2005 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-22-2005

Banjo Buddies Inc v. Renosky

Precedential or Non-Precedential: Precedential

Docket No. 03-2038

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2005

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 2005 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"Banjo Buddies Inc v. Renosky" (2005). 2005 Decisions. Paper 1501.

http://digitalcommons.law.villanova.edu/thirdcircuit_2005/1501
PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

Nos: 03-2038/2107

 

BANJO BUDDIES, INC.

 v.

JOSEPH F. RENOSKY,

 Appellant

 

Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. No. 99-cv-01389)

District Judge: Donetta W. Ambrose

 

Argued March 23, 2004

Before: ROTH, AMBRO and CHERTOFF*, Circuit Judges

___________________

*Judge Chertoff heard oral argument in this case but

resigned prior to the time the opinion was filed. The opinion

is filed by a quorum of the panel. 28 U.S.C. § 46(d). 
(Opinion filed : February 22, 2005)

Wayne A. Kablack, Esquire (Argued)

Simpson, Kablack & Bell

834 Philadelphia Street, Suite 200

Indiana, PA 15701

John J. Richardson, Esquire

C. James Zeszutek

Thorp, Reed & Armstrong

301 Grant Street

One Oxford Centre, 14th Floor

Pittsburgh, PA 15219

Counsel for Appellant/Cross Appellee

Todd S. Holbrook, Esquire (Argued)

Bernstein, Shur, Sawyer & Nelson

100 Middle Street

P.O. Box 9729

Portland, ME 04104

Mark A. Willard, Esquire

Eckert, Seamans, Cherin & Mellott

600 Grant Street, 44th Floor

Pittsburgh, PA 15219

Counsel for Appellee/Cross Appellant

 

OPINION

 
3

ROTH, Circuit Judge:

This appeal requires us to decide whether a showing of

willful infringement is a prerequisite to an accounting of a

trademark infringer’s profits for a violation of section 43(a) of

the Lanham Act. We hold that wilfulness is an important

equitable factor but not a prerequisite to such an award,

noting that our contrary position in SecuraComm Consulting

Inc. v. Securacom Inc., 166 F.3d 182, 190 (3d Cir. 1999), has

been superseded by a 1999 amendment to the Lanham Act. 

We further affirm the District Court’s resolution of several

other damages issues, with a single exception explained

below.

I. Factual Background and Procedural History

Joseph Renosky was a member of the board of

directors of Banjo Buddies, Inc., (“Banjo Buddies” or “BBI”)

from February 1996 until May 1999. Banjo Buddies’

principal product during that time was an extremely

successful fishing lure called the Banjo Minnow, which

Renosky helped develop. 

The Banjo Minnow was principally advertised via

“infomercial” broadcast, and was also sold in sporting goods

catalogs and sporting goods stores. Tristar Products, Inc.,

obtained exclusive rights to advertise and sell the Banjo

Minnow through all forms of “direct response marketing, . . .

print media, and retail distribution.” BBI received 48% of

Tristar’s net profits in return. Renosky agreed to provide the

manufactured Banjo Minnow lure kit through his corporation,
1

 The kit consisted of numerous plastic minnow bodies

of various sizes and colors as well as hooks, jigs, and other

fishing bait paraphernalia, all in a plastic “clam-shell” box. The

kit also included an instructional videotape.

2

 The Bionic Minnow kit is distinguished from the

Banjo Minnow kit largely by minnow bodies with replaceable

heads and the “weedless treble hook,” a hook designed to

reduce the chance of debris catching on the barbs of the hook.

4

Renosky Lures, Inc., to both Tristar and BBI at $5.20 per kit.1

Renosky received additional shares of BBI stock in exchange

for producing the Banjo Minnow kits at a “fair price.” 

Renosky also executed a non-compete agreement in favor of

BBI in exchange for more BBI stock. The Banjo Minnow

sold very well for a little over a year, from mid-1996 through

mid-1997, but then sales dwindled considerably. BBI

introduced several derivative Banjo Minnow products in

1998, but none approached the success of the original.

