Court Opinion

ID: 9960980
Source: CourtListenerOpinion
Date Created: 2024-04-17 17:01:25.741087+00
Date Added: 2024-06-11T08:20:06.764155
License: Public Domain

PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
                   ______

              Nos. 23-1273 and 23-1281
                       ______

                 KARS 4 KIDS INC.

                          v.

                 AMERICA CAN!
             (D.N.J. No. 3-14-cv-07770)

         AMERICA CAN! CARS FOR KIDS

                          v.

                KARS 4 KIDS INC.
             (D.N.J. No. 3-16-cv-04232)

                KARS 4 KIDS, INC.,
                         Appellant in No. 23-1273

AMERICA CAN! and AMERICA CAN! CARS FOR KIDS,
                      Appellants in No. 23-1281
                   ______

    On Appeal from the United States District Court
           for the District of New Jersey
    (D.C. Nos. 3-14-cv-07770 and 3-16-cv-04232)
        District Judge: Honorable Peter G. Sheridan
                          ______

              Argued December 12, 2023
  Before: BIBAS, PORTER, and FISHER, Circuit Judges.

                   (Filed: April 17, 2024)

Upnit K. Bhatti
Orrick Herrington & Sutcliffe
2100 Pennsylvania Ave, N.W.
Washington, DC 20037

Alexandra Bursak
Christopher Cariello [ARGUED]
Orrick Herrington & Sutcliffe
51 W 52nd Street
New York, NY 10019

Marc D. Haefner
Walsh Pizzi O'Reilly & Falanga
Three Gateway Center
100 Mulberry Street, 15th Floor
Newark, NJ 07102

Jonathan Z. King, Esq.
Cowan Liebowitz & Latman
114 W 47th Street
21st Floor
New York, NY 10036
       Counsel for Appellant in No. 23-1273

                                2
Karen A. Confoy
Corinne M. Trainor
Fox Rothschild
997 Lenox Drive
Princeton Pike Corporate Center, Building 3
Lawrenceville, NJ 08648

Christopher R. Kinkade
Pierson Ferdinand
100 Overlook Center
2nd Floor
Princeton, NJ 08054

Aubrey N. Pittman [ARGUED]
The Pittman Law Firm
901 Main Street
Suite 3670
Dallas, TX 75202
       Counsel for Appellants in No. 23-1281

                             3
                 OPINION OF THE COURT

FISHER, Circuit Judge.
        “1-877 Kars for Kids, K-A-R-S Kars for Kids . . .
donate your car today” has become a familiar musical jingle,
and the question before us is whether Kars 4 Kids, Inc. has the
right to use it in the state of Texas.1
        This long-running trademark dispute has returned to this
Court for the second time. Kars 4 Kids, Inc. and America Can!
Cars for Kids sued one another for infringing on their
respective marks. A jury found that Kars 4 Kids infringed on
America Can’s unregistered mark in Texas. The District Court
awarded monetary and injunctive relief. We affirmed in part,
but vacated and remanded for the District Court to reexamine
its conclusion that the doctrine of laches did not bar America
Can’s claims. On remand, the District Court’s reexamination
led it to the same conclusion: that laches did not bar relief. We
disagree. Because the District Court abused its discretion by
again not properly applying the presumption in favor of laches,
and because laches bars both monetary and injunctive relief
here, we will vacate and remand with instructions to dismiss
America Can’s claims with prejudice. We will dismiss as moot
America Can’s cross-appeal.
                                  I.
                    A.     Factual Background2
        America Can and Kars 4 Kids are both charities that sell
donated vehicles to fund children’s education programs.

       1
        https://archive.org/details/youtube-ybJ6fS7ruuo.
       2
        The history of this case was discussed extensively in
our prior decision. See Kars 4 Kids Inc. v. Am. Can!, 8 F.4th
209 (3d Cir. 2021). We repeat the most salient facts here.

                               4
Texas-based America Can began operations in the late 1980s.
In 1989, it started using the name “Cars for Kids” in advertising
campaigns. Beginning in the 1990s, America Can used that
name in advertisements played on a Dallas-area radio station
and in print advertisements in regional publications. During the
same period, the Dallas Morning News ran articles and
columns discussing America Can’s donation program under
the “Cars for Kids” name. While America Can’s activities had
been primarily concentrated in Texas, by 2004, America Can
received donations from forty-nine of the fifty states.
        New Jersey-based Kars 4 Kids was founded in 1995,
and began using its marks, “KARS 4 KIDS” and “1-877-
KARS-4-KIDS,” in its advertising around 1997. Kars 4 Kids
first used flyers and bumper stickers, and later distributed
nationwide mailers. In 1999, Kars 4 Kids started using its
earworm musical jingle on the radio and later adapted it for
television advertisements. By the early 2000s, Kars 4 Kids had
begun advertising in regional newspapers and national Jewish
publications. In 2003, Kars 4 Kids began advertising in
magazines and newspapers and on conventional and internet
radio, billboards, and television. It also purchased keyword
advertisements on Yahoo and Google.
        In 2003, America Can discovered a Kars 4 Kids
advertisement in the Dallas Morning News and sent Kars 4
Kids a cease and desist letter, asserting America Can’s rights
to the “Cars for Kids” mark in Texas. Kars 4 Kids’ leadership
believed that its use of the mark “Kars 4 Kids” in Texas was
lawful and did not take any action in response to the cease and
desist letter. America Can’s representatives did not notice Kars
4 Kids’ advertisements in Texas for several years after sending
the letter. But Kars 4 Kids continued to advertise in Texas. In
2005, Kars 4 Kids purchased a national advertisement in
Reader’s Digest magazine. It also advertised on Google, which

