                                                                                                                           Opinions of the United
2003 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


12-31-2003

Gucci America v. Daffys
Precedential or Non-Precedential: Precedential

Docket No. 02-4046




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2003

Recommended Citation
"Gucci America v. Daffys" (2003). 2003 Decisions. Paper 2.
http://digitalcommons.law.villanova.edu/thirdcircuit_2003/2


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2003 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
                       PRECEDENTIAL

                           Filed December 31, 2003

    UNITED STATES COURT OF APPEALS
         FOR THE THIRD CIRCUIT


                 No. 02-4046


            GUCCI AMERICA, INC.
                        Appellant
                      v.
       DAFFY’S, INC.; JOHN DOES 1-10

On Appeal from the United States District Court
        for the District of New Jersey
             (Civil No. 00-cv-04463)
     District Judge: Hon. Alfred M. Wolin

            Argued: July 14, 2003
  Before: McKEE, BARRY, Circuit Judges, and
         ROSENN, Senior Circuit Judge

      (Opinion Filed: December 31, 2003)

               MILTON SPRINGUT, ESQ. (ARGUED)
               Kalow & Springut
               488 Madison Avenue
               19th Floor
               New York, NY 07102
               Attorney for Appellant
                              2


                      STEPHEN R. BUCKINGHAM
                       (ARGUED)
                      DAVID L. HARRIS
                      MICHELLE R. NANCE
                      Lowenstein Sandler
                      65 Livingston Avenue
                      Roseland, NJ 07068
                      Attorneys for Appellee


                 OPINION OF THE COURT

McKEE, Circuit Judge.
  Gucci America, Inc. appeals the district court’s decision
to deny Gucci’s request for an order compelling defendant
Daffy’s, Inc. to recall counterfeit “Jackie-O” handbags.
Gucci also appeals the district court’s denial of Gucci’s
request for an accounting of profits and other injunctive
relief. For the reasons that follow, we will affirm.

               I.   FACTUAL BACKGROUND
  Daffy’s is a chain of retail clothing stores specializing in
selling popular brands of goods and apparel at discount
prices. In late May 2000, Daffy’s acquired three sizes of a
handbag that appeared to be a particular Gucci model
known as the “Jackie-O”. Daffy’s purchased 594 of these
handbags from its supplier, Sara’s Collection, Inc., for
prices ranging from $238 to $250 depending on size. Sara’s
Collection, Inc. was recognized as a reputable supplier, and
Daffy’s had previously purchased products from it.
  The events leading to the purchase began when a
representative of Sara’s approached Daffy’s regarding some
Gucci handbags that were being diverted to the United
States from a merchant in the Far East. Although Daffy’s
representatives were confident that the bags were genuine,
Daffy’s nevertheless attempted to authenticate the bags by
taking them to a Gucci outlet store in Secaucus, New
Jersey before offering them for resale. There, a Daffy’s
employee presented one of the bags to the Gucci clerk and
informed the clerk that she had received the bag as a gift
                             3


and was not certain of its authenticity. The employee asked
the clerk to examine the bag and confirm that it was
genuine. The clerk did so, and informed the Daffy’s
employee that the bag was authentic. That conclusion was
based on certain indicia of authenticity including the
quality of fabric and leather, the storage bag the handbag
came in, and the Gucci label and appropriate codes on the
bag. The clerk also compared the bag with another Gucci
bag in the store.
   Daffy’s also sent one of the bags it had purchased that
was damaged to the Gucci repair center in New York for
repair. Gucci repaired the bag and returned it without
comment or further inquiry. Based upon its experience with
its reputable supplier, the corroboration of the Gucci clerk,
and the unquestioned repair and return of one of the bags
from Gucci’s own service center, Daffy’s concluded that the
bags it had purchased from Sara’s were genuine Gucci
bags. That conclusion was incorrect. The bags were actually
counterfeit, although they were of exceptional quality,
expensive, and virtually indistinguishable from genuine
Gucci bags.
   Daffy’s proceeded to sell a total of 588 of these bags for
$298.99, $339.99 and $398.99 depending on size. The
sales continued through the summer of 2000. Daffy’s
remained unaware of any problem until counsel for Gucci
sent Daffy’s a letter dated September 5, 2000, demanding
that Daffy’s immediately cease selling the bags and that
Daffy’s disclose its supplier to Gucci. Daffy’s responded by
informing Gucci that the bags had been obtained from a
legitimate parallel importer outside of Gucci’s authorized
chain of distribution and it believed the bags were genuine
Gucci bags. Nevertheless, despite its belief that the bags
were genuine and that it had done nothing improper,
Daffy’s immediately withdrew the handbags from its stores
and has since adopted a policy of not buying any Gucci
merchandise in order to avoid the possibility of purchasing
counterfeit Gucci goods.

               II.   PROCEDURAL HISTORY
  Despite the steps Daffy’s took after being informed of the
                                     4


counterfeit nature of the Gucci bags it was selling, Gucci
sued seeking an Order to Show Cause why Daffy’s should
not be preliminarily enjoined from infringing Gucci’s
trademark through the sale of counterfeit “Jackie-O”
handbags.1 The requested relief was denied, and the court
also denied Gucci’s motion for expedited discovery directed
at Daffy’s supplier. In the court’s view, Gucci had not
demonstrated a sufficient likelihood of success on the
merits to justify the equitable relief it requested. In an effort
to avoid unfair prejudice to any party, the district court
severed the factual issue of the authenticity of the Daffy’s
handbag and proceeded to a bench trial on the merits of
that issue. See Gucci America, Inc. v. Daffy’s, Inc., No. 00-
4463, 2000 WL 1720738 (D. N.J. Nov. 14, 2000) (denying
preliminary injunction and severing authenticity issue for
trial).
   Gucci’s head of quality control testified extensively at the
ensuing trial. Based upon that testimony, the court
concluded that the bags Daffy’s sold as genuine Gucci
product were, in fact, counterfeit bags not manufactured by
Gucci. However, as the district court made clear in its
fourth written opinion in this case, “the Daffy’s handbag
was an extremely high-quality product, capable of fooling
even a very discriminating examiner. It should be apparent
. . . that the quality of the counterfeit and the difficulty in
distinguishing it from a true Gucci has colored every step
of this litigation.” Gucci America v. Daffy’s Inc., No. 00-4463
slip. op. at 2 (D. N.J. Nov. 16, 2001) (“Gucci IV”).
   The district court then moved to the remedy phase of the
trial. Gucci first requested an order compelling Daffy’s to
contact those consumers who had purchased the
counterfeit bags and offer them a refund. As detailed below,
this requested recall was denied, and Daffy’s and Gucci
then filed cross-motions for partial summary judgment. We
are concerned here with Gucci’s cross-motion for partial
summary judgment. Gucci sought an injunction preventing
Daffy’s from using the Gucci trademark, a finding that

1. Gucci alleged violations of §§ 32(1) [15 U.S.C. § 1114(1)] and 43(a), [15
U.S.C. § 1125(a)] of the Lanham Act, and sought remedies for the alleged
violations under § 35 of the Lanham Act codified at 15 U.S.C. § 1117.
                              5


Daffy’s willfully infringed that trademark through the sale
of the counterfeit Gucci bags, and an award of profits based
upon that allegedly willful infringement. Daffy’s insisted
that Gucci was not entitled to profits because there had
been no willful infringement, and Daffy’s also argued that
Gucci was not entitled to an injunction because it could not
establish the necessary harm.
  The district court explained its denial of the requested
recall in its November 14, 2001 Memorandum Opinion.
Gucci IV at 2. The court stated that it had considered
whether:
    (1) the defendant acted in a willful or otherwise
    egregious manner
    (2) the risk of confusion to the public and injury to
    the trademark is greater than the cost and burden of
    recall to the alleged infringer and
    (3) there is substantial risk of danger to the public
    resulting from the defendant’s infringing activity.
Id. at 4. After concluding that Daffy’s had not acted
willfully, and recognizing that Gucci failed to establish a
genuine issue of fact as to whether Daffy’s acted
intentionally or with willful blindness in selling counterfeit
handbags, the court undertook the balancing encompassed
by the second prong of its inquiry. Id at 5-8. In doing so,
the court first considered the low risk of public confusion
due to the high quality and price of the bags and low risk
of injury to the Gucci trademark. Id. at 8-9 The court then
weighed the benefits Gucci might derive from a recall
against the negative impact a recall could have on Daffy’s
goodwill, as well as the difficulties of obtaining the
necessary consumer information for a recall. Id. at 10-11.
The court concluded that the balance tipped in favor of
Daffy’s and therefore denied Gucci’s motion for a recall. Id.
at 12.
  The district court agreed that Daffy’s had infringed
Gucci’s trademark, Gucci America v. Daffy’s Inc., No. 00-
4463 slip. op. at 3-4 (D. N.J. Sept. 3, 2002) (“Gucci V”), but
denied Gucci’s request for an award of Daffy’s profits based
on the absence of the willfulness required under
                                 6


SecuraComm Consulting Inc. v. Securacomm Inc., 166 F.3d
182 (3d Cir. 1999). Id. at 10-12. The court also rejected
Gucci’s request for a permanent injunction because Gucci
could not demonstrate irreparable injury. Id. at 13. In doing
so, the court noted Daffy’s attempts to minimize damage to
Gucci     by   voluntarily   withdrawing      the    offending
merchandise from Daffy’s shelves,2 and the court concluded
that Daffy’s was therefore highly unlikely to infringe Gucci’s
trademark again. Id. at 14. Thus, in the court’s view,
balancing hardships weighed in favor of Daffy’s and against
granting Gucci’s requested relief. Id. at 15. This appeal
followed.

