2005 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit

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. Re no sky

P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de n t i al

D ocke t N o . 03-2038

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Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sit y S choo l of L a

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. e du/thir dc ir c uit_2005/1501PRECE DENTI AL UNITED STATES COURT OF APPEALS FO R T HE TH IRD CIR CU IT



### Nos: 03-2038/2107

BANJO BUDDIES, INC.

v.

JOSEPH F . RENOSK

Y,
Appellant

App eal from th e Un ited States District Co urt for the We stern D istrict of P enns ylvania (D.C. No. 99-cv- 01389) District J udge: Donetta W . Ambrose

Argued March 23, 2004

Be for e: R OT H, A M BR O a nd C HE RT OF F*
, Circuit Judges

___________________ *Judge Chertoff he ard oralargument i n this case but resi gned prior

to the t ime the opi nion was fil ed. The opini on is file d by a quo rum of th e pa nel. 2 8 U .S.C . § 46 (d).(Opinion fi led : Febr uary 22, 2005)

Wayne A. Kablack, Esquire ( Argued) Sim pson , Kab lack & Bell 834 Philadelphia Street, Suite 200 Indiana, PA 15701

John J. R ichardson , Esquire C. James Zeszut ek Thorp, Reed & Armstrong 301 Grant Str eet One Oxford Centre, 14 th Floor Pitt sburgh, PA 15219

Counsel for Appellant /Cross Appellee

Todd S. Holbrook, Esquire (Argued) Bernstei n, Shur, Sawyer & Nelson 100 Middle Stree t P.O. Box 9729 Portl and, ME 04104

Ma rk A. W illard, Esquire Eck ert, Sea man s, Ch erin & M ellott 600 Grant Str eet, 44 th Floor Pitt sburgh, PA 15219

Counsel f

or Appell ee/Cro ss Appel lant

OPI NION3 ROTH , Circ uit J udge:

This appealrequir es us to de cide whether a showing of willfulinfri ngement is a prerequi sit e to an account ing of a trademark infri nger’s pr ofits for a viol ation of secti on 43(a) of the Lanham Act. We hold that wilf ulness i s an import ant equitable fact or but not a prerequi sit e to such an a ward, noting t hat our cont

raryposition in SecuraComm C onsult ing Inc. v. Securacom Inc. , 166 F.3d 182, 190 (3d Cir. 1999), has bee n su per sed ed b y a 19 99 a me ndm ent to the L anh am Ac t. We further affirm the Dist rict Court’s resolution of sever al other damages issues , with asingl e excepti on explai ned be lo w.

I. FactualBackground and Procedural History

Joseph Renoskywas a member of the board of directors of Banjo Buddie s, I nc., (“Banjo Buddies ” or “BBI”) from February 1996 until May 1999. Banjo Bu ddies’ princip al prod uct du ring tha t time w as an extrem ely successf ul fis hing lure call ed the Banjo Minnow, which Re nos ky he lped dev elop

. The Ban jo M inno w w as prin cipally adv ertised v ia “infomerci al” broa dcast, and was also sol d in sport ing goods
cata log s an d sp ortin g go ods store s. Tr istar P rod ucts , Inc ., obtain ed ex clusive rights to adve rtise and sell the B anjo M inn ow thro ugh all fo rms of “ dire ct res pon se m ark eting
, . . . print media, and retai l dis tri bution. ” BBI received 48% of Trist ar’s ne t profi ts i n return. Renosky agreed t o provide t he manufactured Banj o Minnow lure kit t hrough his c orporation,1 

### The kit con sisted of nu merous plastic minnow bodies of variou s sizes and colors as well as hooks, jigs, and other fishingbait par

aphernalia, all in a

plastic “clam-shell” box. The kit also included an instructional videota pe.

2 

### The Bion ic Minnow kit is disti nguished from the Banjo Minnow kit largely by minnow bodies with replaceable heads and the “we edless trebl e hook,” a h ook desig ned to reduce t he chance of debris c atching on t

he barbs of t

he hook.

4 Ren osky L ures, In c., to bo th Trista r and BB I at $5.2 0 per kit. 1 Renosky r eceived addi tionalshares of BBI stock in exc hange for produci ng the Banjo Minnow kits at a “fai r pri ce.” Renosky al so execute d a non-compete agreement in fa vor of BBI in exchange for more BBI stock. The Banj o Minnow sold very wellfor a li ttl e over a y ear, f rom mid-1996 thr ough mid -1 997 , b utth en s al es dwi ndl ed c ons id er abl y . BBI introdu ced s evera l deriva tive B anjo M inno w p rodu cts in 199 8, but n one a ppro ache d the s ucce ss of th e origin al. During the Banj o Minnow’s earlysuccess i n 1996, Renosky pr esented a n idea t o the BBI board for a “new and im pr ove d” Ban

jo Min now ca ll ed th e Bi oni c Mi nno w. 2 The boar d too k no form al action on th e pro posa l, and a mo nth later R enos ky advis ed on e of B BI’s d irectors th at he w ould develop the new lure indepen dently. At least two bo ard members urged Renoskyagainst this course of act

ion, but Renosky coul d not be sway ed. He immediat elybegan developi ng the Bioni c Minnow through Renosky Lure s and ulti matelymarketed t

he new lure vi a infomerci al and other means beginni ng in February 1999.3 

### BBI ma de sever al other claims, and Renosky m

ade severalcounterclaims, none of which isreleva nt to this appeal.

