                                    PRECEDENTIAL

    UNITED STATES COURT OF APPEALS
         FOR THE THIRD CIRCUIT
             _______________

                  No. 15-3893
                _______________

      COVERTECH FABRICATING, INC.

                        v.

      TVM BUILDING PRODUCTS, INC.;
           TVM CANADA, INC.

          TVM Building Products, Inc.,
                               Appellant
             _______________

  On Appeal from the United States District Court
     for the Western District of Pennsylvania
          (W.D. Pa. No. 3-13-cv-00150)
     Honorable Kim R. Gibson, District Judge
               _______________

           Argued: September 21, 2016

Before: JORDAN, VANASKIE, and KRAUSE, Circuit
                   Judges

          (Opinion Filed: April 18, 2017)
Brian W. Shaffer, Esq. [ARGUED]
Andrew C. Whitney, Esq.
Morgan Lewis & Bockius
1701 Market Street
Philadelphia, PA 19103

Attorney for Plaintiff-Appellee

J. Michael Baggett, Esq. [ARGUED]
McCann Garland Ridal & Burke
Suite 1030
11 Stanwix Street
Pittsburgh, PA 15222

Attorney for Defendant-Appellant

                      _______________

                 OPINION OF THE COURT
                     _______________

KRAUSE, Circuit Judge.

        Too often the silence of contracting parties must be
filled by the voice of the courts. Such is the case here, where
we are called upon to resolve a trademark dispute in which no
written contract designates ownership, and, in the process, to
clarify the paradigm through which common law ownership
of an unregistered trademark is determined when the initial
sale of goods bearing the mark is between a manufacturer and
its exclusive distributor. The District Court in this case
awarded ownership to the manufacturer, but did so on the
basis of the first use test, and found the distributor liable for




                                  2
infringement and fraud before rejecting its defense of
acquiescence and awarding damages under the Lanham Act.
Because the District Court failed to recognize and apply the
rebuttable presumption of manufacturer ownership that we
conclude pertains where priority of ownership is not
otherwise established, and because the District Court
incorrectly relied on gross sales unadjusted to reflect sales of
infringing products to calculate damages, we will affirm on
alternative grounds as to ownership, will affirm as to fraud
and acquiescence, and will vacate and remand as to damages.

I.     Factual Background and Procedural History

       Covertech Fabricating, Inc. is a manufacturer of
protective packaging and reflective insulation located in
Toronto, Canada. Since 1998, it has sold numerous reflective
insulation products under the umbrella of its lucrative rFOIL
brand—a United States trademark that has been registered in
Covertech’s name since 2001. The rFOIL brand comprises
the following products: ULTRA NT RADIANT BARRIER
(“ULTRA”), NT RADIANT BARRIER, CONCRETE
BARRIER FOIL, CONCRETE UNDERPAD, and ULTRA
CONCRETE UNDERPAD. CONCRETE BARRIER, like
the umbrella rFOIL brand, is a registered United States
trademark.

       TVM Building Products, Inc. is a distributor of
specialty building materials operating out of Johnstown,
Pennsylvania. In 1998, the President of TVM, Michael
Boulding, and the owner and President of Covertech, Furio
Orologio, entered into a verbal agreement (the “exclusive
distribution agreement”), which designated TVM as the
exclusive marketer and distributor of Covertech’s rFOIL
insulation products in the United States. Under the terms of




                               3
the exclusive distribution agreement, Covertech sold its
rFOIL products directly to TVM for resale to customers in the
United States at a markup; in turn, TVM refrained from
selling competitor products in the United States. TVM held
exclusive responsibility for customer service and marketing
of Covertech products in the United States, and while
Covertech reviewed and approved advertising materials
designed by TVM, it otherwise played no role in marketing,
sales, or customer service.

        In October 2007, Covertech terminated the exclusive
distribution agreement, both because TVM was consistently
struggling to remit timely payment and because Covertech
discovered TVM had been purchasing comparable product
from another manufacturer, Reflectix, and passing off some
of its merchandise as Covertech’s. At the time, TVM assured
Covertech that its labeling indiscretions were isolated
incidents caused by errors in filling its orders. In late 2007 or
early 2008, the parties entered a new agreement (the “private
label agreement”) pursuant to which Covertech manufactured
products for TVM to sell under its own TVM brand name,
and Covertech also continued to sell certain rFOIL products
to TVM for resale to customers using Covertech’s product
names. Under this agreement, TVM represented that it would
refrain from buying products from Covertech’s competitors.