                       III.   DISCUSSION
  Congress has explained that:
     The intent of [the Lanham] Act is to regulate commerce
     within the control of Congress by making actionable
     the deceptive and misleading use of marks in such
     commerce; to protect registered marks used in such
     commerce from interference by State, or territorial
     legislation; to protect persons engaged in such
     commerce against unfair competition; to prevent fraud
     and deception in such commerce by the use of
     reproductions, copies, counterfeits, or colorable
     imitations of registered marks; and to provide rights
     and remedies stipulated by treaties and conventions
     respecting trademarks, trade names, and unfair
     competition entered into between the United States and
     foreign nations.
15 U.S.C. § 1127 (2003). The Senate Report on the Lanham
Act reinforces the congressional intent behind the
legislation noting that Congress enacted it to:
     protect the public so that it may be confident that, in
     purchasing a product bearing a particular trade-mark
     which it favorably knows, it will get the product which
     it asks for and wants to get. Secondly, where the owner
     of a trade-mark has spent energy, time and money in

2. Gucci notes that only six bags remained on Daffy’s shelves at that
point.
                              7


    presenting to the public the product, he is protected in
    his investment from its misappropriation by pirates
    and cheats.
Weil Ceramics v. Dash, 878 F.2d 659, 672 n.17 (3d Cir.
1989) (quoting S.Rep. No. 1333, 19th Cong.2d Sess.,
reprinted in 1946 U.S. Code. Cong. Serv. 1274).
  As noted above, Gucci brought this suit for trademark
infringement under Sections 32(1) and 43(a) of the Lanham
Act. Section 32(1) provides in pertinent part:
    (1) Any person who shall, without the consent of the
    registrant—
    (a) use in commerce any reproduction, counterfeit, . . .
    of a registered mark in connection with the sale, . . . or
    in connection with which such use is likely to cause
    confusion, or to cause mistake, or to deceive; or
    (b) reproduce, counterfeit, copy, or colorably imitate a
    registered mark . . .
    shall be liable in a civil action by the registrant for the
    remedies hereinafter provided. Under subsection (b)
    hereof, the registrant shall not be entitled to recover
    profits or damages unless the acts have been committed
    with knowledge that such imitation is intended to be
    used to cause confusion, or to cause mistake, or to
    deceive.
15 U.S.C. § 1114 (2003) (emphasis added). Section 43(a)
further provides as follows:
    (1) Any person who, on or in connection with any goods
    or services, . . uses in commerce any . . . symbol, . . .
    or any false designation of origin, . . which—
    (A) is likely to cause confusion, or to cause mistake, or
    to deceive as to the . . . origin, . . .
                               * * *
    (B) shall be liable in a civil action by any person who
    believes that he or she is or is likely to be damaged by
    such act.
15 U.S.C. § 1125(a) (2003). Section 34(a) of the Lanham
Act, 15 U.S.C. § 1116(a), is critical to our analysis. That
                              8


section authorizes courts to issue injunctions for trademark
violations “according to the principles of equity and upon
such terms as the court may deem reasonable. . .”.
Recovery of lost profits is governed by § 35(a) of the Lanham
Act which provides in relevant part:
    (a) When a violation of any right of the registrant of a
    mark registered in the Patent and Trademark Office, a
    violation under section 43(a) or (d) [15 U.S.C. § 1125(a)
    or (d)], or a willful violation under section 43(c) [15
    U.S.C. § 1125(c)], shall have been established in any
    civil action arising under this Act, the plaintiff shall be
    entitled, subject to the provisions of sections 29 and 32
    [15 U.S.C. §§ 1111, 1114], and subject to the principles
    of equity, to recover (1) defendant’s profits, (2) any
    damages sustained by the plaintiff, and (3) the costs of
    the action.
15 U.S.C. § 1117(a) (2003).
  With these statutory parameters in mind, we turn to the
precise issues raised in this appeal.

                      A.   Recall Order
  We review the district court’s denial of Gucci’s request for
recall of the counterfeit handbags for an abuse of
discretion. See Jacquin Et Cie, Inc. v. Destileria Serralles,
Inc., 921 F.2d 467, 472 (3d Cir. 1990); see also Perfect Fit
Industries v. Acme Quilting, 646 F.2d 800, 807 (2d Cir.
1981). “[A] district court has abused its discretion if it has
rested its decision on ‘a clearly erroneous finding of fact, an
errant conclusion of law, or an improper application of law
to fact.’ ” Jacquin, 921 F.2d at 472 (quoting International
Union, UAW v. Mack Trucks, Inc., 820 F.2d 91, 95 (3d
Cir.1987)).
  Both Daffy’s and Gucci agree that the propriety of the
court’s recall decision is governed by:
    1. the willful or intentional infringement by the
    defendant;
    2. whether the risk of confusion to the public and
    injury to the trademark owner is greater than the
    burden of the recall to the defendant; and
                                   9


     3. substantial risk of danger to the public due to the
     defendant’s infringing activity.
See Theodore C. Max Total Recall: A Primer on a Drastic
Form of Equitable Relief, 84 Trademark Rep. 325, 327
(1994) (listing these factors); see also Perfect Fit Industries
v. Acme Quilting Co, 646 F.2d 800, 807 (2d Cir 1981)
(weighing the first two factors in decision to order recall).
  Gucci first argues that the district court failed to give
“heavy weight” to whether the public would benefit from a
recall. Appellant’s Brief at 29. Gucci also argues that the
court underestimated the harm the company may suffer
due to the infringement and that it erred in evaluating the
hardship Daffy’s would face in effectuating a recall.3 Daffy’s,
on the other hand, argues that the district court accurately
considered all the equities in its proper exercise of
discretion.
  Gucci does not argue that Daffy’s conduct created a
substantial risk of danger to the public, nor does Gucci
contest the district court’s conclusion that Daffy’s was “an
innocent infringer,” Gucci V at 10, or that Daffy’s was
unaware of the counterfeit nature of the bags it was selling.
Therefore, we may focus our discussion on the court’s
resolution of the balancing of harms required under the
second factor set forth above.
  Gucci’s contention that the district court failed to afford
the public interest “heavy weight” is simply without merit.
The argument rests entirely on the fact that Daffy’s
customers did not get genuine Gucci handbags. The district
court did consider the benefit the consuming public would
receive from recalling the counterfeit bags. The court