4 

### Section 43 (a) provide s in relevant par t: (1) Any pe

rson who, on or

in connect

ion with any goods o r services, . . . uses in commerc e any wo rd , t er m, na me , s ym

b ol, or device, or any combina

tion the r eof, or an y false designat ion of origin, fa

lse or m islea ding descri ptionof fact, o r false or misleading representation of fact, which-- (A) is likely

to cause confus ion, or

to cause mistake, or

t o deceive

as to the

. . . ori gin,

5 After Renosky fail ed to complywith a “ceas e and desist” letter, BBI brought sui t in t he United States Dist

rict Co urt f or th e W este rn D istrict of P enn sylvan ia in A pril 1 999

. BBI alleged t

hat Renoskyviolated secti on 43(a) of t he Lanham Act, 15 U.S.C. § 1125( a), by developi ng and marketing the Bion ic Minn ow in su ch a w ay that customers would belie ve the Bioni c Minnow w as a Banjo Buddies product. BBI also all eged that Renosky’ s conduct br eached the non-compet e contra ct and Renosky ’s fi duciary duties as an officer of Banjo Bu ddies. 3 The Distri ct Court de nied cros s-moti ons for partial summary j udgment and held a f ive-day bench tri al in May 2002. In i ts Findi ngs of Fact and Concl usions of Law is sued in N ovem ber 2 002 , the co urt fou nd th at Re nosk y was liab le for “fal se desi gnation of origi n” under § 43(a) of the Lanham Ac t. 4 The cour t furthe r fou nd th at Re nosk y breach ed his

### sponsorshi p, or approv al o f h is or her goo ds, services or commercia l activitiesby another person . . . * * * * * shall be liable in a civil acti on by a

ny pe rson who believ es that he or she is o r is likely to be damaged b y such act. 15 U.S.C. § 1125(a).

6 fiduci ary duty of loy alty to Banjo Buddies by pur suing a corp orate o ppo rtunity — the B ionic M inno w p roject — without ful ly discl osing hi s acti ons to the board or forcing the board to ac cept or reject the proj ect. The court al so found that Renosky br eached the non- compete agree ment by independently developi ng the Bioni c Minnow. Finall y, the court found t

hat Renoskybreached hi s fiduci ary duty of good faith a nd f air dea ling by ov ercha rging BB I for th e Ba njo Minnow kits. The Distri ct Court c oncluded that Renoskyshould be forced t o disgorge the net profit s of the Bioni c Minnow pro ject u nde r sec tion 35( a) o f the La nha m A ct, 15 U.S .C. § 111 7(a), w hich p rovid es fo r such acco unting s as an equita ble remedy for Lanham A ct violati ons. The District Court also conclud ed that the dam ages arising fro m R enosky’s usurpation of a corporate oppor tunit y, breach of the noncompete contr act, and overchar ging for t he Banjo Minnow lure ki ts were t oo speculat ive to s upport anymonetaryaward. Accordingly , the Distri ct Court ordered Renoskyto pay to Banjo Buddies the net profit s earned bythe Bioni c Minnow project , and t o produce “verifie d financi al rec ords” attesting7 to this amount. Renosky never produced these records, desp ite num erou s delays a nd co urt ord ers. R enos ky did ulti matelyretai n an independent financi al anal ysi s (the “Alpern Report ”), which t he District Court

accepted for purposes of e stabl ishi ng the tot al sal es of the Bi onic Minnow through November 2002. However, the court rej ected that report ’s concl usion that the Bionic Minnow project suffered a net loss . Acc ordin gly, the cou rt calcu lated R enos ky’s prof its by multiply ing the total s ales fi gure by 16%, based on
testimony fr om Renosky’s bus iness manager that Renosky Lures product s typical ly earn a “bottom li ne” of between 15- 17%. The court al so determined that Renosky shoul d be forced to disgorge all of the dis tributi ons (based on gross sales ) made to hi m as a sharehol der in t he Bionic Minnow project. The court entered j udgment in M arch 2003 against Renosky i n the amount of $1, 589,155. Banjo Buddies moved to al ter or amend the Dist

rict Cou rt’s judgmen t pursuant to F ederal Ru le of Civil Pro cedure 59(e), arguing t

hat the court er

red by holding t

hat the damages aris ing from Renosky ’s overc harges for the Banjo Minnow lure kits w ere to o sp ecu lativ e to s upp ort a mo neta ry aw ard

. The Distri ct Court de nied thi s motion i n March 2003. Reno sky and BB I both app eal the District Co urt’s judgment. Renosky as sert s that the Dist rict Court shoul d not have orde red an acco unting of p rofits b ecau se R enos ky did
not inten tion ally or w illfu lly con fus e or dec eive cus tom ers. Reno sky alternatively argues that the District Co urt’s calcu lation o f thos e pro fits w as clea rly erroneo us. B anjo Bud dies cross-app eals, contending that the District Cou rt erred by refusing to a ward d amag es for R enosky’s overcharge s rather than make a reasonable esti mate of8 damages based on the avail able evi dence.

