Visible Systems Corp. v. Unisys Corp.

United States Court of Appeals
For the First Circuit

Nos. 07-2730; 08-1410; 08-1411

VISIBLE SYSTEMS CORPORATION,

Plaintiff, Appellant/Cross-Appellee,

v.

UNISYS CORPORATION,

Defendant, Appellee/Cross-Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge]

Before

Lynch, Chief Judge,
Boudin and Stahl, Circuit Judges.

Stephen H. Galebach for appellant/cross-appellee.
William L. Boesch with whom Anthony M. Doniger and Sugarman,
Rogers, Barshak & Cohen, P.C. were on brief for appellee/cross-
appellant.

December 23, 2008
 LYNCH, Chief Judge. A jury awarded Visible Systems

Corporation ("VSC") trademark infringement damages of $250,000

against Unisys Corporation on a reverse confusion claim. See 15

U.S.C. § 1125(a). The district court also issued a permanent

injunction prohibiting Unisys from using the trademarks or service

marks 3D VISIBLE ENTERPRISE, 3D-VE, or VISIBLE in the United States

in the enterprise modeling or enterprise architecture fields.

VSC appeals, asserting it was entitled to more. Its

primary argument is that the trial judge erred in not granting it

a jury trial under both the Lanham Act and the Seventh Amendment on

its claim for an accounting of Unisys' profits. This court has not

considered before the question of whether there is a jury trial

right on such a claim. VSC also argues the court erred in

tailoring the injunction too narrowly and in denying VSC its

attorneys' fees.

Unisys cross-appeals, arguing the evidence was

insufficient to support both the jury's finding of infringement and

the damages awarded.

We reject all of the challenges and affirm, leaving the

parties where they were.

I.

Because the case presents sufficiency of the evidence

arguments, we state the facts taking all inferences in favor of the

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jury verdict. See Valentín-Almeyda v. Municipality of Aguadilla,

447 F.3d 85, 95-96 (1st Cir. 2006).

VSC is a small Massachusetts company with less than two

dozen employees, founded in 1984, which primarily sells software

products in the enterprise modeling and enterprise architecture

field. "Enterprise modeling" and "enterprise architecture" involve

the diagraming of an entity's business to demonstrate relationships

between information flow and business processes and to allow

decisionmakers to identify errors or redundancies. VSC provides

its customers modeling tools, or software, that diagram their

organizations and automatically generate productivity-improving

software programs. VSC's modeling tools provide value by aiding

clients' decisionmaking and by reducing the need to hand-code

productivity-improving software, resulting in decreased costs and

errors.

VSC sells its software products to private corporations

and government agencies. Purchasing decisions are largely made by

sophisticated IT professionals within those organizations. The

company’s primary marketing channels involve sales of modeling

tools through downloads from its website, www.visible.com. VSC's

modeling products, by the mid-1990s, were the second most widely

used modeling tools in university IT-related courses.

VSC also provided staff-based consulting services from

approximately 1985 to 2002. VSC moved in 2002 to using part-time

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consultants and on-call, temporary subcontractors. Consulting is

a much smaller part of VSC's business than the sale of software.

Some 80 to 90% of VSC's revenue comes from software sales. Its

consulting customers contract with VSC for mentoring and training;

significantly, this is only done on VSC's modeling software.

Representative clients include the Arizona state court system,

which contracted with VSC to upgrade its information technology

system.

In 1997, VSC acquired a company started by Clive

Finkelstein, known as the father of information engineering. The

products and services of his company took on the Visible name, and

his association led to greater prominence for the name.

VSC registered the mark VISIBLE SYSTEMS in 1985 for its

enterprise modeling software. It registered the additional

trademark VISIBLE in 2001 for its software and registered the

service mark VISIBLE for its training and consulting services,

"namely providing advice in the field of information technology."

