In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 07-3585

WMS GAMING INC.,

Plaintiff-Appellant,

v.

WPC GAMING PRODUCTIONS LTD. and

PARTYGAMING PLC,

Defendants-Appellees.

____________

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 06 C 7100—Blanche M. Manning, Judge.

____________

ARGUED FEBRUARY 25, 2008—DECIDED SEPTEMBER 8, 2008

____________

Before ROVNER, WOOD, and WILLIAMS, Circuit Judges.

WOOD, Circuit Judge. This appeal involves a trademarkinfringement dispute between gaming companies. It

began when WMS Gaming, Inc. (“WMS”), sued WPC

Productions Ltd. and its parent corporation, PartyGaming

PLC (collectively, “PartyGaming” or “the defendants”),

for PartyGaming’s unapologetic infringement of WMS’s

registered trademarks JACKPOT PARTY and SUPER
2 No. 07-3585

JACKPOT PARTY. PartyGaming is based in Gibraltar, but

the electronic gaming services that it provides span

the globe. After several failed attempts to persuade

PartyGaming voluntarily to cease its infringing uses

of WMS’s marks, WMS filed this suit in federal district

court seeking injunctive relief, damages, and an equitable

accounting of the profits PartyGaming reaped from its

use of WMS’s marks in the United States.

Despite receiving proper notice, the defendants have

opted to ignore WMS’s lawsuit entirely. The result was

a default judgment for both monetary and injunctive

relief entered in WMS’s favor. Believing that it was

entitled to additional relief, however, WMS appealed,

arguing that the district court applied the wrong standard

to its claim for an accounting of profits. We reverse.

I

WMS has manufactured, sold, and leased gaming

devices, including slot machines, for many years. Since as

early as 1998, WMS has used the JACKPOT PARTY

trademark (U.S. Reg. No. 2,283,967) in interstate commerce in connection with its goods, and since as early

as October 5, 2004, it has used the SUPER JACKPOT

PARTY trademark (U.S. Reg. No. 2,952,924) in the same

way. Under U.S. law, these registrations constitute conclusive evidence of WMS’s exclusive rights to the underlying marks for the uses specified in the registrations, see

15 U.S.C. § 1115(b), and they also provide nationwide

constructive notice of WMS’s rights to the underlying

marks, dating back to the filing dates of the applications
No. 07-3585 3

from which the registrations matured: December 9, 1997,

for JACKPOT PARTY, and February 22, 2002, for SUPER

JACKPOT PARTY, id. § 1057(c).

PartyGaming’s business is online gaming, including slot

machines, poker, bingo, sports betting, and other

casino games. During the years 2004, 2005, and 2006,

PartyGaming used approximate and even exact reproductions of WMS’s marks for that business, throughout

the world and in the United States. Its use of WMS’s marks

is well-documented and has occurred frequently and

persistently throughout the years in question.

In addition to having constructive notice of WMS’s

ownership of the trademarks by virtue of their registration with the U.S. Patent and Trademark Office (“PTO”),

PartyGaming also had actual notice that WMS owned the

JACKPOT PARTY mark by the beginning of 2005. At that

time, it attempted to register the mark “PARTYJACKPOT”

with the PTO, but the PTO promptly rejected the

request because it found that the mark was “confusingly

similar” to WMS’s prior registered mark JACKPOT

PARTY. This was not enough to prompt PartyGaming to

abandon its use of the mark. To the contrary, the record

shows that it instead expanded its use after the PTO’s

action, and with its use, the profits it derived from the

mark. According to PartyGaming’s 2005 Annual Report,

available from its website, the company earned $977.7

million in total revenue that year, of which 84%, or $820

million, came from U.S. customers. (See http://

www.partygaming.com, 2005 Annual Report at 80, 87

(follow “Investors” hyperlink to “Financial Performance”
4 No. 07-3585

and then “Financial Reports” hyperlinks), report reproduced in App. vol. 1, at 141 ff.) PartyGaming also continued for several months to pursue its application in the

United States to register PARTYJACKPOT, ultimately

forcing WMS to oppose that application in litigation

before the Trademark Trial and Appeal Board.

