Tamko Roofing v. Ideal Roofing

United States Court of Appeals
For the First Circuit

Nos. 01-1382, 01-2273

TAMKO ROOFING PRODUCTS, INC.,

Plaintiff, Appellee,

v.

IDEAL ROOFING COMPANY, LTD.,

Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]

Before

Selya, Circuit Judge,
Campbell, Senior Circuit Judge,
and Lynch, Circuit Judge.

H. Joseph Hameline with whom Rosemary M. Allen, Geri L.
Haight, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., and
Michael B. Clapp were on brief for appellant.

Christopher R. Benson with whom Marcy Hogan Greer, Susan J.
Hightower, and Fulbright & Jaworski L.L.P. were on brief for appellee.
March 7, 2002
 LYNCH, Circuit Judge. Tamko Roofing Products, Inc. won its

trademark infringement case against Ideal Roofing Company, Ltd. after

a six-day jury trial. The district court awarded Ideal's profits to

Tamko, ordered Ideal to pay Tamko's attorneys' fees, which amounted to

a sum larger than the profits, and issued a permanent injunction.

Ideal now appeals each of these district court actions.

We affirm. We reject Ideal's argument that bad faith or

fraud is a necessary condition to an award of attorneys' fees under

section 35 of the Lanham Act; willful conduct may be sufficient when

the trial court takes into account all the facts and equities of the

case. We reject Ideal's proposed limitation on the availability of an

accounting of defendant's profits as a remedy for trademark

infringement. The injunction, which covers a broader range of marks

than those Tamko has registered with the United State Patent and

Trademark Office (USPTO), is warranted by the "safe distance rule."

I.

The facts are described "as a jury might have found them,

consistent with the record but in the light most favorable to the

verdict." Grajales-Romero v. Am. Airlines, Inc., 194 F.3d 288, 292

(1st Cir. 1999).

Tamko and Ideal each manufacture and sell roofing products.

Tamko manufactures and sells asphalt roofing products, including

shingles, in the United States and Canada. Ideal is based in Ottawa,

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Canada, and manufactures metal roofing and siding products, which it

sells in Canada and the United States.

Since 1975, Tamko has been using the trademark "Heritage" in

its roofing products business. By 1997, when Ideal began to use the

Heritage mark, Tamko had registered ten marks in the Heritage family

with the USPTO, including "The American Heritage Series" mark, and two

Heritage family trademarks in Canada. Tamko has vigorously defended

the Heritage marks, and has successfully enforced its trademark rights.1

In April 1997, Ideal selected the trademark "Heritage Series"

for hidden fastener metal roofing panels, a new product it introduced

to the market later that year. Ideal's "Heritage Series" mark used

very similar cursive script to Tamko's "The American Heritage Series"

mark. Ideal made the selection through a four-member executive

committee: Marcel Laplante (President), René Laplante (Vice President),

Pierre Tessier (Sales Manager), and Mark Lebreque (Quebec City Office

Manager).

Before Ideal adopted the Heritage Series mark, Tessier

attended several roofing trade shows where Tamko prominently displayed

its Heritage mark. Ideal hired an advertising agency, Innovacom, to

1 For example, Tamko has been involved in disputes over
the Heritage mark with MBCI, a metal roofing manufacturer, and
Supradur, Inc., a slate roofing manufacturer. In both cases,
the companies acknowledged that the rights to the Heritage mark
used for roofing products belonged to Tamko.

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help in the selection and marketing of the new mark. Although the

agency usually recommends a trademark search to its clients before they

adopt a new mark, René Laplante of Ideal decided against conducting

such a search through the agency, an attorney, or Ideal itself. Two

other trademarks considered by Ideal were "Carriage" and "Royal

Albert," both of which are similar to marks owned by other

manufacturers in the roofing industry: Certain-Teed uses the mark

"Carriage House," and IKO uses "Royal Victorian."

Although Tamko and Ideal produce and sell different types of

roofing products, their products -- asphalt and metal roofing

respectively -- are both appropriate for steep-slope roofs. They

compete directly in the roofing industry market, particularly in the

northeastern United States. For example, Ideal belongs to the Metal

Roofing Alliance, which, among other things, attempts to persuade

homeowners to install metal roofing instead of asphalt shingles. Ideal

also tried to persuade consumers to use metal roofing rather than

asphalt shingles in its brochure called "The Smartest Looking House."

When Tamko discovered that Ideal was using the Heritage mark

for its new product line, its president, David Humphreys, wrote to

Marcel Laplante on March 9, 1999. In the letter, Humphreys discussed

the importance of the mark to Tamko, expressed his concern that Ideal's

use of the mark would cause "confusion in the marketplace," and asked

Ideal to "cease and desist all use of HERITAGE in connection with its

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building products." When Humphreys did not receive a response, he sent

another letter to Ideal on March 26, 1999, demanding a response and

warning Ideal that if Tamko did not receive a response, it would have

"no choice but to seek legal help to resolve this matter." Ideal

responded to the second letter, but the companies could not negotiate

a mutually agreeable phase out period in which Ideal would stop using

the Heritage mark. Ideal wanted a two-year period, while Tamko claimed

that a few months would be sufficient.

Tamko gave Ideal notice that it was going to file a suit

against it, and that the USPTO had previously rejected another metal

roofing manufacturer's application for the Heritage mark. In

response, Ideal suggested a one-year phase out as a compromise.

In August 1999, Tamko filed suit against Ideal for trademark

infringement in violation of section 32(1)(a) of the Lanham Act, 15

U.S.C. § 1114(1)(a) (2000).2 On November 3, 1999, Tamko filed a motion

for a preliminary injunction to enjoin Ideal from using the Heritage

mark until the trial resolved the infringement issue. The district

court granted the preliminary injunction on February 29, 2000, adopting

the report and recommendation from the magistrate judge, who was

briefed and held an evidentiary hearing on the issue.

2 Originally, Tamko had two other claims against Ideal:
unfair competition under 15 U.S.C. § 1125(a) (2000), and
trademark dilution under 15 U.S.C. § 1125(c) (2000). Tamko
dropped these claims before the start of the trial.