                               5
allowed Kars 4 Kids’ advertisements to appear nationwide—
including in Texas—when potential donors used certain search
terms. In 2011, America Can’s representatives became aware
of the Kars 4 Kids website and growing internet presence. That
same year, America Can contacted its lawyers to consider its
legal options. In 2013, America Can sent another cease and
desist letter, alleging that Kars 4 Kids was unlawfully using
“KARS 4 KIDS” in Texas.
                  B.     Procedural Background
        Kars 4 Kids sued America Can in 2014 in the United
States District Court for the District of New Jersey, and
America Can countersued in 2015. Both parties alleged federal
and state trademark infringement, unfair competition, and
trademark dilution claims, and both sought equitable relief.
America Can requested cancellation of Kars 4 Kids’ trademark
for 1-877-KARS-4-KIDS, financial compensation, and a
nationwide injunction prohibiting Kars 4 Kids from using the
mark.
        The parties tried their trademark claims before a jury.
The jury found that America Can had trademark rights in the
name “Cars for Kids” and that Kars 4 Kids infringed those
rights in Texas willfully—that is, knowingly or with reckless
indifference. But the jury found that America Can failed to
prove that Kars 4 Kids had obtained registration of its 1-877-
KARS-4-KIDS mark by false representations.
        The District Court held a bench trial on the equitable
claims and remedies. The Court held that Kars 4 Kids’ laches
defense did not apply, finding America Can’s executive
credibly testified that a review of business records from 2004
to 2011 suggested that America Can “assumed” Kars 4 Kids
had “pulled back their advertising” following the 2003 cease
and desist letter. Kars 4 Kids Inc. v. Am. Can!, No. 3:14-cv-
7770 (PGS) (DEA), 2020 WL 1550804, at *4 (D.N.J. Apr. 1,

                              6
2020), aff’d in part, vacated in part, and remanded, 8 F.4th
209 (3d Cir. 2021). The Court found that this apparent lack of
advertising “lulled America Can[] into a passive position until
2011” and “preclude[d] a finding of inexcusable delay.” Id.
The Court also found that Kars 4 Kids tried to “unscrupulously
apply” laches “[b]y waiting to tee [] up its laches defense until
the remedy stage after litigating for four years.” Id. The Court
stated that Kars 4 Kids did not “show any prejudice” from
America Can’s alleged delay. Id.
        The District Court ordered Kars 4 Kids to disgorge
$10,637,135, representing its Texas profits for the years 2008–
2019, minus advertising and other expenses. The Court
declined to award enhanced monetary relief because Kars 4
Kids infringed upon America Can’s mark only in Texas, and
because Kars 4 Kids did not obtain its mark fraudulently. 2020
WL 1550804, at *9. The District Court enjoined Kars 4 Kids
from using its mark in Texas and from using
www.carsforkids.com. The Court declined to cancel Kars 4
Kids’ registered mark, however, because “the jury determined
that Kars 4 Kids did not knowingly procure its registration of
the 1-877-Kars-4-Kids trademark by false or fraudulent
means.” 2020 WL 1550804, at *13. The parties cross-
appealed.
        This Court affirmed in part, but vacated and remanded
for the District Court to reexamine its laches and disgorgement
conclusions. Kars 4 Kids, 8 F.4th at 226. Regarding laches, we
explained that—because America Can waited twelve years to
sue—it bore the burden of disproving delay and prejudice. Id.
at 221. We directed the District Court to consider, as part of its
undue delay and prejudice analysis, whether Kars 4 Kids’
national advertising reached Texas such that a reasonable
entity in America Can’s position should have detected it. Id. at

                                7
222. We also rejected America Can’s argument that Kars 4
Kids forfeited its laches defense. Id. 221 n.12.
       On remand, the District Court again concluded that
“laches remains inappropriate in this case.” Kars 4 Kids Inc. v.
Am. Can!, No. 3:14-cv-7770-PGS-LHG, 2022 WL 2106495, at
*24 (D.N.J. June 10, 2022). The District Court acknowledged
that America Can bore the burden of proving excusable delay
and the lack of prejudice on account of delay. Id. at *1. It
analyzed whether the delay was excusable by considering each
portion of Kars 4 Kids’ advertising. Id. at *2. The Court found
that “[Kars 4 Kids’] early advertising prior to 2003 only
reached Texas in a negligible manner, if at all.” Id. at *16.
Between 2003 and 2013, “[Kars 4 Kids’] advertising grew in
size and types of advertising outlets . . . but most of it failed to
reach Texas in an open and notorious manner.” Id. at *17. In
reaching this conclusion, the Court pointed to the lack of
testimonial, expert, or documentary evidence demonstrating
whether Kars 4 Kids’ advertisements were viewed by enough
Texans to prompt America Can to act more quickly to protect
its mark. See id. at *7–15.
       Based on the evidence provided, the Court found that
because “only a negligible number of advertisements, if any,
reached Texas between 2003 and 2011, an entity in America
Can’s shoes would not conclude that it had a valid claim of
infringement against [Kars 4 Kids] any earlier than 2011.” Id.
at *18. It wasn’t until 2013, according to the Court, that “[Kars
4 Kids] began openly advertising via radio in Texas, a clearly
open and notorious infringement that a reasonable entity in
America Can’s shoes would be expected to act upon.” Id. The
Court held that because America Can sued Kars 4 Kids in 2015,
there was “no inexcusable delay by America Can between
2003 and 2013.” Id. at *20.

