2003 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-31-2003

Gucci America v. Daffys

Precedential or Non-Precedential: Precedential

Docket No. 02-4046

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PRECEDENTIAL

Filed December 31, 2003

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 02-4046

GUCCI AMERICA, INC.

Appellant

v.

DAFFY’S, INC.; JOHN DOES 1-10

On Appeal from the United States District Court

for the District of New Jersey

(Civil No. 00-cv-04463)

District Judge: Hon. Alfred M. Wolin

Argued: July 14, 2003

Before: McKEE, BARRY, Circuit Judges, and

ROSENN, Senior Circuit Judge

(Opinion Filed: December 31, 2003)

MILTON SPRINGUT, ESQ. (ARGUED)

Kalow & Springut

488 Madison Avenue

19th Floor

New York, NY 07102

Attorney for Appellant
STEPHEN R. BUCKINGHAM

(ARGUED)

DAVID L. HARRIS

MICHELLE R. NANCE

Lowenstein Sandler

65 Livingston Avenue

Roseland, NJ 07068

Attorneys for Appellee

OPINION OF THE COURT

McKEE, Circuit Judge. 

Gucci America, Inc. appeals the district court’s decision

to deny Gucci’s request for an order compelling defendant

Daffy’s, Inc. to recall counterfeit “Jackie-O” handbags.

Gucci also appeals the district court’s denial of Gucci’s

request for an accounting of profits and other injunctive

relief. For the reasons that follow, we will affirm. 

I. FACTUAL BACKGROUND

Daffy’s is a chain of retail clothing stores specializing in

selling popular brands of goods and apparel at discount

prices. In late May 2000, Daffy’s acquired three sizes of a

handbag that appeared to be a particular Gucci model

known as the “Jackie-O”. Daffy’s purchased 594 of these

handbags from its supplier, Sara’s Collection, Inc., for

prices ranging from $238 to $250 depending on size. Sara’s

Collection, Inc. was recognized as a reputable supplier, and

Daffy’s had previously purchased products from it. 

The events leading to the purchase began when a

representative of Sara’s approached Daffy’s regarding some

Gucci handbags that were being diverted to the United

States from a merchant in the Far East. Although Daffy’s

representatives were confident that the bags were genuine,

Daffy’s nevertheless attempted to authenticate the bags by

taking them to a Gucci outlet store in Secaucus, New

Jersey before offering them for resale. There, a Daffy’s

employee presented one of the bags to the Gucci clerk and

informed the clerk that she had received the bag as a gift

2
and was not certain of its authenticity. The employee asked

the clerk to examine the bag and confirm that it was

genuine. The clerk did so, and informed the Daffy’s

employee that the bag was authentic. That conclusion was

based on certain indicia of authenticity including the

quality of fabric and leather, the storage bag the handbag

came in, and the Gucci label and appropriate codes on the

bag. The clerk also compared the bag with another Gucci

bag in the store. 

Daffy’s also sent one of the bags it had purchased that

was damaged to the Gucci repair center in New York for

repair. Gucci repaired the bag and returned it without

comment or further inquiry. Based upon its experience with

its reputable supplier, the corroboration of the Gucci clerk,

and the unquestioned repair and return of one of the bags

from Gucci’s own service center, Daffy’s concluded that the

bags it had purchased from Sara’s were genuine Gucci

bags. That conclusion was incorrect. The bags were actually

counterfeit, although they were of exceptional quality,

expensive, and virtually indistinguishable from genuine

Gucci bags. 

Daffy’s proceeded to sell a total of 588 of these bags for

$298.99, $339.99 and $398.99 depending on size. The

sales continued through the summer of 2000. Daffy’s

remained unaware of any problem until counsel for Gucci

sent Daffy’s a letter dated September 5, 2000, demanding

that Daffy’s immediately cease selling the bags and that

Daffy’s disclose its supplier to Gucci. Daffy’s responded by

informing Gucci that the bags had been obtained from a

legitimate parallel importer outside of Gucci’s authorized

chain of distribution and it believed the bags were genuine

Gucci bags. Nevertheless, despite its belief that the bags

were genuine and that it had done nothing improper,

Daffy’s immediately withdrew the handbags from its stores

and has since adopted a policy of not buying any Gucci

merchandise in order to avoid the possibility of purchasing

counterfeit Gucci goods. 

II. PROCEDURAL HISTORY

Despite the steps Daffy’s took after being informed of the

3
counterfeit nature of the Gucci bags it was selling, Gucci

sued seeking an Order to Show Cause why Daffy’s should

not be preliminarily enjoined from infringing Gucci’s

trademark through the sale of counterfeit “Jackie-O”

handbags.1 The requested relief was denied, and the court

also denied Gucci’s motion for expedited discovery directed

at Daffy’s supplier. In the court’s view, Gucci had not

demonstrated a sufficient likelihood of success on the

merits to justify the equitable relief it requested. In an effort

to avoid unfair prejudice to any party, the district court

severed the factual issue of the authenticity of the Daffy’s

handbag and proceeded to a bench trial on the merits of

that issue. See Gucci America, Inc. v. Daffy’s, Inc., No. 00-

4463, 2000 WL 1720738 (D. N.J. Nov. 14, 2000) (denying

preliminary injunction and severing authenticity issue for

trial). 

Gucci’s head of quality control testified extensively at the

ensuing trial. Based upon that testimony, the court

concluded that the bags Daffy’s sold as genuine Gucci

product were, in fact, counterfeit bags not manufactured by

Gucci. However, as the district court made clear in its

fourth written opinion in this case, “the Daffy’s handbag

was an extremely high-quality product, capable of fooling

even a very discriminating examiner. It should be apparent

. . . that the quality of the counterfeit and the difficulty in

distinguishing it from a true Gucci has colored every step

of this litigation.” Gucci America v. Daffy’s Inc., No. 00-4463

slip. op. at 2 (D. N.J. Nov. 16, 2001) (“Gucci IV”). 

The district court then moved to the remedy phase of the

trial. Gucci first requested an order compelling Daffy’s to

contact those consumers who had purchased the

counterfeit bags and offer them a refund. As detailed below,

this requested recall was denied, and Daffy’s and Gucci

then filed cross-motions for partial summary judgment. We

are concerned here with Gucci’s cross-motion for partial

summary judgment. Gucci sought an injunction preventing

Daffy’s from using the Gucci trademark, a finding that

1. Gucci alleged violations of §§ 32(1) [15 U.S.C. § 1114(1)] and 43(a), [15

U.S.C. § 1125(a)] of the Lanham Act, and sought remedies for the alleged

violations under § 35 of the Lanham Act codified at 15 U.S.C. § 1117. 

4
Daffy’s willfully infringed that trademark through the sale

of the counterfeit Gucci bags, and an award of profits based

upon that allegedly willful infringement. Daffy’s insisted

that Gucci was not entitled to profits because there had

been no willful infringement, and Daffy’s also argued that

Gucci was not entitled to an injunction because it could not

establish the necessary harm. 

The district court explained its denial of the requested

recall in its November 14, 2001 Memorandum Opinion.

Gucci IV at 2. The court stated that it had considered

whether:

(1) the defendant acted in a willful or otherwise

egregious manner

(2) the risk of confusion to the public and injury to

the trademark is greater than the cost and burden of

recall to the alleged infringer and

(3) there is substantial risk of danger to the public

resulting from the defendant’s infringing activity.

Id. at 4. After concluding that Daffy’s had not acted

willfully, and recognizing that Gucci failed to establish a

genuine issue of fact as to whether Daffy’s acted

intentionally or with willful blindness in selling counterfeit

handbags, the court undertook the balancing encompassed

by the second prong of its inquiry. Id at 5-8. In doing so,

the court first considered the low risk of public confusion

due to the high quality and price of the bags and low risk

of injury to the Gucci trademark. Id. at 8-9 The court then

weighed the benefits Gucci might derive from a recall

against the negative impact a recall could have on Daffy’s

goodwill, as well as the difficulties of obtaining the

necessary consumer information for a recall. Id. at 10-11.

The court concluded that the balance tipped in favor of

Daffy’s and therefore denied Gucci’s motion for a recall. Id.

at 12. 