        Despite TVM’s promise, it purchased over $2.2
million in reflective insulation products from Reflectix
between 2006 and 2009, and in 2009 it began to purchase
comparable goods from another competitor, Soprema. In late
2010 or early 2011, shortly after Covertech learned of TVM’s
illicit purchases, the parties terminated their relationship
entirely, including the private label agreement, and Covertech




                               4
proceeded to sell its own products directly in the United
States.

        Nonetheless, TVM, without authorization from or
consultation with Covertech, continued to market its
reflective insulation products using the rFOIL brand names.
For example, in 2011, TVM advertised using the
CONCRETE BARRIER, CONCRETE UNDERPAD, and
ULTRA CONCRETE UNDERPAD brands in its own
product catalog, and between 2009 and 2013, TVM marketed
non-Covertech products on its website using the rFOIL,
CONCRETE BARRIER, CONCRETE UNDERPAD, and
ULTRA CONCRETE UNDERPAD labels. At no point did
Covertech give TVM permission to sell merchandise using
these product names, and on multiple occasions when
Covertech was alerted to particular instances of such
unauthorized sales during this period, Covertech confronted
TVM in phone calls and demanded that it discontinue this
practice.

        Over the years that Covertech engaged TVM as its
distributor and made efforts, short of court action, to persuade
TVM to stop using rFOIL brand names in its advertising,
Covertech also took steps to protect its ownership of the mark
in Canada and the United States. Specifically, in 2009,
Covertech filed a petition to register ULTRA as a trademark
with the Canadian Intellectual Property Office (“CIPO”),
which registered the mark in 2010. The next year, although
Covertech had informed TVM of its registration in Canada,
TVM—without notice to or permission from Covertech—
petitioned the United States Patent and Trademark Office
(“PTO”) to register ULTRA as a trademark in its name. Once
it learned that the PTO granted that petition, Covertech filed
an adverse petition with the PTO seeking registration of




                               5
ULTRA in its own name and filed the lawsuit in federal court
against TVM that gives rise to this appeal. 1

        After a one-week bench trial, the District Court
granted judgment in favor of Covertech on all claims and, as
relevant to this appeal, calculated TVM’s ill-gained profits of
$4,054,319 and alternative statutory damages of $4 million
for TVM’s infringement of the rFOIL and CONCRETE
BARRIER marks. See 15 U.S.C. § 1117(a), (c). Because
Covertech elected to receive the profit calculation, judgment
in its favor was awarded in that amount for the infringement
of those marks. The District Court subsequently denied
TVM’s omnibus motion for amended and additional findings,
altered and amended judgment, and a new trial, and awarded
Covertech attorneys’ fees and expenses.           This appeal
followed.

II.    Jurisdiction and Standard of Review

      The District Court had jurisdiction pursuant to 28
U.S.C. §§ 1331, 1332, and 1367, and we have jurisdiction




       1
         The original action, which was filed in the Middle
District of Pennsylvania, also named TVM Canada, Inc., but
Covertech later stipulated to dismissal of TVM Canada, Inc.
and to the transfer of the action to the Western District of
Pennsylvania. The PTO has stayed the adverse petition
proceeding pending resolution of the federal court litigation.




                              6
pursuant to 28 U.S.C. § 1291. 2 We review a district court’s
factual findings following a bench trial for clear error,
affording “due regard to the trial court’s opportunity to judge
the witnesses’ credibility.” Post v. St. Paul Travelers Ins.
Co., 691 F.3d 500, 514-15 (3d Cir. 2012) (quoting Fed. R.
Civ. P. 52(a)(6)); see also United States v. Mallory, 765 F.3d
373, 381-82 (3d Cir. 2014).          In contrast, we review
conclusions of law, including “choice and interpretation of
legal precepts,” de novo, Post, 691 F.3d at 515, and an award
of profits under the Lanham Act for abuse of discretion, see
Banjo Buddies, Inc. v. Renosky, 399 F.3d 168, 173 (3d Cir.
2005).

III.   Discussion

       TVM raises four issues on appeal. First, it contends
that the District Court erred in determining that Covertech,
not TVM, is the owner of the ULTRA trademark. Second,
TVM challenges the District Court’s holding that TVM
committed fraud on the PTO in applying to register the
ULTRA trademark in its name. Third, TVM asserts that the
District Court erred in rejecting TVM’s affirmative defenses
of acquiescence and laches. Finally, TVM argues that the

       2
         We reject Covertech’s suggestion that TVM lacks
standing due to the sale of TVM’s assets to a secured creditor
after entry of final judgment by the District Court.
Regardless of whether TVM would benefit from reversal of
the District Court’s cancellation of the ULTRA mark, TVM
retains liability for damages from its infringement of that
mark and hence continues to hold a live interest in this
controversy. See generally Gayle v. Warden Monmouth Cty.
Corr. Inst., 838 F.3d 297, 303 (3d Cir. 2016).