                                 8
        The District Court held that Kars 4 Kids was not
prejudiced by America Can’s delay because receipt of the 2003
cease and desist letter meant that Kars 4 Kids “assumed the risk
of its advertising campaigns” for the ten years that followed.
Id. In this Court’s decision in the first appeal, we noted that
certain circuits had accepted this line of “assumption of the
risk” reasoning and invited the District Court to consider
several cases when deciding on remand whether Kars 4 Kids
had been prejudiced. Kars 4 Kids, 8 F.4th at 222 n.13.3 The
District Court found this assumption-of-the-risk reasoning
persuasive and held on that basis that Kars 4 Kids was not
prejudiced by America Can’s delay. The Court also found that
“[a]nother reason” for America Can’s delay in filing suit was
Kars 4 Kids’ progressive encroachment into the Texas market.
See 2022 WL 2106495, at *19 (describing Kars 4 Kids’ “slow,
steady change in the use of a mark in a new territory”). Finally,
the Court concluded that Kars 4 Kids’ willful infringement
“over the years constitutes unclean hands that precludes the
invocation of laches.” Id. at *21.

       3
         Those cases all similarly reasoned that “forewarning
of a plaintiff’s objections generally prevents a defendant from
making a laches defense.” Roederer v. J. Garcia Carrion, S.A.,
569 F.3d 855, 859 (8th Cir. 2009); see also Elvis Presley
Enters., Inc, v. Capece, 141 F.3d 188, 205 (5th Cir. 1998)
(“[A]cts after receiving a cease and desist letter are at the
defendant’s own risk because it is on notice of the plaintiff’s
objection to such acts.”); Conan Props., Inc. v. Conans Pizza,
Inc., 752 F.2d 145, 151–52 (5th Cir. 1985); Citibank, N.A. v.
Citibanc Grp., Inc., 724 F.2d 1540, 1546–47 (11th Cir. 1984).

                               9
                  II.     Standard of Review4
        Our review of a District Court’s decision on laches is
multifaceted. “We review factual findings such as length of
delay and prejudice under the clearly erroneous standard; we
review the district court’s balancing of the equities for abuse
of discretion; and our review of legal precepts applied by the
district court in determining that the delay was excusable is
plenary.” Bermuda Exp., N.V. v. M/V Litsa (Ex. Laurie U), 872
F.2d 554, 557 (3d Cir. 1989).
      III.   The Doctrine of Laches Bars America Can’s
                  Claims Against Kars 4 Kids
                    A.      Legal Framework
        The Lanham Act does not contain a statute of
limitations. Instead, it subjects all claims to “the principles of
equity,” including laches. Kars 4 Kids, 8 F.4th at 220 (quoting
Santana Prods., Inc. v. Bobrick Washroom Equip., Inc., 401
F.3d 123, 135 (3d Cir. 2005)). To determine whether laches
bars a claim, we consider two elements: (1) whether the
plaintiff inexcusably delayed in bringing suit, and (2) whether
the defendant was prejudiced as a result of the delay.
See Santana Prods., 401 F.3d at 138.5
        We determine which party bears the burden of proof for
a laches claim by identifying “the most analogous statute of

       4
          The District Court had jurisdiction under 28 U.S.C.
§§ 1331 (federal questions) and 1338(a) (civil actions relating
to patents, copyrights, and trademarks). We exercise appellate
jurisdiction under 28 U.S.C. § 1291 (final decisions of district
courts).
        5
          Both Kars 4 Kids and America Can are plaintiffs in
their respective actions. For purposes of Kars 4 Kids’ laches
defense, however, America Can is the plaintiff and Kars 4 Kids
is the defendant.

                               10
limitation as a guideline,” and then determining whether that
period has expired. Kars 4 Kids, 8 F.4th at 220 (quoting
Santana Prods., 401 F.3d at 135). If so, the defendant “‘enjoys
the benefit of a presumption of inexcusable delay and
prejudice,’ and the plaintiff ‘carrie[s] the burden of proving
that its delay was excusable and that [the delay] did not
prejudice [the defendant].’” Id. at 221 (alterations in original)
(quoting Santana Prods., 401 F.3d at 138–39).
        Here, the parties agree that their Lanham Act claims are
“properly analogized to New Jersey’s six year fraud statute.”
Id. (quoting Kaufhold v. Caiafa, 872 F. Supp. 2d 374, 379
(D.N.J. 2012)). “Because America Can first discovered Kars 4
Kids’ allegedly wrongful conduct in 2003 and did not bring its
counterclaims until 2015, the statute of limitations had run on
America Can’s claims.” Id. It must be presumed, then, that
America Can’s claims are barred by laches unless it establishes
both that (1) its delay in suing was excusable and (2) the delay
did not prejudice Kars 4 Kids. Univ. of Pittsburgh v. Champion
Prods. Inc., 686 F.2d 1040, 1044 (3d Cir. 1982).
      B.      Failure to Apply the Presumption of Laches
                   Was an Abuse of Discretion
        “[L]aches is an equitable doctrine addressed to the
sound discretion of the district judge, whose determination we
will not disturb absent an abuse of that discretion.” Id. at 1045.
As is the case here, however, a district court abuses its
discretion when it applies an incorrect legal standard.
See Santana Prods., 401 F.3d at 138 (“We conclude that the
District Court erred because it did not use the appropriate legal
standard to assess [the] laches defense.”); Churma v. U.S. Steel
Corp., 514 F.2d 589, 593 (3d Cir. 1975) (“Whether the district
court has utilized the correct legal principles is freely
reviewable by this court . . . .”).

