                   UNITED STATES COURT OF APPEALS
                        FOR THE FIFTH CIRCUIT

                          _____________________

                               No. 97-10991
                          _____________________


                          ROLEX WATCH USA, INC.,

                                                     Plaintiff-Appellant,

                                   versus

                   ROBERT MEECE, doing business as
                     American Wholesale Jewelry,

                                                      Defendant-Appellee.

_________________________________________________________________

           Appeal from the United States District Court
                for the Northern District of Texas
_________________________________________________________________
                         October 21, 1998

Before JOLLY, SMITH, and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

     In   this   appeal    by   Rolex    Watch   U.S.A.,   Inc.,   from   the

injunction it obtained in its trademark infringement action, the

primary issue is whether Rolex is entitled to recover profits and

attorney’s fees from Robert Meece, doing business as American

Wholesale Jewelry.    We AFFIRM in part, VACATE in part, and REMAND

for further proceedings.

                                        I.
      Because many of the facts are undisputed, the following is

drawn largely from stipulated facts and the district court’s

findings.

      Rolex Watch U.S.A., Inc., is the exclusive distributor in the

United States of watches and products sold under the registered

trademarks of Rolex, which include “Rolex”, “Oyster”, “President”,

“Crown    Device”,      “Datejust”,     “GMT-Master”,       “Day-Date”,       “Oyster

Perpetual”, and “Submariner”.             The “Crown Device” is a crown,

consisting of five prongs, with a ball at the top of each, and an

oval underneath, depicting the base of the crown.                          The Rolex

trademarks    are    used    in    connection     with    watches    and/or    watch

bracelets and related products.           As of the trial in early 1997, and

with the exception of the registration for “Submariner” (registered

in July 1993), all of these marks had become incontestable pursuant

to   15   U.S.C.    §     1065    (generally,     registrant’s       right    to   use

registered mark becomes incontestable after mark has been in

continuous use for five consecutive years subsequent to date of

registration).

      Rolex   advertises          its   watches     extensively       in     national

magazines, and the watches are sold by authorized dealers, known as

official Rolex jewelers. Rolex watches are known by the purchasing

public as being of high quality, and Rolex consumers are generally

considered    to     be    sophisticated.         In     addition,    there    is    a

substantial market for used Rolex watches.



                                        - 2 -
     A Rolex watch consists of the watch movement; the case (which

holds the movement) and winding mechanism; the bezel (a ring which

is pressure-fitted over the crystal to seal it to the watch case,

and which serves a water-proofing function); the dial; and the

bracelet (also referred to as the band), including the clasp which,

when opened, expands the bracelet so that it will fit over the

wearer’s hand.   The watches, which are available in a number of

styles, are made of stainless steel, stainless steel and gold, and

gold. They are also available with diamond dials and/or diamond

bezels.

     New Rolex watches have a Rolex tag and a green factory sticker

on the back of the watch case.   For genuine Rolex bracelets, the

clasps bear the Rolex “Crown Device” trademark on the exterior of

the clasp; the “Rolex” trademark, on the interior.     The winding

mechanism bears the “Crown Device”, which also appears on the dial,

along with the “Rolex” trademark and other trademarks, such as

“Oyster Perpetual Datejust”. The “Rolex” trademark is also stamped

on the back of the bezels; therefore, that mark is not visible

unless the bezel is removed.

     Authorized Rolex dealers provide Rolex warranties with the

sale of new Rolex products, and also provide services under the

warranty. The warranty distributed with Rolex watches runs for one

year from the date of purchase from an authorized Rolex dealer.

Modification of Rolex watches by the addition or substitution of

parts not provided or authorized by Rolex voids the Rolex warranty.

                               - 3 -
And, it is the policy of Rolex not to service its watches which

have been modified with non-Rolex parts.

     Meece, doing business as American Wholesale Jewelry, has been

in business since 1979, with average gross annual sales of $4.2

million.    He sells parts designed for Rolex and other brands of

watches, and also sells new Rolex watches, to which he adds non-

genuine parts, such as diamond bezels. Meece warrants his products

for one year, and will repair any products returned to him within

a year.

     Meece is not affiliated with Rolex, and his activities are not

sanctioned or authorized by Rolex.           His advertising is directed

exclusively to the retail jewelry store trade, and he sells only to

jewelers.

     Meece’s advertising brochures indicate that his replacement

parts are not genuine Rolex parts; that he is not affiliated with

Rolex; and that the addition of non-Rolex parts will void the Rolex

warranty.    However, he stipulated that the parts he sells do not

bear any markings indicating that he is the source; and that he has

not disclosed on invoices or tags either that his non-Rolex parts

are not authorized by Rolex or that their addition voids the Rolex

warranty.

     As indicated, Meece deals with jewelers, not with the public.

Indeed, he testified that he makes it a point to “hide from the

public”    and   “avoid[s]   them   like    the   plague”.   In   a   typical


                                    - 4 -
transaction, an ultimate consumer requests products or services

from a retail jeweler, who in turn places an order with Meece.               The

jeweler receives the product from Meece and delivers it to the

ultimate consumer.

      But, Meece stipulated that he does not control how his non-

Rolex parts or watches containing non-Rolex parts are sold to

ultimate consumers; and that he has no way of knowing, when a

jeweler places an order, whether there is an actual consumer.                The

district    court   found   that   subsequent   potential     purchasers     of

“reconstructed” watches, discussed infra, may not have the benefit

of dealing with a jeweler or viewing Meece’s advertising brochures.

      Rolex first became aware of the sale of replacement parts by

Meece in the early 1980s.          It protested Meece’s use of Rolex

trademarks in his advertising, and demanded that he disclose in his

advertising materials, as well as on tags and invoices, that his

parts were not manufactured by Rolex and that their addition to

Rolex watches voided the Rolex warranty.            Meece responded that his

“invoices [were] explicit, and buyers [were] reminded that altering

the   manufacturer’s    product,    or   use   of    unauthorized    parts   or

accessories void[ed] the manufacturer’s warranty”.                  Additional

correspondence between Rolex and Meece from December 1990 through

March 1994 reveals further protests by Rolex and further assurances

by Meece.




                                    - 5 -
      In   1994,      Meece    began      distributing         advertising     which

prominently pictured Rolex watches, and in which he offered to

convert a used stainless steel Rolex watch into a new gold watch,

using non-genuine parts.         In these advertising materials, Meece

used Rolex trademarks to identify non-genuine parts, and pictured

an imitation crown design on non-genuine bracelets, in the same

location as the Rolex “Crown Device” appears on genuine Rolex

bracelets.

      In   response     to    this   advertising,        a    Rolex    investigator

furnished a used stainless steel Rolex watch to a retail jeweler,

who in turn asked Meece to convert that used watch to a Rolex 18

karat gold “Submariner”.         Meece returned the altered watch to the

jeweler with an invoice for $5,520.                Rolex discovered that the

watch no longer contained the original movement; instead, a much

older movement, in need of repair, had been substituted.

