraComm Pennsylvania's business that it refrain from 

providing the integrated services that Securacom New 

Jersey furnished to its clients. Id. at 295-96. The Court also 

found that actual confusion had occurred on occasion and 

that the confusion had prejudiced SecuraComm 

Pennsylvania. Id. at 296. In addition, the Court extensively 

quoted Walker's unfavorable opinions about the civil justice 

system. Id. at 291, 293, 293-94, 295. 

The District Court declined to enter an amount of 

compensatory damages because, while it was likely, 

according to the District Court, that SecuraComm 

Pennsylvania had suffered damages, the damages "[could] 

[ ]not be measured with reasonable precision." Id. at 303. 

Then, after finding that an award of Securacom New 

Jersey's profits was necessary to "deter[ ] . . . the kind of 

conduct in which all three defendants . . . engaged," the 

District Court awarded the plaintiffs 10% of Securacom 

New Jersey's gross profits. 984 F. Supp. at 303. The Court 

trebled this amount based on the "egregious 

circumstances" of the case. Id. Finally, the Court awarded 

attorneys' fees on the ground that Securacom New Jersey's 

conduct showed bad faith, fraud, malice, and knowing 

infringement. Id. The defendants appealed. 

II. 

In this appeal, Securacom New Jersey does not either 

challenge the District Court's finding of infringement or the 

order of injunctive relief. However, Securacom New Jersey 

strongly contests the District Court's finding that the 

infringement was willful. In addition, Securacom New 

Jersey challenges (a) the District Court's award of profits, 

which was based in large part on the finding of willful 

infringement, (b) the trebling of the award of profits, and (c) 

the award of attorney's fees. Securacom New Jersey also 

argues that Libengood did not have national trademark 

rights and that, therefore, the figures the District Court 

used to calculate profits were too large. We agree with 

 7 
Securacom New Jersey that the record does not support a 

finding of willful infringement, and we therefore reverse the 

award of profits, the trebling of the award of profits, and 

the order awarding attorneys' fees. We remand the issue of 

the attorneys' fees to the District Court for further 

consideration. 

Section 35 of the Lanham Act, 15 U.S.C. S 1117 provides: 

 When a violation of any right of the registrant of a 

 mark registered in the Patent and Trademark Office, or 

 a violation under section 43(a), shall have been 

 established in any civil action arising under this Act, 

 the plaintiff shall be entitled, subject to the provisions 

 of sections 29 and 32 and subject to the principles of 

 equity, to recover (1) defendant's profits, (2) any 

 damages sustained by the plaintiff, and (3) the costs of 

 the action. The court shall assess such profits or cause 

 the same to be assessed under its direction. In 

 assessing profits the plaintiff shall be required to prove 

 defendant's sales only; defendant must prove all 

 elements of cost of reduction claimed. In assessing 

 damages the court may enter judgment, according to 

 the circumstances of the case, for any sum above the 

 amount found as actual damages, not exceeding three 

 times such amount. If the court shall find that the 

 amount of recovery based on profits is either 

 inadequate or excessive the court may in its discretion 

 enter judgment for such sum as the court shall find to 

 be just, according to the circumstances of the case. 

 Such sum in either of the above circumstances shall 

 constitute compensation and not a penalty. The court 

 in exceptional cases may award reasonable attorney 

 fees to the prevailing party. 

Though the standards for (1) awarding profits; (2) 

determining whether such an award should be enhanced; 

and (3) awarding attorneys' fees under the Lanham Act 

differ somewhat, the issue of willful infringement is central 

to each. See ALPO Petfoods, Inc. v. Ralston Purina Co., 913 

F.2d 958, 968 (D.C. Cir. 1990) ("an award based on 

defendant's profits requires proof that the defendant acted 

willfully or in bad faith"); 5 J. Thomas McCarthy, McCarthy 

on Trademarks and Unfair Competition S 30.91 at 30-148 

 8 
n.6 (4th Ed. 1996) (willful infringement provides usual 

basis for enhancing profits award) (collecting cases); Ferrero 

U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 47 (3d Cir. 