                              7
District Court abused its discretion in awarding $4,054,319 in
damages to Covertech for TVM’s infringement of the
CONCRETE BARRIER and rFOIL marks. We address these
issues in turn.

       A.     Ownership

        In assessing the rightful ownership of the ULTRA
mark, the District Court relied on the “first use test,” which
determines initial ownership by asking which party was the
first to use an unregistered trademark in commerce. See
United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 100
(1918); Ford Motor Co. v. Summit Motor Prods., Inc., 930
F.2d 277, 292 (3d Cir. 1991). The District Court applied that
test to the record developed over five days of trial to conclude
that Covertech was the rightful owner. For the reasons
below, we conclude (1) the first use test was not the correct
test given the unique context of the manufacturer-distributor
relationship, and (2) the District Court should nonetheless be
affirmed because ownership still goes to Covertech when the
correct test is applied.

              1.     The First Use Test v. The McCarthy
                     Test

       The first use test is generally proper for unregistered
trademarks, taking account of the well-established common
law principle of “first-in-time, first-in-right” that rewards
actual and continuous use in commerce as between market
competitors. See Ford Motor Co., 930 F.2d at 292; 2 J.
Thomas McCarthy, McCarthy on Trademarks & Unfair
Competition § 16.1 (4th ed. 2017). This paradigm is an
imperfect fit, however, when it comes to the often exclusive
and noncompetitive manufacturer-distributor relationship,




                               8
where ownership rights would inure to the benefit of the
distributor in a multitude of cases based simply on the fact
that the distributor, albeit at the manufacturer’s direction,
made the initial sale of goods bearing the mark to the public.

       In contrast to a single actor’s entry into the market,
manufacturers and distributors typically engage in concerted
action and thus may, at the outset of the relationship, make
any number of arrangements for the handling of the mark. In
some cases, the parties’ distribution agreement may make
express provision for ownership of the mark in either party.
See Premier Dental Prod. Co. v. Darby Dental Supply Co.,
794 F.2d 850, 854 (3d Cir. 1986). In other cases, there may
be an express assignment of ownership—that is, the sale of a
mark—passing the assignor’s rights in the mark to the
assignee. See Doeblers’ Pa. Hybrids, Inc. v. Doebler, 442
F.3d 812, 821-22 (3d Cir. 2006); 2 McCarthy on Trademarks
§ 18:1. In still other manufacturer-distributor relationships,
the contracting parties may omit to make explicit provision
for ownership of a mark, but even so, have no expectation
that a manufacturer, merely by contracting with a distributor,
thereby relinquishes its ownership rights in favor of the
distributor. To presume that in every case where ownership is
not decided in advance, a distributor who makes the initial
public sale thereby assumes the mark and the manufacturer
cedes any claim to initial ownership would defy logic and
common sense. Thus, it cannot be that, in the absence of a
contractual arrangement, the first use test automatically fills
that gap. Instead, a different test accounting for the realities
of the manufacturer-distributor relationship must control.

      For that reason, when we first considered the
manufacturer-distributor domain in Doebler, we cited
approvingly the ownership test expounded by Professor J.




                               9
Thomas McCarthy in his seminal treatise on trademark law.
Doebler, 442 F.3d at 826 (quoting 2 McCarthy on
Trademarks § 16:48). But we had no need in Doebler to
expressly adopt that test because, in that case, initial
ownership as between the manufacturer and distributor was
clearly established. Id. at 826-27. Today, the issue is
squarely presented to us, and we find the McCarthy test has
much to recommend it.

       As Professor McCarthy explains, where initial
ownership between a manufacturer and its exclusive
distributor is at issue and no contract exists, the manufacturer
is the presumptive trademark owner unless the distributor
rebuts that presumption using a multi-factor balancing test
designed to examine the distribution agreement in effect
between the parties. 2 McCarthy on Trademarks § 16.48; see
also 5 McCarthy on Trademarks § 29.8. The six factors that
should be considered are: (1) “[w]hich party invented or
created the mark”; (2) “[w]hich party first affixed the mark to
goods sold”; (3) “[w]hich party’s name appeared on
packaging and promotional materials in conjunction with the
mark”; (4) “[w]hich party exercised control over the nature
and quality of goods on which the mark appeared”; (5) “[t]o
which party did customers look as standing behind the goods,
e.g., which party received complaints for defects and made
appropriate replacement or refund”; and (6) “[w]hich party
paid for advertising and promotion of the trademarked
product.” Doebler, 442 F.3d at 826 (quoting 2 McCarthy on
Trademarks § 16:48).