II. Juri sdicti on and Standards of Review The Distri ct Court ha d federal questi on juri sdiction over Banjo Buddies ’ Lanham Act clai m, 28 U.S.C. § 1331, supplemental jurisdi ction over the parti es’ state l aw claims, 28 U. S. C. § 136 7, and di ver si tyju ri sdi ct io n ov eral l c la ims

ow ing to th e co mp lete d iver sity ofthe p artie s, 28 U.S .C. § 1332. We have appell ate j urisdi ction to review the Distri ct Court’s f inal j udgment. 28 U.S. C. § 1291. We review the District Cou rt’s factual findings u nder a clearly erroneous standar d, but e xercis e plenary r eview over the D istrict Co urt’s inte rpretatio n of legal q uestion s and its app licatio n of the la w to the f acts

. Ca strol Inc . v. Pen nzoil Co. , 987 F.2d 939, 950 (3d Cir. 1993). We further revi ew the Distri ct Court’ s award of equit able re medies under s ecti on 35(a) of t he Lanham Act under an abuse of di scretion
stan dar d. Gucci America, I nc. v. Daffy’s , Inc. , 354 F.3d 228, 242 (3th C ir. 2003). III. Discussi on

A. Willfulnes s Is a Factor,Not a Prerequisite.
Renosky ar gues that

the Dist rict Court err ed by

aw arding prof its from the B ionic M inno w p roject to Ban jo Buddies under section 35(a) of the Lanham Act because Renosky’ s viol ation of

secti on 43(a) of t

hat st atute was not willfulor int entiona l. Renosky reli es on Se cu ra Comm Consulti ng, Inc. v. Securac om, Inc. , 166 F.3d 182 (3d Cir. 1999), i n which this court hel d that “ a plai ntiff must prove that an infring er acte d w illfully befo re the in fringe r’s pro fits5 

### On the one hand , tha t Di strict Court found that Renosky exhibited “a con siderable lack of g ood faith and fair dealing”by producing a n early i dentical product in identical packaging, using the s ame pr imar y m arketing too l (the infomercial) with similar content, and b y presenting himself as thedeveloper

of the BanjoMinnow in ma rketing m ateri als for the Bionic Minnow. On the other hand, the court found that

even though Renosky

copied the

succes sfulformat

of the Banjo Minnow pr o duct and infomercial, “t here is no evidence that [R en os ky] deliberately in tended by that copying to co nfuse

consumers into believing that the Bionic Minnow wa s a Banjo Buddies p roject.”

9 are r eco ver able ” un der § 35 (a) o f the La nha m A ct. Id. at 190 (citing George Basch Co. v. Bl ue Coral, I nc. , 968 F.2d 1532, 153 7 (2d Cir. 19 92)). T he D istrict Co urt’s fin ding s related to the issu e of R enos ky’s inten t are am bigu ous a nd p ossibly

co nt ra di cto ry. 5 However, we need not deci de whether the Distri ct Court f

ound or should ha ve found that Renosky acted willfu lly, becaus e w e con clude that Se cu ra Comm ’s bri ght-l ine willful ness requirement has be en superse ded by s tatute and that, based on allthe rel evant equi table factor s, the District Court did not

abuse it s discretion by

orderi ng an accounti ng of Renosky’s profits. Se cu ra Comm ’s bri ght-l ine rul e was the dominant view when Se cu ra Comm wa s issu ed in Jan uar y 199 9. See , e.g., Quick Te chnol ogie s, I

nc. v . Sage Group PLC , 313 F.3d 338, 347-48 (5th Cir. 2002) (coll ecti ng cases, includi ng Se cu ra Comm ); George Basch Co. , 968 F.2d at 1537; Restate ment (Thir

d) of Unfai r Competiti on § 37 (1995); J.6 

### The statute has been twice amended since Augu st 1999, see Pub. L. No. 106-11 3, Div. B, § 1000(a)(9 ), 113 Stat. 1536, 1501A -54 (Nov . 29, 199 9), and Pub. L. No. 107-273
, Div. C, Tit. III, § 13207(a), 116 St at. 1906 (Nov. 2, 2002), and now reads a s follows: When a violation o f any rig ht of t he re gist rant of a mark r egiste red in the Patent and Trademark Office, a violati on under section 1125(a)or (d) of this title, or a willful viola tion under section 1125(c) of this title,

10 Thomas McC arthy , 5 M cCa rthy o n Tra dem arks a nd U nfair Competiti on § 30:62 (4t h ed. 1996). In August 1999, how ever, C ong ress am ende d § 3 5. Prio r to the a men dm ent, that secti on provided as follows: When a violati on of any right of t he regis trant

of a mark regis tered i n the Pate nt and Trademark Offi ce,
or a vio latio n un der sec tion 43( a) [1 5 U .S.C . § 1125(a)] , shal l have been es tabli shed . . . the plaint iff shallbe enti tled .
. ., subject to the principl es of equity , to recover (1) defendant’ s profi ts, (2) any dam ages sustain ed by the plaintiff , and (3 ) the co sts of the action.