1991) (showing of bad faith, fraud, malice or willfulness 

necessary for award of attorneys' fees).1 Therefore, we will 

first address the District Court's finding that Securacom 

New Jersey willfully infringed SecuraComm Pennsylvania's 

mark. 

A. Willful Infringement 

Knowing or willful infringement consists of more than the 

accidental encroachment of another's rights. It involves an 

intent to infringe or a deliberate disregard of a mark 

holder's rights. The Second Circuit has aptly described 

willful infringement as involving "an aura of indifference to 

plaintiff's rights" or a "deliberate[ ] and unnecessar[y] 

duplicating [of a] plaintiff's mark . . . in a way that was 

calculated to appropriate or otherwise benefit from the good 

will the plaintiff had nurtured." W.E. Bassett Co. v. Revlon, 

Inc., 435 F.2d 656, 662 (2d Cir. 1970) (citation omitted); see 

also Rolex Watch USA, Inc. v. Meece, 158 F.3d 816, 823 

(5th Cir. 1998) ("willful infringement carries a connotation 

of deliberate intent to deceive.") (quoting Lindy Pen Co. v. 

Bic Pen Corp., 982 F.2d 1400, 1405 (9th Cir.), cert. denied, 

510 U.S. 815 (1993)). We agree with Securacom New Jersey 

_________________________________________________________________ 

1. Willful infringement has a central role in the availability of each of 

these kinds of relief because of the relevance of equitable factors in 

determining their appropriateness on a given set of facts. See 15 U.S.C. 

S 1117 (1994) (collection of defendant's profits and award of enhanced 

damages "subject to principles of equity"); Champion Spark Plug Co. v. 

Sanders, 331 U.S. 125, 131 (1947) (denying accounting of defendant's 

profits based on "equities of the case"); BASF Corp. v. Old World Trading 

Co., Inc., 41 F.3d 1081, 1096 (7th Cir. 1993) (discussing availability of 

enhanced damages under heading "equitable remedies"); Rolex Watch 

USA, Inc. v. Meece, 158 F.3d 818, 826 (5th Cir. 1998) (award of 

enhanced damages limited by "equitable considerations"); Levi Strauss & 

Co. v. Shilon, 121 F.3d 1309, 1314 (9th Cir. 1997) (citing to 15 U.S.C. 

S 1117(b) (court may award attorney fees in"exceptional cases") and 

noting that "equitable considerations" limit award of attorney fees). 

 9 
that the record in this case cannot support a finding of 

willful infringement.2 

First, we are constrained to conclude that the District 

Court committed clear error when it found that "Walker 

and the company he dominated . . . knowingly infringed 

[SecuraComm Pennsylvania's] mark . . .[f]or years before 

this action was commenced." 984 F. Supp. at 303-04.

There is no direct evidence in the record that Securacom 

New Jersey knew about Libengood and his small firm 

before Libengood's cease and desist letter was sent in 1993. 

Thomas testified that he first learned about Libengood and 

his company at that time, and no direct evidence to the 

contrary has been called to our attention. Moreover, there 

is no circumstantial evidence from which it may reasonably 

be inferred that Securacom New Jersey learned about

SecuraComm Pennsylvania prior to the cease and desist 

letter. It is true that Cassetta knew about Libengood and 

his company in 1987, but it is unreasonable under the 

circumstances to infer that Cassetta passed on this

information to Securacom New Jersey's new management 

either directly or indirectly. 

It is apparent that in 1987 neither Cassetta nor 

Libengood attached much significance to the similarities in 

the companies' names. Cassetta expressed the opinion that 

this similarity would not cause problems because his 

company's name included the name of the large firm 

"Burns & Roe" and because the companies worked in 

unrelated areas. It is telling that Libengood made no 

complaint about Cassetta's company for the next six years. 

Cassetta's attitude and Libengood's inaction strongly 

suggest that neither man thought that the matter was 

important. Thus, until at least 1992, Securacom New

_________________________________________________________________ 

2. We review the District Court's finding of willful infringement for 

clear 

error. See ISCYRA v. Tommy Hilfiger, U.S.A., Inc., 80 F.3d 749, 752 (2d 

Cir. 1996); Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 48 

(3d 

Cir. 1991). Under this standard, a finding is"clearly erroneous when the 

reviewing court on the entire evidence is left with the definite and firm 

conviction that a mistake has been committed." Newark Branch, NAACP 

v. City of Bayonne, 134 F.3d 113, 120 (3d Cir. 1997). We do not review 

the evidence de novo, but we do consider whether there is enough 

evidence in the record to support the District Court's factual findings. 