3. Gucci suggests that the counterfeit bags resulted in Gucci losing its
quality control and that this is an additional harm that the court
ignored. However, Gucci’s arguments regarding loss of quality control
were raised for the first time on appeal, and therefore we will not
consider them. See Srein v. Frankford Trust Co., 323 F.3d 214, 224 n.8
(3d Cir. 2003)(declining to consider argument raised for first time on
appeal and noting that the court will not consider such arguments
absent compelling circumstances). In any event, the record lacks any
evidence that Daffy’s handbags were of significantly inferior quality or
even readily distinguishable from Gucci’s.
                             10


explained that it had “given serious consideration to the
fact that denying a recall will leave Daffy’s customers under
the continued misapprehension that they own a real Gucci
product.” Gucci IV at 11-12. The court simply concluded
that the benefit did not justify the concomitant harm a
recall would have upon Daffy’s, an innocent infringer. We
therefore find Gucci’s attack upon the district court’s
analysis unconvincing.
  Gucci does not explain the difference between the “heavy
weight” it argues the district court should have afforded the
public benefit of a recall, and the “serious consideration”
the district court gave it. Moreover, we agree with the
district court’s determination that the public benefit of a
recall does not outweigh the equities counseling against it.
A recall would have a financial impact upon Daffy’s. It
would also likely injure the company’s goodwill as
consumers may well assume that Daffy’s was guilty of
intentional wrongdoing no matter how carefully Daffy’s
explained the circumstances leading to any recall. Since the
counterfeit bags were virtually indistinguishable from Gucci
manufactured bags, the district court quite reasonably
concluded that “a recall would harm Daffy’s with little real
benefit to Gucci,” Gucci IV at 12, or the public.
  Gucci invokes a post-sale confusion theory, which
presumes that “the senior user’s potential purchasers or
ongoing customers might mistakenly associate the inferior
quality work of the junior user with the senior user and,
therefore, refuse to deal with the senior user in the future.”
Axicom Corp. v. Axiom, 27 F.Supp. 2d 478, 497 (D. Del.
1998); see also Payless Shoesource v. Reebok International,
998 F.2d 985, 989 (Fed. Cir. 1993) (describing post sale
confusion as that which occurs when “a consumer observes
someone wearing a pair of Payless accused shoes and
believes that the shoes are Reebok’s. As a consequence, the
consumer may attribute any perceived inferior quality of
Payless shoes to Reebok, thus damaging Reebok’s
reputation and image.”). Yet, Gucci does not challenge the
district court’s conclusion that, given the quality of the
counterfeit bags, third party observers would not perceive
anything inferior about them. Accordingly, consumers
would not attribute substandard merchandise to Gucci.
                                   11


Gucci does, however, claim that the district court gave
short shrift to its concerns over ongoing confusion of
Daffy’s consumers who unknowingly possess a counterfeit
“Gucci.”
  Although this position has some initial surface appeal, it
does not withstand scrutiny. As we noted above, the district
court considered the dangers of customer confusion. It gave
“serious consideration to the fact that denying a recall will
leave    Daffy’s    customers     under    the    continued
misapprehension that they own a real Gucci product.”
Gucci IV at 11-12. However, the court was convinced that
this did not justify a recall because the quality of the
counterfeit bags and the relatively high price Daffy’s
customers were willing to pay for them undermined claims
of a tarnished Gucci trademark.4 Finally, in the absence of
sufficient evidence regarding the comparative durability of
Daffy’s bags and Gucci’s bags, Gucci’s conclusion that
counterfeit bags would require greater maintenance rests
upon pure speculation. Accordingly, the district court
stated the following in explaining why the equities
precluded ordering a recall:
     The potential for damage to Daffy’s goodwill with its
     customers is too obvious to be belabored. Daffy’s
     marketing niche, distress sales of designer goods at
     significant discounts, would mean nothing if the
     consumer lacked confidence that the goods were what
     they purport to be. Daffy’s also points out that a recall
     would require credit card records available only from
     the issuing banks.
Gucci IV at 10. Following a brief discussion of the
exceptions to federal privacy laws which would allow for the
release of customer information from banks, the court
continued:
       Notwithstanding, the affront to the privacy of Daffy’s
     customers, extending the customer’s ill-feeling
     engendered by the counterfeiting to the wholly

4. The district court quite reasonably concluded that the relatively high
price would suggest quality consistent with the image Gucci is
apparently trying to protect.
                                     12


     unrelated credit card issuers, is unmistakable. This
     adds an additional counterweight in the balance of the
     hardships against ordering a recall.
       Finally, there is the real possibility that consumers
     notified of this action will decline to come forward.5
     Gucci does not contend that the Court should compel
     Daffy’s customers to surrender their handbags. An
     underpinning of Gucci’s post-sale confusion argument
     is that Daffy’s customers are posing as true Gucci
     wearers, free-riding on Gucci exclusivity at a Daffy’s
     price. But this theory would hold regardless of whether
     the consumer herself knew that the handbag was a
     counterfeit. Thus, under Gucci’s own construct of the
     consumer mind-set, a Daffy’s customer informed of the
     counterfeiting might well decide that she is content
     with her bargain and decline to return the handbag.
     Lastly, with the passage of time there is a real
     possibility that the Daffy’s handbags have been
     discarded, were given away as gifts, or are otherwise
     unavailable.
Gucci IV at 11. The court’s factual conclusions are not
clearly erroneous. Given the careful application of the
correct equitable standard to the evidence before it, it is
clear to us that the district court did not abuse its
discretion in refusing to order a recall.6

          B.   Summary Judgment-Injunctive Relief
                   and Award of Profits
  We review the district court’s decision to grant or deny an
injunction for an abuse of discretion. Ameristeel Corp. v.

5. Moreover, Daffy’s has represented in its brief and without
contradiction at oral argument that only approximately 200 of the total
588 bags that were sold were purchased with credit cards. The
remaining 388 were apparently purchased with cash and therefore
Daffy’s can not trace them to the purchasers.
6. Gucci also briefly attempts to justify its request for a recall by analogy
to appropriate remedies for consumer fraud under federal and state law.
Appellant’s Brief at 41-3. However, the analogy fails because Daffy’s
conduct is not analogous to the intent necessary to establish consumer
fraud.
                                   13


Int’l Brotherhood of Teamsters, 267 F.3d 264, 267 (3d Cir.
2001). That same standard applies to the court’s refusal to
award Gucci lost profits. See SecuraComm, 166 F.3d at 189
(reviewing award of profits for abuse of discretion).

                       1.   Injunctive Relief
   At the outset of our discussion of Gucci’s challenge to the
district court’s refusal to order an injunction, we note that
Gucci’s concerns were substantially satisfied by Daffy’s
voluntarily enacted policy of not dealing in Gucci products.
Daffy’s counsel confirmed this policy at oral argument,
though some confusion about the precise parameters of
that policy remains.7 Gucci nevertheless contends that the
district court erred by considering an injunction that was
broader than Gucci was seeking. More specifically, Gucci
argues that it requested injunctive relief prohibiting Daffy’s
from future infringement, while the court considered an
injunction “to prohibit Daffy’s from ever using the Gucci’s
trademark in the future.” Gucci V at 13. Gucci further
argues that the court incorrectly required Gucci to prove
that it would be irreparably injured by the denial of
injunctive relief rather than placing the burden of proving
absence of harm on Daffy’s. Finally, Gucci argues that the
district court erred by focusing only on the danger of future
intentional infringement and ignoring what it labels
“evidence of substantial danger of future unintentional
infringement.”
  An examination of the district court’s opinion reveals that
the court correctly considered an injunction to prevent
future infringement. Although the court mentioned that the

7. Gucci and Daffy’s apparently disagree about whether Daffy’s intends
the policy to be indefinite. However, that does not alter our analysis or
our resolution of the issues Gucci is raising. Moreover, inasmuch as
Daffy’s has relied upon this policy in arguing against injunctive relief
both here and before the district court, our affirmance of the district
court’s denial of an injunction will be without prejudice to Gucci’s right
to seek injunctive relief if in the future Daffy’s abandons or alters this
policy such that injunctive relief becomes appropriate. However, we take
no position now as to Gucci’s entitlement to any injunctive relief in the
future.
                                  14


injunction requested was to prevent Daffy’s from ever using
Gucci’s trademark again, it also made clear that Daffy’s
efforts to minimize the damage to Gucci before the bags
proved to be counterfeit “undermines any inference that
Daffy’s intends to infringe Gucci’s trademarks in the
future.” Gucci V at 14. We understand that Gucci maintains
that Daffy’s presale inquiry was not adequate. Indeed, the
dissent suggests that Daffy’s effort “was simply a superficial
effort to cover itself in the event of a lawsuit.” Dissent at 28.
However, the sufficiency of the inquiry does not suggest
that the district court erred in considering Daffy’s presale
inquiries in assessing the likelihood of future infringement
or the need for an injunction.8 Moreover, the court’s
statement shows that it knew the injunction was being
requested to stop trademark infringement, as Gucci
requested.
   The dissent argues that Gucci established irreparable
harm and that the district court should therefore have
granted an injunction against future infringement. Dissent
at 35. According to the dissent, infringement constitutes
irreparable injury as a matter of law and therefore Daffy’s
had the burden “to prove that the injury will not recur in
the future.” Id.
     In deciding whether to grant a permanent injunction,
     the district court must consider whether: (1) the
     moving party has shown actual success on the merits;
     (2) the moving party will be irreparably injured by the
     denial of injunctive relief; (3) the granting of the
     permanent injunction will result in even greater harm
     to the defendant; and (4) the injunction would be in the
     public interest.
Shields v. Zuccarini, 254 F.3d 476, 482 (3d Cir. 2001).
Although we have said that “ ‘trademark infringement
amounts to irreparable injury as a matter of law,” dissent
at 27 (quoting S & R Corp., 968 F.2d at 378), the