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 Despite the preliminary injunction, Ideal continued to use

the Heritage mark in its brochures and on its web site. Ideal

distributed brochures containing the Heritage mark at two trade shows

which took place in March 2000 in the United States. Ideal also did

not modify its web site which contained several references to the

Heritage mark. As a result, on March 16, 2000, Tamko moved for

contempt. After a hearing, the magistrate judge issued another report

and recommendation that "Ideal should be held in contempt," finding

Ideal distributed brochures that contained the Heritage mark at a trade

show two weeks after the preliminary injunction issued, and

"intentionally kept the 'Heritage' mark on its web site" after the

injunction issued. The district court adopted the magistrate judge's

report and recommendation and held Ideal in contempt on May 26, 2000.

The contempt order provided that Ideal would be fined $200 for each day

of noncompliance, starting on May 29, 2000. Ideal was fined $3,000 for

its failure to comply with the contempt order until June 13, 2000.

In advance of trial, Ideal filed a motion in limine to

preclude Tamko "from making reference in the presence of the jury to

the Preliminary Injunction Order issued in this case." The issue was

resolved by an agreement to a stipulated instruction to the jury. The

instruction given to the jury at the start of the trial on May 16,

2000, was "after this case was filed in this court and pending the

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outcome of the case, the Court on February [2]9,3 the year 2000, ordered

Ideal to stop using the trademark in question in order to preserve the

status quo pending the outcome of the case."

On the fourth day of trial, during the cross-examination of

René Laplante, Ideal's attorney questioned Laplante about "the Court's

order" and whether it made "any mention of the Internet site?" In

response, during redirect, Tamko's attorney asked Laplante about the

"magistrate's report" which said that "[Ideal's] use of Heritage Series

in connection with the Internet is a violation of [the] order."

Ideal's attorney objected to this line of questioning.

On the fifth day of the trial, Ideal moved for a mistrial.

Ideal argued that the introduction of testimony about both the

preliminary injunction and the contempt order prejudiced the jury and

deprived Ideal of a fair trial. The district court denied the motion,

stating that Ideal had opened the door to the evidence about the

contempt order, and that a jury would not understand the significance

of a preliminary injunction in any case.

At the end of the trial, the district court ruled that

Tamko's Heritage trademarks were valid. The jury found: (i) "by a

preponderance of the evidence that Ideal infringed Tamko's trademarks";

(ii) "by clear and convincing evidence that Ideal acted willfully in

3 The court made an error in the date of the preliminary
injunction and corrected itself immediately.

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infringing Tamko's trademarks"; and (iii) "by a preponderance of the

evidence that the roofing product[s] of Ideal and Tamko directly

competed with each other."

After the close of the trial, the judge requested briefing

on the issues of an accounting of defendant's profits and attorneys'

fees. On August 21, 2000, the district court issued an order that

Tamko was entitled to both an accounting of Ideal's profits and

attorneys' fees. On October 19, 2000, the court issued an order

awarding $201,385.60 in profits. On August 30, 2000, the district

court permanently enjoined Ideal from "using the term Heritage,

Heritage Series, H Series, or any name or mark confusingly similar to

Heritage."

On appeal, Ideal is represented by new counsel. It does not

contest the jury's findings, but disputes the district court's rulings.

Ideal argues, first, that Tamko should not have been awarded attorneys'

fees because there was no evidence to support the court's findings that

"exceptional circumstances" existed. In the alternative, Ideal argues

that even if attorneys' fees were justified, the district court erred

in calculating the fees. Second, Ideal argues that the district court

should not have awarded Tamko an accounting of 100% of Ideal's profits

because the two companies did not compete in 100% of their markets, and

that the court erred in setting the amount of profits. Third, Ideal

contends that the district court erred in denying its motion for a

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mistrial based on the prejudicial admission of testimony about the

preliminary injunction and contempt order against Ideal. Fourth, Ideal

argues that the scope of the district court's permanent injunction was

too broad in that it enjoined it from using the term "H Series," which

is not one of Tamko's registered trademarks.

II.

A. Ideal’s Challenges to the Award of Attorneys' Fees to
Tamko

The district court awarded over $500,000 in attorneys'

fees and expenses to Tamko. Ideal protests that no fees at all

should have been awarded since this was not an "exceptional

case," a requirement under section 35 of the Lanham Act, 15

U.S.C. § 1117(a) (2000), for an attorneys' fees award. The

district court erred, Ideal says, by using an incorrect legal

standard to determine exceptional circumstances and by

concluding that the evidence supported such an award. The

court's error of law, Ideal argues, is that fees may only be

awarded in circumstances where the defendant acted deceitfully

or with a degree of culpability; it claims the court's error of

fact is that there was no such deceit or culpability here.

Finally, Ideal argues that even if some award of attorneys' fees

was justified, the sum awarded is too high.

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 We review de novo the legal question of the meaning of

"exceptional cases" in the context of section 35 of the Lanham

Act. See Atl. Fish Spotters Ass'n v. Daley, 205 F.3d 488, 490

(1st Cir. 2000) ("A legal ruling . . . as to the meaning of the

statute is almost always an issue of law reviewed de novo.").