      On   a   second   occasion,      the     jeweler       ordered   for   Rolex’s

investigator one of Meece’s 18 karat gold “Submariner” watches, as

shown in Meece’s advertisement, but without providing a watch for

conversion.     In response to that order, the jeweler received an 18

karat gold “Submariner” watch with a used genuine Rolex movement,

a   non-genuine    bracelet,     bezel,      and   case,     and   a   genuine,   but

refinished, Rolex dial.          The watch arrived in a genuine Rolex

leather box bearing Rolex trademarks.




                                       - 6 -
      Moreover,     shortly    before      trial   in    early      1997,   Rolex’s

investigator purchased a new Rolex watch from Meece, which had been

“enhanced” with the addition of non-genuine parts (diamond bezel

and diamond dial).        The watch had the green Rolex factory sticker

on the back of the case; and it included a Rolex tag, a Rolex

warranty    (in    a     foreign   language),      and    Rolex     instructional

materials, which Meece admitted he had copied and surrounded with

a border of Rolex “Crown Device” designs.

      Neither the watch, nor the accompanying literature, contained

any markings to indicate the presence or source of non-genuine

parts or any disclosures that Rolex would not warrant or service

the   watch.      When    confronted    at     trial   with   the    watch,   Meece

testified initially that he was unaware of Rolex watches being

shipped in such a manner; but later, he acknowledged that he was

sending    his    products    with   the     copied     instruction     sheet   “to

everyone” and shipped such enhanced new watches “with everything it

came with”, including warranties, tags, and boxes.

      Meece stipulated that the quality of his non-genuine Rolex

replacement parts is not as good as genuine Rolex parts; that he

has had quality problems when bracelets have fallen apart in two

instances; that his bracelets are not the same weight as genuine

Rolex bracelets; and that some of the diamonds he has used were of

“poor quality”.        Moreover, he testified that he does not pressure-

test watches after installing his non-genuine bezels.



                                       - 7 -
     At trial, in their briefs, and at oral argument, the parties

have not been consistent in describing the types of Meece products

at issue, which has caused considerable difficulty.         Likewise, in

its opinion, the district court referred to Meece’s products as

“individual     replacement     parts”     and,    interchangeably,      as

“reconstructed watches”, “converted watches”, and “modified Rolex

watches”.    For purposes of clarity, we will refer to the products

as follows:

     1.    Parts.    The parts at issue are non-genuine parts (bezels,

bracelets, buckles, clasps, and cases) designed solely for use on

genuine Rolex watches, which Meece sold separately from complete

watches.    Although the bracelets are stamped “Made in Italy”, none

of the parts were marked to indicate their source was Meece or

American Wholesale Jewelry.

     2.     Enhanced New Watches.       This category consists of new,

genuine Rolex watches, which Meece purchased and then “enhanced” by

substituting non-genuine parts, such as diamond bezels and/or

bracelets.    It also includes new, genuine Rolex watches from which

Meece removed the dials, drilled holes in them, added diamonds,

refinished the dials, and then re-installed them on the watches.

     Rolex claims that it first learned of such activities during

discovery,    when   Meece   produced   invoices   reflecting   over   $1.8

million in sales of new Rolex watches which had been enhanced to

imitate more expensive Rolex watches by the substitution of lesser-


                                  - 8 -
quality, non-genuine parts.        In its appellate brief, Rolex refers

to this category as “reconstructed” watches, and asserts that the

district court’s injunction prohibits Meece from selling them.            At

oral argument, Rolex referred to this category of watches as “brand

new” genuine Rolex watches “enhanced” by Meece with non-genuine

parts, and continued to maintain that the sale of such watches is

enjoined.

      The district court’s findings of fact and conclusions of law

do   not   expressly    address   this   discrete   category   of   watches.

Instead, as discussed infra, the court appears to have used the

term “reconstructed” to refer to both old and new Rolex watches to

which Meece added or substituted non-genuine parts.

      In his appellate brief, Meece maintains that the injunction

does not prohibit the sale of new Rolex watches enhanced with non-

genuine parts. According to Meece, enhancement of new watches does

not constitute conversion of watches, and he does not “reconstruct”

a watch when he adds replacement parts.         At oral argument, Meece

repeated his assertion that a “reconstructed” watch, within the

meaning of the injunction, is the same as a “converted” watch,

discussed below.       As explained infra, we interpret the injunction

as prohibiting, inter alia, the sale of enhanced new watches.

      3. Converted Used Watches. This category includes used Rolex

watches which Meece “converted” by recasing genuine old Rolex

movements in non-genuine Rolex cases and substituting other non-


                                    - 9 -
genuine parts.       The district court found that Meece had abandoned

the practice of performing complete conversion services.

      As noted, Meece asserted at oral argument that there is no

difference between “converted” and “reconstructed” watches, and

that this is the only category of watches to which the district

court’s injunction applies.           As also noted, the district court

appears to use the term “reconstructed” to refer to both old and

new   watches   to    which   Meece    has   added   parts,    and   the    term

“converted” to refer to Meece’s practice of taking a stainless

steel Rolex watch and adding non-genuine gold replacement parts “to

produce a reconstructed watch that simulates a Rolex Submariner or

other watch”.

      4.   Non-Genuine Bracelets with Genuine Rolex Clasps.                 This

category consists of non-genuine bracelets on which Meece installed

the   customer’s     original,   genuine     Rolex   clasp,    bearing     Rolex

trademarks.     This activity was enjoined by the district court;

Meece claims that he no longer engages in it.

      The Meece products having been defined, we can turn to the

issues presented in district court.             In its complaint, Rolex

claimed, inter alia, that Meece’s activities constituted trademark

infringement and trademark counterfeiting, in violation of 15

U.S.C. § 1114(1); false designation of origin, false descriptions,

and false representations, in violation of 15 U.S.C. § 1125(a); and

unfair competition and dilution under Texas law.              Meece countered


                                  - 10 -
with affirmative defenses of laches, acquiescence, and estoppel, as

well as counterclaims premised on state law.

     Following a hearing on Rolex’s motion for a preliminary

injunction, the district court, in August 1995, enjoined Meece and

American Wholesale Jewelry from performing any services which would

involve injecting into commerce a watch bearing a Rolex mark which

is reconstructed with generic replacement parts and which simulates

a Rolex watch.        The court denied such relief with respect to

Meece’s sale of individual replacement parts and with respect to

Rolex’s claim of likely confusion resulting from the sale of

watches that resembled a genuine Rolex watch — they had the name

“Geneve” on the dial and an emblem resembling a crown on the

bracelet.       The   preliminary   injunction    noted    that   Meece   had

converted only six used Rolex watches, two of which had been sold

to Rolex’s investigator, and that Meece was no longer advertising

such conversion services.