8. We have previously stated that “carelessness is not the same as
deliberate indifference with respect to another’s rights in a mark or a
calculated attempt to benefit from another’s goodwill.” SecuraComm, 166
F.3d at 188 (the defendant’s failure to conduct a trademark search does
not suggest wilful infringement of plaintiff ’s mark.).
                                    15


irreparable injury we referred to was not intended to
swallow the remaining prongs of the permanent injunction
inquiry.
  In S & R Corp., we stated:
     Grounds for irreparable injury include loss of control of
     reputation, loss of trade, and loss of goodwill. Lack of
     control amounts to irreparable injury regardless of
     allegations that the infringer is putting the mark to
     better use. Irreparable injury can also be based on the
     possibility of confusion. Finally, and most importantly
     for this case, trademark infringement amounts to
     irreparable injury as a matter of law.
968 F.2d at 378 (citations omitted). We cited Opticians
Assoc. of America v. Indept. Opticians of America in support
of our pronouncement that trademark infringement
constitutes irreparable injury as a matter of law. A closer
look at Opticians will therefore further inform our analysis
of the district court’s denial of injunctive relief here.
   In Opticians, we concluded that infringement constitutes
a per se injury “[e]ven if the infringer’s products are of high
quality, . . .” 920 F.2d at 196. This is because infringement
inhibits the owner’s “ability to control its own Guild marks,
which in turn creates the potential for damage to its
reputation. Potential damage to reputation constitutes
irreparable injury for the purpose of granting a preliminary
injunction in a trademark case.” Id. However, as we noted
above, Gucci argued injury from loss of control for the first
time on appeal, and that aspect of irreparable injury was
therefore been waived. See supra at n. 3. Accordingly, the
district court correctly focused on the actual injury to
Gucci’s reputation and goodwill in finding that Gucci had
not established irreparable harm for purposes of injunctive
relief.
  Gucci primarily cites two cases in support of its claim
that the burden shifts to defendant to demonstrate the
impossibility of future harm once the plaintiff establishes
that the defendant infringed plaintiff ’s trademark. See
Appellant’s Brief at 44-46.9 However, neither case advances
Gucci’s claim given the circumstances here.

9. Gucci also cites Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132,
1135-36 (9th Cir. 1986) and Basic Fun, Inc. v. X-Concepts, LLC, 157
                                    16


  Levi Strauss & Co. v. Shilon, 121 F.3d 1309, 1314 (9th
Cir. 1997) involved an egregious case of a dealer
counterfeiting Levi jeans. The court concluded that the
defendant’s conduct demonstrated that the defendant could
not be trusted and an injunction was therefore necessary to
protect plaintiff ’s trademark.
   Lyons Partnership v. Morris Costumes Inc., 243 F.3d 789,
800 (4th Cir. 2001) does offer Gucci a bit more support
given this record. There, the court held that the defendant
was not a willful infringer. The defendant was renting three
costumes resembling characters in the popular children’s
television show, “Barney.” Apparently, the costumes bore
such a strong resemblance to characters on the show that
many children mistakenly associated the wearer of the
costumes with the real purple dinosaur they saw on
television. The court described the situation as follows:
      Lyons Partnership, L.P., . . . , a Texas limited
      partnership, owns all of the intellectual property rights
      to    the   character    “Barney,”     the   well-stuffed
      Tyrannosaurus Rex with a green chest and stomach,
      friendly mien, green spots on its back, and yellow
      “toeballs.” Barney is readily recognizable to young
      children, who repeatedly parrot his song, “I Love You,”10
      often testing the patience of nearby adults.
243    F.3d    at   795    (footnote     in   original).11    The   court

F.Supp. 2d 449, 457 (E.D. Pa. 2001) in support of its burden shifting
argument. Polo Fashions involved a defendant who had willfully violated
Polo’s trademark rights and Basic Fun examined a copyright licensee’s
failure to comply with the terms of a copyright license. Given the facts,
it seems clear that the enjoined parties in both cases previously engaged
in intentional behavior which undermined their credibility and good
faith.
10. Many can recite only the first three lines of the song:
I love you.
You love me.
We’re a happy family.
With a great big hug and a kiss from me to you,
Won’t you say you love me too?
11. Based upon the folk wisdom that counsels that some things are
better left to the imagination, we will resist the temptation to “go there”
                                   17


considered the defendants’ claim that they would
voluntarily stop renting the costumes and hand them over
to “Barney,” once litigation ended. Id. at 800-01. However,
that concession did not prevent the court from granting
injunctive relief. Rather, the court concluded that in an
infringement case, assertions alone are not enough to
eliminate the “plaintiff ’s ‘reasonable expectation that the
alleged violation will recur’ in the absence of a court order.”
Id. at 801. However, we think it significant that one of the
defendants continued to claim that it was not infringing
plaintiff ’s trademark by renting the costumes even after
plaintiff informed the defendant of the infringement and
filed suit to stop it. That defendant also argued that the
plaintiff could not establish that continuing infringement
was possible. Id. at 800. Accordingly, the court was not
convinced that plaintiff ’s trademark would be honored
absent an injunction. However, the fact that the court in
Lyons Partnership concluded that the circumstances there
required an injunction does not mean that the district court
here abused its discretion in concluding that an injunction
was not necessary given Daffy’s conduct.12 We believe that

and explore the subtleties of “toeballs.” The Court of Appeals for the
Fourth Circuit did not favor us with an explanation, and none readily
suggests itself to us. Perhaps, as is true with so many things that are
peculiar to the universe of young children, for those who understand “toe
balls,” no explanation is necessary. For those who do not understand
them, no explanation is possible.
12. The nature of the potential harm threatening Lyons, the owner of the
Barney trademark, substantially differed from the harm threatening
Gucci. Infringement of the Barney trademark could therefore have
harmed Lyons in a manner not analogous to any harm Gucci could have
suffered from Daffy’s infringement given the quality of the counterfeit
bags. The court in Lyons was careful to note that:
    The live appearance of the Barney character, who is played by
    adults in costume, is completely controlled by Lyons, and Lyons
    does not license Barney costumes because of its inability to police
    the behavior of those who might appear in the costume. It claims
    that it would be unable to prevent would-be Barneys from behaving
    in a decidedly un-Barney-like manner and tarnishing his wholesome
    reputation. Accordingly, every person who wears the costume—there
                                   18


conclusion was reasonable, and that the district court did
not abuse its discretion in denying Gucci the injunction
given this record and the inquiry properly undertaken
under Shields.

                       2.   Award of Profits
  Finally, Gucci argues that the district court erred by
relying on SecuraComm in conditioning an award of profits
upon a finding of willful infringement. SecuraComm
involved a trademark infringement action brought by a
Pennsylvania security systems consulting firm against its
New Jersey competitor. SecuraComm, 166 F.3d at 184-86.
At the close of trial, the district court awarded the plaintiffs
10% of the defendant’s gross profits after finding that an
award of profits was necessary to “ ‘deter[ ] . . . the kind of
conduct in which all three defendants . . . engaged.’ ” Id. at
186 (quoting SecuraComm Consulting v. Securacomm Inc.,
984 F.Supp. 286, 303 (D. N.J. 1997)). On appeal, the

    are five—is trained by a single choreographer how to be Barney.
    Moreover, Barney’s live voice is provided by only one person. . . . See
    Brooke A. Masters, Protecting Barney’s Image from Bogus Beasts,
    Wash. Post, Mar. 25, 1998, at B1.
243 F.3d at 795 (some citations omitted).
  Given the importance of the Barney trademark to impressionable
children, the court of appeals was particularly troubled by the district
court’s failure to focus on evidence of confusion in the relevant market.
Id., at 802 (“The evidence of actual confusion among children, . . which
the [district] court disregarded, was substantial.”). That omission was
fatal to the district court’s analysis. The court of appeals explained:
    in conducting its infringement analysis with respect to works
    targeted at children, the district court should have considered the
    perspectives of those children. . . . [B]oth [the defendant] and . . .
    parents foresaw that the costumes would be used to entertain
    children.
Id. at 803. Given the nature of the target audience and the equivocal
nature of the defendant’s “concession” about future use, the court of
appeals concluded that it was an abuse of discretion to deny Lyons
injunctive relief to insure against the harm that would result from future
infringement. That is simply not our case.
                             19