We review the district court's award of attorneys' fees under

section 35 of the Lanham Act for abuse of discretion.4 To the

4 Although this court has not articulated before the
standard of review for the award of attorneys' fees in the
Lanham Act context, we use the abuse of discretion standard in
reviewing an award of attorneys' fees in several other contexts.
See, e.g., Gay Officers Action League v. Puerto Rico, 247 F.3d
288, 292 (1st Cir. 2001) (Civil Rights Act, 42 U.S.C. § 1988);
O'Rourke v. City of Providence, 235 F.3d 713, 737 (1st Cir.
2001) (Title VII); Colortronic Reinhard & Co. v. Plastic
Controls, Inc., 668 F.2d 1, 7-8 (1st Cir. 1981) (similar
attorneys' fees provision of Patent Act, 35 U.S.C. § 285); see
also Dubois v. United States Dep't of Agric., 270 F.3d 77, 80
(1st Cir. 2001). Several other circuits also use the abuse of
discretion standard in reviewing the award of attorneys' fees
under the Lanham Act. See, e.g., Waco Int'l, Inc. v. KHK
Scaffolding Houston Inc., 278 F.3d 523, 529 (5th Cir. 2002);
People for the Ethical Treatment of Animals v. Doughney, 263
F.3d 359, 370 (4th Cir. 2001); Securacomm Consulting, Inc. v.
Securacom Inc., 224 F.3d 273, 279 (3d Cir. 2000). But see S
Indus., Inc. v. Centra 2000, Inc., 249 F.3d 625, 627 (7th Cir.
2001) ("We review a grant of attorney fees to a prevailing
defendant under the Lanham Act only for clear error."). The
widespread use of this standard for awards of attorneys' fees
"reflects the fact that only the district court has the
'intimate knowledge of the nuances of the underlying case,'"
Richardson v. Miller, No. 01-1309, 2002 WL 91406, at *2 (1st
Cir. Jan 29, 2002) (quoting Gay Officers Action League, 247 F.3d

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extent that the district court's award rests on factual

determinations, however, we review those for clear error. See

Pierce v. Underwood, 487 U.S. 552, 557-58 (1988); De Allende v.

Baker, 891 F.2d 7, 11 (1st Cir. 1989); see also People for the

Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th

Cir. 2001). As noted in Atlantic Fish Spotters,

[m]any courts, including the Supreme Court, sum up the
standard in . . . attorney's fee cases by referring to
abuse of discretion. But since they then treat errors
of law as an example of such an abuse, it seems more
informative to recognize that the effective standard
of review depends upon the precise claim of error being
asserted and not the nature of the case.

205 F.3d at 491 n.2 (citations omitted).

1. The Standard for Exceptional Cases

The Lanham Act provides: "The court in exceptional

cases may award reasonable attorneys fees to the prevailing

party." 15 U.S.C. § 1117(a). Ideal asserts that the district

court erred by essentially converting the jury finding of

willful infringement, without more, into a court finding of

at 292), and in "determining whether sanctions are warranted
'the district court is better situated than the court of appeals
to marshal the pertinent facts and apply the fact-dependent
legal standard,'" Dubois, 270 F.3d at 80 (citing Cooter & Gell
v. Hartmarx Corp., 496 U.S. 384, 402 (1990)).

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exceptional circumstances justifying a fee award. In truth, the

district court referred to both the jury finding of willfulness

and to other record evidence before it, so there was no

automatic conversion of a jury willfulness finding into a

finding of exceptional circumstances.5 The district court said

nothing one way or the other as to whether there was bad faith

or fraud on Ideal's part.

Under the statute, the decision to award fees is

committed to the district court, not the jury. 5 J. T. McCarthy,

McCarthy on Trademarks and Unfair Competition § 30:99, at 30-184

(4th ed. 2001). Ideal says that the trial court failed to make

the necessary findings.6 Where the facts of record amply explain

5 To the extent Ideal argues that it would be error for
a district court to adopt a per se equivalence between
"exceptional case" and a jury finding of willfulness, we would
agree. Congress gave the attorneys' fees issue to the court,
not to the jury, and the court must consider whether an award is
equitable. However, here the court did decide the issue of
whether this was an "exceptional case."
6 Ideal relies on two cases in its claim that the lack
of more explicit findings by the district court was an abuse of
discretion which invalidates the fee award in this case.
However, in both Bandag, Inc. v. Al Bolser's Tire Stores, Inc.,
750 F.2d 903, 921 (Fed. Cir. 1984), and Ferrero U.S.A., Inc. v.
Ozak Trading, Inc., 952 F.2d 44, 48 (3d Cir. 1991), the courts
relied not only on the lack of any express findings by the
district court, but also on the lack of clear facts from the

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the decision, we will not find that the mere failure of the

trial judge to be more explicit amounts to an abuse of

discretion. See L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527,

1531 (Fed. Cir. 1995) ("Although the district court did not

state the specific basis for its fee award, sufficient record

evidence supports the award.").

Because the Lanham Act does not further explain the

term "exceptional cases," this court and others have turned to

the legislative history for a working definition. See

Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 821

(1st Cir. 1987); see also Ferrero U.S.A., Inc. v. Ozak Trading,

Inc., 952 F.2d 44, 47 (3d Cir. 1991); VIP Foods, Inc. v. Vulcan

Pet, Inc., 675 F.2d 1106, 1107 (10th Cir. 1982). In exceptional

cases, attorneys' fees may be appropriate in circumstances where

the acts of infringement were "'malicious,' 'fraudulent,'

'deliberate,' or 'willful.'" S. Rep. 93-1400, at 5 (1974),

reprinted in 1974 U.S.C.C.A.N. 7132, 7133. The legislative

history also explains that attorneys' fees may be awarded "when

equitable considerations justify such awards," id. at 6,

record that showed exceptional circumstances. That is not the
case here.

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reprinted in 1974 U.S.C.C.A.N. at 7137, and so the list of four

(for example, "malicious") may not be exclusive.

Ideal urges this court to adopt the "bad faith"

standard utilized by some circuits. See Conopco, Inc. v.

Campbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996) (reciting

Second Circuit rule requiring a showing of fraud or bad faith on

the part of the infringer); Texas Pig Stands, Inc. v. Hard Rock

Cafe Int'l, Inc., 951 F.2d 684, 697 (5th Cir. 1992)

("requir[ing] a showing of a high degree of culpability on the

part of the infringer, for example, bad faith or fraud"); Scotch

Whisky Ass'n v. Majestic Distilling Co., 958 F.2d 594, 599 (4th

Cir. 1991) ("It is clear . . . that for a prevailing plaintiff

to succeed in a request for attorney fees, she must show that

the defendant acted in bad faith."). Other circuits hold that

willfulness alone is an adequate basis for the award of

attorneys' fees. Bishop v. Equinox Int’l Corp., 154 F.3d 1220,

1224 (10th Cir. 1998) ("deliberate or willful" conduct on part

of defendant in "fail[ing] to cease and desist from use of [the

trademark] despite its written commitment to do so" was enough

to warrant award of attorneys' fees); Hartman v. Hallmark Cards,

Inc., 833 F.2d 117, 123 (8th Cir. 1987) ("Bad faith is not a

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prerequisite to a Lanham Act fee award."). While conceding that

an award may be made if the acts of infringement are willful,

Ideal argues that "willful" must mean more than just voluntary

and intentional. Ideal grafts on another requirement that the

infringing act must be fraudulent or malicious; for example, the

act must be done with an intent to deceive or confuse the

public, by palming off inferior goods as though they were

trademark holder's goods, or through "deliberate pirating."