During the Banjo Minnow’s early success in 1996,

Renosky presented an idea to the BBI board for a “new and

improved” Banjo Minnow called the Bionic Minnow.2 The

board took no formal action on the proposal, and a month

later Renosky advised one of BBI’s directors that he would

develop the new lure independently. At least two board

members urged Renosky against this course of action, but

Renosky could not be swayed. He immediately began

developing the Bionic Minnow through Renosky Lures and

ultimately marketed the new lure via infomercial and other

means beginning in February 1999.
3

 BBI made several other claims, and Renosky made

several counterclaims, none of which is relevant to this appeal.

4

 Section 43(a) provides in relevant part:

(1) Any person who, on or in connection with

any goods or services, . . . uses in commerce

any word, term, name, symbol, or device, or

any combination thereof, or any false

designation of origin, false or misleading

description of fact, or false or misleading

representation of fact, which--

(A) is likely to cause confusion, or to cause

mistake, or to deceive as to the . . . origin,

5

After Renosky failed to comply with a “cease and

desist” letter, BBI brought suit in the United States District

Court for the Western District of Pennsylvania in April 1999. 

BBI alleged that Renosky violated section 43(a) of the

Lanham Act, 15 U.S.C. § 1125(a), by developing and

marketing the Bionic Minnow in such a way that customers

would believe the Bionic Minnow was a Banjo Buddies

product. BBI also alleged that Renosky’s conduct breached

the non-compete contract and Renosky’s fiduciary duties as

an officer of Banjo Buddies.3

The District Court denied cross-motions for partial

summary judgment and held a five-day bench trial in May

2002. In its Findings of Fact and Conclusions of Law issued

in November 2002, the court found that Renosky was liable

for “false designation of origin” under § 43(a) of the Lanham

Act.4 The court further found that Renosky breached his
sponsorship, or approval of his or her goods,

services or commercial activities by another

person . . . 

* * * * *

shall be liable in a civil action by any person

who believes that he or she is or is likely to

be damaged by such act.

15 U.S.C. § 1125(a).

6

fiduciary duty of loyalty to Banjo Buddies by pursuing a

corporate opportunity — the Bionic Minnow project —

without fully disclosing his actions to the board or forcing the

board to accept or reject the project. The court also found that

Renosky breached the non-compete agreement by

independently developing the Bionic Minnow. Finally, the

court found that Renosky breached his fiduciary duty of good

faith and fair dealing by overcharging BBI for the Banjo

Minnow kits.

The District Court concluded that Renosky should be

forced to disgorge the net profits of the Bionic Minnow

project under section 35(a) of the Lanham Act, 15 U.S.C. §

1117(a), which provides for such accountings as an equitable

remedy for Lanham Act violations. The District Court also

concluded that the damages arising from Renosky’s

usurpation of a corporate opportunity, breach of the noncompete contract, and overcharging for the Banjo Minnow

lure kits were too speculative to support any monetary award.

Accordingly, the District Court ordered Renosky to pay

to Banjo Buddies the net profits earned by the Bionic Minnow

project, and to produce “verified financial records” attesting
7

to this amount. Renosky never produced these records,

despite numerous delays and court orders. Renosky did

ultimately retain an independent financial analysis (the

“Alpern Report”), which the District Court accepted for

purposes of establishing the total sales of the Bionic Minnow

through November 2002. However, the court rejected that

report’s conclusion that the Bionic Minnow project suffered a

net loss. Accordingly, the court calculated Renosky’s profits

by multiplying the total sales figure by 16%, based on

testimony from Renosky’s business manager that Renosky

Lures products typically earn a “bottom line” of between 15-

17%. The court also determined that Renosky should be

forced to disgorge all of the distributions (based on gross

sales) made to him as a shareholder in the Bionic Minnow

project. The court entered judgment in March 2003 against

Renosky in the amount of $1,589,155.

Banjo Buddies moved to alter or amend the District

Court’s judgment pursuant to Federal Rule of Civil Procedure

59(e), arguing that the court erred by holding that the damages

arising from Renosky’s overcharges for the Banjo Minnow

lure kits were too speculative to support a monetary award. 

The District Court denied this motion in March 2003.

Renosky and BBI both appeal the District Court’s

judgment. Renosky asserts that the District Court should not

have ordered an accounting of profits because Renosky did

not intentionally or willfully confuse or deceive customers. 