defendants contested the award of profits, which was
largely based on the court’s finding that the infringement
was willful. Id. The court began by pointing to § 35(a) of the
Lanham Act [15 U.S.C. § 1117(a)], which then provided:
    When a violation of any right of the registrant of a
    mark registered in the Patent and Trademark Office, or
    a violation under section 43(a), shall have been
    established in any civil action arising under this Act,
    the plaintiff shall be entitled, subject to the provisions
    of sections 29 and 32 and subject to the principles of
    equity, to recover (1) defendant’s profits, (2) any
    damages sustained by the plaintiff, and (3) the costs of
    the action.
Id. (emphasis added). In SecuraComm, we noted the
importance of the intent to an award of profits, stating that
“[t]hough the standards for (1) awarding profits; (2)
determining whether such an award should be enhanced;
and (3) awarding attorneys’ fees under the Lanham Act
differ somewhat, the issue of willful infringement is central
to each.” Id. at 187 (citations omitted). Willful infringement
was viewed as having a central role in each type of relief
“because of the relevance of equitable factors in
determining their appropriateness on a given set of facts.”
Id. at 187 n.1. We clearly stated that “[k]nowing or willful
infringement consists of more than the accidental
encroachment of another’s rights. It involves an intent to
infringe or a deliberate disregard of a mark holder’s rights.”
Id. at 187.
  After examining whether the district court’s finding of
willful infringement was clearly erroneous, we concluded
that the award of profits was inappropriate. Id. at 190.
SecuraComm acknowledged that:
    [t]he Lanham Act permits courts to award monetary
    damages to trademark owners as compensation where
    it is equitable to do so regardless of the willfulness of
    the defendant’s infringement. Here, however, the
    District Court awarded profits to deter defendant’s
    assuredly egregious misconduct; a plaintiff must prove
    that an infringer acted willfully before the infringer’s
    profits are recoverable.
                              20


Id. (citing George Basch Co. v. Blue Coral, Inc., 968 F.2d
1532, 1537 (2d Cir.), cert. denied, 506 U.S. 991, 121 L. Ed.
2d 445, 113 S. Ct. 510 (1992); 5 J. Thomas McCarthy,
McCarthy on Trademarks and Unfair Competition § 30:62,
at 30-102 (4th ed. 1996)).
  Gucci contends that the bright line we recognized in
SecuraComm has been undermined by subsequent
amendments to the Lanham Act and that case is therefore
of limited application here. The Trademark Amendments
Act of 1999, in § 35(a), substituted “a violation under
section 43(a), or a willful violation under section 43(c),” for
“or a violation under section 43(a).” See Pub. L. 106-43 § 3b
(1999) (amending § 35(a)). Therefore, the relevant language
of § 35(a) now reads:
    When a violation of any right of the registrant of a
    mark registered in the Patent and Trademark Office, a
    violation under section 43(a) or (d) [15 U.S.C. § 1125(a)
    or (d)] of this title, or a willful violation under section
    43(c) [15 U.S.C. § 1125(c)] of this title, shall have been
    established in any civil action arising under this
    chapter, the plaintiff shall be entitled, subject to the
    provisions of sections 29 and 32 [15 U.S.C. §§ 1111
    and 1114] of this title, and subject to the principles of
    equity, to recover (1) defendant’s profits, (2) any
    damages sustained by the plaintiff, and (3) the costs of
    the action.
15 U.S.C. 1117(a) (2003). (emphasis added). Gucci argues
that this change signaled Congress’s intent to remove
willfulness as a condition precedent to awarding an
accounting of profits under § 35(a). The House Report on
the Trademark Amendments Act of 1999 stated in its
section by section analysis that the Amendments Act:
    amends section 35(a) of the Lanham Act, which
    provides for recovery of profits, damages and costs, and
    attorneys fees for violations of rights, by clarifying that
    recovery of profits, damages and costs, and attorneys
    fees are also available for a willful violation under
    section 43(c), which provides holders of a famous mark
    the right to obtain relief for dilution.
                                   21


Trademark Amendments Act of 1999, H.R. Rep. 106-250 at
10 (1999). The Report therefore suggests that willfulness is
a prerequisite in a trademark dilution cause of action, not
an infringement action.
  The Federal Trademark Dilution Act of 1995, which is
codified at § 43(c) of the Lanham Act [15 U.S.C. §§1125(c),
1127] creates
     a federal cause of action to protect famous marks from
     unauthorized users that attempt to trade upon the
     goodwill and established renown of such marks and,
     thereby, dilute their distinctive quality. The provision is
     intended to protect famous marks where the
     subsequent, unauthorized commercial use of such
     marks by others dilutes the distinctiveness of the
     mark.
H.R. Rep. No. 104-374, at 2-3 (1995), reprinted in 1995
U.S.C.C.A.N. 1029-30.
   The amendment to § 35(a) was discussed in Quick
Technologies Inc. v. Sage Group PLC, 313 F.3d 338, 347-48
(5th Cir. 2003), and Gucci relies upon the decision in Quick
Technologies in arguing that SecuraComm is no longer
viable given the change in the statute.13 See Appellant’s
Brief at 51. The court in Quick Technologies refused to find
that willful intent was a condition precedent to an award of
profits for trademark infringement. As Gucci notes, the
court proclaimed: “in light of the plain language of
§ 1117(a), . . . we decline to adopt a bright-line rule in
which a showing of willful infringement is a prerequisite to
an accounting of profits.” Id. at 349. In doing so, the court

13. It is worth noting that Tamko Roofing Products, Inc. v. Ideal Roofing
Co. Ltd., 282 F.3d 23 (1st Cir. 2002) affirmed a district court’s decision
to award profits absent a showing of fraud or bad faith. The decision was
based on a precedential rule “that an accounting of defendant’s profits
where the products directly compete does not require fraud, bad faith, or
palming off.” Tamko Roofing, 282 F.3d at 36 (citations omitted). The
court noted that several circuit courts of appeals require a finding of
willfulness in order to award an infringing defendant’s profits and agreed
that “when the rationale for an award of defendant’s profits is to deter
some egregious conduct, willfulness is required.” Id. at 36 n.11 (citing
SecuraComm Consulting, 166 F.3d at 190).
                              22


noted the substantial authority to the contrary, including
our holding in SecuraComm. Id. at 347. The court quoted
the language of the 1999 amendment and concluded that,
rather than conditioning an award of profits upon a finding
of willful intent, Congress intended a broader approach that
considered:
    (1) whether the defendant had the intent to confuse or
    deceive, (2) whether sales have been diverted, (3) the
    adequacy of other remedies, (4) any unreasonable delay
    by the plaintiff in asserting his rights, (5) the public
    interest in making the misconduct unprofitable, and (6)
    whether it is a case of palming off.
Id. (quoting Pebble Beach Co. v. Tour 18 Ltd., 155 F.3d 526,
554 (5th Cir. 1998)).
  The dissent also relies in part upon Quick Technologies,
and describes it as “the only Court of Appeals that has
considered [the issue of the necessity of willfulness] since
the statute’s amendment.” Dissent at 30. However, we do
not believe that Quick Technologies supports an award of
profits here. Rather, it supports our conclusion that the
district court did not err in refusing to award profits on this
record.
  The District Court in Quick Technologies instructed the
jury that it could not award lost profits for the defendant’s
infringement absent a finding that the infringement was
willful. On appeal, the plaintiff argued that the court “erred
by conditioning an award of profits upon a finding of . . .
willful infringement.” The defendants “urged[d the] Court to
explicitly hold that willful infringement is a prerequisite to
an accounting of profits under § 1117(a).” The court of
appeals noted that “several of [its] sister circuits have
embraced a wilfulness requirement in order to obtain an
award of profits.” Id. (citing numerous cases including our
holding in SecuraComm). However, the court relied upon
the “amendment to § 1117(a) on August 5, 1999” and
refused to adopt a bright line rule. Instead, the court held
that an award of profits is governed by the particular
equities in each case. 313 F.3d at 348. The court then
examined various equitable factors and concluded that the
district court had not erred in denying an award of profits
                              23