Se e S ec uraCo mm , 1 66 F. 3d a t 1 86 ( quo ti ng f or mer15 U. S. C. § 1117(a)) . The 1999 amendment repl aced “or a vi olati on under section 43(a) ” with “a vi olati on under section 43(a) , or
a willf ul violat ion under s ecti on 43(c), ” see Pub. L. No. 106- 43, § 3(b ), 11 3 S tat. 21 9 (A ug. 5 , 199 9) (e mp has is ad ded ). The plain language of the amend ment indicates that Congress intended to condition monetary awards for § 43(c) violations, but not § 43(a) violati ons, on a showing of w illful ness. 6

### shal l have been est ablished in any

civil a ction ar ising underthis cha

pter, t he plaintiff shall be

entitled, subject to the provis ions of secti ons 1111 and 1114 of this title, andsu bject to t

he princi ples of equity , to rec over (1) defendant’s profits, (2) an y damages susta ined by the plaintiff, and (3) t

he costsof the act

ion. 15 U.S.C. § 1117(a).

11 We presume Congress was aware that most courts had

cons istently requ ired a s how ing o f w illfulnes s prior to disgorgement of an infringer’s profits in Lanham A ct cases, despit e the abse nce of the word “wil lful” in the s tatutory text prio r to 1 999

. See Sch ei dema nn v . I NS , 83 F.3d 1517, 1525 (3d Cir. 1996) (“[W]e must presume that Congress is aware of existing judicia l interpre tations o f statute s.”). By ad ding this word to the s tatute in 1999, but li miti ng it to § 43(c) violations, Congress effectively superseded the will fulness req uire me nt as app lied t o § 4 3(a ). See Russell o v. U.S. , 464 U.S. 16, 23 ( 1983) (“ ‘ Where Congress includes particular language i n one secti on of a stat ute but omi ts i t in anot

her secti on of the same Act, it i s general ly presumed that Co ngre ss acts in tention ally and p urpo sely in the d ispara te inclus ion or exclusion. ’ ”) ( quoting United Stat es v. Wong Kim Bo , 472 F.2 d 72 0, 72 2 (5 th C ir. 19 72) ). Th is c on clu sio n i s s up po rte d b y Quick Technologi es , 313 F.3d at 349, the only other appe llate decisi on to reac h the issue. The Fifth Cir cuit i n Quick Technologi es consider ed the effect of t

he 1999 amendment and held t hat, based on earl ier decisi ons of that

court as well as “t

he plai n language of [§ 43(a)] ,” wil lful i nfringement was not a prer equisi te to an12 acc oun ting of th e inf ring er’s p rof its. Id. The court not ed the wealth of cont

raryauthori ty , inc luding Se cu ra Comm , but pointed ou t that all of those cases p receded th e statutory cha nge

. Id. at 347-48. The Quick Technologi es court reaff irmed the fa ctor-b ased appr oach elabo rated in prior F ifth Circuit cases, includi ng Pebble Beach Co. v. Tour 18 I Limited , 155 F.3d 526, 554 (5th Cir . 1998), explai ning that the inf ringer ’s intent was an import ant — but not indisp ensa ble — facto r in eva luating wh ether e quity sup ports disg org ing the in frin ger ’s pr ofits

. Quick Techs. , 313 F.3d at 349. These factors “i nclude, but are not limi ted to ( 1) whether the defendant had t he inte nt to conf

use or decei ve, (2) whether

sales have been diverted, (3) the adequacy of other r eme dies, (4) any unr easo nable delay by the plaintiff in
assert ing his right s, ( 5) the publ ic interest in making the misconduct unprofitable, and (6) whether it i s a case of palming off. ” Id. (inte rna l citati ons om itted ). In Gucci America, I

nc. v. Daffy’s , Inc. , 354 F.3d 228 (3d Cir. 2003), t

he panel majority

noted that the 1999 amendment might affe ct the continue d validi ty of Se cu ra Comm ’s br igh t-line wil lfuln ess r equ irem ent. Id. at 239-40 (noting that statutory languag e and legislative history of the 1999 amen dment “suggests that willfulness i s a prerequi sit e in a trademark di luti on cause of action, not an infri ngement acti on”). The maj ority determined i t did not need to deci de the i ssue, however, rea soning that even under the Quick Technologi es factor -based appr oach, the District Court did not

abuse it s discretion i n refusi ng to order an
acc oun ting of th e inf ring er’s p rof its. Id. at 241-43 (“Accordingl y, even after the 1999 amendments to the Lanham Act and any i mpact it may have had on our

holding7 

### Judge Rosenn w rote a di ssenting opinion in Gucc i America
, concludingthatthe bala nce of equit

ies favor ed the plaintiff
, and that an accounting of the infringer’s prof its would make thetrademark own er whole. 354 F.3d at 246-47 (Rosenn, J., disse n ting). Judge Rosenn specifically concluded that Secur aComm“ is no l onger binding precedent because it has been superceded by

subsequ ent s tatutor

y a mendm ents to t he Lanham Act.” Id. at 245.