       The presumption and rebuttal factors of the McCarthy
test place a thumb on the ownership scale in favor of the
manufacturer, but invite courts to consider various indicia of
ownership designed to elicit the roles and responsibilities of




                              10
the parties and the expectations of consumers in order to
gauge whether, in a given case, the distributor and not the
manufacturer operated as the rightful owner of the contested
mark. Thus, unlike the first use test, this approach allows
courts to undertake a thorough, individualized analysis of
each case that accounts for the unique attributes of the
manufacturer-distributor relationship.

        We are persuaded by Professor McCarthy’s approach,
and hold today that as between a manufacturer and its
exclusive distributor, there is a rebuttable presumption of
initial trademark ownership in favor of the manufacturer, and
that Professor McCarthy’s test is the proper analytical tool
through which a distributor may attempt to rebut that
presumption in the absence of a contractual agreement.

        Our adoption of this test is also consistent with our
sister Circuits, which, when asked to determine ownership in
this context, have endorsed some version of the McCarthy
test, see TMT N. Am., Inc. v. Magic Touch GmbH, 124 F.3d
876, 884 n.4 (7th Cir. 1997); Sengoku Works Ltd. v. RMC
Int’l, Ltd., 96 F.3d 1217, 1220 (9th Cir. 1996), as have a
number of district courts, see, e.g., Prod. Source Int’l, LLC v.
Nahshin, 112 F. Supp. 3d 383, 395-97 (E.D. Va. 2015);
Tecnimed SRL v. Kidz-Med, Inc., 763 F. Supp. 2d 395, 403
(S.D.N.Y. 2011), aff’d, 462 F. App’x 31, 33 (2d Cir. 2012);
Ilapak Research & Dev. S.A. v. Record SpA., 762 F. Supp.
1318, 1322 (N.D. Ill. 1991). While some courts have distilled
Professor McCarthy’s six factors to four, see Sengoku, 96
F.3d at 1220; Tecnimed, 763 F. Supp. 2d at 403, and others
have varied the language, see, e.g., Ilapak, 762 F. Supp. at
1322, all have cited either to Professor McCarthy’s treatise




                              11
itself or to cases that do so, applying the McCarthy test with
only minor variations across the federal courts. 3

        Despite its general acceptance and although our own
adoption of it today was presaged by Doebler, the McCarthy
test is absent from the District Court’s analysis of the ULTRA
mark in this case. Nor, apparently, did the parties recognize
its relevance, as it garnered nary a mention in their briefing
before the District Court or on appeal. Instead, the District
Court and the parties relied on Premier Dental Products. Co.
v. Darby Dental Supply Co., 794 F.2d 850 (3d Cir. 1986),
where we counseled consideration of a product’s goodwill
before finding that ownership has vested in a distributor, even
when the manufacturer has expressly assigned title to the
mark. See id. at 853-54. In Doebler, however, we cabined
Premier to only those cases involving express assignment of a
mark. Doebler, 442 F.3d at 826-27 & n.16. Yet the case
before us, all parties agree, falls outside that category.

       After we asked the parties to address Doebler in
supplemental submissions and at argument, TVM conceded
the District Court’s error and the applicability of the
McCarthy test and urged that it should prevail when that test
is applied; Covertech, however, sought to defend the District
Court’s decision in its favor, including the District Court’s

       3
         In reducing McCarthy’s six factors to four, the Ninth
Circuit in Sengoku combined as one factor the first and
second factors—asking “which party invented and first
affixed the mark onto the product”—and omitted the sixth
factor, which party paid for marketing. See Sengoku, 96 F.3d
at 1220. We conclude, however, that district courts’ analysis
and appellate review will be facilitated by considering each of
these factors distinctly.




                              12
application of the first use test. 4 In support, though,
Covertech merely directed us to Ford Motor Co., our case
adopting the first use test, without explaining why that test,
rather than the McCarthy test, should apply here. See Ford
Motor Co., 930 F.2d at 292.