Unisys, the defendant, was formed in 1986 by the merger

of two leading manufacturers of mainframe computers. Unisys is a

much larger company than VSC, employing about 30,000 people

worldwide. Since the mid-1990s, Unisys has focused on providing

services, particularly consulting, rather than products. Unisys'

customers include government organizations and private firms, such

as airlines and telecommunications companies. Part of Unisys'

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consulting methodology involves creating virtual models of clients'

information systems to identify problems and solutions.

Although Unisys does not develop software, its

consultants use modeling tool software in many of their

engagements. Unisys consultants use software from third-party

providers, such as IBM and Proforma, and are "tool agnostic,"

meaning that Unisys' consultants use the software the client

desires if the client expresses a preference. Unisys also

occasionally sells software products to its consulting clients or

to purchasers of its mainframes. These are mainly not Unisys-

developed products.

On June 17, 2004, Unisys launched a marketing campaign

under the mark 3D VISIBLE ENTERPRISE with an advertisement in the

Wall Street Journal. Unisys filed for registration in April 2004.

Its attempt to register the mark was put on hold pending resolution

of this case. Under the 3D VISIBLE ENTERPRISE mark, Unisys sold

consulting services to assist clients with enterprise modeling.

The campaign also included sales of third-party modeling software

to Unisys' consulting clients as part of its consulting services.

In addition to using the term "visible" in its formal 3D VISIBLE

ENTERPRISE mark, Unisys used the term in marketing communications

that included phrases such as "Visible Breakthrough," "Visible

Commerce," and "Visible Advantage."

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 VSC sued Unisys in federal district court on May 3, 2005,

under the Lanham Act and state law, seeking damages, an accounting

of Unisys' profits, and injunctive relief.1 Unisys continued to

use marks such as VISIBLE ADVANTAGE after suit was filed.

Before trial, the court denied Unisys' motion for summary

judgment. The court then held that there was no evidence that

Unisys adopted its mark in bad faith; it later granted Unisys'

motion in limine to preclude evidence and argument on the issue of

bad faith. At the charge conference after the close of VSC's

evidence and just before the end of trial, VSC sought a jury

instruction that the jury consider the remedy of an accounting of

defendant's profits. The court refused, noting that VSC had "had

the option of taking that route, but . . . didn't." The court held

the issue was for the court and said that in any event, the

evidence was insufficient to support such a remedy. The court

stated "if [the jury] ever came back with a verdict, I would have

to throw it out."

At trial, VSC opted to present its case to the jury on a

reverse confusion theory of recovery. VSC's theory was that Unisys

had saturated the market with a mark substantially similar to VSC's

trademarks, leading potential customers to believe that Unisys had

1
No claim is made in this case of dilution in violation of
the Federal Trademark Dilution Act, codified at 15 U.S.C.
§ 1125(c), or of cybersquatting under the Anticybersquatting
Consumer Protection Act, codified at 15 U.S.C.
§ 1125(d)(1)(B)(i)(I)-(IX).

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acquired VSC. This confusion resulted in lost sales to VSC of

software and services. VSC also presented some damages evidence

that the parties competed in the sale of consulting services, and

that Unisys' appropriation of the VISIBLE mark for its own services

caused VSC harm in the consulting portion of VSC's business.

However, a VSC witness testified that while VSC's software sales

had declined after Unisys' infringement, VSC's consulting sales had

increased.

With no objection from VSC, the court instructed the jury

that VSC claimed Unisys had "advertised and promoted the 3D Visible

Enterprise name in a way that has so saturated the market that

potential customers are likely to be misled into thinking that

Visible Systems' goods, in fact, originate from Unisys." The

special questions to the jury specifically included VSC's "products

and/or services."

Unisys moved for judgment as a matter of law at the close

of VSC's case, arguing that the evidence was insufficient to

conclude that VSC had a protectable right to use the mark VISIBLE,

that there was a likelihood of confusion between Unisys' and VSC's

marks, or that VSC was entitled to an accounting of Unisys' profits

as a remedy. See Fed. R. Civ. P. 50, 52. The court reserved its

ruling.