13 in Se cu ra Comm , we nevertheless conclude that the dist rict court di d not abuse i ts di scretion given t he equities her e, including D affy’s good f aith.”). 7 For the r easons expl ained above, we now hold that Se cu ra Comm has bee n su per ced ed b y the 1 999 am end me nt. Relyi ng on the Quick Technologi es factor -based appr oach endorsed i n Gucci America , we furthe r conclude that t he Distri ct Court di d not abuse i ts di scretion by orderi ng an accounti ng of Renosky’ s profi ts. Apart from his contention that hi s viol ation was not willful , Renosky does not ar gue that the Dist rict Court abused i ts di scretion. Accordi ngly , our consider ation of

the equi ties here willbe brief . Because t he District Cou rt’s findings con cerning R enosky’s intent are diff icult to re con cile, see supra note 5, we will ass ume that factor is neutral. N onetheless, all of the o ther Quick Technologies fac tors s upp ort a n aw ard of p rof its he re. It i s li kelythat Renosky ’s conduct diverted sales from Ba njo Bu ddi es. See Quick Techs. , 313 F.3d at 349 (fact or two). The Dist

rict Court found that Renosky ’s marketing for the Bioni c Minnow w as confusi ngly simil ar to t hat of the Banjo Minnow, noting numerous materi al si milari ties in the14 infomercials used to market each product. The court also found that the two lure kits were “n early identical” and w ere packaged ident

ical ly . The court

further found that

the markets for

the two product s were “eit her the s ame or substantially overlap[ping ].” The D istrict Court’s obse rvation s con cernin g the c lose sim ilarities of the pro ducts as well as their packaging and marketing schemes also strongl y suppor

t the c onclusi on that Renosky was “palming off ” the Bio nic M inn ow as a Ba njo Bu ddi es p rod uct. See id. (facto r six). Th e pub lic has a n intere st in disc oura ging this type of b ehav ior, as it inter feres with the co nsum er’s ab ility to

ma ke in for me d pu rch asin g de cisio ns. See id. (factor five). Ne xt, th ere a re n o ot her ade qua te rem edie s. See id. (factor three) . The District Court rej ected Banjo Budd ies’

es ti mat io n of

it s da mage s ( for

both t he Lanha m Actcl ai ms and the state law claims) as too sp eculative. If Re nosky’s prof its are no t assess ed, B anjo B udd ies w ill be w holly

un co m pe ns ate d f or R en os ky’ s in fr in gi ng ac tio ns . F in all y, Banjo Buddies di d not delay i n bringi ng suit to st op Re nos ky’s in frin gin g ac tion s. See id. (fac tor f our ). Accordingly , we conclude t hat the Distri ct Court di d not abuse it s discretion i n decidi ng to order an accounti ng of Renosky’s profits.

B. The D istrict

Court’s Estimation of P rofits.

The remaining i ssues i n Renosky’ s appeal c oncern the Distri ct Court’ s calcul ation of the amount of pr ofits to be

aw arded . We first ho ld that th e D istrict Co urt did n ot clea rly err byrejec ting Renosky ’s cont ention t hat he suffe red a net loss on the B ionic M inno w p roject, an d did not ab use its8 

### As the cour t explained, “I f

ind disturb ing an analysis which i ncludes calcul ations t o the penny

for the cos t of the

15 discre tion by us ing an alterna tive m ethod to estim ate Re nos ky’s p rof its. See Tamko Roofing Products, Inc. v. Ideal Roofing Co., Ltd. , 282 F.3d 23, 39 (1st Ci r. 2002) (calc ulati on of profits un der section 35 (a) is left to the trial court’s discre tion, an d w ill not be disturb ed un less “it res ts on c learly

erroneou s findings o f fact, incorrect legal stand ards, or a

me anin gfu l erro r in ju dgm ent” ). Section 35( a) provi des that “[i]n a ssessi ng profit s the pl ain tif f s ha ll b e r eq ui re d t o p ro ve de fe nd an t’s sa les on ly; defendant must

prove allelements of cost or deducti on claim ed.” 1 5 U .S.C. § 111 7(a); see als o Caesars World, Inc. v. Venus Lounge, Inc. , 520 F.2d 269, 273 (3d Cir. 1975). The Distri ct Court a ccepted t he Alpern report’s f

igure for total sale s of the B ion ic M inn ow thro ugh No vem ber 22, 2 002

. Thus, Banjo Buddies ’ burden of pr oof was sati sfied by Re nos ky’s a cco unt ant’ s fin anc ial re por t. Ho we ver, the Distric t Cou rt held th at Re nosk y failed to satis fy his b urd en o f pr oof reg ard ing cos ts an d de duc tion s. The Distri ct Court reject ed the Alpern report ’s concl usion that Renosky suffered a loss of $ 492,699.00 for several reasons,

mo st of wh ich R eno sky m ake s no attem pt to refu te on app eal. First , the court obs erved that the Alpe rn report’s s ummary of direct e xpen ses ass ociate d w ith the B ionic M inno w p roject — totaling almo st five m illion do llars — wa s sorely lack ing in detai l, l umping costs into s ix broad categori es with no explanation of what spec ific expenses those cate gories repres ented. 8 Reno sky appears to arg ue that the D istrict Court

### product(lessthan $2 million total) but fails to explain expenses totaling almos t $5 million [by] providing even a modicum of detail in supp ort.”

9 

### The A lpern re

port contains summaries of financia l records, not th e records themselves.