        We conclude the District Court’s application of the
first use test was legal error. To the extent there was any
ambiguity after Doebler, we resolve it today: In the absence
of a contractual arrangement or assignment, the McCarthy
test is the proper test to apply to determine ownership in the
manufacturer-distributor context.

              2.     Applying The McCarthy Test

        Where a district court has applied the incorrect legal
test to make the ruling under review, we may remand for that
court to apply the right test in the first instance. See, e.g.,
Forestal Guarani S.A. v. Daros Int’l, Inc., 613 F.3d 395, 401
(3d Cir. 2010). Here, however, the six factors of the
McCarthy test are fully briefed, the parties have confirmed
that they would not add to the record on remand, and our
application of the test may provide helpful guidance to district
courts. We therefore proceed to apply the test ourselves,

       4
           Covertech also contends that we should not
determine the applicability of the McCarthy test in this case
given TVM’s failure to raise it before the District Court and
in its opening brief on appeal. We disagree. Notwithstanding
TVM’s waiver, it is necessary and appropriate for us to take
up the question of the proper legal test because it is a purely
legal question, the resolution of which is in the public
interest. See Huber v. Taylor, 469 F.3d 67, 74-75 (3d Cir.
2006).




                              13
evaluating each of the six factors and concluding that, on
balance, they favor Covertech. See Wallach v. Eaton Corp.,
837 F.3d 356, 374-75 (3d Cir. 2016).

       First, we query which party invented or created the
mark. Although it did so in the context of its first use
analysis, the District Court made a finding that “Covertech
developed and used the ULTRA . . . brand.” App. 11. We
review that finding for clear error, and see none. See Post,
691 F.3d at 514. The District Court’s finding is supported by
the testimony of Covertech’s Vice President, Jonathan Starr,
who explained that Covertech developed ULTRA as a
“heavier-duty product” that “evolved” from its original NT
RADIANT BARRIER product line. App. 862, 886, 902.
Conversely, TVM contends that the testimony of its
President, Michael Boulding, supports TVM’s invention of
the mark, i.e., Boulding’s statements that TVM encouraged
the production of a new insulation product and fashioned the
ULTRA nomenclature that followed. But, in doing so, TVM
ignores the fact that the District Court judged Boulding to be
incredible. We will not disturb the District Court’s credibility
determination—“quintessentially the province of the trial
court, not the appellate court”—except in “rare
circumstances,” not present here, Scully v. US WATS, Inc.,
238 F.3d 497, 506 (3d Cir. 2001), such as when “specific
evidence” exists showing “the Court’s findings were made in
clear error,” Trs. of the Nat’l Elevator Indus. Pension, Health
Benefit & Educ. Fund, v. Lutyk, 332 F.3d 188, 194 (3d Cir.
2003) (internal quotation marks omitted). Thus, far from
rebutting Covertech’s ownership, this factor supports it.

       Second, regarding which party first affixed the mark to
the goods sold, although TVM asserts that “[t]he record does
not adequately reflect the labeling of the ULTRA . . . product




                              14
prior to the expiration of the exclusivity agreement,”
Appellant’s Suppl. Br. 4, the record unequivocally
demonstrates that labeling was handled by Covertech. Peter
Clarke, a sales representative of Covertech and a former
employee of TVM, testified that during the period of the
exclusive distribution agreement, Covertech factory
employees used a label chart to guide them when affixing
labels to manufactured products. The District Court deemed
that testimony credible, and we, of course, defer to such
credibility findings absent clear error. See Trs. of the Nat’l
Elevator Indus. Pension, 332 F.3d at 194. Even Boulding
conceded that TVM “would provide the artwork to Covertech
in a form that they could then print the labels in order to
adhere them to the product.” App. 1102. In sum, this factor
too favors Covertech.

        The third factor, which party’s name appeared on
packaging and promotional materials in conjunction with the
mark, is more equivocal. The record reveals examples of
promotional materials that display both the Covertech and the
TVM logos in connection with advertisement of the ULTRA
mark and associated products, and while TVM’s name is
consistently larger and more prominently visible, Covertech’s
is associated with warranties. Because we are unable to
discern any relative significance in their manner of display,
this factor is in equipoise.

       As to the fourth factor, which party exercised control
over the nature and quality of the goods on which the mark
appeared, although there is evidence on both sides, we
conclude the evidence again tips in Covertech’s favor. The
District Court found that Covertech manufactured all products
contested in this suit, and that TVM fielded complaints and
supplied technical support to customers, and the parties do




                             15
not dispute that Covertech bore responsibility for warranties
and manufactured the ULTRA product. While Boulding
offered testimony that TVM monitored and set in motion the
modification of goods that later became associated with the
ULTRA mark, we accord little weight to that testimony in
view of the District Court’s general credibility findings as to
that witness. See Trs. of the Nat’l Elevator Indus. Pension,
332 F.3d at 194. TVM’s rebuttal garners no support from this
factor.