The district court agreed that Daffy’s had infringed

Gucci’s trademark, Gucci America v. Daffy’s Inc., No. 00-

4463 slip. op. at 3-4 (D. N.J. Sept. 3, 2002) (“Gucci V”), but

denied Gucci’s request for an award of Daffy’s profits based

on the absence of the willfulness required under

5
SecuraComm Consulting Inc. v. Securacomm Inc., 166 F.3d

182 (3d Cir. 1999). Id. at 10-12. The court also rejected

Gucci’s request for a permanent injunction because Gucci

could not demonstrate irreparable injury. Id. at 13. In doing

so, the court noted Daffy’s attempts to minimize damage to

Gucci by voluntarily withdrawing the offending

merchandise from Daffy’s shelves,2 and the court concluded

that Daffy’s was therefore highly unlikely to infringe Gucci’s

trademark again. Id. at 14. Thus, in the court’s view,

balancing hardships weighed in favor of Daffy’s and against

granting Gucci’s requested relief. Id. at 15. This appeal

followed.

III. DISCUSSION

Congress has explained that:

The intent of [the Lanham] Act is to regulate commerce

within the control of Congress by making actionable

the deceptive and misleading use of marks in such

commerce; to protect registered marks used in such

commerce from interference by State, or territorial

legislation; to protect persons engaged in such

commerce against unfair competition; to prevent fraud

and deception in such commerce by the use of

reproductions, copies, counterfeits, or colorable

imitations of registered marks; and to provide rights

and remedies stipulated by treaties and conventions

respecting trademarks, trade names, and unfair

competition entered into between the United States and

foreign nations. 

15 U.S.C. § 1127 (2003). The Senate Report on the Lanham

Act reinforces the congressional intent behind the

legislation noting that Congress enacted it to:

protect the public so that it may be confident that, in

purchasing a product bearing a particular trade-mark

which it favorably knows, it will get the product which

it asks for and wants to get. Secondly, where the owner

of a trade-mark has spent energy, time and money in

2. Gucci notes that only six bags remained on Daffy’s shelves at that

point. 

6
presenting to the public the product, he is protected in

his investment from its misappropriation by pirates

and cheats.

Weil Ceramics v. Dash, 878 F.2d 659, 672 n.17 (3d Cir.

1989) (quoting S.Rep. No. 1333, 19th Cong.2d Sess.,

reprinted in 1946 U.S. Code. Cong. Serv. 1274). 

As noted above, Gucci brought this suit for trademark

infringement under Sections 32(1) and 43(a) of the Lanham

Act. Section 32(1) provides in pertinent part: 

(1) Any person who shall, without the consent of the

registrant— 

(a) use in commerce any reproduction, counterfeit, . . .

of a registered mark in connection with the sale, . . . or

in connection with which such use is likely to cause

confusion, or to cause mistake, or to deceive; or 

(b) reproduce, counterfeit, copy, or colorably imitate a

registered mark . . .

shall be liable in a civil action by the registrant for the

remedies hereinafter provided. Under subsection (b)

hereof, the registrant shall not be entitled to recover

profits or damages unless the acts have been committed

with knowledge that such imitation is intended to be

used to cause confusion, or to cause mistake, or to

deceive.

15 U.S.C. § 1114 (2003) (emphasis added). Section 43(a)

further provides as follows:

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

or services, . . uses in commerce any . . . symbol, . . .

or any false designation of origin, . . which— 

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

to deceive as to the . . . origin, . . . 

* * *

(B) 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) (2003). Section 34(a) of the Lanham

Act, 15 U.S.C. § 1116(a), is critical to our analysis. That

7
section authorizes courts to issue injunctions for trademark

violations “according to the principles of equity and upon

such terms as the court may deem reasonable. . .”.

Recovery of lost profits is governed by § 35(a) of the Lanham

Act which provides in relevant part: 

(a) When a violation of any right of the registrant of a

mark registered in the Patent and Trademark Office, a

violation under section 43(a) or (d) [15 U.S.C. § 1125(a)

or (d)], or a willful violation under section 43(c) [15

U.S.C. § 1125(c)], shall have been established in any

civil action arising under this Act, the plaintiff shall be

entitled, subject to the provisions of sections 29 and 32

[15 U.S.C. §§ 1111, 1114], 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) (2003).

With these statutory parameters in mind, we turn to the

precise issues raised in this appeal. 

A. Recall Order

We review the district court’s denial of Gucci’s request for

recall of the counterfeit handbags for an abuse of

discretion. See Jacquin Et Cie, Inc. v. Destileria Serralles,

Inc., 921 F.2d 467, 472 (3d Cir. 1990); see also Perfect Fit

Industries v. Acme Quilting, 646 F.2d 800, 807 (2d Cir.

1981). “[A] district court has abused its discretion if it has

rested its decision on ‘a clearly erroneous finding of fact, an

errant conclusion of law, or an improper application of law

to fact.’ ” Jacquin, 921 F.2d at 472 (quoting International

Union, UAW v. Mack Trucks, Inc., 820 F.2d 91, 95 (3d

Cir.1987)). 

Both Daffy’s and Gucci agree that the propriety of the

court’s recall decision is governed by:

1. the willful or intentional infringement by the

defendant; 

2. whether the risk of confusion to the public and

injury to the trademark owner is greater than the

burden of the recall to the defendant; and 

8
3. substantial risk of danger to the public due to the

defendant’s infringing activity.

See Theodore C. Max Total Recall: A Primer on a Drastic

Form of Equitable Relief, 84 Trademark Rep. 325, 327

(1994) (listing these factors); see also Perfect Fit Industries

v. Acme Quilting Co, 646 F.2d 800, 807 (2d Cir 1981)

(weighing the first two factors in decision to order recall). 

Gucci first argues that the district court failed to give

“heavy weight” to whether the public would benefit from a

recall. Appellant’s Brief at 29. Gucci also argues that the

court underestimated the harm the company may suffer

due to the infringement and that it erred in evaluating the

hardship Daffy’s would face in effectuating a recall.3 Daffy’s,

on the other hand, argues that the district court accurately

considered all the equities in its proper exercise of

discretion. 

Gucci does not argue that Daffy’s conduct created a

substantial risk of danger to the public, nor does Gucci

contest the district court’s conclusion that Daffy’s was “an

innocent infringer,” Gucci V at 10, or that Daffy’s was

unaware of the counterfeit nature of the bags it was selling.

Therefore, we may focus our discussion on the court’s

resolution of the balancing of harms required under the

second factor set forth above. 

Gucci’s contention that the district court failed to afford

the public interest “heavy weight” is simply without merit.

The argument rests entirely on the fact that Daffy’s

customers did not get genuine Gucci handbags. The district

court did consider the benefit the consuming public would

receive from recalling the counterfeit bags. The court

3. Gucci suggests that the counterfeit bags resulted in Gucci losing its

quality control and that this is an additional harm that the court

ignored. However, Gucci’s arguments regarding loss of quality control

were raised for the first time on appeal, and therefore we will not

consider them. See Srein v. Frankford Trust Co., 323 F.3d 214, 224 n.8

(3d Cir. 2003)(declining to consider argument raised for first time on

appeal and noting that the court will not consider such arguments

absent compelling circumstances). In any event, the record lacks any

evidence that Daffy’s handbags were of significantly inferior quality or

even readily distinguishable from Gucci’s. 

9
explained that it had “given serious consideration to the

fact that denying a recall will leave Daffy’s customers under

the continued misapprehension that they own a real Gucci

product.” Gucci IV at 11-12. The court simply concluded

that the benefit did not justify the concomitant harm a

recall would have upon Daffy’s, an innocent infringer. We

therefore find Gucci’s attack upon the district court’s

analysis unconvincing. 

Gucci does not explain the difference between the “heavy

weight” it argues the district court should have afforded the

public benefit of a recall, and the “serious consideration”

the district court gave it. Moreover, we agree with the

district court’s determination that the public benefit of a

recall does not outweigh the equities counseling against it.

A recall would have a financial impact upon Daffy’s. It

would also likely injure the company’s goodwill as

consumers may well assume that Daffy’s was guilty of

intentional wrongdoing no matter how carefully Daffy’s

explained the circumstances leading to any recall. Since the

counterfeit bags were virtually indistinguishable from Gucci

manufactured bags, the district court quite reasonably

concluded that “a recall would harm Daffy’s with little real

benefit to Gucci,” Gucci IV at 12, or the public. 