16 improperl y r eject ed the di rect e xpense summary because the preparers of the Alpe rn report w ere unab le to confirm expenses as sociated with Paci fic Media, a vendor repres enting no more than two perc ent of the direc t expenses associ ated with the Bioni c Minnow. This argument i s a red he rri ng . T he co ur t re jec ted th e s um m ar y in spi te of the preparers’ success in obtai ning corroboration from most majo r ven dors, n ot bec ause of its fa ilure to o btain

cor rob ora tion fro m o ne. Renosky fai ls t o address t he District Court ’s remai ning

reaso ns fo r rejectin g the A lpern r epor t’s ana lysis of co sts

assoc iated w ith the B ionic M inno w p roject. M ost im portan t, Ren osky m akes no atte mp t to exp lain w hy he tw ice fa iled to produce veri fied fi nancialrecords supporti ng his cl aimed
costs a nd d educ tions as orde red b y the cou rt. 9 The court also observed se veral une xplaine d discr epancies between the Alpern report’s s ummary of di rect e xpenses and other evidence in the record. N ext, the court rejected the Alpern report ’s concl usion that “shared expenses” a ssociated with t he Bionic M innow project we re $ 1,416 ,050. The court explai ned that

the Alpern report di d not show how “each it em of general expense contribut ed to the producti on of the infring ing item s in issu e and offe r a fair a nd ac cepta ble17 formula for

alloc ating a

given portion of overhe ad to the parti cular i nfringi ng items at issue. ” (cit

ing Design v. K-M art Apparel Corp. , 13 F. 3d 55 9, 5 65 -6 6 ( 2d C ir. 1 99 4) ). F in all y, the court found that

the Alpern report’ s “bott om line” l acked credibi lit y. The court doubt ed that Renosky would al low the Bionic Minnow to lose nearly half a mil lion dol lars , and not ed that Renosky ’s cl aimed loss was inconsi stent with his atte mpt to secur e clarific ation t

hat profi ts accr

ued after November 22, 200 2, w oul d be lon g to him and not Ba njo Bu ddi es. Co nside ring the collec tive stren gth o f these argu men ts to ge th erwit

h Re nos ky ’s fa ilur e t o a ddres s mo st of th em, we conclud e that the D istrict Court’s rejection of the A lpern report’s cost anal ysi s was not clearly erroneous. Because Renosky fail ed to meet hi s burden of pr oving
costs and deducti ons, the District Court was forced to us e an alternative metho d to estimate R enosky’s profits. Th e court decided to relyon the trialtesti mony of Renosky’s business manager, Denice Altemus, who st ated that RenoskyLures products “alway s [make] a bottom li ne of between 15 and 17%.” Renosky ar gues that there i s no dire ct evi dence that the B ionic M inno w e arned a pro fit in this ra nge. W hile this is true, the onus of pr oducing such evi dence is c learl y pl aced by § 35 (a) o n R eno sky, no t Ba njo Bu ddi es. 1 5 U .S.C . § 11 17( a). The Distri ct Court ha s broad di scretion in s haping remedi es und er § 35( a), see Burger King Corp. v. Weaver , 169 F.3d 1310, 1321 (11t

h Cir. 1999) , and di d not abuse t hat dis creti on byes t i ma t i ng t ha t t he Bi on i c Mi nn ow ear ne d apr of i t of 16 %. Ren osky fu rther arg ues th at Ba njo B udd ies is on ly entitled to 48% of w hatev er pro fits w ere ea rned by the B ionic Minnow project. That is, if Banjo Buddies had produced the Bionic Minnow, it

would have recei ved only48% of the18 prof its earne d fro m the sale of the lure und er its con tract w ith TriS tar. W e first no te that this conte ntion is impo ssible to evaluat e on appeal as a factualmatter . Pres umably Tri-St ar provided s ome service s in exchange for it s profi t-sharing agreement wit

h Banjo Buddies, and presumably Renosky procured t

hose same services t

hrough servi ces contr acts r ather than a prof it-sharin g agr eem ent. T here is no w ay for this

cou rt to d eterm ine w hich par ty struc k th e be tter d eal. Furth er , t

hi s arg ume ntal so fa il s a s amatte r o f l aw, beca use th ere is n o req uirem ent tha t the de fend ant’s p rofits approximate the plainti ff’s damages. Section 35(a) permits a plaint iff t o recover, “subject

to the principl es of equit y . . ., (1) defendant’ s profi ts, (2) anydamages sust ained bythe plain tiff, a nd ( 3) th e co sts o f the actio n.” 1 5 U .S.C . § 1117(a). As the Second Circui t observed in George Basch
, 968 F.2d at 153 7, an a ccou nting o f the in fringe r’s pro fits is avail able i f the defendant is unj ustl y enriched, if the plaint iff sustai ned damages, or

if an accounting is necessary t o deter infri ngement. These rati onales are stated disj unctive ly ; any
one wil l do

. See id. Allowing Renosky to keep hal f the esti mated profi ts of hi s infringing ac tivi ties would not serve the Congress ional pur

pose of making i nfringement unprofit able — Renosky would be unjus tly enriche d and other

wo uld -be infr ing ers w oul d be insu ffic ientl y dete rred

. See Burger King Corp. , 169 F .3d at 1 321 -22; Louis Vitton S.A. v. Lee , 875 F .2d 58 4, 588 -89 (7 th Cir. 1 989 ); Pla ybo y E nter s., Inc. v. Baccarat Clot

hing Co. , 692 F.2d 1272, 12 74 (9th C ir. 1982). Even if Banjo B uddies receives a windfall in thi s case