     A two-day bench trial was held in February 1997.         Rolex sought

an injunction (1) prohibiting Meece’s sale of enhanced new watches;

(2) requiring Meece to identify the source of his replacement parts

by engraving the bracelet clasp, by placing disclosures on tags,

labels,   and   invoices   accompanying      non-genuine   parts,   and   by

clarifying the disclaimer in his promotional materials; and (3)

requiring Meece to obtain statements from his jeweler customers

that the jewelers’ customers had been advised of the non-genuine

nature of the replacement parts.             Rolex requested profits and

                                    - 11 -
attorney’s fees with respect to the enhanced new and converted used

Rolex watches and the non-genuine bracelets with genuine Rolex

clasps.

     In August 1997, the district court entered findings of fact

and conclusions of law and issued a final judgment and permanent

injunction. It rejected Meece’s claims of laches, acquiescence, or

estoppel; and held that Rolex had established a “substantial

likelihood of confusion” regarding Meece’s sale of “reconstructed”

watches:

                The reconstructed Submariner watch bears
           a high degree of similarity to a completely
           genuine   Rolex   watch   and  a   prospective
           purchaser of the watch would likely confuse
           the reconstructed watch with a genuine Rolex.
           American Wholesale’s name does not appear on
           the generic parts.       Also, the internal
           markings on the parts, such as “made in
           Italy”, would not dispel the likelihood of
           confusion on a completely reconstructed watch.

                From   the   perspective    of   secondary
           purchasers, a watch reconstructed with generic
           parts from American Wholesale, bearing a Rolex
           trademark,   would    create   a    substantial
           likelihood of confusion....      Rolex faces a
           substantial threat of harm in the face of
           sales of such reconstructed watches by Meece.

Accordingly, Meece was enjoined from

           performing any services which would involve
           injecting into commerce a watch bearing a
           Rolex mark which is reconstructed with generic
           replacement parts and which simulates a Rolex
           Submariner or other Rolex watch. For example,
           [Meece] is enjoined from receiving, or using
           from stock, stainless steel or other Rolex
           watches or movements and reconstructing them
           with generic parts into watches simulating a
           Submariner or other Rolex watch.

                               - 12 -
     In addition, the district court found that, although Meece’s

non-genuine   bracelets    were     marked    “Made    in    Italy”    and    “[a]

sophisticated Rolex consumer would likely be aware that the band

was not a genuine Rolex band”, “the likelihood of confusion for

secondary purchasers increases by using the original [genuine]

clasp on the replacement band”.          Therefore, it enjoined Meece from

“selling   replacement    bands     to   customers    with    the     consumers’

original   clasps   bearing   the    Rolex    mark    substituted      onto    the

replacement   band”.       And,     the      court    enjoined      Meece     from

“accompanying modified Rolex watches with copies of instructions

bearing the Rolex mark”.

     On the other hand, the court found that Meece’s “individual

replacement parts do not pose the same potential for confusion as

a completely reconstructed watch”; and that “the mark used by Meece

[on non-genuine bracelet clasps] is not sufficiently similar to be

likely to cause confusion with the Rolex mark”.                  Moreover, it

concluded that Meece’s sale of individual Rolex replacement parts

did not constitute contributory infringement, stating that there

was “insufficient evidence to find that buyers of [Meece’s] parts

are using the parts to create simulated Rolex watches to infringe

upon Rolex’s trademarks”; and that the evidence did not establish

“that Meece is inducing others to infringe or that he knows that he

is selling replacement parts to people who are using the parts to

make reconstructed, infringing watches”.



                                    - 13 -
     Likewise,      the    court   refused     Rolex’s   request   to   require

disclosure by Meece by engraving parts or on tags, labels, or

invoices, and refused to enjoin Meece’s use of Rolex trademarks to

identify replacement parts in his advertising materials. The court

concluded that, “[a]s long as it is clear to the purchaser that the

replacement part is not an authentic Rolex part, ... there is no

reason to enjoin [Meece] from stating that the replacement part

fits a particular Rolex product”.

     Finally, the court held that Rolex was not entitled to an

award of Meece’s profits because “profits derived from the sale of

converted infringing watches [were] de minimis”; and that, because

Meece’s infringing conduct was not deliberate, attorney’s fees

would not be awarded Rolex.          (The state law claims by Rolex and

Meece were dismissed.)

                                      II.

     Meece   does    not    challenge    the    injunction,   including     the

prohibition against “performing any services which would involve

injecting into commerce a watch bearing a Rolex mark which is

reconstructed with generic replacement parts and which simulates a

Rolex Submariner or other Rolex watch”.            He contends, however, as

discussed throughout, that the prohibition does not apply to his

sale of enhanced new watches.           And, not at issue is Meece being

enjoined from “selling replacement bands to customers with the

consumers’ original clasps bearing the Rolex mark substituted onto


                                     - 14 -
the replacement band” and from “accompanying modified Rolex watches

with copies of instructions bearing the Rolex mark”.

     On the other hand, Rolex contends that the district court

erred (1) by failing to find that Meece’s enhanced new watches,

converted used watches, and bracelets with genuine Rolex clasps

were counterfeit and by failing to accordingly award treble profits

and attorney’s fees; (2) by failing to find that Meece was a

deliberate infringer and by failing to accordingly award Rolex

profits and attorney’s fees; (3) by finding that Meece’s sale of

individual parts did not constitute contributory infringement; (4)

by not enjoining Meece’s use of his mark on non-genuine bracelets;

(5) by not requiring disclosures with respect to Meece’s sales of

individual parts; and (6) by not enjoining Meece’s use of Rolex

trademarks   to   describe   individual   parts   in   his   advertising

materials.

     “We review the district court’s decision whether to grant or

deny an injunction and the scope and form of the injunction for an

abuse of discretion.”   Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d

526, 550 (5th Cir. 1998).    Findings of fact are reviewed for clear

error; conclusions of law, de novo.       FED. R. CIV. P. 52(a); Pebble

Beach, 155 F.3d at 537; Elvis Presley Enterprises, Inc. v. Capece,

141 F.3d 188, 196 (5th Cir. 1998).

                                  A.




                                - 15 -
      Concerning the underlying liability required before profits

and attorney’s fees can be awarded, the Lanham Act provides in

pertinent part:

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

                       (a)   use   in   commerce   any
                  reproduction, counterfeit, copy, or
                  colorable imitation of a registered
                  mark in connection with the sale,
                  offering for sale, distribution, or
                  advertising of any goods or services
                  on or in connection with which such
                  use is likely to cause confusion, or
                  to cause mistake, or to deceive ...

            shall be liable in a civil action by the
            registrant   for the remedies hereinafter
            provided....