While that litigation was pending, the U.S. Congress

passed the Unlawful Internet Gambling Enforcement Act,

Pub. L. No. 109-347, 120 Stat. 1952 (2006) (“UIGEA”), which

effectively prohibited gambling businesses from receiving proceeds or monies in connection with online

gambling. Up until that point (late 2006), the largest source

of PartyGaming’s revenues, by far, was the United States.

In the wake of the UIGEA’s enactment, however,

PartyGaming decided to cease its operations in the U.S.

market. It also abandoned its application and litigation

in this country regarding the PARTYJACKPOT mark.

Once again, however, PartyGaming did not abandon

its use of WMS’s trademarks. It continued, for a time, to

rake in hundreds of millions of dollars in revenues from

U.S. customers. When amicable efforts to resolve the

dispute failed, WMS filed this suit, which, as we noted,

PartyGaming chose to boycott despite proper service of

process. Eventually, the district court, having found that

it had subject-matter jurisdiction under 15 U.S.C. § 1121

and 28 U.S.C. § 1338 (and, we might add, apparently 28

U.S.C. § 1332(a)(2)), and that the requirements of

Illinois’s long-arm statute, 735 ILCS 5/2-209 were satisfied, granted WMS’s motion for entry of default judgment. Its order, entered July 19, 2007, awarded damages to
No. 07-3585 5

WMS in the amount of $2,673,422.10. It also granted

injunctive relief, the terms of which it provided in an

order entered on September 21, 2007.

Though the district court granted relief to WMS, the

monetary award that WMS had sought was exponentially

larger than the one it got: WMS had requested

$287,391,140.70. It arrived at this figure by determining the

total amount of revenue that PartyGaming had earned as

a result of its business in the United States in 2004, 2005,

and 2006. WMS obtained that data from PartyGaming’s

website, which featured links to its public financial statements and annual revenue reports. The reports (which

we have in the substantial Appendices that WMS has

filed) reveal, in PartyGaming’s own words and colorful

charts, the hundreds of millions of dollars that it earned

during the years in question. The reports even separate

the revenues into “U.S.” and “non-U.S.” revenues. When

it became clear that PartyGaming would not respond to

WMS’s lawsuit, WMS turned its focus to the accounting-ofprofits remedy it wanted, and it used the defendants’

annual reports to estimate how much money the defendants had earned in the United States while infringing

WMS’s trademark rights.

The district court concluded that WMS’s estimate of its

2004 damages was “reasonable.” That amount was

$891,140.70, and it was significantly lower than the estimates for 2005 and 2006, because the revenues for the

later years reflected PartyGaming’s expanded use of the

marks. In the district court’s view, however, WMS’s

estimates for 2005 and 2006 could not “be ascertained with
6 No. 07-3585

reasonable certainty” and were “clearly excessive.” It

therefore based its awards for those years not in the

amounts that WMS had requested, but instead on the

same amount that it had deemed “reasonable” for 2004:

$891,140.70. The result was the total award reflected in

the court’s order, $2,673,422.10.

WMS responded with a motion under FED. R. CIV. P.

59(e) to alter or amend the judgment. In its motion, it

tried to persuade the district court that it had committed

legal error by applying the standard for actual damages

in its order for default judgment, rather than the proper

(and more flexible) standard for an equitable accounting

of profits. Both types of relief are available under the

Lanham Act to redress trademark infringement, see 15

U.S.C. § 1117(a), and they are distinct remedies with

different legal standards and burdens of proof. The district court denied the Rule 59(e) motion; it remained

committed to its prior interpretation of WMS’s request as

one for “damages” and concluded again that WMS was

asking for “damages that are clearly excessive” and

“cannot be ascertained with reasonable certainty.”

II

Before proceeding to the substance of WMS’s claims,

we believe that it is prudent to assure ourselves that the

federal courts have jurisdiction over this lawsuit. The

statutes on which the district court based its conclusion

that subject-matter jurisdiction exists were 15 U.S.C. § 1121

and 28 U.S.C. § 1338. See 15 U.S.C. § 1121(a) (granting

original jurisdiction to the district courts, and appellate
No. 07-3585 7

jurisdiction to the circuit courts of appeals, “of all actions

arising under this chapter [Chapter 22: Trademarks],

without regard to the amount in controversy or to

diversity or lack of diversity of the citizenship of the

parties”); 28 U.S.C. § 1338(a) (granting exclusive jurisdiction to the district courts “of any civil action arising

under any Act of Congress relating to patents, . . . copyrights and trademarks”); and 28 U.S.C. § 1338(b) (granting

the district courts “original jurisdiction of any civil action

asserting a claim of unfair competition when joined with

a substantial and related claim under the copyright,

patent, plant variety protection or trademark laws”).