— wh ich, as d iscusse d in the prev ious p aragra ph, is impossi ble for t

his court to determine — it is preferabl e that Banjo Buddies rather t

han Renosky r eceive t

he benefit s of19 Re nos ky’s in frin gem ent. See Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kres ge Co. , 316 U .S. 203, 206 -07 (194 2). Finally, we agree w ith Reno sky that the District Cou rt clearlyerred by adding dist ributions made to Renosky as a sharehold er in the Bion ic Minn ow p roject to the profits aw ard because these dis tri butions were alre ady ac counted for in the court’ s esti mation of pr ofits . Financ ial records pr epared by Renosky Lures ’ busine ss manager and i ntroduced at trial by Ban jo Bu ddies show that distrib utions we re paid acco rding to a sim ple f orm ula: f ive p erce nt o f gr oss sale s ea ch m ont h. Those records treat

the dis tri butions as an expense for boo kkee ping purp oses. T hat is, ea ch m onth ’s “T otal Pro fit” was calcul ated bysubtra cting e xpenses fr om sales, and sharehol der dis tri butions (denominat ed “Return Reserve”) were considered expenses i n this calcul ation. Banjo Buddies adde d the “ Tota l Prof it” and “Re turn R eserv e” fig ures to arri ve at a “Tot al Net Profi t” fi gure which it then asked t

he Distri ct Court to assess as the measure of profit s under sec tion 35(a). This is sen sible — distributing mon ies to sharehold ers is a method of

disburs ing income, not a busi ness expense , and the distributions shou ld be include d in the D istrict Court’s profit s award. The Dist rict Court may ha ve been attempting to apply this reasoning w hen it determ ined that Re nosky’s share of t he dist ributions shoul d be added to the esti mated prof its aw ard. H ow ever, w hen th e D istrict Co urt dec ided to esti mate profi ts bymulti ply ing the Alpe rn report’s gross sal es figure by sixt een percent , rat

her than us e the method pr oposed by Banjo B uddies, the issue c reated by Ren osky Lure’s bookkeeping pra ctic e of tre ating di stributions as expenses disappeared. The court ’s estimate acc ounts for all of the profit s of the Bioni c Minnow project — the share holder10 

### Banjo Buddies is incorporated in Wis consin. As theDistrict Court

ex plained, the “internal a ffairs doctrine” holds that courts loo k to the law o f the state of in corporation to resolve iss ues involving the

inte rnal affai rs of a corp oration. 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 (19 83). Because the District Cour t sits in Pe nn syl va nia, it applies that state’s con flict of law p rinciples, Klaxon Co. v. Stento r Electric Manu facturing C o., 313 U .S

. 487 (1941), and Pennsylvania has a dopted the “internalaffairs doctrine” by statute. See 15 Pa. C ons. Sta t. § 4145 (a); In re Estate of Hall , 731 A.2d 617, 622 (Pa. Super. Ct. 1999 ). Banjo Buddies’ claim

that Renosky br

eached hi s fidu ciary dut y of

20 distri butions, which amounted to five percent of gross sales,

as w ell as an estima ted ele ven p ercen t of ad ditiona l profit. C. Overch arge Dam ages.
Banjo Buddies ar gues on cross -appeal that t he District Court err ed by r efusing t o award monetarydamages after determi ning that

Renosky vi olate d his fi duciary duty by

ove rch arg ing Ba njo Bu ddi es f or th e B anjo M inn ow lure kits. We hold that t

he District Court

properl y determined that Banjo Buddies fai led to meet its burden of provi ng the amount of damages to a “reasonabl e cert ainty .” Plywood Oshkosh, Inc. v. Van’s Real ty & Const r. of Appleton, Inc. , 257 N.W.2d 847, 849 (Wis. 1977) (“The cl aimant gener ally has the bu rden of p rovin g by cred ible ev idenc e to a re ason able
certa inty his damage, and the amount t hereof must be established at least to a reaso nable certainty.”). 10 Sp ec ifi ca lly,

### goo d faith and fair dealing by overcharging for the Ban j o Minnow lure k its goes to Ban jo Bud dies’ internal affairs. Ac co rd in gl y, the District

Court properly applied Wisconsin law to this issue.

21 the D istrict Co urt did n ot clea rly err by findin g that B anjo Buddies’ Exhibi t 201 was insuf fici ently reli able. Further , the

cour t did no t com mit leg al error b y refusin g to es timate dam ages base d on this un reliable e xhib it, becau se B anjo Bud dies could h ave, but failed to, introdu ce other, mo re reliable evi dence as proof of the amo unt of damages. To prove the amount of overcharge , Banjo Buddies combined two approache s. Fi rst, Banjo Buddies i ntroduced invoice s indi cati ng Renosky’ s costs for some components of the Banjo M innow lure kit. The District Court accepted these invoice s as rel iable proof of Renosky ’s cost s. Banjo Buddi es then a dded estima ted ov erhea d and a reaso nable prof it marg in to arrive at

the price Renosky should have charged for those

com pon ents o f the lu re kit. H ow ever, th ese inv oices o nly accounted for

20 of the 109 components of the Banjo Minnow lure ki t. Banj o Buddies int roduced Exhibi t 201, a n undated price q uote f rom Ren osky to a third pa rty, Nation al M edia, to establish the pric es R enos ky shou ld hav e cha rged Ban jo Bu ddi es a nd T ristar for the r em ainin g 89 com pon ents