The jury found in favor of VSC on special questions that:

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 [1.] Visible Systems Corporation
established a right to a trademark in the word
VISIBLE[;]
[2.] . . . [T]he Unisys 3D VISIBLE
ENTERPRISE mark is substantially similar to
Visible Systems VISIBLE mark[;]
[3.] Visible Systems established the
likelihood that potential customers have been
or will be confused into mistakenly believing
that Unisys Corporation is the source or
sponsor of Visible Systems' products and/or
services; . . .[; and]
[4.] Unisys Corporation's infringement of
Visible Systems' mark [was] willful.

The jury awarded VSC $250,000 in damages.

After the verdict, VSC moved for, among other things, a

permanent injunction, attorneys' fees, and a supplementary jury

trial to determine an award of Unisys' profits or in the

alternative an award of $100 million of Unisys' profits. Unisys

filed a renewed motion for judgment as a matter of law, arguing

that the evidence was insufficient to support the jury's finding of

infringement, its award of damages, or its finding of willfulness.

The court denied Unisys' motion. Unisys also filed a memorandum

asking the court to adopt injunctive relief which was more limited

than VSC's request. The court issued an injunction similar in

scope to Unisys' proposal. The court denied VSC's request for

attorneys' fees, concluding that the case was not an "exceptional

case" within the meaning of the Lanham Act. The court again

declined VSC's request for an accounting of Unisys' profits, saying

it considered that the issue was for the court and that, in any

event, the evidence was insufficient to support such an award.

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 II.

UNISYS' APPEAL FROM THE VERDICT AND FROM THE DAMAGES AWARD

A. Sufficiency of Evidence to Support the Jury Infringement
Finding

Unisys argues that the facts did not support the jury

finding that Unisys had infringed VSC's marks. Importantly, there

is no challenge to the jury instructions on infringement or to the

jury findings of VSC's right to a trademark and of substantial

similarity.

Unisys contests only the finding of likelihood of

confusion. Our review of the denial of Unisys' renewed motion for

judgment as a matter of law under Fed. R. Civ. P. 50(b) is de novo.

See Valentín-Almeyda, 447 F.3d at 95. The underlying standard for

grant of a Rule 50(b) motion is much more deferential to the

verdict. See id. at 95-96. A motion for judgment as a matter of

law may be granted only if a reasonable person, on the evidence

presented, could not reach the conclusion that the jury reached.

See Attrezzi, LLC v. Maytag Corp., 436 F.3d 32, 37 (1st Cir. 2006).

VSC chose to present this case to the jury as a reverse

confusion case. Under the classic "forward confusion" theory, a

trademark holder alleges customers will purchase goods from the

infringing junior user (here, Unisys) under the mistaken belief

that they are purchasing from the senior user (here, VSC). See

4 J. McCarthy, McCarthy on Trademarks and Unfair Competition

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§ 23:10, at 23-46 (4th Ed. 2006); see also Boston Duck Tours, LP v.

Super Duck Tours, LLC, 531 F.3d 1, 12 (1st Cir. 2008).

By contrast, under a reverse confusion theory, customers

purchase the senior user's goods under the "misimpression that the

junior user is the source of the senior user's goods. . . .

[C]onsumers may consider [the senior user] the unauthorized

infringer, and [the junior user's] use of the mark may in that way

injure [the senior user's] reputation and impair its goodwill."

4 McCarthy, supra, §23:10, at 23-47 (alterations and omission in

original) (quoting Banff, Ltd. v. Federated Dep't Stores, Inc., 841

F.2d 486, 490 (2d Cir. 1988)) (internal quotation mark omitted);

see also Attrezzi, 436 F.3d at 38-39; Pignons S.A. de Mecanique de

Precision v. Polaroid Corp., 657 F.2d 482, 492 n.4 (1st Cir. 1981).

Harm from the reverse confusion may occur because the junior user

"saturates the market" and overwhelms the senior user, causing harm

to the value of the trademark and the senior user's business.2

Attrezzi, 436 F.3d at 39. "A reverse confusion case is proven only

if the evidence shows that the junior user was able to swamp the

reputation of the senior user with a relatively much larger

advertising campaign." 4 McCarthy, supra, § 23:10, at 23-47 to

-48. There is no actionable reverse confusion in the absence of a

showing of likely confusion as to source or sponsorship. See

2
VSC did not advance an argument that Unisys offered
inferior products, an alternate theory of harm from reverse
confusion. Attrezzi, 436 F.3d at 39.