Id. 

 10 
Jersey reasonably believed the use of the Securacom mark 

did not infringe, and "[i]nfringement is not willful if the 

defendant might have reasonably thought that its proposed 

usage was not barred by the statute." Blockbuster Videos, 

Inc. v. City of Tempe, 141 F.3d 1295, 1300 (9th Cir. 1998) 

(internal quotation omitted). 

The similarity in the companies' names became 

potentially more significant in 1992. At that time,

Libengood changed the name of his company from 

"SecuraComm Associates" to "SecuraComm Consulting 

Inc." and expanded its client base. There is no evidence, 

however, that Cassetta or anyone else at Securacom New 

Jersey took notice of these changes. Also in 1992,"Burns 

& Roe Securacomm" changed its name to "Securacom Inc.," 

and the company expanded its business into new fields, 

but these events occurred after Cassetta left. Cassetta was 

fired two days after Thomas took over, and there is nothing 

to suggest that during these final two days Cassetta told 

Thomas or anyone else who remained with the firm about 

Libengood and his company -- a matter that, as noted, had 

not previously been regarded as troublesome. Under these 

circumstances, we see no reasonable basis for inferring that 

Cassetta directly or indirectly informed Securacom New 

Jersey's management about Libengood and his company. 

Relying upon the general principle that the knowledge of 

a corporate officer is imputed to the corporation, the 

plaintiffs argue that Cassetta's knowledge of the existence 

of SecuraComm Pennsylvania should be imputed to 

Securacom New Jersey and that therefore Securacom New 

Jersey's use of its mark after the critical events of 1992 

cannot be regarded as having been done in good faith. We 

reject this argument because we find it inconsistent with 

the equitable principles that make the question of 

willfulness important. Whether Securacom New Jersey

engaged in willful infringement is significant because 

courts, looking to "the principles of equity," 15 U.S.C. 

S 1117, have held that a finding of willfulness or bad faith 

is important in determining whether to award profits, 

enhance damages, and award attorney fees. See page 7, 

supra. Under the circumstances here, plaintiffs' argument 

regarding imputed knowledge is inconsistent with the 

 11 
equitable basis of these doctrines. As we have noted, 

neither Cassetta nor Libengood seemed concerned about 

the similarity between the names of their two companies 

when Cassetta's company was called "Burns & Roe 

Securacom" and the companies served different clienteles. 

As of the date of Cassetta's termination, neither of these 

factors had changed. The plaintiffs would have us combine 

what Cassetta knew (but, as far as the record shows, never 

passed on to the new management that fired him) with 

what new management subsequently knew regarding the

company's change in name and range of services. The

plaintiffs cite no direct supporting authority for this 

argument, and we find it inequitable under the 

circumstances present here. 

Second, we conclude that Securacom New Jersey's failure 

to conduct a trademark search is not sufficient to support 

the finding of willful infringement. In Tommy Hilfiger, 

U.S.A., Inc., 80 F.3d 749 (2d Cir. 1996), the Second Circuit 

stated that an alleged infringer's failure to conduct a full 

trademark search after its attorneys advise that such a 

search is warranted may evidence willful ignorance akin to 

willful infringement. But the Second Circuit emphasized in 

that case that the infringer's attorneys had specifically 

advised it to conduct a full search and that the infringer 

was aware when it adopted the mark that it was copying 

"authentic details" from the plaintiff's design. Id. at 753. In 

the present case, by contrast, SecuraComm Pennsylvania 

did not establish that Securacom New Jersey knew that it 

was copying SecuraComm's name. Similarly, there was no 

evidence that Securacom New Jersey's attorneys had 

advised Securacom to conduct a full trademark search. In 

the absence of these key details, it is unreasonable to 

conclude that Securacom New Jersey's failure to conduct a 

trademark search established willful ignorance akin to 

willful infringement. Rather, as far as the record reflects, 

Securacom New Jersey's failure to conduct a search was at 

most careless. See Fisons Horticulture, Inc. v. Vigoro Indus., 

Inc., 30 F.3d 466, 480 (3d Cir. 1994); Interpace Corp. v. 

Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1993). And 

carelessness is not the same as deliberate indifference with 

respect to another's rights in a mark or a calculated 

attempt to benefit from another's goodwill. See W.E. 

 12 
Bassett, 435 F.2d at 662. Therefore, Securacom New 

Jersey's failure to conduct a trademark search is sufficient 

to establish that its infringement was willful or intentional. 

Third, Securacom New Jersey's failure to stop its use of 

the Securacomm mark after receiving Libengood's cease 

and desist letter does not demonstrate willful infringement. 

A defendant's refusal to cease using a mark upon demand 

is not necessarily indicative of bad faith. Sands, Taylor & 

Wood Co. v. Quaker Oats Co., 978 F.2d 947, 962 (7th Cir. 

1992), cert. denied, 507 U.S. 1042 (1993). This is 

particularly true when the trademark at issue is not 

registered. Charles Jacquin Et Cie, Inc. v. Destileria 

Serralles, Inc., 921 F.2d 467, 472 (3d Cir. 1990). When 

Libengood sent the cease and desist letter, he did not have 

a federally registered mark. Libengood instructed 

Securacom New Jersey to cease using the Securacomm 

mark in early 1993, only ten days after he firstfiled to 

register his mark. The registration was not complete until 

May 20, 1997. In addition, since Securacom New Jersey 

had already been denied a trademark registration for the 

word "Securacom" because two other companies had 

attempted to register similar words, Securacom New Jersey 

had a reasonable ground for believing that SecuraComm 

Pennsylvania would also be unable to obtain federal

registration in the name "Securacomm." 

In addition to the absence of a federally registered 

trademark, Securacom New Jersey had other reasons to 

believe that it had a legal right to use Securacom. First, 

Securacom New Jersey had a reasonable basis for 

concluding that Libengood did not have nationwide 

trademark rights in the mark due to the localized nature of 

his business. Additionally, Securacom New Jersey had a 

plausible basis for believing that its use of its name was not 

likely to cause confusion. As a result, Securacom New 

Jersey's failure to stop using the Securacomm mark after 

receiving Libengood's cease and desist letter does not 

support a finding of willful infringement. 

Finally, we agree with SecuraComm Pennsylvania that

neither Walker's views regarding the civil justice system nor 

Securacom New Jersey's litigation tactics support the 

finding that Securacom New Jersey willfully infringed upon 

 13 
Libengood's Securacomm mark. See SecuraComm 

Pennsylvania's Br. at 21 n. 6. There are other, appropriate 

remedies for abusive litigation tactics. Viewing all of the 

evidence together, we conclude that the record is 

insufficient to show that Securacom New Jersey willfully 

infringed upon SecuraComm Pennsylvania's mark and that 

the District Court's contrary finding was clearly erroneous. 

B. Defendant's Profits3 

Securacom New Jersey argues that the District Court

abused its discretion when it awarded a portion of 

Securacom New Jersey's profits to SecuraComm 

Pennsylvania and then trebled this award.4 The District 

Court concluded that an award of 10% of Securacom New 

Jersey's profits for the years in question was appropriate to 

deter a willful infringer such as Securacom New Jersey 

from such acts in the future. 984 F. Supp. at 303. The 

District Court then trebled the damages because of the 

"egregious circumstances of this case." Id. 

Since the evidence does not support a finding that 

Securacom New Jersey willfully infringed Libengood's 

trademark rights, we conclude that the award of profits was 

not appropriate in the present case. The Lanham Act

permits courts to award monetary damages to trademark 

owners as compensation where it is equitable to do so 

regardless of the willfulness of the defendant's 

_________________________________________________________________ 

3. When we refer to the District Court's award of profits in this case, we 

refer to its award of the defendant corporation's profits, in distinction 

to 

an award of plaintiff's lost profits. The District Court awarded 

defendant's profits not plaintiff's profits. See 5 J. Thomas McCarthy, 

McCarthy on Trademarks and Unfair Competition S 30.57 at 30-95 (noting 

"semantic confusion" in opinions discussing monetary recovery under 

S 1117: "the word profits is often used without revealing whose profits -- 

plaintiff's or infringer's -- are being discussed"). 