WMS’s claims fall squarely within the scope of these

statutes.

Our appellate jurisdiction is secure because the defendants were properly served but failed to appear or answer

WMS’s complaint. They therefore were found to be in

default, and the district court’s entry of default judgment and later denial of WMS’s Rule 59(e) motion constitutes an appealable judgment. Though a few loose ends

remain in the district court (namely, WMS’s motion for

fees and costs and a separate motion to have the defendants held in contempt), those collateral issues do not

affect the existence of appellate jurisdiction for purposes

of the issues before us. See Osterneck v. Ernst & Whinney,

489 U.S. 169, 175 (1989) (costs); Budinich v. Becton Dickinson

& Co., 486 U.S. 196, 199-201 (1988) (attorneys’ fees).

We also note that while the defendants had the opportunity to contest the district court’s personal jurisdiction

over them, they have now waived their opportunity to
8 No. 07-3585

do so. See FED. R. CIV. P. 12(h)(1). While we thus cannot

rule on the point, it does appear to us that their business

contacts with the United States probably would have

sufficed to secure personal jurisdiction under FED. R. CIV.

P. 4(k)(2). Cf. Ins. Corp. of Ireland, Ltd. v. Compagnie

des Bauxites de Guinee, 456 U.S. 694, 715-16 (1982) (Powell,

J., concurring in the judgment) (court should assure

itself of prima facie support for personal jurisdiction).

III

WMS’s appeal rests on its position that the district

court misconstrued its request for relief as limited to one

for actual damages, rather than seeing it for what it was:

a request for the separate remedies of damages at law

(if possible) and an equitable accounting of profits. Indeed, WMS maintains that its central claim was for an

accounting, not for damages, and so the district court

committed reversible error when it failed to recognize

that distinct standards apply to each type of claim, which

in turn led it to conflate the standards for damages with

those that govern an equitable accounting of profits.

We begin by noting that because this was a default

judgment, the usual rule that a party should be given

the relief to which it is entitled whether or not it has

requested that relief does not apply. See FED. R. CIV. P.

54(c). Instead, Rule 54(c) stipulates that “[a] default

judgment must not differ in kind from, or exceed in

amount, what is demanded in the pleadings.” WMS’s

pleadings thus are more important, for purposes of relief,
No. 07-3585 9

than they would have been had PartyGaming appeared

and contested the case. 

That said, we find it clear from WMS’s filings in the

district court that, contrary to the assumption in the

district court’s orders of July 19, 2007, and September 24,

2007, WMS has throughout this litigation requested an

equitable accounting of profits, rather than—or at least

in addition to—actual damages. In its six-count complaint, WMS repeatedly stated that it sought the equitable

remedies of injunctive relief and an accounting of profits,

and it asserted multiple times that “there is no adequate

remedy at law” for the defendants’ actions. The complaint

also asks for attorneys’ fees, costs, statutory damages,

treble damages, punitive damages, and, at a few points,

actual damages. All of the paragraphs requesting actual

damages also request an accounting of profits. From the

start, then, WMS recognized the distinction between

these two types of relief and properly requested that the

court consider both. The complaint also shows that the

request for an accounting appears far more often than

the request for actual damages. WMS thus did not bury

or obscure its requests for an accounting, nor did it

attempt a sudden change of course midway through the

proceedings.

WMS’s motion for entry of default judgment continues

this theme. This motion, filed after WMS realized that

PartyGaming would not respond or participate in this

litigation in any way, asks only for “injunctive relief

and . . . an accounting of profits.” Similarly, WMS’s

memorandum in support of entry of default judgment
10 No. 07-3585

requested only statutory damages (available for willful

infringement), injunctive relief, and “an accounting of

defendants’ profits while operating under the infringing

marks”; it makes no mention at any point of a request

for actual damages.