Renosky alternatively argues that the District Court’s

calculation of those profits was clearly erroneous. Banjo

Buddies cross-appeals, contending that the District Court

erred by refusing to award damages for Renosky’s

overcharges rather than make a reasonable estimate of
8

damages based on the available evidence.

II. Jurisdiction and Standards of Review

The District Court had federal question jurisdiction

over Banjo Buddies’ Lanham Act claim, 28 U.S.C. § 1331,

supplemental jurisdiction over the parties’ state law claims,

28 U.S.C. § 1367, and diversity jurisdiction over all claims

owing to the complete diversity of the parties, 28 U.S.C. §

1332. We have appellate jurisdiction to review the District

Court’s final judgment. 28 U.S.C. § 1291.

We review the District Court’s factual findings under a

clearly erroneous standard, but exercise plenary review over

the District Court’s interpretation of legal questions and its

application of the law to the facts. Castrol Inc. v. Pennzoil

Co., 987 F.2d 939, 950 (3d Cir. 1993). We further review the

District Court’s award of equitable remedies under section

35(a) of the Lanham Act under an abuse of discretion

standard. Gucci America, Inc. v. Daffy’s, Inc., 354 F.3d 228,

242 (3th Cir. 2003).

III. Discussion

A. Willfulness Is a Factor, Not a Prerequisite.

Renosky argues that the District Court erred by

awarding profits from the Bionic Minnow project to Banjo

Buddies under section 35(a) of the Lanham Act because

Renosky’s violation of section 43(a) of that statute was not

willful or intentional. Renosky relies on SecuraComm

Consulting, Inc. v. Securacom, Inc., 166 F.3d 182 (3d Cir.

1999), in which this court held that “a plaintiff must prove

that an infringer acted willfully before the infringer’s profits
5 On the one hand, that District Court found that

Renosky exhibited “a considerable lack of good faith and fair

dealing” by producing a nearly identical product in identical

packaging, using the same primary marketing tool (the

infomercial) with similar content, and by presenting himself as

the developer of the Banjo Minnow in marketing materials for

the Bionic Minnow. On the other hand, the court found that

even though Renosky copied the successful format of the Banjo

Minnow product and infomercial, “there is no evidence that

[Renosky] deliberately intended by that copying to confuse

consumers into believing that the Bionic Minnow was a Banjo

Buddies project.”

9

are recoverable” under § 35(a) of the Lanham Act. Id. at 190

(citing George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532,

1537 (2d Cir. 1992)). The District Court’s findings related to

the issue of Renosky’s intent are ambiguous and possibly

contradictory.5 However, we need not decide whether the

District Court found or should have found that Renosky acted

willfully, because we conclude that SecuraComm’s bright-line

willfulness requirement has been superseded by statute and

that, based on all the relevant equitable factors, the District

Court did not abuse its discretion by ordering an accounting

of Renosky’s profits.

SecuraComm’s bright-line rule was the dominant view

when SecuraComm was issued in January 1999. See, e.g.,

Quick Technologies, Inc. v. Sage Group PLC, 313 F.3d 338,

347-48 (5th Cir. 2002) (collecting cases, including

SecuraComm); George Basch Co., 968 F.2d at 1537;

Restatement (Third) of Unfair Competition § 37 (1995); J.
6 The statute has been twice amended since August

1999, see Pub. L. No. 106-113, Div. B, § 1000(a)(9), 113 Stat.

1536, 1501A-54 (Nov. 29, 1999), and Pub. L. No. 107-273,

Div. C, Tit. III, § 13207(a), 116 Stat. 1906 (Nov. 2, 2002), and

now reads as follows:

When a violation of any right of the registrant of a

mark registered in the Patent and Trademark Office, a

violation under section 1125(a) or (d) of this title, or a

willful violation under section 1125(c) of this title,

10

Thomas McCarthy, 5 McCarthy on Trademarks and Unfair

Competition § 30:62 (4th ed. 1996). In August 1999,

however, Congress amended § 35. Prior to the amendment,

that section provided as follows:

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) [15 U.S.C. §

1125(a)], shall have been established . . . the plaintiff

shall be entitled . . ., 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.

See SecuraComm, 166 F.3d at 186 (quoting former 15 U.S.C.