Gucci invokes a post-sale confusion theory, which

presumes that “the senior user’s potential purchasers or

ongoing customers might mistakenly associate the inferior

quality work of the junior user with the senior user and,

therefore, refuse to deal with the senior user in the future.”

Axicom Corp. v. Axiom, 27 F.Supp. 2d 478, 497 (D. Del.

1998); see also Payless Shoesource v. Reebok International,

998 F.2d 985, 989 (Fed. Cir. 1993) (describing post sale

confusion as that which occurs when “a consumer observes

someone wearing a pair of Payless accused shoes and

believes that the shoes are Reebok’s. As a consequence, the

consumer may attribute any perceived inferior quality of

Payless shoes to Reebok, thus damaging Reebok’s

reputation and image.”). Yet, Gucci does not challenge the

district court’s conclusion that, given the quality of the

counterfeit bags, third party observers would not perceive

anything inferior about them. Accordingly, consumers

would not attribute substandard merchandise to Gucci.

10
Gucci does, however, claim that the district court gave

short shrift to its concerns over ongoing confusion of

Daffy’s consumers who unknowingly possess a counterfeit

“Gucci.” 

Although this position has some initial surface appeal, it

does not withstand scrutiny. As we noted above, the district

court considered the dangers of customer confusion. It gave

“serious consideration to the fact that denying a recall will

leave Daffy’s customers under the continued

misapprehension that they own a real Gucci product.”

Gucci IV at 11-12. However, the court was convinced that

this did not justify a recall because the quality of the

counterfeit bags and the relatively high price Daffy’s

customers were willing to pay for them undermined claims

of a tarnished Gucci trademark.4 Finally, in the absence of

sufficient evidence regarding the comparative durability of

Daffy’s bags and Gucci’s bags, Gucci’s conclusion that

counterfeit bags would require greater maintenance rests

upon pure speculation. Accordingly, the district court

stated the following in explaining why the equities

precluded ordering a recall: 

The potential for damage to Daffy’s goodwill with its

customers is too obvious to be belabored. Daffy’s

marketing niche, distress sales of designer goods at

significant discounts, would mean nothing if the

consumer lacked confidence that the goods were what

they purport to be. Daffy’s also points out that a recall

would require credit card records available only from

the issuing banks. 

Gucci IV at 10. Following a brief discussion of the

exceptions to federal privacy laws which would allow for the

release of customer information from banks, the court

continued:

Notwithstanding, the affront to the privacy of Daffy’s

customers, extending the customer’s ill-feeling

engendered by the counterfeiting to the wholly

4. The district court quite reasonably concluded that the relatively high

price would suggest quality consistent with the image Gucci is

apparently trying to protect. 

11
unrelated credit card issuers, is unmistakable. This

adds an additional counterweight in the balance of the

hardships against ordering a recall. 

Finally, there is the real possibility that consumers

notified of this action will decline to come forward.5

Gucci does not contend that the Court should compel

Daffy’s customers to surrender their handbags. An

underpinning of Gucci’s post-sale confusion argument

is that Daffy’s customers are posing as true Gucci

wearers, free-riding on Gucci exclusivity at a Daffy’s

price. But this theory would hold regardless of whether

the consumer herself knew that the handbag was a

counterfeit. Thus, under Gucci’s own construct of the

consumer mind-set, a Daffy’s customer informed of the

counterfeiting might well decide that she is content

with her bargain and decline to return the handbag.

Lastly, with the passage of time there is a real

possibility that the Daffy’s handbags have been

discarded, were given away as gifts, or are otherwise

unavailable.

Gucci IV at 11. The court’s factual conclusions are not

clearly erroneous. Given the careful application of the

correct equitable standard to the evidence before it, it is

clear to us that the district court did not abuse its

discretion in refusing to order a recall.6

B. Summary Judgment-Injunctive Relief

and Award of Profits

We review the district court’s decision to grant or deny an

injunction for an abuse of discretion. Ameristeel Corp. v.

5. Moreover, Daffy’s has represented in its brief and without

contradiction at oral argument that only approximately 200 of the total

588 bags that were sold were purchased with credit cards. The

remaining 388 were apparently purchased with cash and therefore

Daffy’s can not trace them to the purchasers. 

6. Gucci also briefly attempts to justify its request for a recall by analogy

to appropriate remedies for consumer fraud under federal and state law.

Appellant’s Brief at 41-3. However, the analogy fails because Daffy’s

conduct is not analogous to the intent necessary to establish consumer

fraud. 

12
Int’l Brotherhood of Teamsters, 267 F.3d 264, 267 (3d Cir.

2001). That same standard applies to the court’s refusal to

award Gucci lost profits. See SecuraComm, 166 F.3d at 189

(reviewing award of profits for abuse of discretion). 

1. Injunctive Relief

At the outset of our discussion of Gucci’s challenge to the

district court’s refusal to order an injunction, we note that

Gucci’s concerns were substantially satisfied by Daffy’s

voluntarily enacted policy of not dealing in Gucci products.

Daffy’s counsel confirmed this policy at oral argument,

though some confusion about the precise parameters of

that policy remains.7 Gucci nevertheless contends that the

district court erred by considering an injunction that was

broader than Gucci was seeking. More specifically, Gucci

argues that it requested injunctive relief prohibiting Daffy’s

from future infringement, while the court considered an

injunction “to prohibit Daffy’s from ever using the Gucci’s

trademark in the future.” Gucci V at 13. Gucci further

argues that the court incorrectly required Gucci to prove

that it would be irreparably injured by the denial of

injunctive relief rather than placing the burden of proving

absence of harm on Daffy’s. Finally, Gucci argues that the

district court erred by focusing only on the danger of future

intentional infringement and ignoring what it labels

“evidence of substantial danger of future unintentional

infringement.” 

An examination of the district court’s opinion reveals that

the court correctly considered an injunction to prevent

future infringement. Although the court mentioned that the

7. Gucci and Daffy’s apparently disagree about whether Daffy’s intends

the policy to be indefinite. However, that does not alter our analysis or

our resolution of the issues Gucci is raising. Moreover, inasmuch as

Daffy’s has relied upon this policy in arguing against injunctive relief

both here and before the district court, our affirmance of the district

court’s denial of an injunction will be without prejudice to Gucci’s right

to seek injunctive relief if in the future Daffy’s abandons or alters this

policy such that injunctive relief becomes appropriate. However, we take

no position now as to Gucci’s entitlement to any injunctive relief in the

future. 

13
injunction requested was to prevent Daffy’s from ever using

Gucci’s trademark again, it also made clear that Daffy’s

efforts to minimize the damage to Gucci before the bags

proved to be counterfeit “undermines any inference that

Daffy’s intends to infringe Gucci’s trademarks in the

future.” Gucci V at 14. We understand that Gucci maintains

that Daffy’s presale inquiry was not adequate. Indeed, the

dissent suggests that Daffy’s effort “was simply a superficial

effort to cover itself in the event of a lawsuit.” Dissent at 28.

However, the sufficiency of the inquiry does not suggest

that the district court erred in considering Daffy’s presale

inquiries in assessing the likelihood of future infringement

or the need for an injunction.8 Moreover, the court’s

statement shows that it knew the injunction was being

requested to stop trademark infringement, as Gucci

requested. 

The dissent argues that Gucci established irreparable

harm and that the district court should therefore have

granted an injunction against future infringement. Dissent

at 35. According to the dissent, infringement constitutes

irreparable injury as a matter of law and therefore Daffy’s

had the burden “to prove that the injury will not recur in

the future.” Id. 

In deciding whether to grant a permanent injunction,

the district court must consider whether: (1) the

moving party has shown actual success on the merits;

(2) the moving party will be irreparably injured by the

denial of injunctive relief; (3) the granting of the

permanent injunction will result in even greater harm

to the defendant; and (4) the injunction would be in the

public interest.

Shields v. Zuccarini, 254 F.3d 476, 482 (3d Cir. 2001).