4. The District Court, at one time, described this award as a "royalty" 

without engaging in the analysis required to grant such an award. See 

A&H Sportswear Co. v. Victoria's Secret Stores, Inc., 967 F. Supp. 1457, 

1479 (E.D. Pa. 1997). Both parties agree that the District Court's use of 

the word "royalty" was likely a shorthand description of Securacom New 

Jersey's profits. See Securacom New Jersey's Br. at 37; SecuraComm 

Pennsylvania's Br. at 30 n.10. 

 14 
infringement. See 5 J. Thomas McCarthy, McCarthy on

Trademarks and Unfair Competition S 30.75 at 30-128 (4th 

Ed. 1996) ("Unlike recovery of defendant's profits, attorney 

fees and treble damages, no wrongful intent or state of 

mind is needed for the recovery of actual damages [under 

15 U.S.C. S 1117(a).]"). In this case, however, the District 

Court awarded profits to deter defendant's assertedly 

egregious misconduct; a plaintiff must prove that an 

infringer acted willfully before the infringer's profits are 

recoverable. George Basch Co. v. Blue Corral, Inc., 968 F.2d 

1532, 1537 (2d Cir.), cert. denied, 506 U.S. 991 (1992); see 

also, 5 J. Thomas McCarthy, McCarthy on Trademarks and 

Unfair Competition S 30:62, at 30-102 (4th ed. 1996). 

Once monetary damages have been awarded, the Lanham

Act permits courts, under certain circumstances, to

enhance the damages. 15 U.S.C. S 1117(a) (1994); see also 

5 J. Thomas McCarthy, McCarthy on Trademarks and 

Unfair Competition, S 30:90 at 30-146 (4th Ed. 1996) Since 

the evidence at trial did not support a finding of willful 

infringement, the award of profits was not warranted, and 

trebling the damages was likewise inappropriate. See 

Caesar's World, Inc. v. Venus Lounge, Inc., 520 F.2d 269, 

273 (3d Cir. 1995) (holding that enhanced damages award 

was inappropriate where no evidence of actual damages 

was adduced; "[t]hree times zero is zero."). We therefore 

reverse the award of profits and treble profits.5 

C. Attorneys' Fees 

Securacom New Jersey contends that the District Court 

improperly exercised its discretion in awarding attorneys' 

fees.6 The Lanham Act provides that a court may award 

reasonable attorneys' fees to the prevailing party when 

_________________________________________________________________ 

5. Securacom New Jersey argues that the District Court erred in 

awarding profits based on its national profits because Libengood did not 

have national trademark rights prior to the federal registration of his 

mark on May 20, 1997. Because we conclude that profits were not 

properly awarded in the present case, we need not reach this issue. 

6. The Lanham Act gives the District Court the discretionary power to 

award attorneys' fees. 15 U.S.C. S 1117(a) (1994). We review the district 

court's award of attorneys' fees for abuse of discretion. Ferrero U.S.A., 

Inc. v. Ozak Trading, Inc., 952 F.2d 44, 48 (3d Cir. 1991). 

 15 
"exceptional circumstances" exist. 15 U.S.C.S 1117(a). Our 

Court has interpreted "exceptional circumstances" to 

include culpable conduct on the part of the losing party, 

such as bad faith, fraud, malice or knowing infringement. 

Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 47 

(3d Cir. 1991). In this case, the District Court awarded 

attorneys' fees to SecuraComm Pennsylvania because 

Securacom New Jersey exhibited bad faith, fraud, malice, 

and knowing infringement. 984 F. Supp. at 303-04. Since 

the District Court's finding of willful infringement appears 

to be a substantial basis for the award of attorneys' fees, we 

are required to reverse and remand on the issue of whether 

exceptional circumstances, other than willful infringement, 

exist warranting an attorneys' fees award. 

III. 

Because the evidence in the record does not support the 

finding of willful infringement, we reverse the award of 

profits and attorneys' fees. We remand the issue of

attorneys' fees for further consideration. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 16