§ 1117(a)). The 1999 amendment replaced “or a violation

under section 43(a)” with “a violation under section 43(a), or

a willful violation under section 43(c),” see Pub. L. No. 106-

43, § 3(b), 113 Stat. 219 (Aug. 5, 1999) (emphasis added). 

The plain language of the amendment indicates that Congress

intended to condition monetary awards for § 43(c) violations,

but not § 43(a) violations, on a showing of willfulness.6 
shall have been established in any civil action arising

under this chapter, the plaintiff shall be entitled, subject

to the provisions of sections 1111 and 1114 of this title,

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.

15 U.S.C. § 1117(a).

11

We presume Congress was aware that most courts had

consistently required a showing of willfulness prior to

disgorgement of an infringer’s profits in Lanham Act cases,

despite the absence of the word “willful” in the statutory text

prior to 1999. See Scheidemann v. INS, 83 F.3d 1517, 1525

(3d Cir. 1996) (“[W]e must presume that Congress is aware of

existing judicial interpretations of statutes.”). By adding this

word to the statute in 1999, but limiting it to § 43(c)

violations, Congress effectively superseded the willfulness

requirement as applied to § 43(a). See Russello v. U.S., 464

U.S. 16, 23 (1983) (“ ‘Where Congress includes particular

language in one section of a statute but omits it in another

section of the same Act, it is generally presumed that

Congress acts intentionally and purposely in the disparate

inclusion or exclusion.’ ”) (quoting United States v. Wong

Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972)). 

This conclusion is supported by Quick Technologies,

313 F.3d at 349, the only other appellate decision to reach the

issue. The Fifth Circuit in Quick Technologies considered the

effect of the 1999 amendment and held that, based on earlier

decisions of that court as well as “the plain language of [§

43(a)],” willful infringement was not a prerequisite to an
12

accounting of the infringer’s profits. Id. The court noted the

wealth of contrary authority, including SecuraComm, but

pointed out that all of those cases preceded the statutory

change. Id. at 347-48. The Quick Technologies court

reaffirmed the factor-based approach elaborated in prior Fifth

Circuit cases, including Pebble Beach Co. v. Tour 18 I

Limited, 155 F.3d 526, 554 (5th Cir. 1998), explaining that

the infringer’s intent was an important — but not

indispensable — factor in evaluating whether equity supports

disgorging the infringer’s profits. Quick Techs., 313 F.3d at

349. These factors “include, but are not limited to (1)

whether the defendant had the intent to confuse or deceive,

(2) whether sales have been diverted, (3) the adequacy of

other remedies, (4) any unreasonable delay by the plaintiff in

asserting his rights, (5) the public interest in making the

misconduct unprofitable, and (6) whether it is a case of

palming off.” Id. (internal citations omitted). 

In Gucci America, Inc. v. Daffy’s, Inc., 354 F.3d 228

(3d Cir. 2003), the panel majority noted that the 1999

amendment might affect the continued validity of

SecuraComm’s bright-line willfulness requirement. Id. at

239-40 (noting that statutory language and legislative history

of the 1999 amendment “suggests that willfulness is a

prerequisite in a trademark dilution cause of action, not an

infringement action”). The majority determined it did not

need to decide the issue, however, reasoning that even under

the Quick Technologies factor-based approach, the District

Court did not abuse its discretion in refusing to order an

accounting of the infringer’s profits. Id. at 241-43

(“Accordingly, even after the 1999 amendments to the

Lanham Act and any impact it may have had on our holding
7

JudgeRosennwrote a dissenting opinion in Gucci

America, concluding that the balance of equities favored the

plaintiff, and that an accounting of the infringer’s profits would

make the trademark owner whole. 354 F.3d at 246-47 (Rosenn,

J., dissenting). Judge Rosenn specifically concluded that

SecuraComm “is no longer binding precedent because it has

been superceded by subsequent statutory amendments to the

Lanham Act.” Id. at 245.

13

in SecuraComm, we nevertheless conclude that the district

court did not abuse its discretion given the equities here,

including Daffy’s good faith.”).7

 For the reasons explained above, we now hold that

SecuraComm has been superceded by the 1999 amendment. 