                               11
        In the first appeal, we vacated the District Court’s
judgment and remanded on the question of laches because the
District Court did not apply the presumption in favor of laches
or consider whether Kars 4 Kids’ national advertising reached
Texas such that an entity in America Can’s shoes could or
should have detected it. Kars 4 Kids, 8 F.4th at 221–22. The
District Court has repeated the mistake and has abused its
discretion in failing to apply the correct legal standard on
remand. Specifically, the District Court did not hold America
Can to its burden to establish that its delay in bringing suit was
excusable, and wrongly circumvented a prejudice analysis by
concluding instead that Kars 4 Kids had “assumed the risk”
following its receipt of the 2003 cease and desist letter.
                           1.     Delay
        The doctrine of laches is “based upon [the] maxim that
equity aids the vigilant and not those who slumber on their
rights.” Kansas v. Colorado, 514 U.S. 673, 687 (1995)
(quoting Black’s Law Dictionary 875 (6th ed. 1990)). In order
to avoid the application of laches, America Can had to show
that “a reasonable person in [its] shoes would have waited to
file suit.” Kars 4 Kids, 8 F.4th at 222. “Open and notorious use
by the defendant is relevant to the plaintiff’s knowledge and,
thus, whether its delay is excusable.” Univ. of Pittsburgh, 686
F.2d at 1044 n.14. The answers to two distinct but related
questions determine whether America Can is able to rebut the
presumption of inexcusable delay: What did America Can
know? And what did America Can do? The District Court
abused its discretion by erroneously holding Kars 4 Kids
responsible for answering the first question, and not
sufficiently considering the second.

                               12
          America Can’s Knowledge of Kars 4 Kids’
                  Advertising Reaching Texas
        “A plaintiff is not obligated to sue until it knows or
should know that the defendant’s conduct constitutes
trademark infringement.” Kars 4 Kids, 8 F.4th at 221
(collecting cases). On remand, the District Court made
extensive findings—consistent with our directive—detailing
all of Kars 4 Kids’ national and Texas-specific advertising
from 2003 to 2019. And the Court did acknowledge that
“America Can bears the burden of disproving delay.” 2022 WL
2106495, at *1 (quoting Kars 4 Kids, 8 F.4th at 221).
        In the analysis that the Court conducted, however, it
functionally reversed the presumption of laches by discounting
evidence of Kars 4 Kids’ presence in Texas because Kars 4
Kids did not show whether these advertisements were viewed
by a sufficient number of Texans to put America Can on actual
or constructive notice. See 2022 WL 2106495, at *7–13
(noting Kars for Kids did not provide mailing lists for
postcards or national email blasts; holding the record contained
insufficient detail about Yahoo and Google web advertising,
2003 print advertising in Texas, and 2003–04 CBS radio
advertisements; and concluding there was no evidence that
vendor “Clear Channel Outdoor TX” provided billboards in
Texas or that a 2005 Reader’s Digest advertisement reached
Texas in any appreciable or open and notorious manner).
Discussing Kars 4 Kids’ internet advertising, the Court
concluded that “there is no way to calculate market penetration
in this case” because “neither party has undertaken any such
analysis.” Id. at *17 (emphasis added).
        Such burden shifting is legal error because it was
America Can’s burden to establish that it was not aware of Kars
4 Kids’ presence in Texas. Under the presumption of laches,
Kars 4 Kids had no obligation to establish anything. That

                              13
burden was America Can’s alone. See Burke v. Gateway
Clipper, Inc., 441 F.2d 946, 949 (3d Cir. 1971) (when the
analogous statute of limitations has run, this Court “requires
the plaintiff to come forward and prove that his delay was
excusable”).
        The District Court also discounted evidence that
America Can was aware that Kars 4 Kids continued to operate
as a competitor in the years following the 2003 cease and desist
letter. America Can’s director of marketing testified that she
became aware of Kars 4 Kids around 2006 when she heard
from “donors that were confused” about the difference
between the charities. JA1198. The District Court concluded
that it would be merely “speculative” to find the donor
confusion sufficient to “prompt action” by America Can
because the record did not indicate whether the confused
donors were from Texas. 2022 WL 2106495, at *13. This again
inverts the burden. America Can was charged with establishing
that it was not aware of Kars 4 Kids’ presence in Texas. It could
have inquired with those confused donors about their location
or where they encountered Kars 4 Kids’ advertisements.
America Can made no such inquiry. Had the District Court
held America Can to its burden, it would have concluded that
America Can failed to elicit testimony that America Can was
not aware of Kars 4 Kids’ presence in Texas.
        America Can argues that the District Court did not err
in how it weighed this evidence. It asserts that the Court instead
appropriately shifted the burden back to Kars 4 Kids after
America Can overcame the rebuttable presumption of
inexcusable delay. It overcame the presumption, America Can
claims, because it produced all the evidence it possessed
concerning Kars 4 Kids’ advertising. According to America
Can, requiring any more would ask it to prove a negative. The
District Court, however, engaged in no such sequential