Although we have said that “ ‘trademark infringement

amounts to irreparable injury as a matter of law,” dissent

at 27 (quoting S & R Corp., 968 F.2d at 378), the

8. We have previously stated that “carelessness is not the same as

deliberate indifference with respect to another’s rights in a mark or a

calculated attempt to benefit from another’s goodwill.” SecuraComm, 166

F.3d at 188 (the defendant’s failure to conduct a trademark search does

not suggest wilful infringement of plaintiff ’s mark.). 

14
irreparable injury we referred to was not intended to

swallow the remaining prongs of the permanent injunction

inquiry. 

In S & R Corp., we stated:

Grounds for irreparable injury include loss of control of

reputation, loss of trade, and loss of goodwill. Lack of

control amounts to irreparable injury regardless of

allegations that the infringer is putting the mark to

better use. Irreparable injury can also be based on the

possibility of confusion. Finally, and most importantly

for this case, trademark infringement amounts to

irreparable injury as a matter of law.

968 F.2d at 378 (citations omitted). We cited Opticians

Assoc. of America v. Indept. Opticians of America in support

of our pronouncement that trademark infringement

constitutes irreparable injury as a matter of law. A closer

look at Opticians will therefore further inform our analysis

of the district court’s denial of injunctive relief here. 

In Opticians, we concluded that infringement constitutes

a per se injury “[e]ven if the infringer’s products are of high

quality, . . .” 920 F.2d at 196. This is because infringement

inhibits the owner’s “ability to control its own Guild marks,

which in turn creates the potential for damage to its

reputation. Potential damage to reputation constitutes

irreparable injury for the purpose of granting a preliminary

injunction in a trademark case.” Id. However, as we noted

above, Gucci argued injury from loss of control for the first

time on appeal, and that aspect of irreparable injury was

therefore been waived. See supra at n. 3. Accordingly, the

district court correctly focused on the actual injury to

Gucci’s reputation and goodwill in finding that Gucci had

not established irreparable harm for purposes of injunctive

relief. 

Gucci primarily cites two cases in support of its claim

that the burden shifts to defendant to demonstrate the

impossibility of future harm once the plaintiff establishes

that the defendant infringed plaintiff ’s trademark. See

Appellant’s Brief at 44-46.9 However, neither case advances

Gucci’s claim given the circumstances here. 

9. Gucci also cites Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132,

1135-36 (9th Cir. 1986) and Basic Fun, Inc. v. X-Concepts, LLC, 157

15
Levi Strauss & Co. v. Shilon, 121 F.3d 1309, 1314 (9th

Cir. 1997) involved an egregious case of a dealer

counterfeiting Levi jeans. The court concluded that the

defendant’s conduct demonstrated that the defendant could

not be trusted and an injunction was therefore necessary to

protect plaintiff ’s trademark. 

Lyons Partnership v. Morris Costumes Inc., 243 F.3d 789,

800 (4th Cir. 2001) does offer Gucci a bit more support

given this record. There, the court held that the defendant

was not a willful infringer. The defendant was renting three

costumes resembling characters in the popular children’s

television show, “Barney.” Apparently, the costumes bore

such a strong resemblance to characters on the show that

many children mistakenly associated the wearer of the

costumes with the real purple dinosaur they saw on

television. The court described the situation as follows:

Lyons Partnership, L.P., . . . , a Texas limited

partnership, owns all of the intellectual property rights

to the character “Barney,” the well-stuffed

Tyrannosaurus Rex with a green chest and stomach,

friendly mien, green spots on its back, and yellow

“toeballs.” Barney is readily recognizable to young

children, who repeatedly parrot his song, “I Love You,”

10

often testing the patience of nearby adults. 

243 F.3d at 795 (footnote in original).11 The court

F.Supp. 2d 449, 457 (E.D. Pa. 2001) in support of its burden shifting

argument. Polo Fashions involved a defendant who had willfully violated

Polo’s trademark rights and Basic Fun examined a copyright licensee’s

failure to comply with the terms of a copyright license. Given the facts,

it seems clear that the enjoined parties in both cases previously engaged

in intentional behavior which undermined their credibility and good

faith. 

10. Many can recite only the first three lines of the song: 

I love you.

You love me.

We’re a happy family.

With a great big hug and a kiss from me to you,

Won’t you say you love me too? 

11. Based upon the folk wisdom that counsels that some things are

better left to the imagination, we will resist the temptation to “go there”

16
considered the defendants’ claim that they would

voluntarily stop renting the costumes and hand them over

to “Barney,” once litigation ended. Id. at 800-01. However,

that concession did not prevent the court from granting

injunctive relief. Rather, the court concluded that in an

infringement case, assertions alone are not enough to

eliminate the “plaintiff ’s ‘reasonable expectation that the

alleged violation will recur’ in the absence of a court order.”

Id. at 801. However, we think it significant that one of the

defendants continued to claim that it was not infringing

plaintiff ’s trademark by renting the costumes even after

plaintiff informed the defendant of the infringement and

filed suit to stop it. That defendant also argued that the

plaintiff could not establish that continuing infringement

was possible. Id. at 800. Accordingly, the court was not

convinced that plaintiff ’s trademark would be honored

absent an injunction. However, the fact that the court in

Lyons Partnership concluded that the circumstances there

required an injunction does not mean that the district court

here abused its discretion in concluding that an injunction

was not necessary given Daffy’s conduct.12 We believe that

and explore the subtleties of “toeballs.” The Court of Appeals for the

Fourth Circuit did not favor us with an explanation, and none readily

suggests itself to us. Perhaps, as is true with so many things that are

peculiar to the universe of young children, for those who understand “toe

balls,” no explanation is necessary. For those who do not understand

them, no explanation is possible. 

12. The nature of the potential harm threatening Lyons, the owner of the

Barney trademark, substantially differed from the harm threatening

Gucci. Infringement of the Barney trademark could therefore have

harmed Lyons in a manner not analogous to any harm Gucci could have

suffered from Daffy’s infringement given the quality of the counterfeit

bags. The court in Lyons was careful to note that: 

The live appearance of the Barney character, who is played by

adults in costume, is completely controlled by Lyons, and Lyons

does not license Barney costumes because of its inability to police

the behavior of those who might appear in the costume. It claims

that it would be unable to prevent would-be Barneys from behaving

in a decidedly un-Barney-like manner and tarnishing his wholesome

reputation. Accordingly, every person who wears the costume—there

17
conclusion was reasonable, and that the district court did

not abuse its discretion in denying Gucci the injunction

given this record and the inquiry properly undertaken

under Shields.

2. Award of Profits

Finally, Gucci argues that the district court erred by

relying on SecuraComm in conditioning an award of profits

upon a finding of willful infringement. SecuraComm

involved a trademark infringement action brought by a

Pennsylvania security systems consulting firm against its

New Jersey competitor. SecuraComm, 166 F.3d at 184-86.

At the close of trial, the district court awarded the plaintiffs

10% of the defendant’s gross profits after finding that an

award of profits was necessary to “ ‘deter[ ] . . . the kind of

conduct in which all three defendants . . . engaged.’ ” Id. at

186 (quoting SecuraComm Consulting v. Securacomm Inc.,

984 F.Supp. 286, 303 (D. N.J. 1997)). On appeal, the

are five—is trained by a single choreographer how to be Barney.

Moreover, Barney’s live voice is provided by only one person. . . . See

Brooke A. Masters, Protecting Barney’s Image from Bogus Beasts,

Wash. Post, Mar. 25, 1998, at B1. 

243 F.3d at 795 (some citations omitted). 

Given the importance of the Barney trademark to impressionable

children, the court of appeals was particularly troubled by the district

court’s failure to focus on evidence of confusion in the relevant market.

Id., at 802 (“The evidence of actual confusion among children, . . which

the [district] court disregarded, was substantial.”). That omission was

fatal to the district court’s analysis. The court of appeals explained: 

in conducting its infringement analysis with respect to works

targeted at children, the district court should have considered the

perspectives of those children. . . . [B]oth [the defendant] and . . .

parents foresaw that the costumes would be used to entertain

children. 

Id. at 803. Given the nature of the target audience and the equivocal

nature of the defendant’s “concession” about future use, the court of

appeals concluded that it was an abuse of discretion to deny Lyons

injunctive relief to insure against the harm that would result from future

infringement. That is simply not our case. 