Ideal’s argument confuses sufficient conditions for an

attorneys' fees award with necessary conditions for such an

award. Fraud or bad faith may justify an attorneys' fees award

in some cases,7 but a finding of bad faith or fraud is not a

necessary precondition. Willfulness short of bad faith or fraud

will suffice when equitable considerations justify an award and

the district court supportably finds the case exceptional.

There are two reasons we reject a bad faith or fraud requirement

as a precondition to an award of attorneys' fees. First, the

legislative history of section 35 links such exceptional cases

7 Nonetheless, it is also possible that a finding of bad
faith by one party might not justify an award if equity required
otherwise: for example, in a case where there is equivalent bad
faith by the other party.

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to situations where the acts are malicious or fraudulent or

deliberate or willful, and where equity justifies the award.

Congress's list does not stop with "malicious" or "fraudulent,"

and we are loath to strip "deliberate" and "willful" of meaning.

Second, the purpose of the attorneys' fees amendment to the

Lanham Act was to provide for an award in exceptional cases in

which equity called for an award in the sound discretion of the

district judge. We would be hard pressed to say that such a

case can never arise unless there is fraud or bad faith. As an

example, one circuit has approved an award of fees in a case

where there was no bad faith in the infringement but the

subsequent litigation was oppressive and meant to delay. See

Securacomm Consulting, Inc. v. Securacom Inc., 224 F.3d 273,

279-83 (3d Cir. 2000).8

8 Although this court has never held that bad faith is
a requirement for an award of attorneys' fees under the Lanham
Act and now rejects the notion, language in some of our cases
about award of fees under the Patent Act, 35 U.S.C. § 285,
refers to the need for "strong evidence of unfairness and bad
faith," Colotronic Reinhard & Co. v. Plastic Controls, Inc.,
668 F.2d 1, 8 (1st Cir. 1981), in the context of determining
whether the losing party has engaged in "inequitable conduct,"
Codex Corp. v. Milgo Elec. Corp., 717 F.2d 622, 630 (1st Cir.
1983). The language of the two acts is identical; what is
different is that here we have the benefit of the Lanham Act's
legislative history.

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 Still, awards may be made only in exceptional cases.

In Volkswagenwerk, this court reversed an award where the

plaintiff did not plead attorneys' fees in its complaint,

defendant had no statutory constructive notice of plaintiff's

claim of ownership of the marks because neither the trade name

nor design mark were registered, and it would have been

inequitable to visit an award on the defendant's small local

automobile shop. 814 F.2d at 821. Other circuits have

identified as counseling against an award the following factors:

the area of law is unclear and defendants might reasonably think

they did not infringe, Ferrero U.S.A., 952 F.2d at 49; there is

a close legal question as to whether there is any trademark

violation, Martin's Herend Imps., Inc. v. Diamond & Gem Trading

USA, Co., 112 F.3d 1296, 1305 (5th Cir. 1997); Ferrero U.S.A.,

952 F.2d at 49; defendant had no intent to deceive or confuse

the public, VIP Foods, 675 F.2d at 1107; the defendant made a

concerted effort to create a non-infringing mark, Roulo v. Russ

Berrie & Co., 886 F.2d 931, 942 (7th Cir. 1989); the plaintiff

suffered no actual damage, Bishop, 154 F.3d at 1224; VIP Foods,

675 F.2d at 1107. We agree that these are factors to be

considered as part of a case-specific multi-factored analysis.

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 Here, there was adequate evidence of exceptional,

willful behavior, both in the infringing acts and in Ideal’s

conduct after Tamko brought the infringement to Ideal's

attention. We outline just some of the pertinent conduct.

1. Within several days of a 1997 trade show attended by Ideal,

where Tamko’s Heritage Mark was prominently displayed, Ideal

adopted the Heritage name and told its advertising agency not to

do a trademark search, which is usually done. Neither Ideal nor

its patent attorney did a trademark search.

2. The other two names considered by Ideal for its new product

were substantially similar to marks owned by other companies.

3. Ideal used an elaborate cursive script for its "Heritage

Series" mark, very similar to the one used in Tamko’s mark "The

American Heritage Series" (which was displayed in a 1996 Tamko

brochure).

4. Ideal’s metal roofing competes directly with Tamko's asphalt

roofing for steep-slope roofs and Ideal tried to increase its

market in the residential marketplace, which is asphalt’s

primary market.

5. Ideal did not respond to the March 9, 1999 letter from

Tamko, which notified Ideal of its infringement. Tamko sent

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another letter on March 26, 1999. Ideal responded and suggested

a lengthy two-year phase out. When Tamko informed Ideal that

the USPTO rejected a trademark application for Heritage for

another company's metal roofing panels, Ideal still refused to

stop its use of the mark.

6. Before filing suit, Tamko gave Ideal notice on August 17,

1999; Ideal asked for a one-year phase out.

7. In August 1999, Ideal nonetheless reprinted one of its

brochures that continued the use of the Heritage Series name.

8. On February 29, 2000, the district court issued a

preliminary injunction against Ideal, enjoining it from further

use of the mark.

9. Nonetheless, Ideal used the brochures containing the mark

in a trade show in mid-March 2000, after the preliminary

injunction had issued against it.

10. Despite the preliminary injunction, Ideal continued to use

the mark on its web site, which was accessed by users in the

United States.