                               14
analysis. It sought solely to determine whether Kars 4 Kids’
advertisements reached Texas, based on whether Kars 4 Kids
could establish sufficient market penetration.
       Even assuming that America Can satisfied the burden
of production, however, satisfying the burden of proof also
requires satisfying the burden of persuasion. See McCann v.
Newman Irrevocable Tr., 458 F.3d 281, 287 (3d Cir. 2006). A
District Court abuses its discretion when it fails to hold the
correct party to its burden of persuasion. Delta Air Lines, Inc.
v. Chimet, S.p.A., 619 F.3d 288, 295 (3d Cir. 2010). It follows
that the District Court abused its discretion by placing the
burden of persuasion on Kars 4 Kids. It was America Can’s
obligation to persuade the Court that it was not sufficiently
aware of Kars 4 Kids’ use of its mark in Texas. The District
Court erred by not holding America Can to that burden.
              America Can’s Affirmative Inquiry
                   and Protection of its Mark
       The second question to consider when assessing the
delay prong of laches is what America Can did to identify and
stop any potentially infringing behavior. This Court has
required “diligence” on behalf of parties in America Can’s
shoes. United States v. Koreh, 59 F.3d 431, 445 (3d Cir. 1995)
(describing diligence as the standard for undue delay). Our
sister circuits agree that proactive inquiry is relevant to
determining if any delay was excusable. See, e.g., Chattanooga
Mfg., Inc. v. Nike, Inc., 301 F.3d 789, 793 (7th Cir. 2002) (“[A]
trademark owner is chargeable with information it might have
received had due inquiry been made.”) (internal quotation
marks and citation omitted); Wanlass v. Gen. Elec. Co., 148
F.3d 1334, 1340 (Fed. Cir. 1998) (holding that, after being on
notice of a potential infringer, the plaintiff’s “failure to
investigate” was “especially egregious”).

                               15
       The District Court considered the reach of Kars 4 Kids’
advertising, but did not seriously engage with America Can’s
obligation to diligently and affirmatively protect its mark. The
Court accepted the testimony of America Can’s Chief
Operating Officer Malcolm Wentworth that “America Can
personnel did not see any infringing [Kars 4 Kids]
advertisements in Texas again for many years” following the
2003 cease and desist letter. 2022 WL 2106495, at *8. But
Wentworth did not begin work as COO until 2011. His 2019
testimony about what America Can knew years before he was
involved with the car donation program thus reflects only the
fact that America Can had no record of Kars 4 Kids’
advertisements during the time in question. It does not indicate
whether America Can personnel took any affirmative steps to
discover potential infringement.
       On appeal, America Can argues that it was “diligent in
looking for infringement,” and that it “did investigate and
found nothing.” America Can Br. 51. However, it provides
neither an example of this investigation nor a record citation to
support its assertion. Even when confronted with donors who
were confused between the two organizations, the record does
not show that America Can took any action to investigate.
Without more, America Can fails to meet its burden of
demonstrating that its delay was reasonable because it
diligently protected its mark during the relevant period.
See Koreh, 59 F.3d at 445.
       America Can argues it “cannot show what does not
exist.” America Can Br. 42. True enough. But evidence of
America Can’s diligence in protecting its mark would exist had
it done so. It was America Can’s burden to show what it knew
about Kars 4 Kids and what it did to protect its mark. The
District Court erred when it failed to hold America Can to that
burden.

                               16
                         2.     Prejudice
        “[P]rejudice resulting to the defendant from [the] delay”
is the second “essential element[]” for the application of
laches. Univ. of Pittsburgh, 686 F.2d at 1044. “Courts have
identified two types of prejudice caused by delay:
(1) evidentiary; and (2) economic or expectation-based.”
4 McCarthy on Trademarks and Unfair Competition § 31:12
(5th ed. 2024) (internal quotation marks omitted). “Evidentiary
prejudice exists where a plaintiff’s delay has led to ‘lost, stale,
or degraded evidence, or witnesses whose memories have
faded . . . .’” Eat Right Foods Ltd. v. Whole Foods Mkt., Inc.,
880 F.3d 1109, 1120 (9th Cir. 2018) (quoting Evergreen Safety
Council v. RSA Network Inc., 697 F.3d 1221, 1227 (9th Cir.
2012)). Economic prejudice exists where “a defendant ‘took
actions or suffered consequences that it would not have, had
the plaintiff brought suit promptly.’” Id. (quoting Evergreen,
697 F.3d at 1227). A defendant demonstrates economic
prejudice “by proving that it has continued to build a valuable
business around its trademark during the time that the plaintiff
delayed the exercise of its legal rights.” Grupo Gigante SA De
CV v. Dallo & Co., 391 F.3d 1088, 1105 (9th Cir. 2004) (citing
5 McCarthy § 31:12); see also Gruca v. U.S. Steel Corp., 495
F.2d 1252, 1260 (3d Cir. 1974) (“Pecuniary loss is a very real
factor to be considered in determining whether prejudice to the
defendant exists.”). It would be inequitable for a plaintiff “with
knowledge of a claimed invasion of right, to wait to see how
successful his competitor will be and then destroy with the aid
of a court decree, much that the competitor has striven for and
accomplished.” Anheuser-Busch, Inc. v. Du Bois Brewing Co.,
175 F.2d 370, 375 (3d Cir. 1949).
        America Can bore the burden of establishing that Kars
4 Kids was not prejudiced as a result of its delay in bringing
suit. See Kars 4 Kids, 8 F.4th at 221. But rather than engaging