18
defendants contested the award of profits, which was

largely based on the court’s finding that the infringement

was willful. Id. The court began by pointing to § 35(a) of the

Lanham Act [15 U.S.C. § 1117(a)], which then provided: 

When a violation of any right of the registrant of a

mark registered in the Patent and Trademark Office, or

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

established in any civil action arising under this Act,

the plaintiff shall be entitled, subject to the provisions

of sections 29 and 32 and subject to the principles of

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

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

the action. 

Id. (emphasis added). In SecuraComm, we noted the

importance of the intent to an award of profits, stating that

“[t]hough the standards for (1) awarding profits; (2)

determining whether such an award should be enhanced;

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

differ somewhat, the issue of willful infringement is central

to each.” Id. at 187 (citations omitted). Willful infringement

was viewed as having a central role in each type of relief

“because of the relevance of equitable factors in

determining their appropriateness on a given set of facts.”

Id. at 187 n.1. We clearly stated that “[k]nowing or willful

infringement consists of more than the accidental

encroachment of another’s rights. It involves an intent to

infringe or a deliberate disregard of a mark holder’s rights.”

Id. at 187. 

After examining whether the district court’s finding of

willful infringement was clearly erroneous, we concluded

that the award of profits was inappropriate. Id. at 190.

SecuraComm acknowledged that: 

[t]he Lanham Act permits courts to award monetary

damages to trademark owners as compensation where

it is equitable to do so regardless of the willfulness of

the defendant’s infringement. Here, however, the

District Court awarded profits to deter defendant’s

assuredly egregious misconduct; a plaintiff must prove

that an infringer acted willfully before the infringer’s

profits are recoverable.

19
Id. (citing George Basch Co. v. Blue Coral, Inc., 968 F.2d

1532, 1537 (2d Cir.), cert. denied, 506 U.S. 991, 121 L. Ed.

2d 445, 113 S. Ct. 510 (1992); 5 J. Thomas McCarthy,

McCarthy on Trademarks and Unfair Competition § 30:62,

at 30-102 (4th ed. 1996)). 

Gucci contends that the bright line we recognized in

SecuraComm has been undermined by subsequent

amendments to the Lanham Act and that case is therefore

of limited application here. The Trademark Amendments

Act of 1999, in § 35(a), substituted “a violation under

section 43(a), or a willful violation under section 43(c),” for

“or a violation under section 43(a).” See Pub. L. 106-43 § 3b

(1999) (amending § 35(a)). Therefore, the relevant language

of § 35(a) now reads: 

When a violation of any right of the registrant of a

mark registered in the Patent and Trademark Office, a

violation under section 43(a) or (d) [15 U.S.C. § 1125(a)

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

43(c) [15 U.S.C. § 1125(c)] of this title, shall have been

established in any civil action arising under this

chapter, the plaintiff shall be entitled, subject to the

provisions of sections 29 and 32 [15 U.S.C. §§ 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) (2003). (emphasis added). Gucci argues

that this change signaled Congress’s intent to remove

willfulness as a condition precedent to awarding an

accounting of profits under § 35(a). The House Report on

the Trademark Amendments Act of 1999 stated in its

section by section analysis that the Amendments Act: 

amends section 35(a) of the Lanham Act, which

provides for recovery of profits, damages and costs, and

attorneys fees for violations of rights, by clarifying that

recovery of profits, damages and costs, and attorneys

fees are also available for a willful violation under

section 43(c), which provides holders of a famous mark

the right to obtain relief for dilution.

20
Trademark Amendments Act of 1999, H.R. Rep. 106-250 at

10 (1999). The Report therefore suggests that willfulness is

a prerequisite in a trademark dilution cause of action, not

an infringement action. 

The Federal Trademark Dilution Act of 1995, which is

codified at § 43(c) of the Lanham Act [15 U.S.C. §§1125(c),

1127] creates 

a federal cause of action to protect famous marks from

unauthorized users that attempt to trade upon the

goodwill and established renown of such marks and,

thereby, dilute their distinctive quality. The provision is

intended to protect famous marks where the

subsequent, unauthorized commercial use of such

marks by others dilutes the distinctiveness of the

mark.

H.R. Rep. No. 104-374, at 2-3 (1995), reprinted in 1995

U.S.C.C.A.N. 1029-30. 

The amendment to § 35(a) was discussed in Quick

Technologies Inc. v. Sage Group PLC, 313 F.3d 338, 347-48

(5th Cir. 2003), and Gucci relies upon the decision in Quick

Technologies in arguing that SecuraComm is no longer

viable given the change in the statute.13 See Appellant’s

Brief at 51. The court in Quick Technologies refused to find

that willful intent was a condition precedent to an award of

profits for trademark infringement. As Gucci notes, the

court proclaimed: “in light of the plain language of

§ 1117(a), . . . we decline to adopt a bright-line rule in

which a showing of willful infringement is a prerequisite to

an accounting of profits.” Id. at 349. In doing so, the court

13. It is worth noting that Tamko Roofing Products, Inc. v. Ideal Roofing

Co. Ltd., 282 F.3d 23 (1st Cir. 2002) affirmed a district court’s decision

to award profits absent a showing of fraud or bad faith. The decision was

based on a precedential rule “that an accounting of defendant’s profits

where the products directly compete does not require fraud, bad faith, or

palming off.” Tamko Roofing, 282 F.3d at 36 (citations omitted). The

court noted that several circuit courts of appeals require a finding of

willfulness in order to award an infringing defendant’s profits and agreed

that “when the rationale for an award of defendant’s profits is to deter

some egregious conduct, willfulness is required.” Id. at 36 n.11 (citing

SecuraComm Consulting, 166 F.3d at 190). 

21
noted the substantial authority to the contrary, including

our holding in SecuraComm. Id. at 347. The court quoted

the language of the 1999 amendment and concluded that,

rather than conditioning an award of profits upon a finding

of willful intent, Congress intended a broader approach that

considered: 

(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. (quoting Pebble Beach Co. v. Tour 18 Ltd., 155 F.3d 526,

554 (5th Cir. 1998)). 

The dissent also relies in part upon Quick Technologies,

and describes it as “the only Court of Appeals that has

considered [the issue of the necessity of willfulness] since

the statute’s amendment.” Dissent at 30. However, we do

not believe that Quick Technologies supports an award of

profits here. Rather, it supports our conclusion that the

district court did not err in refusing to award profits on this

record. 

The District Court in Quick Technologies instructed the

jury that it could not award lost profits for the defendant’s

infringement absent a finding that the infringement was

willful. On appeal, the plaintiff argued that the court “erred

by conditioning an award of profits upon a finding of . . .

willful infringement.” The defendants “urged[d the] Court to

explicitly hold that willful infringement is a prerequisite to

an accounting of profits under § 1117(a).” The court of

appeals noted that “several of [its] sister circuits have

embraced a wilfulness requirement in order to obtain an

award of profits.” Id. (citing numerous cases including our

holding in SecuraComm). However, the court relied upon

the “amendment to § 1117(a) on August 5, 1999” and

refused to adopt a bright line rule. Instead, the court held

that an award of profits is governed by the particular

equities in each case. 313 F.3d at 348. The court then

examined various equitable factors and concluded that the

district court had not erred in denying an award of profits

22
even though it had incorrectly conditioned such an award

on the willfulness of the defendant. The court explained:

It is obvious from our cases that willful infringement is

an important factor which must be considered when

determining whether an accounting of profits is

appropriate. . . . [H]owever, we decline to adopt a

bright-line rule in which a showing of willful

infringement is a prerequisite to an accounting of

profits. Rather, we reaffirm the factor-based approach

outlined [in our earlier cases].

Id., at 349. Thus, even though the court rejected the brightline rule we adopted in SecuraComm, it recognized that

principles of equity still control whether profits should be

awarded. Id. at 346 (“As this Court has previously stated,

‘the goal behind §§ 1116 and 1117 remedies is to achieve

equity between or among parties.’ ”). The individualized

inquiry the court adopted to determine whether profits

should be awarded was therefore aimed at achieving an

equitable result. The court stressed: “[a]s [we have]

previously stated, [t]he goal behind §§ 1116 and 1117

remedies is to achieve equity between or among the

parties.’ ” Id. at 346-7. After noting that “a mark holder is

only entitled to those profits attributable to the unlawful

use of its mark,” the court refused to award the plaintiff

lost profits because “the principles of equity still do not

weigh in favor of [such an] award.” Id. at 350. 