        TVM fares no better with the fifth factor, i.e., to which
party did customers look as standing behind the goods—for
example, which party received complaints for defects and
made appropriate replacements or refunds. Although the
District Court’s findings and the record reflect TVM’s high-
visibility roles in marketing, sales, and fielding customer
complaints, it is undisputed that Covertech provided the
warranties for ULTRA products and that this was made plain
in product advertisements. In addition, Covertech presented
customer testimony, found credible by the District Court, that
reflected the ULTRA products were associated with
Covertech. This factor thus supports Covertech’s ownership.

       The sixth and last factor—which party paid for
advertising and promotion of the trademarked product—as it
turns out, is the only one that favors TVM. It is undisputed
that TVM was responsible for advertising and promoting the
products for sale in the United States, including ULTRA, and
the District Court found that TVM “was compensated by
being the exclusive distributor of the product line and getting
Covertech’s products at a very good price, which it would
then mark up for sale in the United States.” App. 16.
Although Covertech contends these discounts were




                               16
tantamount to its own payment and responsibility for
advertising, that contention finds no support in the record.

       Having reviewed all six factors, we conclude the
presumption is dispositive, as the weight of the McCarthy
factors is indisputably in Covertech’s favor. While a mere
counting of the factors is not dispositive—the weight of each
being variable with the facts—the numbers here, as well as
the weight, favor Covertech. Factors one, two, four, and five
are for Covertech; factor three is inconclusive; and factor six
is for TVM. Even if the balance was in equilibrium, such a
result would still be insufficient to overcome Covertech’s
presumptive ownership of the ULTRA mark. The District
Court’s conclusion that Covertech was the rightful owner of
the mark, albeit under an incorrect test, was thus correct, and
we will affirm as to that ruling.

       B.    Fraud on The PTO

       In addition to ownership of the mark, TVM challenges
the District Court’s cancellation of TVM’s registration of the
mark based on a finding of fraud on the PTO, specifically, its
finding that Boulding made intentional misrepresentations in
TVM’s application to register the ULTRA trademark and its
legal conclusion that TVM committed fraud.              These
challenges lack merit.

        The Lanham Act provides that a third party may
petition for cancellation of a registered trademark if the
registration was procured by fraud, 15 U.S.C. §§ 1064(3),
1120, a showing that must be made by clear and convincing
evidence that the “applicant or registrant knowingly ma[de] a
false, material representation with the intent to deceive the
PTO,” In re Bose Corp., 580 F.3d 1240, 1245 (Fed. Cir.




                              17
2009); see Marshak v. Treadwell, 240 F.3d 184, 196 (3d Cir.
2001). That intent to deceive can be inferred from indirect or
circumstantial evidence, In re Bose Corp., 580 F.3d at 1245,
indicating that “the registrant actually knew or believed that
someone else had a right to the mark,” Marshak, 240 F.3d at
196.

        Here, Boulding attested in connection with TVM’s
petition to register the ULTRA mark that “he believed no
other person, firm, corporation, or association ha[d] the right
to use the mark,” a statement he made under penalty of
perjury. 5 App. 1451. The District Court was entirely
justified in finding Boulding’s testimony at trial not credible
and in concluding that, “[i]n light of Mr. Boulding’s prior
interactions with Covertech, he must have known or believed
that Covertech had a right to use the mark.” App. 98-99.
While Boulding asserted his statement was a mere mistake,
the District Court astutely observed, first, that TVM was
aware on the date of its PTO application that Covertech had
recently registered the ULTRA mark in Canada, and second,
that Covertech continued to sell ULTRA in the United States


      5
         The District Court found not only that statement, but
also two additional statements Boulding made in applying to
the PTO, to be intentional misrepresentations—(1) “TVM
first used the mark in 2006” and (2) Boulding “believed that
TVM was the owner of the mark.” App. 97. We need not
address knowledge or falsity as to these statements because
we will affirm the District Court’s conclusion as to the
statement above, which alone supports the conclusion that
TVM’s registration was fraudulently procured and thus
should be cancelled.