15 U.S.C. § 1114(1)(a) (emphasis added).        As noted, the district

court’s conclusion that Meece violated § 1114(1)(a) was based on

finding that, “[f]rom the perspective of secondary purchasers, a

watch reconstructed with generic parts from American Wholesale,

bearing a Rolex trademark, would create a substantial likelihood of

confusion”.

      Remedies for violation of § 1114(1)(a) are found in 15 U.S.C.

§§   1116   (injunctive   relief),   1117   (profits,   damages,   costs,

attorneys’ fees), and 1118 (destruction of infringing articles).

At issue is § 1117.

      Section 1117(a) provides, in pertinent part, that a successful

plaintiff is entitled,




                                - 16 -
          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....      If the court
          shall find that the amount of the recovery
          based on profits is either inadequate or
          excessive the court may in its discretion
          enter judgment for such sum as the court shall
          find   to   be   just,    according   to   the
          circumstances of the case. Such sum in either
          of the above circumstances shall constitute
          compensation and not a penalty. The court in
          exceptional   cases   may   award   reasonable
          attorney fees to the prevailing party.

(Emphasis added.)

     Our court has considered the following non-exclusive list of

factors in determining whether an award of profits under § 1117(a)

is appropriate:

          (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.

Pebble Beach, 155 F.3d at 554.   See also George Basch Co., Inc. v.

Blue Coral, Inc., 968 F.2d 1532, 1540 (2d Cir.) (to recover profits

under § 1117(a), the “plaintiff must prove that an infringer acted

with willful deception”), cert. denied, 506 U.S. 991 (1992);

International Star Class Yacht Racing Ass’n v. Tommy Hilfiger,

U.S.A., Inc., 80 F.3d 749, 753 (2d Cir. 1996) (“In order to recover

an accounting of an infringer’s profits, a plaintiff must prove

that the infringer acted in bad faith”); Lindy Pen Co., Inc. v. Bic


                              - 17 -
Pen Corp., 982 F.2d 1400, 1405 (9th Cir.) (“Willful infringement

carries a connotation of deliberate intent to deceive”), cert.

denied, 510 U.S. 815 (1993); Alpo Petfoods, Inc. v. Ralston Purina

Co., 913 F.2d 958, 968 (D.C. Cir. 1990) (“an award based on a

defendant’s    profits   requires    proof   that    the   defendant   acted

willfully or in bad faith”); Frisch’s Restaurants, Inc. v. Elby’s

Big Boy, 849 F.2d 1012, 1015 (6th Cir. 1988) (“For a court to order

an accounting ..., bad faith must be shown”); Maltina Corp. v. Cawy

Bottling Co., Inc., 613 F.2d 582, 585 (5th Cir. 1980) (“district

court properly ordered [defendant] to account to the plaintiffs for

the profits it earned from its willful infringement”).

     Similarly, § 1117(a) expressly permits an award of attorney’s

fees only in “exceptional cases”.       “[T]he exceptional case is one

in   which     the   defendant’s    trademark       infringement   can    be

characterized as malicious, fraudulent, deliberate, or willful, and

... it has been interpreted by courts to require a showing of a

high degree of culpability”.         Martin’s Herend Imports, Inc. v.

Diamond & Gem Trading USA, Co., 112 F.3d 1296, 1305 (5th Cir. 1997)

(internal quotation marks and citation omitted); see also Pebble

Beach, 155 F.3d at 555-56.

     But, for use of a counterfeit mark, § 1117(b) provides that,

             [i]n assessing damages under subsection (a) of
             this section, the court shall, unless the
             court finds extenuating circumstances, enter
             judgment for three times such profits or


                                   - 18 -
               damages, whichever is greater, together with a
               reasonable attorney’s fee, in the case of any
               violation of section 1114(1)(a) of this title
               ... that consists of intentionally using a
               mark or designation, knowing such mark or
               designation is a counterfeit mark (as defined
               in section 1116(d) of this title), in
               connection with the sale, offering for sale,
               or distribution of goods or services....

(Emphasis added.)

       Thus,     under    subsection    (a),    for   willful   or    deliberate

infringement, the district court may award profits “subject to the

principles of equity”; and, in “exceptional cases”, it may award

attorney’s fees.         But, for counterfeiting cases, under subsection

(b), the court “shall” award treble profits and attorney’s fees,

“unless the court finds extenuating circumstances”.

       As noted, the district court concluded that Rolex was not

entitled to an award of profits under § 1117(a), because the

“profits derived from the sale of converted, infringing watches

[are] de minimis” and because Meece did not engage in deliberate

infringement.        But, it did not address, even by implication,

whether Meece’s activities constituted trademark counterfeiting

and, therefore, did not consider whether Rolex was entitled to the

remedies available under subsection (b), to include whether there

were    extenuating       circumstances    within     the   meaning    of   that

subsection.

       Rolex contends that the district court clearly erred by

finding that Meece’s profits were de minimis; that it erred by


                                       - 19 -
failing to address, under § 1117(b), whether Meece’s activities

constituted trademark counterfeiting and by failing, as a result,

to award treble profits and attorney’s fees; and that it was

entitled to an award of profits and attorney’s fees under §

1117(a), because Meece’s activities at least constituted deliberate

infringement.

                                       1.

     The Lanham Act “expressly confers upon the district judges

wide discretion in determining a just amount o[f] recovery for

trademark infringement”.        Martin’s Herend Imports, 112 F.3d at

1304.   “The purpose of section 1117 is to take all the economic

incentive out of trademark infringement”.         Intel Corp. v. Terabyte

Int’l, Inc., 6 F.3d 614, 621 (9th Cir. 1993) (internal quotation

marks and citations omitted); see also Maltina, 613 F.2d at 585

(agreeing    with   reasoning   of    Ninth   Circuit   that   “awarding   an

accounting [of profits] would further Congress’ purpose in enacting

[§ 1117] of making infringement unprofitable”).                “In assessing

profits the plaintiff shall be required to prove defendant’s sales

only; defendant must prove all elements of cost or deduction

claimed.”    15 U.S.C. § 1117(a).

     Rolex produced Meece’s invoices reflecting enhanced new watch

sales   of   $1,813,748;   “convert/converted”      used   watch   sales   of

$26,475; and sales of non-genuine bracelets with genuine Rolex

clasps of $5,940.


                                     - 20 -
     Meece testified that he had a gross profit of 13 percent and

an overhead of seven percent, resulting in a before-tax profit of

six percent.   According to Meece, that six percent is comprised of

five to five-and-one-half percent on accessories and less than one

percent on new watches. He testified that his gross profit on

accessories was between 20 and 25 percent; but, in his post-trial

brief, he claimed that he had a 25 percent profit on diamond

bezels, dials, and bands.      Meece produced no documentary evidence

to support those figures, and offered no evidence as to the nature

or amount of his overhead expenses.                Although he listed his

financial statements as exhibits, he did not introduce them into

evidence.