Accordingly, even after the 1999 amendments to the

Lanham Act and any impact it may have had on our

holding in SecuraComm, we nevertheless conclude that the

district court did not abuse its discretion given the equities

here, including Daffy’s good faith. See Siegrun D. Kane,

Trademark Law: A Practitioner’s Guide, §16:3.1 (3d ed.

2000) (noting that “[d]efendant’s profits are usually

awarded only where defendant is guilty of intentional

infringement, i.e. deliberately trading on plaintiff ’s mark”);

5 J. Thomas McCarthy, McCarthy on Trademarks and

Unfair Competition §30:62, 30-116 (4th ed. 2002) (stating

that “[t]o obtain an accounting of profits, the courts almost

always require that defendant’s infringement imply some

connotation of ‘intent’ or a knowing act denoting an intent,

23
to infringe or reap the harvest of another’s mark and

advertising.”). 

First, we note that, as was the case in Quick

Technologies, the record does not establish what percentage

of Daffy’s sales, if any, was the result of the use of Gucci’s

mark. We understand, of course, that “Gucci” suggests a

certain level of quality and prestige.14 It is therefore

certainly possible that the instant sales were the direct

result of the exploitation of that brand name. However, it is

also quite possible that the purchasers were motivated by

the opportunity of purchasing what appeared to be an

attractive handbag of exceedingly high quality at the very

favorable price afforded by Daffy’s “discount.” To the extent

that consumers were motivated by obtaining such a

bargain, the fact that they were also obtaining “a genuine

Gucci” may have been only an incidental factor in their

purchase, or no factor at all. In other words, given the

quality, attractiveness, and price of the bags, we cannot

conclude that Daffy’s could not have sold them at the same

price even if they contained no reference to “Gucci.” Since

Gucci is “only entitled to those profits attributable to the

unlawful use of its mark,” the record would not support

awarding Gucci lost profits. Id.

15

Furthermore, the aforementioned equities that the

district court enunciated in its balancing of harms also

counsels against concluding that principles of equity

support awarding lost profits. The price and quality of the

handbags at issue, the small number of bags sold, Daffy’s

status as an innocent infringer, and the possibility that

Gucci could recover from the actual manufacturer of the

bags all weigh against awarding profits.16

14. That is the very reason that Gucci argues it was damaged by the sale

of counterfeit handbags. 

15. The owner has the burden of proving that lost profits are attributable

to the unlawful use of the mark. See Quick Technologies, 313 F.3d at

350 (citing Texas Pig Stands, Inc., 951 F.2d 684,696 (5th Cir. 1992)); see

also A & H Sportswear Inc. v. Victoria’s Secret Stores, Inc., 166 F.3d 197

(3d Cir. 1999). 

16. Given Daffy’s initial inquiry and its attempts to ensure that the bags

were genuine before offering them for sale, Daffy’s can be viewed as a

victim of the same counterfeiting Gucci is complaining of. 

24
In recognizing that profits can be denied under principles

of equity even absent the continuing viability of

SecuraComm, Gucci suggests that equity demands such an

award here to avoid unjust enrichment, because the

infringer intended to trade on Gucci’s good will, and also

because lost profits constitute a “proxy for the trademark

owner’s damages.” Appellant’s Brief at 54. The dissent

agrees, arguing, “[a]n award of the infringer’s profits seeks

to make the trademark owner whole for losses sustained by

the plaintiff as a result of infringer’s use of something that

did not belong to him.” Dissent at 32. However, that

position would argue in favor of creating the very kind of

bright-line rule that the courts, including Quick

Technologies, have rejected. The logical extension of Gucci’s

position would require awarding profits in all cases of

infringement. Congress clearly rejected that policy choice by

making an individualized equitable inquiry central to

awarding remedies under the Lanham Act. 

The dissent also expresses an understandable concern

that Daffy’s will be unjustly enriched unless it disgorges

profits. However, that concern is exaggerated where, as

here, the record does not establish that the infringer was

enriched because of the owner’s mark. As noted above, that

requires speculation. The district court could not conclude

that Daffy’s was able to sell the counterfeit bags because of

the Gucci mark without speculating about whether

purchasers were attracted to the handbags because of the

Gucci mark as opposed to quality, price, and appearance.

The district court clearly did not err in not engaging in

such speculation, and it did not abuse its discretion in

denying an award of lost profits.

IV. CONCLUSION

For all of the above reasons, we will affirm the orders of

the district court denying Gucci’s request for a recall. We

In addition, Daffy’s represents without contradiction that “Gucci did

not avail itself of other remedies,” although the district court afforded it

“every opportunity to do so.” Appellant’s Brief at 43. Daffy’s therefore

convincingly argues that Gucci waived its right to seek actual damages

under § 1117 (a)(2), or to seek the counterfeit-specific remedy of

statutory damages under § 1117(c).” Appellee’s Brief at 43. 

25
will also affirm the district court’s order denying Gucci’s

request for summary judgment which precluded both

injunctive relief and an award of profits. 

26
ROSENN, Circuit Judge, dissenting:

The District Court erred in denying the plaintiff injunctive

relief on the ground that Gucci had not sustained

irreparable injury. The undisputed infringement of Gucci’s

undisputed trademark constituted a prima facie case of

irreparable injury as a matter of law. Indeed, this court has

held that “trademark infringement amounts to irreparable

injury as a matter of law.” S & R Corp. v. Jiffy Lube Int’l,

Inc., 968 F.2d 371, 378 (3d Cir. 1992). The District Court

committed further error in denying Gucci the undisputed

profits that Daffy’s realized in the sale of bags under

Gucci’s trademark on the ground that Daffy’s did not

infringe willfully. The court relied on Securacom Consulting,

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

is not a counterfeiting case and is no longer binding

precedent in light of subsequent statutory amendments. 

In considering the trade-mark statute as enacted in

1946, the Senate Committee on Patents reported: 

Trade-marks encourage the maintenance of quality by

securing to the producer the benefit of the good

reputation which excellence creates. To protect trademarks, therefore, is to protect the public from deceit, to

foster fair competition, and to secure to the business

community the advantages of reputation and good will

by preventing their diversion from those who have

created them to those who have not. 

S. Rep. No. 79-1333, at 1275 (1946). 

The District Court ignored the purpose of the trade-mark

statute to protect the public from deceit and secure to the

business community the advantages of its good name and

reputation. It left the purchasers of 588 highly expensive

counterfeit bags without any relief or even notice that the

bags they were carrying were not genuine. The court’s

decision does nothing to discourage trade-mark

infringement but rewards a party to the deceit by allowing

it to retain all of the profits obtained by the use of the

producer’s good name and reputation. Moreover, the court

denies the innocent trademark owner an injunction against

future infringement and a recall of the spurious goods sold

27
under the producer’s trade-mark and good name. Because

the majority affirms that decision, I respectfully dissent.

I.

The majority concludes that Gucci America’s (Gucci’s)

request for a recall of the 588 counterfeit handbags sold

under the Gucci name shall be denied because the District

Court’s findings of the difficulties to be encountered with

such a remedy were not clearly erroneous. Such a denial,

therefore, adds considerable weight to Gucci’s claim that

Daffy’s, the defendant, should be required to disgorge the

profits it made in trading on the Gucci name and

reputation. This is not an unreasonable request and the

least that a court should do to repair the damage to the

innocent owner of the trademark. 

Daffy’s business specializes in selling popular goods at

discount prices. It operates a business which, as

characterized by the District Court, involves considerable

risk. As the District Court observed in denying Gucci’s

motion for an order compelling Daffy’s to recall the

counterfeit “Jackie-O” handbags, its business “is clearly not

a business for the fainthearted, and Daffy’s buyers are

constantly aware that any given batch of branded goods

offered to them might be counterfeit. If Daffy’s buyers are

“constantly aware” of the risk that the goods they purchase

are counterfeit, how much more so must be Daffy’s, the

seller. This observation, without more — and there is much

more to which I refer below — seriously weakens Daffy’s

claims of innocence and favors Gucci’s claims for relief.