Relying on the Quick Technologies factor-based approach

endorsed in Gucci America, we further conclude that the

District Court did not abuse its discretion by ordering an

accounting of Renosky’s profits. Apart from his contention

that his violation was not willful, Renosky does not argue that

the District Court abused its discretion. Accordingly, our

consideration of the equities here will be brief. Because the

District Court’s findings concerning Renosky’s intent are

difficult to reconcile, see supra note 5, we will assume that

factor is neutral. Nonetheless, all of the other Quick

Technologies factors support an award of profits here. 

It is likely that Renosky’s conduct diverted sales from

Banjo Buddies. See Quick Techs., 313 F.3d at 349 (factor

two). The District Court found that Renosky’s marketing for

the Bionic Minnow was confusingly similar to that of the

Banjo Minnow, noting numerous material similarities in the
14

infomercials used to market each product. The court also

found that the two lure kits were “nearly identical” and were

packaged identically. The court further found that the

markets for the two products were “either the same or

substantially overlap[ping].” The District Court’s

observations concerning the close similarities of the products

as well as their packaging and marketing schemes also

strongly support the conclusion that Renosky was “palming

off” the Bionic Minnow as a Banjo Buddies product. See id.

(factor six). The public has an interest in discouraging this

type of behavior, as it interferes with the consumer’s ability to

make informed purchasing decisions. See id. (factor five).

Next, there are no other adequate remedies. See id.

(factor three). The District Court rejected Banjo Buddies’

estimation of its damages (for both the Lanham Act claims

and the state law claims) as too speculative. If Renosky’s

profits are not assessed, Banjo Buddies will be wholly

uncompensated for Renosky’s infringing actions. Finally,

Banjo Buddies did not delay in bringing suit to stop

Renosky’s infringing actions. See id. (factor four). 

Accordingly, we conclude that the District Court did not

abuse its discretion in deciding to order an accounting of

Renosky’s profits.

B. The District Court’s Estimation of Profits.

The remaining issues in Renosky’s appeal concern the

District Court’s calculation of the amount of profits to be

awarded. We first hold that the District Court did not clearly

err by rejecting Renosky’s contention that he suffered a net

loss on the Bionic Minnow project, and did not abuse its
8

 As the court explained, “I find disturbing an analysis

which includes calculations to the penny for the cost of the

15

discretion by using an alternative method to estimate

Renosky’s profits. See Tamko Roofing Products, Inc. v. Ideal

Roofing Co., Ltd., 282 F.3d 23, 39 (1st Cir. 2002) (calculation

of profits under section 35(a) is left to the trial court’s

discretion, and will not be disturbed unless “it rests on clearly

erroneous findings of fact, incorrect legal standards, or a

meaningful error in judgment”). 

Section 35(a) provides that “[i]n assessing profits the

plaintiff shall be required to prove defendant’s sales only;

defendant must prove all elements of cost or deduction

claimed.” 15 U.S.C. § 1117(a); see also Caesars World, Inc.

v. Venus Lounge, Inc., 520 F.2d 269, 273 (3d Cir. 1975). The

District Court accepted the Alpern report’s figure for total

sales of the Bionic Minnow through November 22, 2002. 

Thus, Banjo Buddies’ burden of proof was satisfied by

Renosky’s accountant’s financial report. 

However, the District Court held that Renosky failed to

satisfy his burden of proof regarding costs and deductions. 

The District Court rejected the Alpern report’s conclusion that

Renosky suffered a loss of $ 492,699.00 for several reasons,

most of which Renosky makes no attempt to refute on appeal. 

First, the court observed that the Alpern report’s summary of

direct expenses associated with the Bionic Minnow project —

totaling almost five million dollars — was sorely lacking in

detail, lumping costs into six broad categories with no

explanation of what specific expenses those categories

represented.8 Renosky appears to argue that the District Court
product (less than $2 million total) but fails to explain expenses

totaling almost $5 million [by] providing even a modicum of

detail in support.”

9 TheAlpern report containssummaries offinancial

records, not the records themselves.

16

improperly rejected the direct expense summary because the

preparers of the Alpern report were unable to confirm

expenses associated with Pacific Media, a vendor

representing no more than two percent of the direct expenses

associated with the Bionic Minnow. This argument is a red

herring. The court rejected the summary in spite of the

preparers’ success in obtaining corroboration from most

major vendors, not because of its failure to obtain

corroboration from one. 