11. On May 15, 2000, the magistrate judge issued a report and

recommendation, which found that Ideal was in contempt for

violation of the preliminary injunction. The district court

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adopted the report and recommendation and held Ideal in contempt

on May 26, 2000.

12. Ideal did not come into compliance with the preliminary

injunction until June 13, 2000; in the course of its

noncompliance it incurred fines of $3,000.

It is the totality of the circumstances, rather than

a particular item alone, that suffices for an award of

attorneys' fees. For example, mere failure to conduct a

trademark search before using a mark may evidence nothing more

than carelessness, and so may not warrant an award of fees.

Securacomm Consulting, 166 F.3d at 188-89. In combination, the

facts above warrant the district court’s conclusion that the

initial infringement and continuing infringement, even in the

face of court orders, was deliberate and willful and that equity

required an award of fees.

2. Amount of the Fees

The district court determined the amount of attorneys'

fees under the commonly used lodestar method, in which the

number of hours reasonably spent by the attorneys on the case is

multiplied by a reasonable hourly rate. Hensley v. Eckerhart,

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461 U.S. 424, 433 (1983); Lipsett v. Blanco, 975 F.2d 934, 937

(1st Cir 1992). Tamko submitted a supporting declaration by an

experienced trademark attorney. It also submitted detailed time

records from lead counsel, house counsel, and local counsel.

The court considered the time and labor required, the skill

required, the nature and length of the professional relationship

with the client, and time limitations imposed by the client. It

is clear from the court's October 6, 2000 order that it reviewed

the materials in some detail.

Because Ideal did not file any opposition to Tamko's

attorneys' fees request and materials, it may well have

forfeited this issue for appeal. Hebert v. Wicklund, 744 F.2d

218, 223-24 (1st Cir. 1984). Ideal argues that because the size

of the award is substantially larger than the award of profits

in this case, an injustice might result if this court does not

review the amount of fees. Neither the statute nor the

legislative history limits the award of fees to an amount less

than the award of profits or damages. To the contrary, the

legislative intent was partly to encourage the enforcement of

trademark rights in cases where "the measurable damages are

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nominal." S. Rep. 93-1400, reprinted in 1974 U.S.C.C.A.N. 7132,

7136. When a trademark is infringed, trademark owners have more

at stake than just the damages or loss of profits in that case.

Their failure to enforce their rights may result in the

weakening of these rights over time. 2 McCarthy on Trademarks,

supra, § 17:17, at 17-31. The cost of enforcing the rights may

well be larger than the lost profits in any particular case. In

all events, the district court appears carefully to have

scrutinized Tamko's filing,9 and it articulated a clear

understanding of the applicable lodestar principles. Given

these facts, and given Ideal's failure to furnish the district

court with any reasons why Tamko's fee application should have

been pared down, we do not think that this is an issue that

requires further review.

B. Award to Tamko of Ideal's Profits on the Heritage
Series Products

The district court awarded Tamko Ideal's profits of

$201,385.60, a sum calculated on the basis of conservative

9 For example, the court did not initially approve the
fees and expenses of Tamko's local counsel because their records
were not sufficiently specific about the dates on which services
were rendered, and "a number of invoices appear[ed] to reflect
that several lawyers performed the same work."

-22-
estimates of Ideal's actual profits from the Heritage Series

products between November 1997 and February 2000. Ideal argues

that no profits should be awarded and the district court

committed errors of law; and if any award was justified, this

award was too high.

We review de novo the legal standard by which an award

of defendant's profits is calculated, and for clear error the

factual findings supporting the award.

1. Standard for an Award of Defendant's Profits

The jury found that Tamko and Ideal were in direct

competition. Ideal does not argue that the factual finding was

unsupported, but does argue that the district court was

nonetheless obligated to inquire further as to the percent of

direct market overlap in which such competition took place

before it could award an accounting of profits. At most, Ideal

says, the two companies competed in 20-30% of their business, so

it was error to award 100% of Ideal's profits. Ideal’s argument

is based on product differentiation. That is, Ideal sold only

metal roofing, while Tamko sold only asphalt roofing. Only

customers with residential steep-slope roofs would consider

-23-
buying each of the two types of roofing. Ideal says that only

20% of its sales are in this residential market; its remaining

sales are in the commercial and agricultural buildings market,

where the products do not compete.

The thrust of the argument is essentially that most of

the products Ideal sold under the infringing mark should be

considered to be noncompeting products and so it is inequitable

to award 100% of the profits to Tamko. Under circuit precedent,

there may be infringement, as well as an accounting of

defendant’s profits, even when most of the products are not in

competition, if there is evidence, as there was here, of

likelihood of confusion. See Baker v. Simmons Co., 325 F.2d

580, 582 (1st Cir. 1963) (affirming an award of defendant’s

profits based on defendant's gross sales where some of goods

sold by defendant did not compete with those sold by plaintiff);

Baker v. Simmons Co., 307 F.2d 458, 462-63 (1st Cir. 1962)

(affirming infringement finding where plaintiff held the mark

Simmons for mattresses and sleep products and defendant used the

name Simmonds for reupholstering services).

-24-
 An accounting of defendant's profits may be awarded in

a trademark infringement action "subject to the principles of

equity." 15 U.S.C. § 1117(a). Here, Tamko did not seek its

actual damages, but did seek an accounting as well as injunctive

relief. If injunctive relief provides a complete and adequate

remedy, then the equities of the case may not require an

accounting of profits. Aktiebolaget Electrolux v. Armatron

Int'l, Inc., 999 F.2d 1, 5 (1st Cir. 1993) ("We have found 'a

clear distinction between the showing required to establish a

right to injunctive relief and that required to establish a

right to damages.'") (quoting Camel Hair and Cashmere Inst. of

Am., Inc. v. Associated Dry Goods Corp., 799 F.2d 6, 12 (1st

Cir. 1986)). For example, injunctive relief may be adequate if

there has been no fraud or palming off and there is little

likelihood of actual damage to the plaintiff or profit to the

defendant. Champion Spark Plug Co. v. Sanders, 331 U.S. 125,

131 (1947); Valmor Prods. Co. v. Standard Prods. Corp., 464 F.2d

200, 204 (1st Cir. 1972); see generally J. Koelemay Jr.,

Monetary Relief in Trademark Infringement Cases, in Litigating

-25-
Copyright, Trademark and Unfair Competition Cases for the

Experienced Practitioner 287, 294 (1997).