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DeCosta v. Viacom Int'l, Inc., 981 F.2d 602, 609 (1st Cir. 1992).

A trademark holder must show a likelihood of confusion; it need not

show actual confusion, but actual confusion will strengthen the

holder's infringement claim. Borinquen Biscuit Corp. v. M.V.

Trading Corp., 443 F.3d 112, 120 (1st Cir. 2006).

On the evidence, VSC's strongest case for likelihood of

confusion was as follows. VSC was a small company, firmly

entrenched in what was once, in 1985, the new field of enterprise

modeling. Indeed, VSC became associated with the academic

progenitor in the field, Clive Finkelstein, who founded a company

which VSC acquired and who served as VSC's Chief Scientist. The

term "VISIBLE" was VSC's mark, and it was used to denote VSC's

various software products. For many years, VSC's competitors in

the enterprise modeling field were other small companies. That

changed, starting in about 2000, when VSC's small competitors were

acquired by large companies such as IBM, Microsoft, CA, and

Telelogic. Through the use by the large companies of the name and

marks of the small acquired companies, the identities and

distinctness of the acquired former competitors merged into that of

the larger acquirers. Substantially all of the modeling tool names

from the 1990s used by VSC's competitors were acquired and

rebranded, or disappeared altogether.

Thus, when Unisys started using a mark (3D VISIBLE

ENTERPRISE) substantially similar to VSC's VISIBLE mark, that use

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posed the risk that potential customers of VSC would assume VSC had

likewise been acquired by Unisys. This problem was exacerbated

because both companies had extensive websites. A customer

searching for "Visible" and "enterprise modeling" could be led to

Unisys. Given Unisys' large online presence, the use of the term

"Visible" by the junior user, Unisys, threatened to overwhelm the

mark of the senior user, VSC. The risk was that VSC would be

thought to have disappeared into Unisys, to the detriment of VSC's

sales. The question is whether a rational jury could conclude that

there was a likelihood of this sort of reverse confusion.

Our caselaw has long had a non-exclusive list of factors

against which a finding of a likelihood of confusion is assessed.

See Beacon Mut. Ins. Co. v. OneBeacon Ins. Group, 376 F.3d 8, 15

(1st Cir. 2004). In Attrezzi we described one such representative

list, and applied the analysis to a reverse confusion case:

In assessing confusion, this circuit has
resorted to the consultation of a series of
factors . . . [that] includes: (1) the
similarity of the marks; (2) the similarity of
the goods (or, in a service mark case, the
services); (3) the relationship between the
parties' channels of trade; (4) the
juxtaposition of their advertising; (5) the
classes of prospective purchasers; (6) the
evidence of actual confusion; (7) the
defendant's intent in adopting its allegedly
infringing mark; and (8) the strength of the
plaintiff's mark.

Attrezzi, 436 F.3d at 39 (quoting Int'l Ass'n of Machinists v.

Winship Green Nursing Ctr., 103 F.3d 196, 201 (1st Cir. 1996)); see

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also Venture Tape Corp. v. McGills Glass Warehouse, 540 F.3d 56,

60-61 (1st Cir. 2008). The district court expressly incorporated

these factors3 into its instructions to the jury. It cautioned the

jury not to consider any one factor as conclusive.

Using such a list as a check against jury irrationality,

the application of these factors to the facts of record in this

case rationally support a finding of likelihood of reverse

confusion. The jury found the parties' marks were "substantially

similar." Unisys argues they were not so similar as to support a

likelihood of reverse confusion. Both Unisys and VSC use the word

"Visible," even though Unisys used the word primarily as part of

the phrase "3D Visible Enterprise." Unisys argues that the two

marks have different typefaces, backgrounds, and visual cues. Even

so, the dissimilarities are not so great as to render irrational

the finding of likelihood of reverse confusion.