even though it had incorrectly conditioned such an award
on the willfulness of the defendant. The court explained:
    It is obvious from our cases that willful infringement is
    an important factor which must be considered when
    determining whether an accounting of profits is
    appropriate. . . . [H]owever, we decline to adopt a
    bright-line rule in which a showing of willful
    infringement is a prerequisite to an accounting of
    profits. Rather, we reaffirm the factor-based approach
    outlined [in our earlier cases].
Id., at 349. Thus, even though the court rejected the bright-
line rule we adopted in SecuraComm, it recognized that
principles of equity still control whether profits should be
awarded. Id. at 346 (“As this Court has previously stated,
‘the goal behind §§ 1116 and 1117 remedies is to achieve
equity between or among parties.’ ”). The individualized
inquiry the court adopted to determine whether profits
should be awarded was therefore aimed at achieving an
equitable result. The court stressed: “[a]s [we have]
previously stated, [t]he goal behind §§ 1116 and 1117
remedies is to achieve equity between or among the
parties.’ ” Id. at 346-7. After noting that “a mark holder is
only entitled to those profits attributable to the unlawful
use of its mark,” the court refused to award the plaintiff
lost profits because “the principles of equity still do not
weigh in favor of [such an] award.” Id. at 350.
  Accordingly, even after the 1999 amendments to the
Lanham Act and any impact it may have had on our
holding in SecuraComm, we nevertheless conclude that the
district court did not abuse its discretion given the equities
here, including Daffy’s good faith. See Siegrun D. Kane,
Trademark Law: A Practitioner’s Guide, §16:3.1 (3d ed.
2000) (noting that “[d]efendant’s profits are usually
awarded only where defendant is guilty of intentional
infringement, i.e. deliberately trading on plaintiff ’s mark”);
5 J. Thomas McCarthy, McCarthy on Trademarks and
Unfair Competition §30:62, 30-116 (4th ed. 2002) (stating
that “[t]o obtain an accounting of profits, the courts almost
always require that defendant’s infringement imply some
connotation of ‘intent’ or a knowing act denoting an intent,
                                   24


to infringe or reap the harvest of another’s mark and
advertising.”).
  First, we note that, as was the case in Quick
Technologies, the record does not establish what percentage
of Daffy’s sales, if any, was the result of the use of Gucci’s
mark. We understand, of course, that “Gucci” suggests a
certain level of quality and prestige.14 It is therefore
certainly possible that the instant sales were the direct
result of the exploitation of that brand name. However, it is
also quite possible that the purchasers were motivated by
the opportunity of purchasing what appeared to be an
attractive handbag of exceedingly high quality at the very
favorable price afforded by Daffy’s “discount.” To the extent
that consumers were motivated by obtaining such a
bargain, the fact that they were also obtaining “a genuine
Gucci” may have been only an incidental factor in their
purchase, or no factor at all. In other words, given the
quality, attractiveness, and price of the bags, we cannot
conclude that Daffy’s could not have sold them at the same
price even if they contained no reference to “Gucci.” Since
Gucci is “only entitled to those profits attributable to the
unlawful use of its mark,” the record would not support
awarding Gucci lost profits. Id.15
  Furthermore, the aforementioned equities that the
district court enunciated in its balancing of harms also
counsels against concluding that principles of equity
support awarding lost profits. The price and quality of the
handbags at issue, the small number of bags sold, Daffy’s
status as an innocent infringer, and the possibility that
Gucci could recover from the actual manufacturer of the
bags all weigh against awarding profits.16

14. That is the very reason that Gucci argues it was damaged by the sale
of counterfeit handbags.
15. The owner has the burden of proving that lost profits are attributable
to the unlawful use of the mark. See Quick Technologies, 313 F.3d at
350 (citing Texas Pig Stands, Inc., 951 F.2d 684,696 (5th Cir. 1992)); see
also A & H Sportswear Inc. v. Victoria’s Secret Stores, Inc., 166 F.3d 197
(3d Cir. 1999).
16. Given Daffy’s initial inquiry and its attempts to ensure that the bags
were genuine before offering them for sale, Daffy’s can be viewed as a
victim of the same counterfeiting Gucci is complaining of.
                                    25


  In recognizing that profits can be denied under principles
of equity even absent the continuing viability of
SecuraComm, Gucci suggests that equity demands such an
award here to avoid unjust enrichment, because the
infringer intended to trade on Gucci’s good will, and also
because lost profits constitute a “proxy for the trademark
owner’s damages.” Appellant’s Brief at 54. The dissent
agrees, arguing, “[a]n award of the infringer’s profits seeks
to make the trademark owner whole for losses sustained by
the plaintiff as a result of infringer’s use of something that
did not belong to him.” Dissent at 32. However, that
position would argue in favor of creating the very kind of
bright-line rule that the courts, including Quick
Technologies, have rejected. The logical extension of Gucci’s
position would require awarding profits in all cases of
infringement. Congress clearly rejected that policy choice by
making an individualized equitable inquiry central to
awarding remedies under the Lanham Act.
  The dissent also expresses an understandable concern
that Daffy’s will be unjustly enriched unless it disgorges
profits. However, that concern is exaggerated where, as
here, the record does not establish that the infringer was
enriched because of the owner’s mark. As noted above, that
requires speculation. The district court could not conclude
that Daffy’s was able to sell the counterfeit bags because of
the Gucci mark without speculating about whether
purchasers were attracted to the handbags because of the
Gucci mark as opposed to quality, price, and appearance.
The district court clearly did not err in not engaging in
such speculation, and it did not abuse its discretion in
denying an award of lost profits.

                         IV.    CONCLUSION
  For all of the above reasons, we will affirm the orders of
the district court denying Gucci’s request for a recall. We

  In addition, Daffy’s represents without contradiction that “Gucci did
not avail itself of other remedies,” although the district court afforded it
“every opportunity to do so.” Appellant’s Brief at 43. Daffy’s therefore
convincingly argues that Gucci waived its right to seek actual damages
under § 1117 (a)(2), or to seek the counterfeit-specific remedy of
statutory damages under § 1117(c).” Appellee’s Brief at 43.
                            26


will also affirm the district court’s order denying Gucci’s
request for summary judgment which precluded both
injunctive relief and an award of profits.
                              27


ROSENN, Circuit Judge, dissenting:
   The District Court erred in denying the plaintiff injunctive
relief on the ground that Gucci had not sustained
irreparable injury. The undisputed infringement of Gucci’s
undisputed trademark constituted a prima facie case of
irreparable injury as a matter of law. Indeed, this court has
held that “trademark infringement amounts to irreparable
injury as a matter of law.” S & R Corp. v. Jiffy Lube Int’l,
Inc., 968 F.2d 371, 378 (3d Cir. 1992). The District Court
committed further error in denying Gucci the undisputed
profits that Daffy’s realized in the sale of bags under
Gucci’s trademark on the ground that Daffy’s did not
infringe willfully. The court relied on Securacom Consulting,
Inc. v. Securacom, Inc., 166 F.3d 182 (3d Cir. 1999), which
is not a counterfeiting case and is no longer binding
precedent in light of subsequent statutory amendments.
  In considering the trade-mark statute as enacted in
1946, the Senate Committee on Patents reported:
    Trade-marks encourage the maintenance of quality by
    securing to the producer the benefit of the good
    reputation which excellence creates. To protect trade-
    marks, therefore, is to protect the public from deceit, to
    foster fair competition, and to secure to the business
    community the advantages of reputation and good will
    by preventing their diversion from those who have
    created them to those who have not.
S. Rep. No. 79-1333, at 1275 (1946).
   The District Court ignored the purpose of the trade-mark
statute to protect the public from deceit and secure to the
business community the advantages of its good name and
reputation. It left the purchasers of 588 highly expensive
counterfeit bags without any relief or even notice that the
bags they were carrying were not genuine. The court’s
decision    does    nothing    to  discourage    trade-mark
infringement but rewards a party to the deceit by allowing
it to retain all of the profits obtained by the use of the
producer’s good name and reputation. Moreover, the court
denies the innocent trademark owner an injunction against
future infringement and a recall of the spurious goods sold
                              28


under the producer’s trade-mark and good name. Because
the majority affirms that decision, I respectfully dissent.