Trying to fit itself into these shoes, Ideal suggests

that injunctive relief should suffice, as it engaged in neither

fraud nor palming off. Ideal’s argument is misplaced. The

presence of injunctive relief does not preclude an accounting

here. There was adequate evidence that Tamko did suffer actual

damages and that Ideal did benefit from its infringement. To

boot, Ideal's contumacious behavior also raises a question of

the adequacy of injunctive relief alone as a remedy.

Repeating its theme that it acted neither fraudulently

nor in bad faith, Ideal says that an accounting of profits is

unwarranted. Even if we were to accept this theme, it has been

this circuit's rule that an accounting of defendant's profits

where the products directly compete does not require fraud, bad

faith, or palming off. AB Electrolux, 999 F.2d at 5-6. Our

rule is thus different from the Restatement rule that an

accounting of profits is conditioned on a showing of bad faith.

Restatement (Third) of Unfair Competition § 37 cmt. e (1995).

Although AB Electrolux was silent on whether "willfulness" is a

-26-
precondition for an accounting, the jury here found

willfulness,10 and so we need not reach the issue in this case.11

This circuit and others have articulated three

justifications for awarding to plaintiff an accounting of the

defendant's profits: (1) as a rough measure of the harm to

plaintiff; (2) to avoid unjust enrichment of the defendant; or

(3) if necessary to protect the plaintiff by deterring a willful

infringer from further infringement. Estate of Bishop, 256 F.3d

at 1054; Minn. Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41

F.3d 1242, 1247 (8th Cir. 1994); AB Electrolux, 999 F.2d at 5-6;

George Brasch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d.

Cir. 1992); see generally 5 McCarthy on Trademarks, supra, §§

30:59, 30:64.

10 As to the meaning of willfulness, the jury was
instructed that "[a]n act is done willfully if done voluntarily
and intentionally."
11 Several circuits require a finding of willfulness to
support an award of the infringing defendant's profits. See,
e.g., Banff, Ltd. v. Colberts, Inc., 996 F.2d 33, 35 (2d Cir.
1993); Frisch's Rests., Inc. v. Elby's Big Boy, 849 F.2d 1012,
1016 (6th Cir. 1988); Reader's Digest Ass'n v. Conservative
Digest, Inc., 821 F.2d 800, 807-08 (D.C. Cir. 1987). We agree
that when the rationale for an award of defendant's profits is
to deter some egregious conduct, willfulness is required. See
Securacomm Consulting, 166 F.3d at 190.

-27-
 Ideal’s most cogent argument is that it did not

directly compete against Tamko in all the markets in which it

profited from use of the mark, and so all of its profits should

not go to Tamko. Ideal points to the articulated justification

for the AB Electrolux rule, which is that the defendant acts as

a "trustee" of profits that would otherwise belong to plaintiff.

999 F.2d at 5; see also Valmor Prods. Co., 464 F.2d at 204.

From this, Ideal argues that AB Electrolux established a "but

for" rule: a defendant may be deemed to have acted as "trustee"

for the plaintiff’s profits, which, but for the infringement,

would have been made by plaintiff. It follows then, Ideal

argues, that it cannot be deemed to have acted as "trustee" for

the plaintiff's profits as to the 70-80% of the market where, it

says, the two companies were not in direct competition; that is,

where asphalt roofing and metal roofing did not compete.

We reject any such limitation for an accounting of

profits award, once there has been a finding of direct

competition, for three reasons, each articulated in the Lanham

Act, 15 U.S.C. § 1117(a). First, the limitation misplaces the

burdens, in assuming plaintiffs must meet such a test as to

-28-
remedy, once infringement and direct competition are

established. The burden of showing that not all profits should

be awarded is more akin to the burden of showing the amount of

costs to be deducted from profits, which the Act places on

defendant. Second, such a test ignores the three rationales for

the remedy of accounting of profits. Third, the test is

inconsistent with the inherent equitable power of the district

court and the Lanham Act's designation of an accounting of

defendant's profits as an equitable remedy.

First, we think once plaintiff has shown direct

competition and infringement, the statute places the burden on

the infringer to show the limits of the direct competition: "In

assessing profits the plaintiff shall be required to prove

defendant's sales only; defendant must prove all elements of

cost or deduction claimed." 15 U.S.C. § 1117(a). Even before

the Lanham Act, the Supreme Court had squarely placed the burden

on the infringer "to prove that his infringement had no cash

value in sales made by him. If he does not do so, the profits

made on sales of goods bearing the infringing mark properly

belong to the owner of the mark." Mishawaka Rubber & Woolen

-29-
Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 206-07 (1942); see

also 5 McCarthy on Trademarks, supra, § 30:65, at 30-128 ("Under

the federal Lanham Act, as well as the common law, it is the

infringer's burden to prove any proportion of his total profits

which may not have been due to his use of the infringing

mark."); Koelemay, supra, at 322-23 ("The burden of

apportionment [of profits resulting directly from infringement

and those not], however, is on the infringer."). Here, the

plaintiff proved the amount of defendant’s sales; we consider

the defense of only partial direct competition to be very

similar to an element of cost or deduction claimed, which

defendant has the burden of showing. At trial, Ideal did not

ask for a jury finding on the percentage of market overlap. Nor

did it present the issue and evidence to the trial judge when he

requested briefing from both parties on the accounting of

profits. The trial judge was under no obligation to raise or

resolve the issue sua sponte. In fact, Tamko disputes Ideal’s

assertions made on appeal about the percentage of direct

competition in the market, and says there was 100% overlap. The

place for resolution of this issue was the trial court.