Renosky fails to address the District Court’s remaining

reasons for rejecting the Alpern report’s analysis of costs

associated with the Bionic Minnow project. Most important,

Renosky makes no attempt to explain why he twice failed to

produce verified financial records supporting his claimed

costs and deductions as ordered by the court.9 The court also

observed several unexplained discrepancies between the

Alpern report’s summary of direct expenses and other

evidence in the record. Next, the court rejected the Alpern

report’s conclusion that “shared expenses” associated with the

Bionic Minnow project were $ 1,416,050. The court

explained that the Alpern report did not show how “each item

of general expense contributed to the production of the

infringing items in issue and offer a fair and acceptable
17

formula for allocating a given portion of overhead to the

particular infringing items at issue.” (citing Design v. K-Mart

Apparel Corp., 13 F.3d 559, 565-66 (2d Cir. 1994)). Finally,

the court found that the Alpern report’s “bottom line” lacked

credibility. The court doubted that Renosky would allow the

Bionic Minnow to lose nearly half a million dollars, and noted

that Renosky’s claimed loss was inconsistent with his attempt

to secure clarification that profits accrued after November 22,

2002, would belong to him and not Banjo Buddies. 

Considering the collective strength of these arguments

together with Renosky’s failure to address most of them, we

conclude that the District Court’s rejection of the Alpern

report’s cost analysis was not clearly erroneous.

Because Renosky failed to meet his burden of proving

costs and deductions, the District Court was forced to use an

alternative method to estimate Renosky’s profits. The court

decided to rely on the trial testimony of Renosky’s business

manager, Denice Altemus, who stated that Renosky Lures

products “always [make] a bottom line of between 15 and

17%.” Renosky argues that there is no direct evidence that

the Bionic Minnow earned a profit in this range. While this is

true, the onus of producing such evidence is clearly placed by

§ 35(a) on Renosky, not Banjo Buddies. 15 U.S.C. § 1117(a). 

The District Court has broad discretion in shaping remedies

under § 35(a), see Burger King Corp. v. Weaver, 169 F.3d

1310, 1321 (11th Cir. 1999), and did not abuse that discretion

by estimating that the Bionic Minnow earned a profit of 16%.

Renosky further argues that Banjo Buddies is only

entitled to 48% of whatever profits were earned by the Bionic

Minnow project. That is, if Banjo Buddies had produced the

Bionic Minnow, it would have received only 48% of the
18

profits earned from the sale of the lure under its contract with

TriStar. We first note that this contention is impossible to

evaluate on appeal as a factual matter. Presumably Tri-Star

provided some services in exchange for its profit-sharing

agreement with Banjo Buddies, and presumably Renosky

procured those same services through services contracts rather

than a profit-sharing agreement. There is no way for this

court to determine which party struck the better deal. 

Further, this argument also fails as a matter of law,

because there is no requirement that the defendant’s profits

approximate the plaintiff’s damages. Section 35(a) permits a

plaintiff to recover, “subject to the principles of equity . . ., (1)

defendant’s profits, (2) any damages sustained by the

plaintiff, and (3) the costs of the action.” 15 U.S.C. §

1117(a). As the Second Circuit observed in George Basch,

968 F.2d at 1537, an accounting of the infringer’s profits is

available if the defendant is unjustly enriched, if the plaintiff

sustained damages, or if an accounting is necessary to deter

infringement. These rationales are stated disjunctively; any

one will do. See id. Allowing Renosky to keep half the

estimated profits of his infringing activities would not serve

the Congressional purpose of making infringement

unprofitable — Renosky would be unjustly enriched and other

would-be infringers would be insufficiently deterred. See

Burger King Corp., 169 F.3d at 1321-22; Louis Vitton S.A. v.

Lee, 875 F.2d 584, 588-89 (7th Cir. 1989); Playboy Enters.,

Inc. v. Baccarat Clothing Co., 692 F.2d 1272, 1274 (9th Cir.

1982). Even if Banjo Buddies receives a windfall in this case

— which, as discussed in the previous paragraph, is

impossible for this court to determine — it is preferable that

Banjo Buddies rather than Renosky receive the benefits of
19

Renosky’s infringement. See Mishawaka Rubber & Woolen

Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 206-07 (1942).