     Rolex   asserts   that   Meece’s      testimony       is   insufficient   to

support any deductions from sales and that it is therefore entitled

to an award of the entire $1,846,163 in sales, trebled, because, as

discussed    infra,   it   claims   that     the   goods    were   counterfeit.

Alternatively, based on Meece’s testimony, Rolex calculates Meece’s

profits as follows:

     $15,819.08 - 1% profit on $1,581,908 (new watches)

     $57,960.00 - 25% profit on $231,840 (Meece parts added

                       to new watches)

     $ 6,618.75 - 25% profit on $26,475 (converted used watches)

     $ 1,485.00 - 25% profit on $5,940 (Rolex clasps on non-

                       Rolex bands)


                                    - 21 -
       $81,882.83 - TOTAL

Rolex asserts that, even accepting Meece’s profit percentages, this

amount is not de minimis.

       As stated, Meece was enjoined from “performing any services

which would involve injecting into commerce a watch bearing a Rolex

mark which is reconstructed with generic replacement parts and

which simulates a Rolex Submariner or other Rolex watch”.               Rolex

does not     challenge   that   portion    of   the   injunction,   which   it

interprets as prohibiting, inter alia, Meece’s sale of enhanced new

watches.    Meece maintains, however, that the district court found

no counterfeiting because it found no infringement as to enhanced

new watches.     According to Meece, the district court “did not

enjoin the sale of watches that have merely been enhanced or

repaired”.    Meece maintains that he does not “reconstruct” a watch

when he adds parts, and that a “reconstructed” watch is the same as

a “converted” watch.

       The injunction would seem to encompass both enhanced new

watches and converted used watches, because both types contain

generic replacement parts and simulate genuine Rolex watches. And,

both enhanced new watches and converted used watches seem to pose

the same threat of harm to Rolex from the perspective of secondary

purchasers; the district court found that “a watch reconstructed

with   generic   parts   from   American    Wholesale,    bearing   a   Rolex

trademark, would create a substantial likelihood of confusion”.


                                  - 22 -
But, in that Meece’s sales of enhanced new watches exceeded $1.8

million and his profits from such sales exceeded $80,000, it is

difficult to square that interpretation with the district court’s

finding that Meece’s “profits derived from the sale of converted,

infringing watches [are] de minimis”.

       Considering all of the evidence and, especially, the district

court’s findings regarding the likelihood of confusion with respect

to secondary purchasers, we interpret the injunction as prohibiting

the sale of enhanced new watches and converted used watches.                That

interpretation is also supported by case law interpreting the

Lanham Act as prohibiting a party from making changes in integral

parts of a product and then selling the modified product under the

original trademark without full disclosure.

       For example, in Bulova Watch Co. v. Allerton Co., 328 F.2d 20

(7th   Cir.   1964),     the   defendant     removed   genuine    Bulova   watch

movements, bearing the Bulova trademark on the dial, from their

original Bulova cases and placed the movements in diamond-decorated

cases.    Id. at 21.     The defendant then sold the watches under the

trade name “Treasure Mates”. Id. The Seventh Circuit affirmed the

district court’s finding that the recasing operation resulted in “a

different product”; and held that the district court erred by not

enjoining the use of the Bulova trademark on the recased watches.

Id. at 23-24.     As noted, the bezel on a Rolex watch is a necessary

and    integral   part    of   the   watch    and   serves   a   water-proofing


                                     - 23 -
function.     Obviously, bracelets and dials are also necessary,

integral parts:    a watch cannot be worn without a bracelet; and,

the watch cannot serve its purpose of timekeeping without a dial.

     Including Meece’s sales of enhanced new watches, Rolex proved

infringing sales of $1,846,163; based on Meece’s testimony, his

profits on those sales totaled $81,882.83.           We reject Rolex’s

contention that Meece produced insufficient evidence to establish

deductions from gross sales. But, the district court clearly erred

by finding those profits de minimis.

     Nevertheless, it does not automatically follow that Rolex is

entitled to treble profits.    As stated, under § 1117(a), an award

of profits requires proof of willful or deliberate infringement,

and the decision whether to award profits is subject to equitable

considerations. And, under § 1117(b), treble profits are available

only if the activity involves trademark counterfeiting, and the

court does not find extenuating circumstances.            “Under either

subsection, awards are never automatic and may be limited by

equitable   considerations”.     Intel,   6   F.3d   at   620   (internal

quotation marks and citations omitted).

                                 2.

     For the seizure remedy for counterfeit goods, a “counterfeit

mark” is defined as

                 (i) a counterfeit of a mark that is
            registered on the principal register in the
            United States Patent and Trademark Office for
            such goods or services sold, offered for sale,

                               - 24 -
           or distributed and that is in use, whether or
           not the person against whom relief is sought
           knew such mark was so registered; or

                (ii) a spurious designation that is
           identical     with,    or    substantially
           indistinguishable from, a designation as to
           which the remedies of this chapter are made
           available by reason of section 380 of Title
           36....

15 U.S.C. § 1116(d).       Similarly, § 1127 defines a “counterfeit” as

“a   spurious   mark     which    is   identical      with,       or   substantially

indistinguishable from, a registered mark”.                 15 U.S.C. § 1127.

      Again,    Rolex    claims    that     Meece’s    enhanced        new   watches,

converted used watches, and bracelets with genuine Rolex clasps are

counterfeit. In selling those items, Meece did not copy or imitate

Rolex’s trademarks; quite to the contrary — those items bear

original Rolex trademarks.         For example, Rolex asserts that, once

Meece added non-genuine parts to genuine Rolex watches bearing

original Rolex trademarks, the watches on which those trademarks

appear   are    no   longer      Rolex’s     product       and    are,    therefore,

counterfeit     within     the    meaning       of    §§    1116(d)      and    1127.

Accordingly, it contends that, under § 1117(b), it is entitled to

treble profits and attorney’s fees.

      Because    Meece’s    items      in   question       bore    original     Rolex

trademarks, rather than imitations or copies of those trademarks,

they would not seem to be “counterfeit” in the literal sense.

Nevertheless, other courts have found that similar uses of genuine

trademarks constitute counterfeiting.            In Westinghouse Elec. Corp.

                                       - 25 -
v. General Circuit Breaker & Electric Supply, Inc., 106 F.3d 894

(9th Cir.), cert. denied, ___ U.S. ___, 118 S. Ct. 155 (1997), the

defendant       sold    used     Westinghouse        circuit      breakers       after

reconditioning them and attaching labels bearing the Westinghouse

trademark.        The    Ninth      Circuit      noted    that    “[t]he   original

Westinghouse      labels   are    not    themselves      ‘counterfeits’         in   the

literal sense”, but concluded, nevertheless, that the products were

counterfeit.      Id. at 900.       “When an original mark is attached to a

product in such a way as to deceive the public, the product itself

becomes a ‘counterfeit’ just as it would if an imitation of the

mark were attached.”        Id.