                                17
in an analysis of evidentiary or economic prejudice, the District
Court held that Kars 4 Kids was not prejudiced because it
assumed the risk of losing any investment made after receiving
the 2003 cease and desist letter. See 2022 WL 2106495, at *20–
21. The cases cited by America Can and relied upon by the
District Court to reach that conclusion, however, are
distinguishable from the facts here. In both Fifth Circuit cases,
the plaintiff sued only one year after sending a demand letter.
See Elvis Presley Enters., 141 F.3d at 192; Conan Props., Inc.,
752 F.2d at 148. In the Eleventh Circuit decision, the plaintiff
repeatedly warned the defendant by letter and ultimately sued
within two years of the defendant drastically increasing the
infringing behavior. Citibank, 724 F.2d at 1546. Each of those
cases involved a registered trademark, whereas America Can’s
mark was unregistered. Registration, while not determinative
of a party’s rights, is relevant because “federal registration of
a trademark is prima facie evidence of the mark’s validity, the
registrant’s ownership of the mark, and its exclusive right to
use the mark in commerce.” Lucent Info. Mgmt., Inc. v. Lucent
Techs., Inc., 186 F.3d 311, 315 (3d Cir. 1999); see also Charles
Jacquin Et Cie, Inc. v. Destileria Serralles, Inc., 921 F.2d 467,
472 (3d Cir. 1990) (distinguishing between alleged
infringement of a registered mark and distinctive trade dress).
        America Can’s inaction was of a different order. It
observed what it believed to be infringing behavior in 2003, so
it sent a cease and desist letter. In the ten years that followed,
however, America Can took no proactive steps to police the
marketplace or protect its mark. In fact, a total of twelve years
elapsed before America Can filed suit. During that time, and
confident in its ability to rightfully use its mark, Kars 4 Kids
steadily increased its investment in that mark. From 2004 to
2014, it spent more than $75 million on advertising. It also
increased its Texas-specific advertising between 2003 and

                               18
2019, resulting in over $16,000,000 in net revenue from
thousands of donations in Texas from 2008 to 2019. This
prolonged and concerted investment in its brand and the related
goodwill, without any further contact from America Can,
constitutes classic economic prejudice. See, e.g., Eat Right
Foods, 880 F.3d at 1119–20; Anheuser-Busch, 175 F.2d at 375.
To the extent that America Can had difficulty meeting its
burden to establish that these advertisements did not reach a
sufficient number of Texans, that is a feature—not a bug—of
evidentiary prejudice and the shifting burden after so many
years of America Can’s inaction.
        America Can’s 2003 decision to send a cease and desist
letter was an important and perhaps necessary step in acting to
diligently protect its mark. However, it was not—on its own—
sufficient to warrant a finding that Kars 4 Kids assumed more
than ten years’ and tens of millions of dollars’ worth of risk
following receipt of that letter when Kars 4 Kids reasonably
believed it had the right to use its mark. Were we to hold
otherwise on this record, a mark holder could be empowered
to send a single demand letter and then rest comfortably in the
knowledge that it need not concern itself with any prejudice
caused by its delay before acting again to protect its mark.
There may be circumstances, consistent with our sister circuits’
reasoning, under which it would be appropriate to hold that an
alleged infringer has assumed the risk for its conduct following
a mark holder’s warning. But this is not that case. The letter
that started the laches clock here does not foreclose the
potential for future prejudice. Kars 4 Kids did not assume the
risk, and America Can has otherwise failed to meaningfully
rebut the presumption that Kars 4 Kids suffered prejudice
during the time America Can inexcusably delayed in acting to
protect its mark.
                         *      *     *

                              19
       In our prior decision, we instructed the District Court to
hold America Can to its burden of establishing that its delay
was excusable and that Kars 4 Kids was not prejudiced as a
result of that delay. Because America Can failed to meet that
burden, it failed to overcome the presumption of laches and its
claims against Kars 4 Kids are therefore barred.
      C.     Kars 4 Kids Did Not Progressively Encroach
                on America Can’s Mark in Texas
       America Can’s delay was further excusable, according
to the District Court, because the character of Kars 4 Kids’
advertising “changed substantially over the years.” 2022 WL
2106495, at *19 (quoting Univ. of Pittsburgh, 686 F.2d at
1046). The Court found that “[Kars 4 Kids’] advertising
appeared in Texas in 2003, more or less disappeared from
Texas until 2011 when it appeared in a limited way on the
internet, and then openly reappeared in 2013 in Texas with a
burst of radio advertisements.” Id. (internal citations omitted).
This excuses America Can’s delay, in the District Court’s
view, because the “progression of [Kars 4 Kids’] advertising
methods illustrates a slow, steady change in the use of a mark
in a new territory.” Id. The basis for this holding, the doctrine
of progressive encroachment, is inapposite here for two
reasons.
       First, the laches period began in 2003 when America
Can asserted that Kars 4 Kids was already engaged in
actionable infringement. It cannot be said, then, that Kars 4
Kids’ presence in Texas constituted a “slow, steady” change
that progressed towards infringement. Second, Kars 4 Kids did
not change how it used its mark or enter into a new territory.
See Tillamook Country Smoker, Inc. v. Tillamook Cnty.
Creamery Ass’n, 465 F.3d 1102, 1110 (9th Cir. 2006) (quoting
Grupo Gigante, 391 F.3d at 1105) (“To establish progressive
encroachment, Creamery would have had to show that Smoker