Finally, we agree with Renosky that the District Court

clearly erred by adding distributions made to Renosky as a

shareholder in the Bionic Minnow project to the profits award

because these distributions were already accounted for in the

court’s estimation of profits. Financial records prepared by

Renosky Lures’ business manager and introduced at trial by

Banjo Buddies show that distributions were paid according to

a simple formula: five percent of gross sales each month. 

Those records treat the distributions as an expense for

bookkeeping purposes. That is, each month’s “Total Profit”

was calculated by subtracting expenses from sales, and

shareholder distributions (denominated “Return Reserve”)

were considered expenses in this calculation. Banjo Buddies

added the “Total Profit” and “Return Reserve” figures to

arrive at a “Total Net Profit” figure which it then asked the

District Court to assess as the measure of profits under section

35(a). This is sensible — distributing monies to shareholders

is a method of disbursing income, not a business expense, and

the distributions should be included in the District Court’s

profits award. The District Court may have been attempting

to apply this reasoning when it determined that Renosky’s

share of the distributions should be added to the estimated

profits award. However, when the District Court decided to

estimate profits by multiplying the Alpern report’s gross sales

figure by sixteen percent, rather than use the method proposed

by Banjo Buddies, the issue created by Renosky Lure’s

bookkeeping practice of treating distributions as expenses

disappeared. The court’s estimate accounts for all of the

profits of the Bionic Minnow project — the shareholder
10 Banjo Buddies is incorporated in Wisconsin. As

the District Court explained, the “internal affairs doctrine”

holds that courts look to the law of the state of incorporation to

resolve issues involving the internal affairs of a corporation.

CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 89-93

(1987); First National City Bank v. Banco Para El Comercio,

462 U.S. 611, 621 (1983). Because the District Court sits in

Pennsylvania, it applies that state’s conflict of law principles,

Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S.

487 (1941), and Pennsylvania has adopted the “internal affairs

doctrine” by statute. See 15 Pa. Cons. Stat. § 4145(a); In re

Estate of Hall, 731 A.2d 617, 622 (Pa. Super. Ct. 1999). Banjo

Buddies’ claim that Renosky breached his fiduciary duty of

20

distributions, which amounted to five percent of gross sales,

as well as an estimated eleven percent of additional profit.

C. Overcharge Damages.

Banjo Buddies argues on cross-appeal that the District

Court erred by refusing to award monetary damages after

determining that Renosky violated his fiduciary duty by

overcharging Banjo Buddies for the Banjo Minnow lure kits. 

We hold that the District Court properly determined that

Banjo Buddies failed to meet its burden of proving the

amount of damages to a “reasonable certainty.” Plywood

Oshkosh, Inc. v. Van’s Realty & Constr. of Appleton, Inc., 257

N.W.2d 847, 849 (Wis. 1977) (“The claimant generally has

the burden of proving by credible evidence to a reasonable

certainty his damage, and the amount thereof must be

established at least to a reasonable certainty.”).10 Specifically,
good faith and fair dealing by overcharging for the Banjo

Minnow lure kits goes to Banjo Buddies’ internal affairs.

Accordingly, the District Court properly applied Wisconsin law

to this issue.

21

the District Court did not clearly err by finding that Banjo

Buddies’ Exhibit 201 was insufficiently reliable. Further, the

court did not commit legal error by refusing to estimate

damages based on this unreliable exhibit, because Banjo

Buddies could have, but failed to, introduce other, more

reliable evidence as proof of the amount of damages.

To prove the amount of overcharge, Banjo Buddies

combined two approaches. First, Banjo Buddies introduced

invoices indicating Renosky’s costs for some components of

the Banjo Minnow lure kit. The District Court accepted these

invoices as reliable proof of Renosky’s costs. Banjo Buddies

then added estimated overhead and a reasonable profit margin

to arrive at the price Renosky should have charged for those

components of the lure kit. However, these invoices only

accounted for 20 of the 109 components of the Banjo Minnow

lure kit. Banjo Buddies introduced Exhibit 201, an undated

price quote from Renosky to a third party, National Media, to

establish the prices Renosky should have charged Banjo

Buddies and Tristar for the remaining 89 components. 