Unisys argues that the two companies have dissimilar

offerings and "are in fundamentally different businesses." While

VSC primarily sells goods, in the form of software, Unisys sells

services, in the form of consulting. A rational finding of reverse

confusion, was possible, even so. Dr. Malcolm Lane, an expert

witness for the plaintiff, testified that Unisys' and VSC's

3
The court did not instruct the jury on the question of
the defendant's intent as a separate factor but rather, instructed
the jury to consider Unisys' intent in deciding whether Unisys
acted willfully, an issue the jury was to address only if it found
infringement. There was no objection.

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offerings were "very similar and have very similar outputs and

results for clients." A jury could conclude that in the field of

enterprise modeling through computer applications, there was a

realistic likelihood of reverse confusion. This is not a case in

which the two companies' offerings are so dissimilar as to make

confusion highly unlikely. See Attrezzi, 436 F.3d at 39.

Similarities between channels of trade, advertising, and

prospective customers are related factors, are often considered

together, see id. at 39-40, and support the jury verdict. Unisys

argues that the two companies differ greatly: (1) while VSC's

product sales occur primarily through downloads from its website,

Unisys' consulting engagements result from longstanding client

relationships; (2) VSC primarily markets through its website, while

Unisys advertises in general business publications, though both

companies market extensively on the internet. Still, the jury

heard testimony that both parties targeted many of the same

customers. In addition, there was evidence of overlap between the

parties' channels of trade. For example, the jury heard testimony

that VSC's clients, such as the Arizona court system, signed

ongoing consulting contracts of the kind Unisys identifies as its

own primary channel of trade.

While VSC presented no evidence of actual confusion at

trial, the jury could have inferred actual reverse confusion from

the company's decline in revenues from the sales of its software

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products. And actual confusion is not a prerequisite to a finding

of likelihood of confusion. See Borinquen Biscuit Corp., 443 F.3d

at 120-21.

In a reverse confusion case, the focus is on the relative

strengths of the marks so as to gauge the ability of the junior

user's mark to overcome the senior user's mark.4 See 4 McCarthy,

supra, § 23:10, at 23-54 to -55 (citing Checkpoint Sys., Inc. v.

Check Point Software Techs., Inc., 269 F.3d 270, 303 (3d Cir.

2001)). A jury could conclude the Unisys mark could overcome the

VSC mark. Unisys had a national advertising campaign for 3D

Visible Enterprise, promoted the 3D Visible Enterprise campaign on

the internet, and built the 3D VISIBLE ENTERPRISE mark through

partnerships with developers of modeling tools. The VISIBLE mark

had been used by VSC for over twenty years, VSC had spent over $2

million to promote the mark since 1987, and VSC had acted in the

past to protect its mark. A jury could reasonably find that these

facts established the identity of VSC's mark, but did not prevent

the mark from being overwhelmed by Unisys' mark.

In sum, the jury could rationally have found a likelihood

of reverse confusion.

4
Both VSC's and Unisys' proposed instructions, as well as
the court's ultimate instructions to the jury, focused on the
strength of VSC's mark rather than the strength of Unisys' mark.
Neither party raised an objection to the court's instructions.

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B. Sufficiency of Evidence To Support Jury Award of $250,000
in Damages

Unisys argues that the evidence is insufficient to

support the damages award, a challenge we review de novo to

determine whether "reasonable persons could not have reached the

conclusion that the jury embraced." Attrezzi, 436 F.3d at 37

(quoting Sanchez v. P.R. Oil Co., 37 F.3d 712, 716 (1st Cir.

1994)). The test for Unisys "is a stringent one," requiring Unisys

to demonstrate a "total failure of evidence to prove plaintiff's

case." Id. (quoting Vázquez-Valentín v. Santiago-Díaz, 385 F.3d

23, 29 (1st Cir. 2004), vacated on other grounds, 545 U.S. 1143

(2006)) (internal quotation marks omitted).