      Likewise, in General Elec. Co. v. Speicher, 877 F.2d 531, 534

(7th Cir. 1989), the Seventh Circuit concluded that the defendant’s

placement of non-General Electric products in boxes that General

Electric had stamped with its registered “GE” trademark constituted

trademark counterfeiting. And, similarly, in Intel, 6 F.3d at 619-

20, the Ninth Circuit concluded that the defendant’s practice of

purchasing genuine Intel math coprocessors and relabeling and

selling them as faster and more expensive coprocessors constituted

counterfeiting.         “When the chip genuinely from Intel was marked

with a speed designation Intel would not have given it, the chip

became a counterfeit Intel 80287-10 instead of a true Intel 80287-

6."     Id. at 620.      See also Joy Manufacturing Co. v. CGM Valve &

Gauge    Co.,   Inc.,    730   F.    Supp.    1387,      1396    (S.D.   Tex.    1989)


                                        - 26 -
(reconditioned       valves      sold    under    plaintiff’s      trademark     found

counterfeit).

       There is considerable evidence that Meece’s activities with

respect to the items in issue constitute trademark counterfeiting.

For example, new, genuine Rolex watches were modified by Meece with

non-genuine parts to make them resemble more expensive Rolex

watches.     Although Rolex was still the source of the watches, it

was not responsible for the non-genuine diamond bezels added by

Meece, or for refinishing and placing diamonds in the genuine Rolex

dials, or for any diamonds Meece added to the bracelets.                     Rolex did

not perform or authorize the modifications, and its warranty was

voided by Meece’s activities.             Meece, not Rolex, stood behind the

watches; but the trademark suggested otherwise.

       In   this     regard,     Rolex     introduced       evidence     that    Meece

distributed        enhanced      new    watches        without   any    markings     or

disclosures       that   would    reach    ultimate       consumers     or   secondary

purchasers; and that the watches contained the Rolex factory seal

and the Rolex tag and were distributed in genuine Rolex boxes, with

winding instructions copied from a Rolex booklet. Meece stipulated

that he does not control how watches containing non-Rolex parts are

sold   to   the     ultimate     consumer;       and    that,    when   he   sells    to

retailers, he has no way of knowing if there is an actual consumer.

       Accordingly, we must remand this action for the district court

to   determine      whether    Meece’s     use    of    Rolex    trademarks     on   the



                                         - 27 -
enhanced new watches, converted used watches, and non-genuine

bracelets with genuine Rolex clasps caused them to be “counterfeit”

within the meaning of §§ 1116(d) and 1127; and, if they were, it

should,   pursuant    to   §    1117(b),      award    profits     (trebled)    and

attorney’s     fees   to       Rolex,    unless       it   finds        “extenuating

circumstances”.

                                         3.

       In addition, Rolex asserts that it is otherwise entitled to an

award of profits and attorney’s fees under § 1117(a), because

Meece’s activities at least constituted deliberate infringement.

In finding no deliberate infringement, the district court stated

that Meece “attempted to ‘ride the line’ but did not intend to

cross it”.    We review this finding for clear error.

       Rolex contends that the following evidence proves deliberate

infringement: (1) Meece’s false representation that he complied

with    all   Rolex   requests     for     disclosures      as     to    individual

replacement parts; (2) his substitution of an older Rolex movement

when converting the used stainless steel Rolex watch submitted by

Rolex’s investigator; (3) his sale of over $1.8 million in enhanced

new Rolex watches accompanied by the Rolex warranty (which Meece

knew was void), the Rolex factory sticker, and the Rolex tag; (4)

his sales of enhanced new watches accompanied by copied Rolex

instruction sheets with a border of Rolex “Crown Device” designs;

(5) his sale of enhanced new Rolex watches in original Rolex boxes;


                                    - 28 -
(6) his sale of enhanced new Rolex watches without any disclosure

to consumers as to the presence or origin of the non-genuine parts;

(7) his repeated use of marks resembling the Rolex “Crown Device”

mark, including a five-prong crown displayed in his catalog years

after he allegedly discontinued use of that design; (8) his use of

Rolex trademarks (“President”, “Oyster”, etc.) to identify his non-

genuine watch parts, before and after suit was filed; (9) his

advertisement of his conversion services for over a year after

entry of the preliminary injunction, which Meece understood as

enjoining such services; and (10) his placement of genuine Rolex

clasps, bearing the Rolex trademarks, on non-genuine bracelets.

Rolex posits that there is no explanation for Meece’s conduct other

than to profit from the use of Rolex marks in a manner that

deceives consumers, takes sales away from Rolex, and damages its

reputation.

     Rolex maintains that, in other cases, similar activities have

been found to constitute deliberate infringement.      It cites Joy

Manufacturing Co. v. CGM Valve & Gauge Co., Inc., 730 F. Supp. 1387

(S.D. Tex. 1989), where the defendant used unauthorized nameplates

bearing the plaintiff’s mark on valves that defendant refurbished

to look like new, and failed to mark the valves as used or

reconditioned.   Id. at 1391.   The court found the conduct willful,

entitling plaintiff to trebled profits under § 1117(a), and a fee

award under the exceptional case provision.    Id. at 1395-96.


                                - 29 -
     The conduct of the defendant in Joy was much more egregious

than Meece’s.       In Joy, the court found that, as a result of other

lawsuits, the defendant was fully aware that its practices were

unlawful and that, even after being enjoined from such acts in a

number    of   cases,    the   defendant      continued      to      use   counterfeit

nameplates     of   other   valve      manufacturers       on   its    reconditioned

valves.

     Rolex also relies on Sealy, Inc. v. Easy Living, Inc., 743

F.2d 1378, 1384-85 (9th Cir. 1984), where the defendants sold

genuine Sealy mattresses together with non-Sealy foundations with

identical fabric covering.             The combined mattress and foundation

appeared to be a matched set, and the defendants advertised the

product as a Sealy mattress and matching foundation.                        There was

evidence that retail salesmen made no effort to correct consumers’

mistaken impressions that the foundation was a Sealy product.                      The

Ninth Circuit affirmed the district court’s finding the conduct to

constitute     willful      and    deliberate,       bad     faith     infringement,

justifying an award of attorney’s fees.                    The court noted that

“[t]here was substantial evidence tending to show that [defendants]

manufactured and sold their look-alike foundations deliberately to

deceive    consumers     and      to   take      advantage      of    Sealy’s   brand

identification”.        Id. at 1384.       Here, there is no evidence that

Meece intended that his products would be passed off as Rolex

products, and his advertising indicated that his products were not


                                        - 30 -
Rolex products and that American Wholesale was not affiliated with

Rolex.