-30-
 Second, even ignoring momentarily Ideal’s waiver at the

district court level, the argument is inconsistent with the

first rationale for providing an accounting of profits --

recompense to plaintiff for the harms it has suffered. Congress

recognized that the defendant’s profits may be an inexact proxy

for the detriment suffered by plaintiffs. Toward this end, the

Act also provides:

If the court shall find that the amount of the
recovery based on profits is either inadequate or
excessive the court may in its discretion enter
judgment for such sum as the court shall find to be
just, according to the circumstances of the case.
Such sum in . . . the above circumstances shall
constitute compensation and not a penalty.

15 U.S.C. § 1117(a). Here, Ideal provided little basis for the

district court to conclude that an award of all of defendant’s

profits was excessive. In addition to its own loss of profits,

a plaintiff may, for example, suffer harm to the goodwill

associated with its mark. But beyond that, the district court,

so long as the sum awarded was not a penalty, was entitled to

consider two other policy objectives once it found that

defendant's conduct was inequitable: awarding defendant's

profits based on unjust enrichment to the defendant, or based on

-31-
a deterrence theory. AB Electrolux, 999 F.2d at 5 ("[W]here

defendant’s inequitable conduct warrants bypassing the usual

rule of actual harm, damages may be assessed on an unjust

enrichment or deterrence theory.").

Even assuming that Tamko and Ideal directly compete as

to only a portion of Ideal's sales, and even if we were to give

Ideal the benefit of plain error review, we could not say that

there was an abuse of discretion in awarding defendant's profits

in order to avoid unjust enrichment where the infringement was

willful. The award itself was conservative. Further, the

evidence is that the infringement was willful, intended to

divert customers from Tamko, and, importantly, to trade on the

goodwill Tamko had established, nurtured, and assiduously

guarded in its Heritage mark. There was also evidence of

customer confusion. Thus, even in the absence of palming off,

it is reasonable to conclude that Ideal was unjustly enriched by

trading on Tamko’s goodwill beyond the two companies' areas of

direct competition.

In cases of at least some direct competition and

willfulness, some role may exist for deterrence in an award of

-32-
an accounting of profits. The role of deterrence must be

carefully weighed in light of the statutory prohibition on the

imposition of penalties. 15 U.S.C. § 1117(a) ("Such sum . . .

shall constitute compensation and not a penalty."); Koelemay,

supra, at 307; see also ALPO Petfoods, Inc. v. Ralston Purina

Co., 913 F.2d 958, 969 (D.C. Cir. 1990) (criticizing deterrence

rationale). In an analogous case, one circuit revised an award

of 20% of defendant’s profits and directed an award of 100% of

the profits because it believed that 20% was "clearly inadequate

to ensure that similar conduct will not reoccur in the future."

Truck Equip. Serv. Co. v. Fruehauf Corp., 536 F.2d 1210, 1223

(8th Cir. 1976). The rule that where there is willful

infringement, an accounting of profits is not necessarily

restricted to the particular area of direct competition is

reinforced by the intention of the Lanham Act to provide

nationwide protection of a mark, in contrast to the more limited

geographic protection afforded by the common law. See Minn. Pet

Breeders, 41 F.3d at 1246. Tamko had an unusually strong

interest in deterrence, given Ideal’s track record, and it would

not be an abuse of discretion to conclude that the accounting of

-33-
profits should reflect some recognition of that interest.

Nonetheless, the deterrence rationale is primarily served by the

attorneys' fees award, and should not be the primary reason for

an accounting of profits. Koelemay, supra, at 308.

Our third reason for rejecting Ideal’s limitation on

profits awards is that it is inconsistent with the equitable

nature of the court’s remedial power. It may well be equitable

for a court to include in the damages calculation an award of

less than the defendant's complete profits in light of less than

complete direct competition. See, e.g., Truck Equip. Serv. Co.,

536 F.2d at 1221-22 (awarding defendant's profits only from

geographical areas where parties directly competed). On other

facts it may be inequitable to give defendants such a benefit.

Mechanical rules are of little aid in this analysis.

Equity must take account of the purposes served by the

Lanham Act:

One is to protect the public so 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 presenting to the public the
product, he is protected in his investment from its
misappropriation by pirates and cheats.

-34-
S. Rep. No. 1333 (1946), reprinted in 1946 U.S.C.C.S. 1274,

1274. As another circuit cogently observed in a case raising the

issue of less than 100% competition, either through product

differentiation or geographical separation: "We think it

doubtful whether even the second of these purposes, protection

of the trademark owner, is adequately served by a rule which

would allow accountings only where the parties directly

compete." Monsanto Chem. Co. v. Perfect Fit Prods. Mfg. Co.,

349 F.2d 389, 395 (2d Cir. 1965); see also Maltina Corp. v. Cawy

Bottling Co., 613 F.2d 582, 585 (5th Cir. 1980) (holding that a

"diversion of sales," or direct competition, is not necessary

for an award of profits because of the need to protect a

trademark as a property right).

The award of Ideal’s entire profits was correct.

2. Amount of Award

This still leaves Ideal's attack on the amount of the

profits award. This attack is also without merit. The

calculation of the award is up to the trial court's discretion,

and we will not disturb it unless it rests on clearly erroneous

-35-
findings of fact, incorrect legal standards, or a meaningful

error in judgment.

The court awarded Tamko $201,385.60 as Ideal's profits

from the sales of its Heritage Series products. To calculate

this amount, the court accepted the $449,522 figure for Ideal's sales

of the Heritage Series product in the United States between January 1,

1998 and January 31, 2000, which was provided by René Laplante (Ideal's

Vice President) in response to an interrogatory. The court prorated

this amount "to account for sales made in November and December of 1997

and February 2000" to arrive at $503,464. The court then subtracted

60% from that amount because "LaPlante previously testified that

Ideal's profit margin on sales of its 'Heritage Series' product [was]

40%." Thus, the court arrived at its final figure.