Unisys argues that there was no proof of either actual

harm or of causation, pointing to evidence that VSC's revenues had

been in decline before Unisys' launch in 2004 of the 3D Visible

Enterprise campaign. It argues that the decline in VSC's revenues

immediately following the June 2004 publication of Unisys'

advertisement in the Wall Street Journal represented one of a

normal series of fluctuations in VSC's revenues and was not caused

by the launch of Unisys' campaign.5

5
We do not need to discuss in detail Unisys' argument that
VSC waived any claim to damages based on harm to its goodwill.
VSC's counsel argued for an instruction on damages based on harm to
the company's goodwill and the district court itself later stated
that the colloquy did not constitute a waiver.

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 Nonetheless, the jury heard testimony that VSC's revenues

in the quarter immediately following the launch of Unisys' campaign

were "[p]robably the lowest in the history of the company." VSC

introduced into evidence a chart of its quarterly revenues before

and after the infringement as well as its financial statements from

the relevant years. The jury could conclude that Unisys'

infringement reduced VSC's average monthly revenue by approximately

$28,000 in the period immediately following the infringement.

Michael Cesino, VSC's President, testified that a later increase in

revenues was due to VSC's re-hiring of an experienced salesman.

The jury could have reasonably inferred that VSC's revenues would

have been higher but for the infringement.

Cesino's testimony provided a basis for the $250,000

figure. He testified the jury could determine VSC's lost profits

by calculating a profit margin on operations (using VSC's revenues

and operating expenses) and applying that margin to VSC's lost

revenues. By using this method, the jury had a basis for

determining that an award of approximately $250,000 was

appropriate. In fact, VSC argued to the jury that an award of

about $500,000 was appropriate. The award was neither excessive

nor inadequate, itself a sign that the jury did not behave

unreasonably. See Attrezzi, 436 F.3d at 40.

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 III.

VSC'S APPEAL FROM THE COURT'S EXCLUSION OF EVIDENCE OF BAD FAITH,
THE REFUSAL TO ISSUE A BROADER INJUNCTION, THE DENIAL OF AN
ACCOUNTING REMEDY, AND THE DENIAL OF ATTORNEYS' FEES

A. Bad Faith

VSC argues that the evidence showed Unisys proceeded in

bad faith and that the court erred in deciding otherwise. It uses

that argument to buttress its other arguments that it was entitled

to other remedies and to attorneys' fees. Because we find no error

in the district court's rulings, we have no need to discuss the

relevance of bad faith to the other issues in the case. See

generally D. Conway-Jones, Remedying Trademark Infringement: The

Role of Bad Faith in Awarding an Accounting of Defendant's Profits,

42 Santa Clara L. Rev. 863, 865 (2002) (proposing that "Congress

did not intend a bad faith requirement be met before an owner of an

infringed mark is able to recover a defendant's profits collected

on the back of the infringed mark").

Bad faith, in trademark law, "refers to an attempt by a

junior user to exploit the good will and reputation of a senior

user with the intent to sow confusion." 4 McCarthy, supra, §

23:113, at 23-357 (quoting Star Indus., Inc. v. Bacardi & Co., 412

F.3d 373, 388 (2d Cir. 2005)). Bad faith differs from

"willfulness," which arises when an infringer proceeds despite

knowledge of the senior user's trademark. See id. § 23:113; see

also Tamko Roofing Prods., Inc. v. Ideal Roofing Co., 282 F.3d 23,

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31 (1st Cir. 2002). The court said it would allow a jury question

on willfulness because the jury's answer might be of use in

evaluating a later request for attorneys' fees.

VSC's argument about bad faith consists of two inferences

it draws from evidence admitted and a subsidiary argument that the

court improperly excluded evidence. Bad faith could be inferred,

VSC argues, from the alleged failure of Unisys' good faith

explanation for how the company developed the 3D VISIBLE ENTERPRISE

mark. VSC also argues that evidence that numerous Unisys employees

had requested information on VSC's products and had downloaded

software from VSC's website supported the inference Unisys knew of

and deliberately intended to benefit from VSC's reputation.