                              18
at that time, placing the companies in direct competition.
Deferring to the District Court’s credibility findings, which
are fully supported by the record, we perceive no error in the
District Court’s determination that Boulding subjectively
intended to deceive the PTO, see In re Bose Corp., 580 F.3d
at 1245; Marshak, 240 F.3d at 196, and that TVM obtained
registration of the ULTRA mark through fraud.

      C.     Acquiescence

       We turn next to TVM’s argument that the District
Court should have found Covertech’s claims barred by the
doctrines of laches and acquiescence. We dispose quickly of
the laches argument, which was raised for the first time on
appeal and is therefore waived.       TVM’s acquiescence
argument is preserved for appeal, but is nonetheless
unavailing.

       An alleged infringer may assert the equitable defense
of acquiescence “when the trademark owner, by affirmative
word or deed, conveys its implied consent” to the use of a
mark. Pappan Enters., Inc. v. Hardee’s Food Sys., Inc., 143
F.3d 800, 804 (3d Cir. 1998). Relevant considerations,
required as elements in a number of our sister Circuits, may
include whether “(1) the senior user actively represented that
it would not assert a right or a claim; (2) the [senior user’s]
delay between the active representation and assertion of the
right or claim was not excusable; and (3) the delay caused the
defendant undue prejudice.” Hyson USA, Inc. v. Hyson 2U,
Ltd., 821 F.3d 935, 941 (7th Cir. 2016); see also Seller
Agency Council, Inc. v. Kennedy Ctr. for Real Estate Educ.,
Inc., 621 F.3d 981, 989 (9th Cir. 2010); ProFitness Physical
Therapy Ctr. v. Pro-Fit Orthopedic & Sports Physical
Therapy P.C., 314 F.3d 62, 67 (2d Cir. 2002); SunAmerica




                              19
Corp. v. Sun Life Assurance Co. of Can., 77 F.3d 1325, 1334
(11th Cir. 1996). Once use becomes infringing, the relevant
date for quantifying the “delay” is when the trademark owner
either knew or should have known of the existence of a
provable claim of infringement, and an owner’s claim does
not ripen until the defendant’s infringement is sufficiently far-
reaching to create a likelihood of confusion. See, e.g., What-
A-Burger of Va., Inc. v. Whataburger, Inc. of Corpus Christi,
Tex., 357 F.3d 441, 449-50 (4th Cir. 2004).

        Here, these considerations lead us to conclude
Covertech did not acquiesce in TVM’s infringement. TVM
has not identified any affirmative statement or act on the part
of Covertech that expressly or impliedly authorized TVM’s
infringement, nor has it shown that Covertech’s delay in
initiating suit was either inexcusable or unduly prejudicial.
See Hyson, 821 F.3d at 941; Pappan, 143 F.3d at 804.
Although Covertech learned on at least three occasions in
2007 and 2008 that TVM was passing off other
manufacturer’s goods under its brand names, TVM led it to
believe these incidents were isolated and merely accidental,
and Covertech did not discover until late 2010 or early
2011—in a deposition for an unrelated matter—the true
magnitude of TVM’s infringement. Only then did the
acquiescence clock start to run, and Covertech’s escalating
responses from that point forward appear both reasonable and
timely.      That is, having discovered TVM’s actual
infringement, Starr called Boulding on multiple occasions
between 2010 and 2013 to demand that TVM “stop using . . .
[Covertech’s] brand names.” App. 935. And when those
efforts failed to yield results, Covertech commenced this
litigation in May 2013. On that record, we perceive no
factual or legal error in the District Court’s conclusion that




                               20
Covertech’s delay in initiating suit did not demonstrate
implied consent. See Pappan, 143 F.3d at 804.

       D.     Damages

       In its final argument on appeal, TVM submits that the
District Court abused its discretion in awarding to Covertech
$4,054,319 of TVM’s profits for TVM’s infringement of the
rFOIL and CONCRETE BARRIER trademarks because, in
the absence of any evidence in the record of TVM’s actual
profits for sales of infringing products, the District Court
based its calculation on TVM’s total sales in the metal
building industry. That is, rather than awarding $4 million in
statutory damages, the District Court relied on evidence of
TVM’s gross sales between 2009 and 2013 and then
spontaneously reduced this figure by 30% to avoid an
excessive award. If the finding of infringement is upheld on
appeal, TVM contends the proper award would be statutory
damages. 6 We agree.