                               20
‘expand[ed] its business into different regions or into different
markets.’” (alteration in original)). Kars 4 Kids continued to
expand the use of its mark nationally, which included Texas.
And a normal expansion in the quantity of Kars 4 Kids’
advertising does not constitute progressive encroachment.
See id. (“A junior user’s growth of its existing business and the
concomitant increase in its use of the mark do not constitute
progressive encroachment.”).
     D.     The Doctrine of Unclean Hands Does Not Bar
                 Kars 4 Kids’ Laches Defense
       We noted in our earlier decision America Can’s
argument that Kars 4 Kids acted with unclean hands and
therefore that its laches defense was inappropriate. Kars 4
Kids, 8 F.4th at 221 n.12. We left it to the District Court to
determine if “the equities of the case outweigh any finding of
delay or prejudice,” and to clarify whether its description of
Kars 4 Kids’ conduct as “willful” should be understood to find
that Kars 4 Kids acted with “intent” as a “knowing infringer”
or merely as a “reckless infringer.” Id.
       On remand, the District Court found that the doctrine of
unclean hands barred Kars 4 Kids’ laches defense. 2022 WL
2106495, at *21. In support of this finding, the Court pointed
to (1) the fact that Kars 4 Kids did not undertake an
investigation in response to the 2003 cease and desist letter;
(2) the Kars 4 Kids founder’s “dismissive” testimony that he
believed America Can was trying to piggyback on Kars 4 Kids
and that Kars 4 Kids didn’t take America Can seriously;
(3) Kars     4    Kids’     registration    of    the    domain
www.carsforkids.com         without     any     disclaimer     or
acknowledgement of America Can; and (4) an internal Kars 4
Kids email acknowledging that there might be confusion
within Texas regarding the two similarly named organizations,
and suggesting that such confusion “may be to [Kars 4 Kids’]

                               21
advantage” in the beginning but may ultimately “hurt” Kars 4
Kids “in the long run.” Id. The District Court again described
this conduct as “willful infringement” and concluded that the
imposition of laches would be inappropriate on that basis. Id.
at *22.
        “The equitable doctrine of unclean hands applies when
a party seeking relief has committed an unconscionable act
immediately related to the equity the party seeks in respect to
the litigation.” Highmark, Inc. v. UPMC Health Plan, Inc., 276
F.3d 160, 174 (3d Cir. 2001). This Court has required “clear,
convincing evidence of egregious misconduct before invoking
the doctrine of unclean hands.” Citizens Fin. Grp., Inc. v.
Citizens Nat’l Bank of Evans City, 383 F.3d 110, 129 (3d Cir.
2004) (internal quotation marks and citation omitted). The
misconduct must be rooted in “fraud, unconscionable conduct,
or bad faith . . . that injures the other party and affects the
balance of equities.” Paramount Aviation Corp. v. Agusta, 178
F.3d 132, 147 n.12 (3d Cir. 1999); see also Anheuser-Busch,
175 F.2d at 374 (“[A] fraudulent infringer cannot expect tender
mercy of a court of equity . . . .”).
        “Mere knowledge” of another’s mark, however, is
insufficient to constitute fraudulent intent. Anheuser-Busch,
175 F.2d at 374–76 (“[A]wareness of the business possibilities
of a name is not persuasive proof that the choice of the name
was with fraudulent intent; i.e., a conscious effort to woo the
unsuspecting disciples of [a competitor’s] products.”); see also
Pinkette Clothing, Inc. v. Cosm. Warriors Ltd., 894 F.3d 1015,
1029 (9th Cir. 2018) (holding that a defendant who was aware
of a plaintiff’s mark and understood there was a likelihood of
confusion was not guilty of unclean hands where the defendant
believed its conduct was not infringing).
        The District Court erred here because it did not answer
the predicate question we posed in the first appeal—whether

                              22
Kars 4 Kids was an intentional, knowing infringer—and
therefore applied an erroneous legal standard. In its discussion
of unclean hands on remand, the District Court again repeated
that Kars 4 Kids’ infringement was “willful,” without
specifying whether Kars 4 Kids acted with a bad-faith intent to
deceive or defraud, or merely with recklessness.6 This point is
salient because the jury could have found that Kars 4 Kids’
conduct was willful based on recklessness alone.
Willfulness—as defined for the jury and not further clarified
by the District Court—is insufficient to support a finding of
unclean hands. See Paramount, 178 F.3d at 147 n.12 (requiring
“fraud, unconscionable conduct, or bad faith”).
        When evaluated under the appropriate standard, the
conduct relied upon by the District Court fails to rise to the
level of unclean hands. For instance, the District Court
considered Kars 4 Kids’ decision not to investigate America
Can and to continue using its own mark after receiving the
cease and desist letter as evidence of sufficiently culpable
behavior. But we have held that a party’s “failure to stop its use
of [a competitor’s] mark after receiving [a] cease and desist
letter does not demonstrate willful infringement” or necessarily
show bad faith. SecuraComm Consulting Inc. v. Securacom
Inc., 166 F.3d 182, 189 (3d Cir. 1999), abrogated in part by
Banjo Buddies, Inc. v. Renosky, 399 F.3d 168, 175 (3d Cir.
2005). That is especially so where, as here, America Can’s
trademark is not registered. See Charles Jacquin, 921 F.2d at
471–72.

       6
          We review the District Court’s balancing of the
equities for an abuse of discretion, and our review of the legal
precepts applied by the District Court is plenary. See Bermuda
Exp., N.V., 872 F.2d at 557.