The court correctly ruled at summary judgment that the

proffered evidence did not show bad faith. For example, the

evidence does not provide a basis for the conclusion that Unisys

chose the mark 3D VISIBLE ENTERPRISE in order to take advantage of

VSC's reputation and goodwill in the market. See Aktiebolaget

Electrolux v. Armatron Int'l, Inc., 999 F.2d 1, 6 (1st Cir. 1993).

Unisys' witness John Aaker, a vice president of the Grey Worldwide

advertising agency, testified that it was the advertising agency,

not Unisys, which conceived of the 3D VISIBLE ENTERPRISE mark and

developed it. Grey, in turn, then caused its counsel to conduct a

search for other marks, received advice that Unisys was in a strong

position, and went ahead to present the mark to Unisys. The letter

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from Grey's trademark counsel was admitted into evidence by

agreement.

In rebuttal, VSC offered evidence that Unisys had used

the terms "3D" and "visible," during an internal marketing event in

June 2003 launching its "Business Blueprinting" campaign (a

predecessor of the 3D Visible Enterprise campaign) and that the

advertising agency had reviewed a video of the event. This

evidence is insufficient for a conclusion that Unisys "tried a

scheme to launder its 3D VISIBLE ENTERPRISE mark" through the

advertising agency.

Evidence was admitted of a list of Unisys employees who

had since 1988 requested information from VSC or downloaded

information from its website. The evidence showed that some Unisys

marketing employees and other employees were aware of VSC's mark in

1996, almost a decade earlier, but VSC did not call witnesses or

connect any of the listed employees to the 2004 adoption of the 3D

VISIBLE ENTERPRISE mark. That is not enough to show bad faith.

See Century 21 Real Estate Corp. v. Century 21 Real Estate, Inc.,

929 F.2d 827, 829 (1st Cir. 1991). This is particularly true given

the different slants in the two businesses -- one slanted to sales

of software, the other to sales of consulting services.

VSC also proffered additional evidence on bad faith,

consisting of Unisys' post-suit internal communications, such as

prohibitions on use of the term "visible" in product or service

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marks with the exception of the 3D VISIBLE ENTERPRISE mark, that

VSC argued showed willfulness in Unisys' later deployment of

additional marks that contained the term. The district court did

not abuse its discretion in excluding this evidence.

B. VSC's Request for Broader Injunctive Relief

Our review of the trial court's choice of injunctive

relief is for abuse of discretion. Metro-Goldwyn Mayer, Inc. v.

007 Safety Prods., Inc., 183 F.3d 10, 14-15 (1st Cir. 1999). The

terms of the injunction issued enjoined Unisys "from using the

trademarks or service marks 3D VISIBLE ENTERPRISE, 3D-VE, or

VISIBLE, in the sale, offering for sale, distribution or

advertising in the United States of goods or services in the

enterprise modeling or enterprise architecture fields." The

injunction also ordered Unisys to "remove all uses of the 3D

VISIBLE ENTERPRISE, 3D-VE, and VISIBLE marks from the Internet

website www.unisys.com, and . . . [to] remove and destroy all other

advertising or promotional materials that are within the United

States and within the control of Unisys and that incorporate the

marks 3D VISIBLE ENTERPRISE, 3D-VE, and VISIBLE." The injunction

allowed Unisys to continue using the marks internally and to

continue using "visible" in its ordinary descriptive sense.

VSC argues that the court erred in refusing to bar

Unisys' use of VISIBLE on Unisys' country-specific websites based

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outside of the United States and in allowing Unisys to use

"visible" in its ordinary descriptive sense.

VSC argues that allowing Unisys to use VISIBLE in its

non-U.S. websites contravenes the principle that Lanham Act

jurisdiction may extend to extraterritorial conduct by American

citizens that has a substantial effect on domestic commerce. See

generally McBee v. Delica Co., Ltd., 417 F.3d 107, 116-18 (1st Cir.