        The Lanham Act provides two alternatives for
calculating damages: either an award subject to principles of
equity that turns on evidence of the defendant’s sales and
profits, see 15 U.S.C. § 1117(a), or, alternatively, statutory
damages of between $1,000 and $2 million per counterfeit
mark for each type of good or service offered for sale or
distributed, as the court considers just, see id. § 1117(c). The
choice between these awards is at the plaintiff’s election, and

       6
         While in briefing, TVM appeared to assert error in
the District Court’s calculation of both actual and statutory
damages, at oral argument, it clarified that it contests only
actual damages, not the District Court’s alternative
calculation of $4 million in statutory damages.




                              21
the district court enjoys wide discretion in applying equitable
principles. See id.; Banjo Buddies, 399 F.3d at 177. But, in
particular where a district court is making an estimate of
actual profits under the first alternative, its discretion must be
within boundaries, and the touchstone is reasonableness.
Those boundaries were tested here and, we conclude, were
crossed when the District Court calculated damages by using
industry-wide gross sales figures and by selecting a random
discount value to determine—in the absence of, for example,
company records, expert testimony, or other record
evidence—that profits approximated 70% of gross sales of all
industry products.

       Covertech, relying on our decision in Banjo Buddies v.
Renosky, 399 F.3d 168 (3d Cir. 2005), contends the District
Court’s calculation was within its discretion in view of the
Lanham Act’s burden-shifting framework for an equitable
award of actual damages. Under that framework, the
trademark owner is tasked with proving the infringer’s sales
before the burden of proof shifts to the defendant to show
costs and deductions. See 15 U.S.C. § 1117(a). Covertech’s
argument seems to be that if a plaintiff makes a showing of
gross sales—even industry-wide sales, not limited to the
infringing product—and a defendant then fails to offer a
rebuttal, it is within the district court’s discretion to award as
“actual profits” any dollar amount up to 100% of those gross
sales. Covertech is mistaken.

       A district court’s discretion, wide as it may be, is not
unbounded, and a bare showing of gross sales is not sufficient
to fashion an equitable award without some anchor in the
record to support a reasonable estimation of actual profits.
Indeed, Covertech’s approach would render equitable
considerations—and by extension, our review for abuse of




                               22
discretion—a nullity. We will not interpret the Lanham Act’s
statutory burden-shifting mechanism in such a nonsensical
manner. See In re Kaiser Aluminum Corp., 456 F.3d 328,
330 (3d Cir. 2006).

        Nor does our case law go so far. In Banjo Buddies,
while we explained that a district court has broad discretion to
fashion remedies where a defendant fails to meet its burden of
proof regarding costs and damages, we affirmed the district
court’s decision to rely sua sponte on testimony of the
defendant’s business manager to estimate profits. 399 F.3d at
177. Further, in Venture Tape Corp. v. McGills Glass
Warehouse, 540 F.3d 56 (1st Cir. 2008), and WMS Gaming
Inc. v. WPC Productions Ltd., 542 F.3d 601 (7th Cir. 2008),
although the respective defendants offered no evidence to
mitigate the plaintiffs’ showing of gross sales, those Courts of
Appeals held that the damages requested were reasonable
because, in each case, gross sales were tied directly to total
profits resulting from infringement and the damages sought
were only a small proportion of that amount. Venture Tape,
540 F.3d at 64; WMS Gaming, 542 F.3d at 604, 609.

       As these cases make clear, where a district court
endeavors to calculate damages under the Lanham Act on the
basis of the defendant’s actual profits, rather than awarding
statutory damages, it must ground its estimate in the record—
e.g., business records, credible witness testimony, expert
testimony, or industry data—in order to pass muster as a
reasonable estimate and an appropriate exercise of discretion.
Conversely, where the court lacks a sound basis for
extrapolating actual profits, it abuses its discretion by
resorting to guesswork. For just such situations, the Lanham
Act provides for statutory damages in the alternative, and it is




                              23
on that provision that the court must rely. See 15 U.S.C.
§ 1117(c).

       Here, the District Court eschewed statutory damages
and awarded $4,054,319 as a matter of equitable discretion
even though the record was insufficient to approximate actual
damages. For the reasons we have explained, that award
constituted an abuse of discretion and cannot stand. As
Covertech has requested the opportunity on remand to elect
an award of statutory damages, see, e.g., Cotter v. Christus
Gardens, Inc., No. 99-5996, 2000 WL 187698, at *6 (6th Cir.
Dec. 12, 2000); Oboler v. Goldin, 714 F.2d 211, 213 (2d Cir.
1983) (per curiam), we will vacate and remand with
instructions to the District Court to grant that request.

IV.   Conclusion

      For the foregoing reasons, we will affirm in part and
will vacate and remand to the District Court for further
proceedings consistent with this opinion.




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