                              I.
  The majority concludes that Gucci America’s (Gucci’s)
request for a recall of the 588 counterfeit handbags sold
under the Gucci name shall be denied because the District
Court’s findings of the difficulties to be encountered with
such a remedy were not clearly erroneous. Such a denial,
therefore, adds considerable weight to Gucci’s claim that
Daffy’s, the defendant, should be required to disgorge the
profits it made in trading on the Gucci name and
reputation. This is not an unreasonable request and the
least that a court should do to repair the damage to the
innocent owner of the trademark.
   Daffy’s business specializes in selling popular goods at
discount prices. It operates a business which, as
characterized by the District Court, involves considerable
risk. As the District Court observed in denying Gucci’s
motion for an order compelling Daffy’s to recall the
counterfeit “Jackie-O” handbags, its business “is clearly not
a business for the fainthearted, and Daffy’s buyers are
constantly aware that any given batch of branded goods
offered to them might be counterfeit. If Daffy’s buyers are
“constantly aware” of the risk that the goods they purchase
are counterfeit, how much more so must be Daffy’s, the
seller. This observation, without more — and there is much
more to which I refer below — seriously weakens Daffy’s
claims of innocence and favors Gucci’s claims for relief.
Daffy’s did not acquire the counterfeit bags directly from
Gucci or through the normal chain of distribution. It
purchased them without any supporting documentation
from a middleman, Sara’s Collections. Therefore, it knew
that the nature of its business involved the risk of selling
counterfeit or stolen merchandise.
  Even though Daffy’s knew of these possibilities, it
perfunctorily “attempted to authenticate the bags” by taking
one to a clerk at a Gucci outlet store in Secaucus, New
Jersey. This was simply a superficial effort to cover itself in
the event of a lawsuit. Daffy’s did not take the bag to the
                             29


store manager or to someone in authority in the Gucci
organization who was familiar with the construction of the
bag. It satisfied its concern by asking some unknown retail
clerk of unknown experience, of unknown authority, and
with unknown familiarity with the intricacies of bag
construction, to confirm the authenticity of the bag. It also
sent a damaged bag to the Gucci repair center without any
specific inquiry as to the authenticity of the bag.
  The District Court found that Daffy’s unintentionally sold
counterfeit bags. However, as between a sophisticated chain
of discount stores in the high risk business of selling
products acquired outside the customary chain of retail
distribution and without the usual authenticating
documentation and an innocent infringed, the District
Court rewarded the “unintentional” infringer with all the
profits derived from the sale of counterfeit bags under
Gucci’s famed good name. The Court has favored and
enriched the infringer and left the innocent and innovative
creator of a famous product and trademark owner without
any remedy whatsoever. Moreover, the court has denied
protection against future infringement. Furthermore, it has
inverted the objective of the Lanham Act. “Protection of
infringers is not a purpose of the Lanham Act. On the
contrary, the Act’s objective is the protection of the
trademark and the public.” United States Jaycees v.
Philadelphia Jaycees, 639 F.2d 134, 142 (3d Cir. 1981).
   Daffy’s unjustly enriched itself at Gucci’s expense and
reputation. During the summer of 2000, Daffy’s sold
approximately 588 of the 594 Jackie-O handbags at prices
ranging from $298.99 to $398.99, depending on size. These
prices were far higher than the prices of the handbags
Daffy’s normally sells. Daffy’s gained $195,000, including
stipulated gross profits of $51,064.12. Daffy’s generally
sells $40 handbags and has sometimes sold handbags from
other Italian designers for $100-$200. Daffy’s acknowledged
that the Gucci bags were “in a league of their own,” on a
different level from what they normally would sell.
   The District Court held that this Court’s precedent in
Securacom Consulting, Inc. v. Securacom, Inc., 166 F.3d 182
(3d Cir. 1999), required a showing of willful infringement in
all trademark cases as a prerequisite to an award of profits.
                                  30


(Dist. Ct. op. at A 21.) Securacom held that “a plaintiff must
prove that an infringer acted willfully before the infringer’s
profits are recoverable.” Securacom, 166 F.3d at 187. Willful
infringement involves an intent to infringe or willful
infringement of a trademark holder’s rights. Id.
   Securacom is no longer binding precedent because it has
been superceded by subsequent statutory amendments to
the Lanham Act. Willful infringement is not a prerequisite
in all trademark cases for an award of profits. There is no
longer an absolute willfulness requirement under Section
43(a) of the Lanham Act except for dilution claims. The
Trademark Amendment Act of 1999, Pub. L. No. 106-43,
113 Stat. 219 (1999), replaced “or a violation under section
43(a)” with “a violation . . . under section 43(a), (c) or (d), or
a willful violation under section 43(c). . . .” 15 U.S.C.
§ 1117(a). Under the new standard, I submit that the
District Court erred in declining to allow Gucci to recover
Daffy’s profits pursuant to 15 U.S.C. § 1117(a). The specific
inclusion of the word “willful” prior to “violation” in the
same sentence with the word “violation” without any
adjective suggests an intentional contrast between the
requirements for proving each type of violation. This is the
interpretation adopted by the Fifth Circuit Court of
Appeals, the only Court of Appeals that has considered this
issue since the statute’s amendment. See Quick Techs., Inc.
v. Sage Group PLC, 313 F.3d 338, 348-49 (5th Cir. 2002)
(declining to adopt bright-line willfulness requirement and
describing pre-1999 cases as of limited utility).1 Even in

1. In a recent study of remedies for trademark infringement reported in
“Remedying Trademark Infringement: The Role of Bad Faith in Awarding
an Accounting of Defendant’s Profits,” author Danielle Conway-Jones
notes that the remedies for dilution are distinguishable from the
remedies for infringement; only a showing of willfulness under a claim
for dilution will entitle the owner of a famous trademark to all of the
Lanham Act remedies, including defendant’s profits. The express
requirement that a mark owner show a willful violation before perfecting
his entitlement to Lanham Act remedies for dilution supports the
premise that the theories of recovery underlying the remedies for
trademark infringement, as opposed to trademark dilution, are not
dependent upon the existence of a bad faith requirement. 42 Santa Clara
L. Rev. 863 (2002).
                                  31


Securacom, this court recognized that willfulness was not
an absolute requisite to an accounting for profits by an
infringer. We stated: “The Lanham Act permits courts to
award monetary damages to trademark owners as
compensation where it is equitable to do so regardless of
the willfulness of the defendant’s infringement.” 166 F.3d at
190.
   An equitable remedy generally does not require
willfulness, bad faith, or even wrongdoing. Instead, the
question is whether the property has been acquired in such
circumstances that the holder of legal title may not in good
conscience retain the beneficial interest. Here, Daffy’s
concedes that the sales of counterfeit Gucci bags netted
$51,064. It cannot be seriously doubted that customers
paid a premium for the Gucci name. The Seventh Circuit
Court of Appeals has explained that “[a]s between the
innocent infringer who seeks to get off scot-free, and the
innocent infringed . . . the stronger equity is with the
innocent infringed.” Louis Vuitton S.A. v. Lee, 875 F.2d 584,
589 (7th Cir. 1989). This remedy is particularly appropriate
here, where the infringer understood the risks, but made

Ms. Conway-Jones concludes:
    Congress did not intend bad faith to be a requirement for an award
    of the remedy of an accounting of profits in response to cases of
    trademark infringement. As demonstrated by a review of the newest
    substantive additions to the Lanham Act — the FTCA and the ACPA
    — it is apparent that Congress had several opportunities to consider
    and include a bad faith requirement before permitting an award of
    an accounting of an infringer’s profits. With each opportunity,
    Congress remained silent on this issue. Taking the language
    surrounding the Lanham Act’s remedy provision and reviewing the
    legislative history of the Trademark Act, the FTCA, and the ACPA, it
    is evident that the accounting of profits remedy is restricted to bad
    faith showings only when the cause of action pressed by the
    trademark owner is dilution or cybersquatting. Nowhere in the
    language of the statute or the legislative history is there a
    requirement to show bad faith in trademark infringement actions
    before the accounting remedy can be awarded.
Id. at 924-25.
                             32


only a feeble and perfunctory effort to ascertain whether the
bags were authentic. On balance, the equities favor Gucci.
   An accounting of profits may be seen as a rough estimate
of Gucci’s lost sales. Congress did not put upon the
“despoiled” the often impossible burden of showing that
“but for the defendant’s unlawful use of the mark,
particular customers would have purchased the plaintiff ’s
goods.” Mishawaka Rubber & Woolen Mfg. Co. v. S.S.
Kresge Co., 316 U.S. 203, 206 (1942). An accounting of
profits functions as a rough measure of damages, including
less tangible damages such as injury to reputation. See Polo
Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 149 (4th Cir.
1987). An award of the infringer’s profits seeks to make the
trademark owner whole for losses sustained by the plaintiff
as a result of infringer’s use of something that did not
belong to him. See Mishawaka, 316 U.S. at 206.
   The majority denies disgorgement of profits by the
infringer on two untenable grounds. First, the majority
views Daffy’s as a victim of the counterfeiting, n.16, p. 24,
given Daffy’s initial inquiry to authenticate the genuineness
of the bags. As pointed out above, that inquiry was feeble,
superficial, perfunctory, and unsupported by any
documentation.       Second,    the   majority    places   an
unreasonable and incredible burden upon the innocent
trademark owner to prove that the infringer’s customers
purchased these handbags because they were attracted by
the Gucci mark.
  Although the majority recognizes the concern that Daffy’s
will be unjustly enriched unless it disgorges the profits
reaped in the sale of Gucci counterfeit bags, it denies
disgorgement because “the record does not establish that
the infringer was enriched because of the owner’s mark.”
The majority, without any supporting authority, places an
untenable and virtually impossible burden upon the
innocent trademark owner to prove that the purchasers of
the bags “were attracted to the handbags because of the
owner’s mark,” as opposed to quality, price and
appearance. This burden is very much greater than the
burden the District Court rejected in denying Gucci’s
motion for recall of the counterfeit bags. The purchasers
were Daffy’s customers who had no contact with Gucci.
                             33


Requiring the innocent trademark victim affirmatively to
prove that the purchasers unknown to it “were attracted to
the handbags because of the Gucci mark” is an argument
that Daffy’s never raised in the District Court or on appeal.
Adopting it totally turns trademark law on its head and ipse
dixit places an impossible and unreasonable burden on the
innocent trademark victim.