Section 35 of the Lanham Act, on which WMS was

relying, has this to say, in relevant part, about a plaintiff’s

remedies:

When a violation of any right of the registrant of a

mark registered in the Patent and Trademark Office . . .

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. . . . In assessing profits the plaintiff shall be

required to prove defendant’s sales only; defendant

must prove all elements of cost or deduction 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 the 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. . . .

15 U.S.C. § 1117(a).
No. 07-3585 11

We agree with WMS that the district court, despite

mentioning in passing the proper standard for an accounting of profits, made a fundamental error of law by

failing to distinguish between WMS’s right to the defendants’ profits and its right to its damages. In its order of

July 19, 2007, the district court referred to WMS’s “requests

for damages.” It then noted that “the plaintiff must provide

evidence to the court so that it may . . . ‘ascertain the

amount of damages with reasonable certainty.’ ” The court

quoted from In re Catt, 368 F.3d 789, 793 (7th Cir. 2004),

which had quoted Credit Lyonnais Securities (USA), Inc. v.

Alcantara, 183 F.3d 151, 155 (2d Cir. 1999). Both of those

cases dealt with claims for actual damages, not for an

accounting of profits.

The court then set forth the three “types of damages”

that “are available for the infringement of trademarks,”

quoting in part the language from section 35 of the Lanham

Act that we have furnished above. But after doing so,

the district court did not follow through with two

separate computations, one for the accounting and one

for damages. The result was that the court incorporated

into its accounting-of-profits analysis the additional

considerations of whether the “damages” could be “ascertained with reasonable certainty,” and whether WMS had

proven that its calculation properly separated out the

revenues gained from lawful business as opposed to

infringing uses of WMS’s marks. In rejecting WMS’s

estimate of profits for 2005, for example, the court stated:

Although the defendants’ Annual Report reported

revenue attributable to casino games, it did not identify
12 No. 07-3585

which portion of that revenue was attributable to

games that infringed WMS’ mark. According to WMS’

own submissions, the defendants offered a wide

variety of casino games, including “poker, bingo,

backgammon, sports betting,” and slot machines,

which presumably included slot machines that did not

infringe WMS’ marks. Therefore, the revenue amount

upon which WMS based its damages calculation

overstated the revenue generated by the defendants’

infringing uses of WMS’ marks. WMS has not identified any information from which the court can calculate what percentage of the defendants’ casino revenues are attributable to the defendants’ infringing

uses of WMS’ marks.

The court applied the same reasoning when rejecting

WMS’s 2006 estimate. This analysis was based on the

wrong standard. The Supreme Court held nearly a

century ago in Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,

240 U.S. 251 (1916), that “the owner of the trademark is

entitled to so much of the profit as resulted from the use

of the trademark,” and while it is often difficult to “ascertain[ ] what proportion of the profit is due to the trademark, and what to the intrinsic value of the commodity”—such that the proper proportional often “cannot be

ascertained with any reasonable certainty”—the Court

decided that

it is more consonant with reason and justice that the

owner of the trademark should have the whole

profit than that he should be deprived of any part of it

by the fraudulent act of the defendant. It is the same
No. 07-3585 13

principle which is applicable to a confusion of goods.

If one wrongfully mixes his own goods with those of

another, so that they cannot be distinguished and

separated, he shall lose the whole, for the reason that

the fault is his; and it is but just that he should suffer

the loss rather than an innocent party, who in no

degree contributed to the wrong.

240 U.S. at 262.

Thus, when the district court in this case assumed that

it had to segregate PartyGaming’s legitimate revenues

from those that PartyGaming derived through its infringement, and that WMS had to bear the risk of uncertainty

about the proper characterization of the revenues, it

erred. Moreover, as WMS points out, it was more generous

to PartyGaming than it had to be when it used lowend estimates and U.S.-only revenues to calculate its

estimates. In doing so, the court relieved PartyGaming of

its burden to show which portions of its gross income

were not attributable to its infringing uses. The Supreme

Court has made it clear, both in Hamilton-Brown Shoe Co.