                               23
        As for Kars 4 Kids’ dismissive attitude and the rest of
the conduct relied upon by the District Court, we note that both
parties to this litigation engaged in unscrupulous activity.
America Can stated that it could “take advantage” of what Kars
4 Kids built and that it was “[c]ool” that America Can received
a donation intended for Kars 4 Kids. JA1599–1600. For its
part, Kars 4 Kids suggested it could “bait” America Can and
“see what happens,” and, as recognized by the District Court,
stated that confusion between the two organizations could
redound to its benefit. JA1513. Both organizations registered
domain names that invoke the name of the other. See JA1312
(America Can’s site “kar4kids.com”); JA1924 (Kars 4 Kids’
site “carsforkids.com”).
        Neither party’s conduct in this matter, upon the close
inspection necessitated by litigation, was beyond reproach. But
nor is there clear and convincing evidence that either party
engaged in the type of egregious, unconscionable misconduct
demonstrating the fraudulent intent or bad faith necessary for
the doctrine of unclean hands to apply. See Citizens Fin. Grp.,
383 F.3d at 129; Paramount, 178 F.3d at 147 n.12. It was
therefore error for the District Court to find that Kars 4 Kids’
“willful” conduct satisfies the legal standard for unclean hands
on this record.
   IV. Laches Bars Both Monetary and Injunctive Relief
        Laches, an equitable doctrine, generally cannot bar
damages, a legal remedy. Petrella v. Metro-Goldwyn-Mayer,
572 U.S. 663, 678 (2014). But trademark law is an exception
to that rule. Because the Lanham Act has no statute of
limitations and applies the principles of equity to all claims,
laches may bar both equitable and legal relief. 15 U.S.C.
§ 1117(a) (making damages claims “subject to the principles
of equity”); see also 4 McCarthy § 31:4 (5th ed.); Miller v.
Glenn Miller Prods., Inc., 454 F.3d 975, 997 (9th Cir. 2006)

                              24
(“It is well established that laches is a valid defense to Lanham
Act claims for both monetary damages and injunctive relief.”).
        We have recognized that laches does not act, in every
instance, as a per se bar to all relief in a trademark dispute.
See Univ. of Pittsburgh, 686 F.2d at 1044. Where only delay—
but not prejudice—is established, we have concluded that
laches may bar retrospective monetary relief but not
prospective injunctive relief. See id. (recognizing that “mere
delay” or “laches without more” typically bars only monetary
recovery unless the delay is so “outrageous . . . as to constitute
a virtual abandonment” of a mark) (citation omitted). “Actual
laches,” on the other hand, “works an equitable estoppel
barring all relief” where “both delay and prejudice” are
established. Id. (internal quotation marks and citation omitted);
see also Santana Prods., 401 F.3d at 140 (holding that a
plaintiff’s failure to rebut the presumption of laches after the
analogous statute of limitations had run barred a Lanham Act
claim requesting both injunctive and monetary relief).
        This is a case of “actual laches.” Because the analogous
statute of limitations had run, America Can bore the burden of
proving both that its delay was excusable, and that Kars 4 Kids
was not prejudiced. As explained above, it failed to do so.
America Can failed to show that it diligently worked to protect
its mark in the years following the 2003 cease and desist letter.
During that time, Kars 4 Kids continued to build up valuable
recognition and goodwill around its mark nationwide,
including in Texas. As a result of America Can’s failure to
meet its burden as to both delay and prejudice, laches “bar[s]
all relief” America Can seeks. Univ. of Pittsburgh, 686 F.2d at
1044.
        America Can argues for the first time in supplemental
briefing that, notwithstanding a finding that laches properly
bars monetary relief, the public interest favors upholding the

                               25
injunction. The principle underlying this argument—the
doctrine or rule of inevitable confusion—has been recognized
by some of our sister circuits.7 The Eleventh Circuit has held
that “if the likelihood of confusion is inevitable, or so strong as
to outweigh the effect of the plaintiff’s delay in bringing a suit,
a court may in its discretion grant injunctive relief, even in
cases where a suit for damages is appropriately barred.”
Pinnacle Advert. & Mktg. Grp., Inc. v. Pinnacle Advert. &
Mktg. Grp., LLC, 7 F.4th 989, 1011 (11th Cir. 2021) (quoting
Kason Indus., Inc. v. Component Hardware Grp., Inc., 120
F.3d 1199, 1207 (11th Cir. 1997)). The Ninth Circuit applies
the doctrine only in the “narrow set of circumstances . . . when
the suit concerns allegations that the product is harmful or
otherwise a threat to public safety and well being.” Pinkette
Clothing, 894 F.3d at 1029.
        Whatever the doctrine’s merits, we decline to apply it
for the first time here. While America Can argued before the
District Court that the public interest would be served if Kars
4 Kids was enjoined from using its mark in Texas, at no point
in this litigation did America Can argue that the injunction
could or should remain in place in the event that laches was
found to bar monetary relief. And arguments asserted for the
first time on appeal or arguments not raised in a party’s
opening brief are generally deemed forfeited. See Simko v. U.S.
Steel Corp., 992 F.3d 198, 205 (3d Cir. 2021); United States v.
Quillen, 335 F.3d 219, 224 (3d Cir. 2003).
        At oral argument, counsel for America Can appeared to
concede that this issue had not been briefed, but claimed that
was because Kars 4 Kids failed to raise the argument. This
again misunderstands the parties’ relative burdens. Our
precedent is clear that a finding of “actual laches” bars all

       7
           See 4 McCarthy § 31:10 (5th ed.) (collecting cases).

                                26
relief––monetary as well as injunctive. See Univ. of Pittsburgh,
686 F.2d at 1044. Given that the parties did not explicitly
address this issue until after oral argument in the second
appeal, we will not now consider the applicability of the
doctrine here as an exception to our established precedent.
       America Can failed to rebut the presumption in favor of
laches as to both delay and prejudice, and that failure is not
absolved by the doctrine of inevitable confusion. Laches
therefore properly bars both monetary and injunctive relief.
                               V.
       For these reasons, we will vacate the District Court’s
judgment granting monetary and injunctive relief, and remand
with instructions to dismiss America Can’s claims with
prejudice based on laches. We will dismiss as moot America
Can’s cross-appeal.

                              27