Combining the invoices (adjusted for overhead and profit)

and the price quote, Banjo Buddies contends that Renosky

should have charged Tristar and Banjo Buddies $3.44 per lure

kit, $1.76 less than the amount actually charged, $5.20. The

District Court, however, found the National Media price

quote unreliable.
11 Banjo Buddies’ failure to delve into the National

Media price quote at trial despite the fact that this document is

the linchpin of its damages proof is not as inexplicable as it

appears. It turns out that Banjo Buddies did not make the

argument that this price quote establishes the appropriate price

for most of the components in the Banjo Minnow lure kit until

after trial in its proposed findings of fact and conclusions of

22

This finding was not clearly erroneous. First, the

National Media quote is undated. There is evidence that over

time some of Renosky’s component prices fell, while other

component prices, operational expenses, and labor costs rose,

after Renosky’s business manager produced the quote to

Banjo Buddies that established the price of $5.20 per kit in

March 1996. Given these fluctuating costs, the District Court

properly observed that not knowing the date of the National

Media quote makes it difficult to conclude that the component

prices quoted therein should have been comparable to those in

the Banjo Buddies quote. The District Court further noted

that Banjo Buddies’ counsel failed to sufficiently question

Renosky or his business manager about the National Media

quote at trial. Such questioning could have readily

established the date and context of the quote, and offered the

persons most familiar with the component prices — Renosky

and his business manager — an opportunity to explain the

different prices in the National Media and Banjo Buddies

price quotes. The National Media quote is not inherently

unreliable, but given Banjo Buddies’ failure to substantiate

the quote at trial, the District Court did not err by refusing to

rely on the quote.

11
law. That is, by the time Banjo Buddies realized the importance

of the document, it was too late to flesh it out on the stand.

23

Banjo Buddies alternatively argues that the District

Court, having found liability, should nonetheless have

estimated damages based on the less-than-reliable National

Media price quote because it was the only available evidence. 

As the Wisconsin Supreme Court explained in Metropolitan

Sewerage Comm’n v. R.W. Constr., Inc., 255 N.W.2d 293,

299 (Wis. 1977), “where records are inadequate to assess

specific damages, yet plaintiff has been injured . . . and

liability is clear,” “[i]t is enough if the evidence adduced is

sufficient to enable a court or jury to make a fair and

reasonable approximation.” (Internal citation omitted); see

also Cutler Cranberry Co. v. Oakdale Elec. Co-op., 254

N.W.2d 234, 240 (Wis. 1977) (“[T]he fact that the full extent

of the damages is a matter of uncertainty by reason of the

nature of the tort is not a ground for refusing damages.”). The

problem here is that the lack of better evidence in this case is

not due to a lack of adequate records, Metropolitan Sewerage,

255 N.W.2d at 299, or the “nature of the tort,” Cutler

Cranberry, 254 N.W.2d at 240, but to Banjo Buddies’ failure

to introduce more reliable evidence, either by introducing

Renosky’s invoices for the remaining 89 components or

substantiating the undated National Media quote through

questioning at trial. As the court explained in Cutler

Cranberry, the rule permitting estimated damages in the face

of uncertainty as to the amount of damages “has been

sustained where, from the nature of the case, the extent of

injury and the amount of damage are not capable of exact and
24

accurate proof.” Id. (emphasis added) (internal citation

omitted).

Banjo Buddies attempts to lay the blame for its failure

to introduce better evidence on Renosky. Banjo Buddies

contends that Renosky failed to provide discovery “in a timely

manner,” and did not produce “any invoices or other

information on costs until two business days before trial.” 

However, Banjo Buddies never claims that Renosky

ultimately failed to produce those documents. Further, if

Banjo Buddies felt that Renosky had not complied (or not

timely complied) with its discovery requests, it should have

pursued relief under the discovery rules or sought a

continuance. Banjo Buddies cannot reasonably claim that its

burden of proof should be lowered because it did not have

time to sift through the boxes of documents Renosky

allegedly produced on the eve of trial. Furthermore, as noted

above, see supra n.11, Banjo Buddies’ failure to substantiate

the National Media quote cannot be attributed to Renosky’s

foot-dragging during discovery.

IV. Conclusion

For the reasons given above, we will affirm the District

Court’s award of Renosky’s estimated profits on the Bionic

Minnow project but reverse the District Court’s decision to

add Renosky’s shareholder distributions to that amount. We

will affirm the District Court’s judgment in all other respects.