Ideal argues that the court used the wrong numbers for

the amount of the costs. The defendant has the burden of

producing evidence as to its costs. 15 U.S.C. § 1117(a). Ideal

only provided the district court with a conclusory earnings

statement which included a number for costs. The court decided

that this statement was unreliable without supporting

documentation. Instead, it relied on a statement made by Ideal

at trial as to its profit margin on the Heritage Series

-36-
products. This was not an abuse of discretion, and the amount

of the accounting award is affirmed.

C. Denial of the Motion for Mistrial

Upon redirect examination of Ideal's vice president,

Tamko introduced some evidence concerning the existence of the

preliminary injunction and of the magistrate judge’s conclusion

that Ideal failed to comply with the preliminary injunction.

Ideal moved for a mistrial. The basis for the motion was that

the trial judge erred in admitting the evidence, causing

irreparable prejudice to Ideal. The court denied the motion.

Because the mistrial motion was premised on the

district court’s admission of evidence, Ideal bears an unusually

heavy appellate burden: a double burden of showing abuse of

discretion, both as to the admission of evidence and as to the

denial of the mistrial. United States v. Arias-Santana, 964

F.2d 1262, 1265 (1st Cir. 1992) ("We normally review the denial

of a request for the exclusion of evidence, or a motion for

mistrial, under the same 'abuse of discretion' standard.").

There was no abuse in the admission of the evidence,

and consequently could be no abuse in the denial of the

-37-
mistrial. Initially, when Ideal moved in limine before the

trial to exclude any mention of the preliminary injunction and

the contempt order, the parties reached an agreement to a

stipulated jury instruction, described earlier. The parties

also agreed that they would not introduce evidence of the

contempt order. However, during the cross-examination of René

Laplante (Ideal's Vice President), Ideal's lawyer asked about

the preliminary injunction and whether it referred to the web

site. Then, on redirect, Tamko's lawyer asked about the court's

contempt order and some of its contents.

In response to Ideal's objection to the testimony about

the contempt order, the district judge stated that Ideal's

lawyer had opened the door to this testimony by asking about the

injunction and Ideal's compliance with it on cross-examination.

The next day, when Ideal moved for mistrial based on the

admission of the evidence of the contempt order, the judge

repeated his finding that Ideal had opened the door, and said

"it's unfortunate, but we will do everything reasonable to

minimize any problems from it." The judge then suggested a

curative instruction that would tell the jury "that they can use

-38-
the evidence that they have received and focus as they should

solely on the issue of willfulness. It has no relevance to the

other issues in this case." During the jury instructions, the

court instructed the jury "to disregard all evidence relating to

the February 29, 2000, [preliminary injunction] order. Such

evidence is not to be considered by you in any way in deciding

any issue in this case."

In sum, the district court was admirably sensitive to

the problem of potential prejudice to Ideal and set up ground

rules to avoid the problem. Ideal transgressed those rules and

tried to give the impression that it had complied with the

injunction. In this it went too far and its own examination of

Laplante opened the door. Nevertheless, the district court

continued to be sympathetic to the potential problems with the

admission of the evidence and gave a strong curative instruction

to the jury. See United States v. Chamorro, 687 F.2d 1, 6 (1st

Cir. 1982) (cautionary jury instructions dispelled any

significant risk of unfair prejudice). Admission and exclusion

of evidence, as well as the necessity (if any) for a mistrial is

-39-
committed to the sound discretion of the district court and we

see no error, much less an abuse of discretion.

D. The Permanent Injunction Against Ideal's Use of "H-
Series"

The district court issued a permanent injunction

against Ideal on August 30, 2000, barring Ideal "from using the

term Heritage, Heritage Series, H Series, or any name or mark

confusingly similar to Heritage in connection with the sale,

offer to sell, promotion, marketing, or advertising of any

roofing product or service in the United States."

Ideal argues that the injunction is overbroad in

barring use of "H-Series" by Ideal, because H-Series is not one

of Tamko’s registered trademarks. "[I]njunctive relief should

be no more burdensome to the defendant than necessary to provide

complete relief to plaintiffs," Califano v. Yamaski, 442 U.S.

682, 702 (1979), and courts must "closely tailor injunctions to

the harm that they address," ALPO Petfoods, 913 F.2d at 972.

While generally the issuance of injunctive relief is reviewed

for abuse of discretion, we review underlying factual

determinations for clear error. I.P. Lund Trading ApS v. Kohler

Co., 163 F.3d 27, 33 (1st Cir. 1998).

-40-
 On different facts, we might have more sympathy for a

claim that an injunction against the use of a mark not

registered to plaintiff is overbroad. Not here. This case is

a perfect example of the need for the "safe distance rule,"

which counsels that "an infringer, once caught, must expect some

fencing in. . . . Thus, a court can frame an injunction which

will keep a proven infringer safely away from the perimeter of

future infringement." 5 McCarthy on Trademarks, supra, § 30:4,

at 30-12. Indeed, it was after Ideal faced contempt charges

that it came up with "H-Series," effectively dropping the

"eritage" of "Heritage Series." The district court, during the

contempt proceedings, heard evidence that Ideal’s use of "H-

Series" would cause confusion: Tamko representatives and their

customers used "H" as an abbreviated reference for Tamko

Heritage products, and Tamko’s "Heritage 25" product is often

referred to as H25. Cf. Forum Corp. of N. Am. v. Forum, Ltd.,

903 F.2d 434, 441 (7th Cir. 1990); Syrelec v. Pass & Seymour,

Inc., 869 F.2d 838, 839 (5th Cir. 1989); Purolator, Inc. v. EFRA

Distribs., Inc., 687 F.2d 554, 560 (1st Cir. 1982). There are

circumstances in which abbreviations of trademarks may be

-41-
protectable as independent marks. See 1 McCarthy on Trademarks,

supra, § 7:18, at 7-48. Whether or not that is the case here,

the evidence that Ideal's use of "H-Series" would cause

confusion is sufficient to justify the injunction requiring

Ideal to steer clear of this similar abbreviation of the mark.

III.

Although Ideal’s counsel on appeal have striven

mightily, the trial record dooms the appeal. The judgment is

affirmed. Costs are awarded to Tamko.

-42-