     As the district court noted, Rolex and Meece had co-existed

for over ten years.    Meece advertised and sold his products only to

retail jewelers, not to ultimate consumers.             In his advertising

materials, he made efforts to disclose to his customers (retail

jewelers) that he was not affiliated with Rolex and that the

addition of his parts to genuine Rolex watches voided the Rolex

warranty.    There    is   very   little    evidence   that   Meece    made   a

concerted effort to palm off his products to his customers (retail

jewelers) or to ultimate consumers as Rolex products. Accordingly,

we conclude that the district court did not clearly err by finding

no deliberate infringement.         As a result, it did not err by

refusing to award profits and attorney’s fees under § 1117(a).

                                     B.

     Rolex maintains that the district court erred by not finding

that Meece’s sales of unmarked non-genuine parts designed to fit

Rolex    watches   constituted      contributory       infringement.          In

conjunction, it urges that Meece should have been enjoined to

include disclosures to ensure that such parts are not being used

for infringement purposes by his customers.            The court ruled that

the evidence did not support finding “that Meece is inducing others

to infringe or that he knows that he is selling replacement parts




                                   - 31 -
to people who are using the parts to make reconstructed, infringing

watches”.

     The doctrine of contributory infringement is discussed in

Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 853-54 (1982)

(emphasis added):

            [L]iability for trademark infringement can
            extend beyond those who actually mislabel
            goods with the mark of another.     Even if a
            manufacturer does not directly control others
            in the chain of distribution, it can be held
            responsible for their infringing activities
            under certain circumstances.      Thus, if a
            manufacturer or distributor intentionally
            induces another to infringe a trademark, or if
            it continues to supply its product to one whom
            it knows or has reason to know is engaging in
            trademark infringement, the manufacturer or
            distributor is contributorily responsible for
            any harm done as a result of the deceit.

                                  1.

     Accordingly, Meece is liable for contributory infringement by

distributing parts if he “continue[d] to supply [his parts] to one

whom [he knew] or ha[d] reason to know is engaging in trademark

infringement”.    Id. at 854.   Rolex points to Meece’s admissions

that his replacement parts are made to fit Rolex watches and that

he knows of no other watch that they fit; and that, even with his

15 years’ experience, Meece could be fooled as to whether a Rolex

watch contains non-genuine parts. Rolex asserts that, accordingly,

Meece had reason to know that his non-genuine parts, designed to

fit only Rolex watches, were destined to end up in infringing

watches.

                                - 32 -
     The    district     court     did   not    clearly     err   by   finding    no

contributory infringement.          There was no evidence that Meece sold

large quantities of parts to any single retailer. Instead, he sold

only one or, at most, a few parts at a time to numerous jewelers.

He testified that there was no group of jewelers or any particular

jeweler    who    purchased   a    large      number   of   replacement       parts.

Although Meece had no control over what the jewelers did with the

parts he sold to them, there is no evidence that he continued to

supply parts to jewelers he either knew, or had reason to know,

were engaging in trademark infringement.

                                         2.

     In any event, Rolex asserts that the district court erred by

not requiring adequate disclosures to identify non-genuine parts,

claiming that disclosures are necessary to prevent contributory

infringement.      Rolex urges that Meece should disclose on tags and

invoices that his replacement parts do not originate with Rolex and

that Rolex will not guarantee or service watches containing such

parts.     And, because tags and invoices may be discarded by the

jewelers to whom Meece sells the parts, Rolex maintains that Meece

should also obtain statements from jewelers advising that they have

disclosed to the jeweler’s customers (ultimate consumers) the same

information as disclosed to the jewelers on Meece’s tags and

invoices.        Rolex   asserts    that      permanent     engraving    of    Meece

bracelets could be accomplished inexpensively, and that statements



                                     - 33 -
from jewelers regarding disclosures to consumers could be easily

accomplished.

     Meece responds that most of the requested disclosures already

appear in his advertising materials, warranties, and invoices;

that disclosing on tags that his replacement parts do not originate

with Rolex and that Rolex will not guarantee or service watches

containing such parts is “impractical and impossible due to the

volume of parts sold, the size and shape of the parts, and the

difficulty in attaching a document to a dial or link”; and that

engraving his non-genuine bracelets is impractical, because he

obtains them from different suppliers, and it would destroy the

value of the jewelry.    He contends further that an injunction

limiting the sale of replacement parts to jewelers who furnish

written statements that they have disclosed to their customers that

Meece’s replacement parts do not originate with Rolex and that the

addition of such parts voids the Rolex warranty, is impractical,

because his orders are taken over the telephone and shipped to

jewelers; and that such a requirement would create more bookkeeping

duties, “as he would have to match each statement to the order to

which it relates”, and he fills approximately 3,500 orders per

year.   He asserts also that requiring a written statement in

advance of shipping would encourage customers to buy elsewhere to

avoid both the trouble of providing written statements and the

attendant delays in shipping.



                                - 34 -
     Because   the   no   contributory    infringement   finding   is   not

clearly erroneous, the district court did not err by not requiring

such disclosures.

                                   C.

     Next, Rolex contends that the district court erred by not

finding that Meece’s mark on non-genuine bracelet clasps is likely

to cause confusion with the Rolex “Crown Device” mark, which

appears on the clasps of genuine Rolex bracelets.

     Likelihood of confusion is a question of fact; we review only

for clear error.       E.g., Pebble Beach, 155 F.3d at 537; Elvis

Presley Enterprises, 141 F.3d at 196; Moore Business Forms, Inc. v.

Ryu, 960 F.2d 486, 489 (5th Cir. 1992).

               In determining whether a likelihood of
          confusion exists, this court considers the
          following nonexhaustive list of factors: (1)
          the type of trademark allegedly infringed, (2)
          the similarity between the two marks, (3) the
          similarity of the products or services, (4)
          the identity of the retail outlets and
          purchasers,    (5)   the   identity   of   the
          advertising media used, (6) the defendant’s
          intent, and (7) any evidence of actual
          confusion.... No one factor is dispositive,
          and a finding of a likelihood of confusion
          does not even require a positive finding on a
          majority of these “digits of confusion”....
          In addition to the listed factors, a court is
          free to consider other relevant factors in
          determining whether a likelihood of confusion
          exists.

Elvis Presley Enterprises, 141 F.3d at 194; see also Pebble Beach,

155 F.3d at 543.     An eighth factor, the degree of care employed by

consumers, was added to the list in       Sunbeam Products, Inc. v. West

                                 - 35 -
Bend Co., 123 F.3d 246, 257 (5th Cir. 1997), cert. denied, ___ U.S.

___, 118 S. Ct. 1795 (1998).   And, in that case, our court held:

“In determining the likelihood of confusion, the district court

must apply the ‘digits of confusion’ test”.      Id.