Daffy’s did not acquire the counterfeit bags directly from

Gucci or through the normal chain of distribution. It

purchased them without any supporting documentation

from a middleman, Sara’s Collections. Therefore, it knew

that the nature of its business involved the risk of selling

counterfeit or stolen merchandise. 

Even though Daffy’s knew of these possibilities, it

perfunctorily “attempted to authenticate the bags” by taking

one to a clerk at a Gucci outlet store in Secaucus, New

Jersey. This was simply a superficial effort to cover itself in

the event of a lawsuit. Daffy’s did not take the bag to the

28
store manager or to someone in authority in the Gucci

organization who was familiar with the construction of the

bag. It satisfied its concern by asking some unknown retail

clerk of unknown experience, of unknown authority, and

with unknown familiarity with the intricacies of bag

construction, to confirm the authenticity of the bag. It also

sent a damaged bag to the Gucci repair center without any

specific inquiry as to the authenticity of the bag. 

The District Court found that Daffy’s unintentionally sold

counterfeit bags. However, as between a sophisticated chain

of discount stores in the high risk business of selling

products acquired outside the customary chain of retail

distribution and without the usual authenticating

documentation and an innocent infringed, the District

Court rewarded the “unintentional” infringer with all the

profits derived from the sale of counterfeit bags under

Gucci’s famed good name. The Court has favored and

enriched the infringer and left the innocent and innovative

creator of a famous product and trademark owner without

any remedy whatsoever. Moreover, the court has denied

protection against future infringement. Furthermore, it has

inverted the objective of the Lanham Act. “Protection of

infringers is not a purpose of the Lanham Act. On the

contrary, the Act’s objective is the protection of the

trademark and the public.” United States Jaycees v.

Philadelphia Jaycees, 639 F.2d 134, 142 (3d Cir. 1981). 

Daffy’s unjustly enriched itself at Gucci’s expense and

reputation. During the summer of 2000, Daffy’s sold

approximately 588 of the 594 Jackie-O handbags at prices

ranging from $298.99 to $398.99, depending on size. These

prices were far higher than the prices of the handbags

Daffy’s normally sells. Daffy’s gained $195,000, including

stipulated gross profits of $51,064.12. Daffy’s generally

sells $40 handbags and has sometimes sold handbags from

other Italian designers for $100-$200. Daffy’s acknowledged

that the Gucci bags were “in a league of their own,” on a

different level from what they normally would sell. 

The District Court held that this Court’s precedent in

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

(3d Cir. 1999), required a showing of willful infringement in

all trademark cases as a prerequisite to an award of profits.

29
(Dist. Ct. op. at A 21.) Securacom held that “a plaintiff must

prove that an infringer acted willfully before the infringer’s

profits are recoverable.” Securacom, 166 F.3d at 187. Willful

infringement involves an intent to infringe or willful

infringement of a trademark holder’s rights. Id.

Securacom is no longer binding precedent because it has

been superceded by subsequent statutory amendments to

the Lanham Act. Willful infringement is not a prerequisite

in all trademark cases for an award of profits. There is no

longer an absolute willfulness requirement under Section

43(a) of the Lanham Act except for dilution claims. The

Trademark Amendment Act of 1999, Pub. L. No. 106-43,

113 Stat. 219 (1999), replaced “or a violation under section

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

a willful violation under section 43(c). . . .” 15 U.S.C.

§ 1117(a). Under the new standard, I submit that the

District Court erred in declining to allow Gucci to recover

Daffy’s profits pursuant to 15 U.S.C. § 1117(a). The specific

inclusion of the word “willful” prior to “violation” in the

same sentence with the word “violation” without any

adjective suggests an intentional contrast between the

requirements for proving each type of violation. This is the

interpretation adopted by the Fifth Circuit Court of

Appeals, the only Court of Appeals that has considered this

issue since the statute’s amendment. See Quick Techs., Inc.

v. Sage Group PLC, 313 F.3d 338, 348-49 (5th Cir. 2002)

(declining to adopt bright-line willfulness requirement and

describing pre-1999 cases as of limited utility).1 Even in

1. In a recent study of remedies for trademark infringement reported in

“Remedying Trademark Infringement: The Role of Bad Faith in Awarding

an Accounting of Defendant’s Profits,” author Danielle Conway-Jones

notes that the remedies for dilution are distinguishable from the

remedies for infringement; only a showing of willfulness under a claim

for dilution will entitle the owner of a famous trademark to all of the

Lanham Act remedies, including defendant’s profits. The express

requirement that a mark owner show a willful violation before perfecting

his entitlement to Lanham Act remedies for dilution supports the

premise that the theories of recovery underlying the remedies for

trademark infringement, as opposed to trademark dilution, are not

dependent upon the existence of a bad faith requirement. 42 Santa Clara

L. Rev. 863 (2002). 

30
Securacom, this court recognized that willfulness was not

an absolute requisite to an accounting for profits by an

infringer. We stated: “The Lanham Act permits courts to

award monetary damages to trademark owners as

compensation where it is equitable to do so regardless of

the willfulness of the defendant’s infringement.” 166 F.3d at

190. 

An equitable remedy generally does not require

willfulness, bad faith, or even wrongdoing. Instead, the

question is whether the property has been acquired in such

circumstances that the holder of legal title may not in good

conscience retain the beneficial interest. Here, Daffy’s

concedes that the sales of counterfeit Gucci bags netted

$51,064. It cannot be seriously doubted that customers

paid a premium for the Gucci name. The Seventh Circuit

Court of Appeals has explained that “[a]s between the

innocent infringer who seeks to get off scot-free, and the

innocent infringed . . . the stronger equity is with the

innocent infringed.” Louis Vuitton S.A. v. Lee, 875 F.2d 584,

589 (7th Cir. 1989). This remedy is particularly appropriate

here, where the infringer understood the risks, but made

Ms. Conway-Jones concludes: 

Congress did not intend bad faith to be a requirement for an award

of the remedy of an accounting of profits in response to cases of

trademark infringement. As demonstrated by a review of the newest

substantive additions to the Lanham Act — the FTCA and the ACPA

— it is apparent that Congress had several opportunities to consider

and include a bad faith requirement before permitting an award of

an accounting of an infringer’s profits. With each opportunity,

Congress remained silent on this issue. Taking the language

surrounding the Lanham Act’s remedy provision and reviewing the

legislative history of the Trademark Act, the FTCA, and the ACPA, it

is evident that the accounting of profits remedy is restricted to bad

faith showings only when the cause of action pressed by the

trademark owner is dilution or cybersquatting. Nowhere in the

language of the statute or the legislative history is there a

requirement to show bad faith in trademark infringement actions

before the accounting remedy can be awarded. 

Id. at 924-25. 

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only a feeble and perfunctory effort to ascertain whether the

bags were authentic. On balance, the equities favor Gucci.

An accounting of profits may be seen as a rough estimate

of Gucci’s lost sales. Congress did not put upon the

“despoiled” the often impossible burden of showing that

“but for the defendant’s unlawful use of the mark,

particular customers would have purchased the plaintiff ’s

goods.” Mishawaka Rubber & Woolen Mfg. Co. v. S.S.

Kresge Co., 316 U.S. 203, 206 (1942). An accounting of

profits functions as a rough measure of damages, including

less tangible damages such as injury to reputation. See Polo

Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 149 (4th Cir.

1987). An award of the infringer’s profits seeks to make the

trademark owner whole for losses sustained by the plaintiff

as a result of infringer’s use of something that did not

belong to him. See Mishawaka, 316 U.S. at 206. 

The majority denies disgorgement of profits by the

infringer on two untenable grounds. First, the majority

views Daffy’s as a victim of the counterfeiting, n.16, p. 24,

given Daffy’s initial inquiry to authenticate the genuineness

of the bags. As pointed out above, that inquiry was feeble,

superficial, perfunctory, and unsupported by any

documentation. Second, the majority places an

unreasonable and incredible burden upon the innocent

trademark owner to prove that the infringer’s customers

purchased these handbags because they were attracted by

the Gucci mark.

Although the majority recognizes the concern that Daffy’s

will be unjustly enriched unless it disgorges the profits

reaped in the sale of Gucci counterfeit bags, it denies

disgorgement because “the record does not establish that

the infringer was enriched because of the owner’s mark.”