                             II.
  Gucci is also entitled to an injunction to protect it from
future unintentional infringement by Daffy’s. Although the
District Court found that Daffy’s infringement was
unintentional, there is still a danger that Daffy’s will harm
Gucci in the future through an incident of unintentional
infringement.
   To determine whether an injunction is appropriate, the
District Court considered four factors: (1) whether Gucci
had shown actual success on the merits; (2) whether Gucci
would be irreparably injured by the denial of injunctive
relief; (3) whether granting a permanent injunction would
result in even greater harm to Daffy’s; and (4) whether the
injunction would be in the public interest. See Gucci V at
13 (citing Shields v. Zuccarini, 254 F.3d 476, 482 (3d Cir.
2001)). However, the District Court improperly placed the
burden of proof regarding future harm on Gucci rather
than on Daffy’s. The District Court denied Gucci’s claim for
a permanent injunction because Gucci failed to produce
any evidence to support a finding that it would be
irreparably injured by the denial of a permanent injunction.
Gucci V at 13-14. The District Court failed to recognize that
a trademark is a form of property and neither the
trademark nor the infringement here are in dispute. To
prove irreparable injury, the plaintiff must only make out a
prima facie case showing of trademark infringement. S & R
Corp. v. Jiffy Lube Int’l, Inc., 968 F.2d 371, 378 (3d Cir.
1992)(“[T]rademark infringement amounts to irreparable
injury as a matter of law.”); Basic Fun, Inc. v. X-Concepts,
LLC, 157 F. Supp.2d 449, 457 (E.D. Pa. 2001).
   Although the majority acknowledges, as it must, that
“trademark infringement amounts to irreparable injury as a
                              34


matter of law,” it jumps to an inexplicable conclusion that
Gucci’s failure to argue in the District Court that the “loss
of control” over its trademarked goods by the infringement
also amounts to a waiver of irreparable harm “for purposes
of injunctive relief.” This holding incredibly transforms the
“control of quality” argument asserted by Gucci in its
contention that the District Court committed legal error in
failing to order a recall of the counterfeit goods into a
general waiver of irreparable harm “for purposes of
injunctive relief.” Irreparable harm was and is a basic
element of plaintiff ’s case from its inception. Implying a sub
silentio waiver, as the majority does, of the fundamental
legal principal that “trademark infringement amounts to
irreparable injury”is highly unwarranted and imprudent.
   Furthermore, even though the “control of quality”
argument was not presented to the District Court in Gucci’s
motion for recall relief, that failure should not have an
adverse effect on its argument in this court, even on the
recall issue. The recall issue as a form of relief is, as far as
I can ascertain, a matter of first impression in this court.
The argument is a legal one, requiring no additional
evidence which might prejudice Daffy’s. Barring its
consideration under these circumstances is harsh and
contrary to the prudential stance that this court took in
Ross v. Hotel Employees & Restaurant Employees Int’l
Union, 266 F.3d 236, 242-43 (3d Cir. 2001). In Ross, the
court considered on appeal an argument not raised in the
District Court. Writing for the court, Judge McKee reasoned
that the appeal raised important implications for labor law
and “a question of first impression in this circuit” and the
District Court, as in this case, “was afforded the rare
advantage of a fully developed record in analyzing the
issue.” Id. at 243. The court, accordingly, considered the
argument not raised before.
  By proving infringement, Gucci proved irreparable injury
as a matter of law. Upon proving irreparable injury, the
burden shifted to Daffy’s to prove that the injury will not
recur in the future. “[I]t is well established that the
voluntary discontinuance of challenged activities by a
defendant does not necessarily moot a lawsuit.” Lyons
P’ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 800 (4th
                             35


Cir. 2001) (internal quotation marks omitted). “That rule is
subject to the caveat that an injunction is unnecessary
when there is no reasonable expectation that the wrong will
be repeated.” Id. (citing United States v. W.T. Grant Co., 345
U.S. 629, 633 (1953) (emphasis in original)(internal
quotation marks omitted). Daffy’s cannot show that its
putative policy against selling infringed goods moots Gucci’s
motion for an injunction. To show that an injunction is
unnecessary and further proceedings are mooted by Daffy’s
plans not to sell any more Gucci products, Daffy’s must
meet its “heavy burden” of showing that future
infringement is “practically speaking, nearly impossible.”
Lyons P’ship, 243 F.3d at 800.
   Daffy’s argues that it now has a policy of not buying any
Gucci goods. It points out that if it does not buy any Gucci
branded goods, it cannot even unintentionally infringe
Gucci’s trademark. That is true as long as the policy lasts,
but that is of little comfort to Gucci because Daffy’s has the
ability to change the policy at any time. Moreover, Gucci
argues that Daffy’s does not point to any evidence in the
record in support of its statement that it has adopted a
policy never to sell Gucci goods in the future. Even now,
Daffy’s has no policies or procedures to authenticate
merchandise. In response to our question at oral argument,
Daffy’s attorney would not stipulate that Daffy’s will never
sell Gucci’s products. It merely claimed that its present
policy is not to do so. No legal obligation prevents Daffy’s
from changing its mind tomorrow and immediately
resuming sales of purported Gucci products.
   Daffy’s unwillingness to stipulate forbodes the possibility
of future infringements, and once an infringement is
shown, the trademark owner is not required to prove that
the infringer is likely to infringe again. Hard Rock Café
Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143,
1151 (7th Cir. 1992); Basic Fun, Inc. v. X-Concepts, LLC.,
157 F. Supp.2d at 457 (“If the infringers sincerely intended
not to infringe, the injunction harms them little; if they do,
it gives [the trademark owner] substantial protection of its
trademark.”). Once infringement has been proven, a “heavy
burden” falls on the infringer to demonstrate that there is
no possibility of further recurrence of the infringement.
                             36


Lyons P’ship, 243 F.3d at 800. The unwillingness of Daffy’s
to stipulate that in the future it would not sell Gucci bags
obviously inspires no confidence in its present policy.
  Gucci did not seek an injunction as broad as the District
Court actually considered — the prohibition of Daffy’s from
ever using the Gucci trademark in the future. Gucci sought
to enjoin Daffy’s only from future infringement “through
sales of unauthorized goods and false advertising.” It was
erroneous as a matter of law for the court to place the
burden on Gucci to prove that trademark infringement
would continue in the future. Shields v. Zuccarini, 254 F.3d
476, 482 (3d Cir. 2001), merely identifies the four factors to
be considered by the court in granting an injunction. Once
an act of infringement is proven, federal courts do not
require the plaintiff to show that the defendant is likely to
infringe again in the future. Levi Strauss & Co. v. Shilon,
121 F.3d 1309, 1314 (9th Cir. 1997)(any doubt regarding
extent of injunctive relief “must be resolved in [the
plaintiff ’s] favor as the innocent producer and against the
[defendant]”); Basic Fun, Inc. v. X-Concepts, LLC, 157 F.
Supp.2d at 457. Once an infringement is demonstrated, a
“heavy burden” shifts to the defendant to prove that there
is no possibility of future recurrence of the infringement.
Lyons P’ship, 243 F.3d at 800. Daffy’s made no effort,
beyond its non-binding policy, to prove that in the future it
will not infringe upon Gucci’s trademarks through sales of
counterfeits.
  For the reasons set forth above, the denial of the
injunction constituted reversible error.

                             III.
  Accordingly, I submit that Daffy’s should not be allowed
to reap the profits of its infringement and the judgment of
the District Court with respect to it should be reversed. I
also believe that the judgment of the District Court denying
the permanent injunction enjoining future infringements of
Gucci’s trademark, as well as attorneys’ fees and costs,
should be reversed.
                            37


A True Copy:
        Teste:

                 Clerk of the United States Court of Appeals
                             for the Third Circuit