. Co mb ining th e invo ices (ad justed f or ov erhea d and prof it) and the pri ce quote, Banjo Buddies cont ends that Renosky should h ave cha rged T ristar and Ban jo Bud dies $3.44 p er lure kit, $1.76 le ss than t

he amount actua lly

charged, $5.20. The Distri ct Court, however, found the NationalMedia price quote unrel iable

.11 

### Banjo Buddies’ failure to delve into the National Media price quote at trial despite the fact

that this document is thelinchpin of its damages proof is not as inexp licable as it appears. Itturns out t

hat Banjo Buddie s did not make the argume nt that this price quote est

ablishes the approp riate price for most of the componen ts in the Banj o Minno w lure kit un til after trial in its pr oposed findingsof fact and c onclusions of

22 This findi ng was not clearly erroneous . Fir st, the National Media quote is undated. There is e vidence that over time some of Renosky ’s component prices fe ll, while othe r component pri ces, oper ationa l expenses , and l abor cost s rose, after R enos ky’s bus iness m anag er pro duce d the q uote to Ban jo Bu ddies that esta blished the pric e of $ 5.20 p er kit in Ma rch 199 6. Given these fluctuating costs, the District Cou rt properl y obse rved that

not knowing the date of the National Media quote makes it

diffi cult to conclude that the component prices quo ted the rein sh ould have been com parab le to tho se in the Banjo Buddies quote. The Distri ct Court f urther noted that Banj o Buddies’ couns el fai led to s uffici ently questi on Ren osky or h is busin ess m anag er abo ut the N ationa l M edia quo te at trial. Su ch qu estionin g cou ld hav e read ily establ ished t

he date and context of the quote, and offered t he persons most

famili ar with t

he component pri ces — Renosky and his busi ness manager — an opportuni ty to explain the differe nt pri ces in t

he NationalMedia and Banjo Buddies price q uotes . The Na tional M edia q uote is n ot inhe rently

unre liable, bu t given Ban jo Bu ddies ’ failure to sub stantiate the qu ote at trial, th e D istrict Co urt did n ot err b y refusin g to relyon the quote

. 11

### law. Thatis, by the time Banjo Buddies realized the im portance of the docum

ent, it was too la

te to fle sh it out on t

he stand.

23 Banjo Buddies al ternat

ively argues that the Distri ct Court, ha ving found li abili ty , shoul d nonethel ess have esti mated damages based on t he less -than- reli able Nati onal M edia pric e qu ote b eca use it w as th e on ly ava ilabl e ev iden ce. As the Wisconsi n Supreme Court expl ained i n Metropolit an 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

plaint iff has bee n injured . . . and liability is clear,” “ [i]t is eno ugh if the e viden ce ad duce d is suffici ent to e nable a court or j ury to make a fai r and

reaso nable appr oxim ation.” ( Intern al citation om itted); see also Cutl er Cranberry Co. v. Oakdale Ele c. Co-op. , 254 N.W.2d 234, 240 (Wis. 1977) (“[T]he f act that the full e xtent of the damages i s a matte r of uncert ainty by r eason of the nature of the tor t is not a ground for

refusi ng damages.”) . The prob lem h ere is tha t the lack of b etter ev idenc e in this c ase is
not due to a la ck o f ad equ ate re cor ds, Metropolit an Sewerage
, 255 N.W.2d at 299, or

the “nature of the tort ,” Cutler Cranberry , 254 N .W.2d a t 240, but to B anjo Bu ddies’ failure to int roduce more re liabl e evidence, eithe r by intr oducing Renosky’ s invoi ces for t he remaini ng 89 components or substant iati ng the undat ed NationalMedia quote thr ough questi oning at t

rial . As the court explained in Cutler Cranberry , the rule permitting estimated damages i n the face of uncert ainty

as to t he amount of damages “has been

sus taine d w her e, from the n atu re o f the c ase , the ext ent of injury and t

he amount of damage are not capable of exa ct and24 accurat e proof.” Id. (emphasis added) (i nternalcitation omitted). Banjo B uddies attem pts to lay the blame fo r its failure to int roduce better evi dence on Renosky . Banjo Buddies
conte nds th at Re nosk y failed to p rovid e disco very “in a timely manner,” and di d not produce “ any i nvoices or other information on cost s unti l two busi ness day s before t rial .” However, Banjo Buddies never clai ms that Renosky ultima tely failed to prod uce th ose d ocum ents. F urther , if Banjo Buddies fel t that

Renosky had not

complied ( or not timel y compli ed) with i ts di scoveryrequest s, i t shoul d have pursu ed relie f un der the disco very rules or sou ght a contin uanc e. Ba njo B udd ies can not rea sona bly claim th at its burden of proof s hould be lowere d because i t did not have time t o sift

through t

he boxes of documents Renosky alle gedlyproduced on the eve of trial. Furthermore, as noted abo ve, see supra n.11, B anjo B udd ies’ failu re to su bstan tiate the Na tional M edia quo te cannot b e attributed to Re nosky’s fo ot -d ra gg in g d ur in g d isc ov er y.

IV. Conclusion

For the r easons gi ven above, we willaffirm the District Co urt’s aw ard o f Re nosk y’s estima ted pro fits on the B ionic M inno w p roject b ut reve rse the Distric t Cou rt’s dec ision to ad d R en os ky ’ s s har eh ol de r di st r i bu t i on s to tha t am ou nt

. We will affirm the Distri ct Court’s judgment in all ot her respects.