The majority, without any supporting authority, places an

untenable and virtually impossible burden upon the

innocent trademark owner to prove that the purchasers of

the bags “were attracted to the handbags because of the

owner’s mark,” as opposed to quality, price and

appearance. This burden is very much greater than the

burden the District Court rejected in denying Gucci’s

motion for recall of the counterfeit bags. The purchasers

were Daffy’s customers who had no contact with Gucci.

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Requiring the innocent trademark victim affirmatively to

prove that the purchasers unknown to it “were attracted to

the handbags because of the Gucci mark” is an argument

that Daffy’s never raised in the District Court or on appeal.

Adopting it totally turns trademark law on its head and ipse

dixit places an impossible and unreasonable burden on the

innocent trademark victim.

II.

Gucci is also entitled to an injunction to protect it from

future unintentional infringement by Daffy’s. Although the

District Court found that Daffy’s infringement was

unintentional, there is still a danger that Daffy’s will harm

Gucci in the future through an incident of unintentional

infringement. 

To determine whether an injunction is appropriate, the

District Court considered four factors: (1) whether Gucci

had shown actual success on the merits; (2) whether Gucci

would be irreparably injured by the denial of injunctive

relief; (3) whether granting a permanent injunction would

result in even greater harm to Daffy’s; and (4) whether the

injunction would be in the public interest. See Gucci V at

13 (citing Shields v. Zuccarini, 254 F.3d 476, 482 (3d Cir.

2001)). However, the District Court improperly placed the

burden of proof regarding future harm on Gucci rather

than on Daffy’s. The District Court denied Gucci’s claim for

a permanent injunction because Gucci failed to produce

any evidence to support a finding that it would be

irreparably injured by the denial of a permanent injunction.

Gucci V at 13-14. The District Court failed to recognize that

a trademark is a form of property and neither the

trademark nor the infringement here are in dispute. To

prove irreparable injury, the plaintiff must only make out a

prima facie case showing of trademark infringement. S & R

Corp. v. Jiffy Lube Int’l, Inc., 968 F.2d 371, 378 (3d Cir.

1992)(“[T]rademark infringement amounts to irreparable

injury as a matter of law.”); Basic Fun, Inc. v. X-Concepts,

LLC, 157 F. Supp.2d 449, 457 (E.D. Pa. 2001). 

Although the majority acknowledges, as it must, that

“trademark infringement amounts to irreparable injury as a

33
matter of law,” it jumps to an inexplicable conclusion that

Gucci’s failure to argue in the District Court that the “loss

of control” over its trademarked goods by the infringement

also amounts to a waiver of irreparable harm “for purposes

of injunctive relief.” This holding incredibly transforms the

“control of quality” argument asserted by Gucci in its

contention that the District Court committed legal error in

failing to order a recall of the counterfeit goods into a

general waiver of irreparable harm “for purposes of

injunctive relief.” Irreparable harm was and is a basic

element of plaintiff ’s case from its inception. Implying a sub

silentio waiver, as the majority does, of the fundamental

legal principal that “trademark infringement amounts to

irreparable injury”is highly unwarranted and imprudent. 

Furthermore, even though the “control of quality”

argument was not presented to the District Court in Gucci’s

motion for recall relief, that failure should not have an

adverse effect on its argument in this court, even on the

recall issue. The recall issue as a form of relief is, as far as

I can ascertain, a matter of first impression in this court.

The argument is a legal one, requiring no additional

evidence which might prejudice Daffy’s. Barring its

consideration under these circumstances is harsh and

contrary to the prudential stance that this court took in

Ross v. Hotel Employees & Restaurant Employees Int’l

Union, 266 F.3d 236, 242-43 (3d Cir. 2001). In Ross, the

court considered on appeal an argument not raised in the

District Court. Writing for the court, Judge McKee reasoned

that the appeal raised important implications for labor law

and “a question of first impression in this circuit” and the

District Court, as in this case, “was afforded the rare

advantage of a fully developed record in analyzing the

issue.” Id. at 243. The court, accordingly, considered the

argument not raised before. 

By proving infringement, Gucci proved irreparable injury

as a matter of law. Upon proving irreparable injury, the

burden shifted to Daffy’s to prove that the injury will not

recur in the future. “[I]t is well established that the

voluntary discontinuance of challenged activities by a

defendant does not necessarily moot a lawsuit.” Lyons

P’ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 800 (4th

34
Cir. 2001) (internal quotation marks omitted). “That rule is

subject to the caveat that an injunction is unnecessary

when there is no reasonable expectation that the wrong will

be repeated.” Id. (citing United States v. W.T. Grant Co., 345

U.S. 629, 633 (1953) (emphasis in original)(internal

quotation marks omitted). Daffy’s cannot show that its

putative policy against selling infringed goods moots Gucci’s

motion for an injunction. To show that an injunction is

unnecessary and further proceedings are mooted by Daffy’s

plans not to sell any more Gucci products, Daffy’s must

meet its “heavy burden” of showing that future

infringement is “practically speaking, nearly impossible.”

Lyons P’ship, 243 F.3d at 800. 

Daffy’s argues that it now has a policy of not buying any

Gucci goods. It points out that if it does not buy any Gucci

branded goods, it cannot even unintentionally infringe

Gucci’s trademark. That is true as long as the policy lasts,

but that is of little comfort to Gucci because Daffy’s has the

ability to change the policy at any time. Moreover, Gucci

argues that Daffy’s does not point to any evidence in the

record in support of its statement that it has adopted a

policy never to sell Gucci goods in the future. Even now,

Daffy’s has no policies or procedures to authenticate

merchandise. In response to our question at oral argument,

Daffy’s attorney would not stipulate that Daffy’s will never

sell Gucci’s products. It merely claimed that its present

policy is not to do so. No legal obligation prevents Daffy’s

from changing its mind tomorrow and immediately

resuming sales of purported Gucci products. 

Daffy’s unwillingness to stipulate forbodes the possibility

of future infringements, and once an infringement is

shown, the trademark owner is not required to prove that

the infringer is likely to infringe again. Hard Rock Café

Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143,

1151 (7th Cir. 1992); Basic Fun, Inc. v. X-Concepts, LLC.,

157 F. Supp.2d at 457 (“If the infringers sincerely intended

not to infringe, the injunction harms them little; if they do,

it gives [the trademark owner] substantial protection of its

trademark.”). Once infringement has been proven, a “heavy

burden” falls on the infringer to demonstrate that there is

no possibility of further recurrence of the infringement.

35
Lyons P’ship, 243 F.3d at 800. The unwillingness of Daffy’s

to stipulate that in the future it would not sell Gucci bags

obviously inspires no confidence in its present policy. 

Gucci did not seek an injunction as broad as the District

Court actually considered — the prohibition of Daffy’s from

ever using the Gucci trademark in the future. Gucci sought

to enjoin Daffy’s only from future infringement “through

sales of unauthorized goods and false advertising.” It was

erroneous as a matter of law for the court to place the

burden on Gucci to prove that trademark infringement

would continue in the future. Shields v. Zuccarini, 254 F.3d

476, 482 (3d Cir. 2001), merely identifies the four factors to

be considered by the court in granting an injunction. Once

an act of infringement is proven, federal courts do not

require the plaintiff to show that the defendant is likely to

infringe again in the future. Levi Strauss & Co. v. Shilon,

121 F.3d 1309, 1314 (9th Cir. 1997)(any doubt regarding

extent of injunctive relief “must be resolved in [the

plaintiff ’s] favor as the innocent producer and against the

[defendant]”); Basic Fun, Inc. v. X-Concepts, LLC, 157 F.

Supp.2d at 457. Once an infringement is demonstrated, a

“heavy burden” shifts to the defendant to prove that there

is no possibility of future recurrence of the infringement.

Lyons P’ship, 243 F.3d at 800. Daffy’s made no effort,

beyond its non-binding policy, to prove that in the future it

will not infringe upon Gucci’s trademarks through sales of

counterfeits. 

For the reasons set forth above, the denial of the

injunction constituted reversible error.

III.

Accordingly, I submit that Daffy’s should not be allowed

to reap the profits of its infringement and the judgment of

the District Court with respect to it should be reversed. I

also believe that the judgment of the District Court denying

the permanent injunction enjoining future infringements of

Gucci’s trademark, as well as attorneys’ fees and costs,

should be reversed.

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A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

37