and in later cases, that

[t]he burden is the infringer’s to prove that his infringement had no cash value in sales made by him. If

he does not do so, the profits made on sales of goods

bearing the infringing mark properly belong to the

owner of the mark. There may well be a windfall to

the trade-mark owner where it is impossible to isolate

the profits which are attributable to the use of the

infringing mark. But to hold otherwise would give

the windfall to the wrongdoer.
14 No. 07-3585

Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316

U.S. 203, 206-07 (1942). The Court in Mishawaka went on

to note that, unless the infringer could provide evidence

that it did not earn some or all of its profits by infringing

the owner’s marks, “it promotes honesty and comports

with experience to assume that the wrongdoer who

makes profits from the sales of goods bearing a mark

belonging to another was enabled to do so because he

was drawing upon the good will generated by that mark.”

Id. at 207; see also Nintendo of Am., Inc. v. Dragon Pac. Int’l,

40 F.3d 1007, 1012 (9th Cir. 1994) (“[W]here infringing

and noninfringing elements of a work cannot be readily

separated, all of a defendant’s profits should be awarded

to a plaintiff.”); Wesco Mfg. v. Tropical Attractions of Palm

Beach, Inc., 833 F.2d 1484, 1488 (5th Cir. 1987) (“Although

the exact amount of infringing sales cannot be determined from the [evidence], exactness is not required. [The

defendant] is in the best position to ascertain exact sales

and profits, and it bears the burden of doing so in an

accounting.”); id. at 1487-88 (“A plaintiff need not demonstrate actual damage to obtain an accounting of an infringer’s profits under section 35 of the Lanham Act. It is

enough that the plaintiff proves the infringer’s sales. The

burden then shifts to the defendant, which must prove

its expenses and other deductions from gross sales.”

(citations omitted)).

The burden was therefore on PartyGaming to show that

certain portions of its revenues—which for purposes of

the award after its default judgment WMS established by

using PartyGaming’s own public financial statements and

reports—were not obtained through its infringement of
No. 07-3585 15

WMS’s marks. There was no evidence in the record that

would have helped PartyGaming to meet that burden. As

the Second Circuit noted in Louis Vuitton S.A. v. Spencer

Handbags Corp., 765 F.2d 966 (2d Cir. 1985), 

[p]laintiffs here proved defendants’ sales, using defendants’ own words. The burden then shifted, requiring

defendants to prove costs or deductions. Defendants

failed to sustain their burden. In the absence of any

evidence introduced by defendants, the court’s reliance

on defendants’ videotaped statements as to their

profits was not unreasonable. 

Id. at 973.

Similarly, in this case PartyGaming has not come forward

with any evidence suggesting that deductions are warranted from the revenues that its own annual reports

reflect. Courts consistently find that when a trademark

plaintiff offers evidence of infringing sales and the infringer fails to carry its statutory burden to offer evidence

of deductions, the plaintiff’s entitlement to profits under

the Lanham Act is equal to the infringer’s gross sales. See,

e.g., Tex. Tech. v. Spiegelberg, 461 F. Supp. 2d 510, 526 (N.D.

Tex. 2006); N.Y. Racing Ass’n, Inc. v. Stroup News Agency

Corp., 920 F. Supp. 295, 301 (N.D.N.Y. 1996).

WMS has provided evidence of the profits that

PartyGaming earned from its U.S. sales. In the absence of

evidence from PartyGaming showing that deductions

are warranted, WMS is entitled to the revenues supported

by its evidence. A remand is necessary so that the district court can assess WMS’s claim for an accounting in

accordance with the proper legal standard for that claim.
16 No. 07-3585

We add that while the figure WMS seeks, $287,391,140.70,

is considerably larger than the “damages” award granted

by the district court, $2,673,422.10, the record shows that

in a single year (2005), the defendants reported revenues of

$977.7 million—nearly $1 billion. WMS urges that “this is

not a case in which [the plaintiff] is seeking wildly excessive relief.” Be that as it may, it is Congress that has

specified the types of relief to which WMS is entitled, and

it is our job to uphold those rules. The record shows

persistent, pervasive, knowing, and willing infringement

for several years by PartyGaming, as it repeatedly

refused to cease and desist even after receiving several

forms of actual notice of its unlawful activity, from both

the PTO and from WMS. We therefore REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion.

9-8-08