      Rolex introduced evidence that Meece has used three different

marks on his non-genuine bracelets.     The first was a five-prong

crown, very similar to the Rolex “Crown Device”.       He discontinued

using that mark in 1988, and sold fewer than 50 bracelets bearing

it.   The second mark was a three-prong crown.     After an objection

by Rolex, Meece discontinued using that mark two years prior to

trial, and did not sell any bracelets bearing it.      Meece’s current

mark is a four-sided figure, with no prongs; but, it is wider at

the top than at the bottom and resembles the shape or outline of a

crown.   The border is smooth and the center has a matte finish.

      Rolex’s expert testified that the similarity of the Meece and

Rolex marks should be evaluated under the following guidelines: (1)

the designs should not be compared side by side, because that is

not the context in which they would be seen by consumers; (2)

consumer recollection of the Rolex “Crown Device” is imperfect; and

(3) the overall context of the design, including its use on

bracelets that look identical to Rolex bracelets, and its placement

in the same location on the bracelets, should be considered.

Rolex’s expert considered Meece’s current mark likely to cause

confusion with the Rolex “Crown Device”.


                               - 36 -
     Rolex notes that the same design used by Meece was the subject

of an action brought by Rolex against one of Meece’s customers.         In

Rolex Watch, U.S.A., Inc. v. Michel Co., No. 96-0805 (S.D. Cal.

1997) (unpublished), the court found that the “trapezoidal” design

was likely to cause confusion with the Rolex “Crown Device”,

stating   that   “the   overall   impression    created   by   Defendants’

imitation crown is likely to cause confusion among prospective

purchasers who carry an imperfect recollection of the Rolex crown”.

     But, in the case at hand, the district court found that

Meece’s current mark “is not sufficiently similar to be likely to

cause confusion with the Rolex mark”.           Although the marks are

similar in shape and size, they are not identical.        Meece’s mark is

a four-sided figure, the top of which is wider than the bottom.         It

has a smooth border, and a matte finish in the center.          As stated,

the Rolex “Crown Device” is a five-pronged crown, with a ball at

the top of each prong, and an oval underneath, depicting the base

of the crown.    However, “similarity of appearance is determined on

the basis of the total effect of the designation, rather than on a

comparison of individual features”.            Moore, 960 F.2d at 490.

Meece’s mark is placed on the exterior of the clasps of non-genuine

bracelets which are very similar to genuine Rolex bracelets; and,

it is placed in the same location that the Rolex “Crown Device” is

placed on the exterior of the clasps of genuine Rolex bracelets.




                                  - 37 -
      Meece    contends   that,    because      Rolex   purchasers   are   very

sophisticated, they are not likely to confuse his mark with that of

Rolex.     He also points out that his bracelets are stamped “Made in

Italy”, and claims that potential purchasers would know that Rolex

watches are not made there.       But, the “Made in Italy” marking is on

the interior of the bracelet clasp. Moreover, even Meece testified

that he did not know where genuine Rolex bracelets are made, so it

seems unlikely that his customers (jewelers) or their customers

(ultimate consumers) would be informed by that designation that the

bracelets are not genuine.

      The district court erred by failing to consider and weigh all

of the digits of confusion. Furthermore, it should have considered

the factors identified by Rolex’s expert in determining whether

Meece’s mark is confusingly similar to that of Rolex. Accordingly,

on remand, the district court should consider, in the light of all

of the appropriate factors, whether Meece’s mark is likely to cause

confusion with the Rolex “Crown Device”.

                                         D.

      Rolex acknowledges that Meece is entitled to advise consumers

that he is selling replacement parts for Rolex watches; but, it

asserts that the district court erred by failing to enjoin Meece’s

use   of   Rolex   trademarks     to    identify   his   non-genuine   parts.

Specifically, Rolex complains of Meece’s use of various Rolex




                                       - 38 -
trademarks (“Submariner”, “Oyster”, “Presidential Style”) in his

sales literature to identify his non-genuine parts.

       In refusing to enjoin such use, the district court stated:

                   There is no principled difference between
              selling generic or custom bands or bezels made
              specifically for a Rolex watch from, for
              example, selling a custom high-performance
              carbur[e]tor made specifically to fit a Ford
              Mustang.    Common sense indicates that a
              replacement part must be specifically designed
              to replace the original part.      A part not
              specifically designed to replace the original
              part is simply not a replacement part.      As
              long as it is clear to the purchaser that the
              replacement part is not an authentic Rolex
              part, ... there is no reason to enjoin [Meece]
              from stating that the replacement part fits a
              particular Rolex product.

Rolex apparently concedes as much, but asserts that Meece is not

using its trademarks in that manner; instead, according to Rolex,

he    is    illegally    using   the   Rolex    trademarks   to   identify   his

products.

       The district court did not err by refusing to enjoin Meece’s

use    of     Rolex     trademarks     to   identify   the    Rolex   products

corresponding to his replacement parts.            He uses the trademarks in

his advertising materials sent to retail jewelers. Those materials

adequately disclose that the parts are non-genuine; that Meece is

not affiliated with Rolex; and that the addition of those parts to

genuine Rolex watches voids the Rolex warranty.

       In a footnote, Rolex asserts that, even absent a finding of

likely confusion, Meece’s use of Rolex marks violates the Texas

anti-dilution statute, TEX. BUS. & COM. CODE § 16.29.             We refuse to

                                       - 39 -
address this claim, because it is not adequately briefed.    FED. R.

APP. P. 28(a)(6).

                                III.

     For the foregoing reasons, the judgment is VACATED with

respect to the findings that Meece’s profits on infringing sales

are de minimis and that his mark is not sufficiently similar to be

likely to cause confusion with the Rolex “Crown Device” mark; and

the conclusion that Rolex is not entitled to recover profits and

attorney’s fees.    In all other respects, the judgment is AFFIRMED.

The case is REMANDED for further proceedings consistent with this

opinion.

               AFFIRMED in PART, VACATED in PART, and REMANDED




                               - 40 -
JERRY E. SMITH, Circuit Judge, dissenting:



     The majority presents a careful and well-researched opinion.

I respectfully dissent, however, from the decision to vacate the

district court’s findings that Meece’s profits on infringing sales

were de minimis and that his mark is not sufficiently similar to be

likely to cause confusion with the Rolex “Crown Device” mark, and

also to vacate the district court’s conclusion that Rolex is not

entitled to recover profits and attorney’s fees.          I would affirm,

essentially for the reasons stated by the district court in its

comprehensive findings of fact and conclusions of law.             As the

district   court   stated,   its   judgment   “attempts    to   strike   an

equitable balance that protects the rights of Rolex, yet recognizes

the legitimate interest of Meece to provide a valuable service to

the public.”   I would hold that the district court was successful

in that attempt.




                                   - 41 -