2005) (noting that the Lanham Act may reach such conduct but that

"[t]he reach of the Lanham Act depends on context"). There was no

evidence that VSC maintained any overseas websites or that it had

any substantial overseas sales. Its argument to the district court

focused on the possibility that domestic customers could access

Unisys' overseas websites from the United States. There was no

error of law or abuse of discretion; the court's stated reason for

rejecting VSC's broader language was that it found the proposed

injunction "simply so broad . . . as [to be] largely unworkable in

the real world."

VSC's challenge to allowing Unisys to use the word

"visible" in its ordinary descriptive sense also fails. VSC argues

the court's decision was error because the trial record disclosed

no use in the relevant field of "visible" as a descriptive term.

The trial court had "first-hand exposure to the litigants and the

evidence," Rosario-Torres v. Hernandez-Colon, 889 F.2d 314, 323

-22-
(1st Cir. 1989) (en banc), and it acted well within its discretion6

in deciding that a narrower prohibition would be adequate to

prevent future harm.

C. VSC's Claim to an Accounting of Unisys' Profits and for
a Jury Trial on That Issue

There is no dispute that VSC was entitled to and received

a jury trial for VSC's claim of its own damages for infringement,

though the request was joined with a request for equitable relief.

See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 508-11 (1959);

Attrezzi, 436 F.3d at 36.

VSC argues that it was also entitled under both the Act

and the Seventh Amendment to a jury trial, under Dairy Queen, Inc.

v. Wood, 369 U.S. 469 (1962), on its request for an accounting of

defendant's profits. It had earlier sought $100 million for an

accounting from the court, which was denied. The question of what

role a jury plays as to the remedy of an accounting in a Lanham Act

case is complicated.

VSC argues the Lanham Act gives it a statutory right to

a jury trial on the remedy of an accounting. The Lanham Act

directs that the question of entitlement of plaintiffs to

defendants' profits be subject to "the principles of equity":

6
Unisys argues that because VSC was not entitled to any
injunctive relief at all due to unclean hands, it cannot complain
about the limits on the injunctive relief it did get. There is no
need to address the argument.

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 When a violation of any right of the
registrant of a mark registered in the Patent
and Trademark Office, a violation under
section 1125(a) or (d) of this title, or a
willful violation under section 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 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). The remedial provisions of the Lanham Act

authorize four forms of relief: an accounting of the defendant's

profits, any damages sustained by the plaintiff, the costs of the

action, id., and injunctive relief under § 1116(a). However, even

the monetary relief available under § 1117(a) is "subject to the

principles of equity." Further, "if the court . . . find[s] that

the amount of the recovery based on [defendant's] 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."7 Id. The Lanham Act prohibits

the use of such relief as a penalty. Under the Act's language,

even if a jury were to determine the amount of defendant's profits,

a court could in its discretion set the jury award aside if the

7
As McCarthy notes, the remedy of an accounting of profits
has its historic roots in equity jurisprudence. "An accounting of
profits is never automatic. The courts retain the right to
withhold the remedy if, in view of the overall facts and equities
of the case, it is not appropriate." 5 McCarthy, supra, § 30:59,
at 30-138 to -139 (footnote omitted).

-24-
profits were excessive.8 Plaintiff has argued only that there is

an initial right to a jury trial, not that the court lacks power to

set aside an award under the terms set in the Act.

VSC concedes that an accounting is generally described as

an equitable remedy, see 15 U.S.C. § 1117(a); see also Tamko, 282

F.3d at 36, but correctly says that is not dispositive of the

Seventh Amendment question. This court has not directly addressed

the question. We have said generally, in a trademark case not

raising this precise question, that common-law claims are to be

tried to a jury while equitable claims can be tried to a judge.

See Attrezzi, 436 F.3d at 36.

In order to avoid reaching the Seventh Amendment

question, we ask first if the Lanham Act itself provides for a jury

trial, as VSC contends. Under the reasoning of the Supreme Court's

opinion in Feltner v. Columbia Pictures Television, Inc., 523 U.S.

340 (1998), construing similar phraseology in the Copyright Act, it

seems clear that the Lanham Act itself does not create a right to

a jury trial whenever the remedy of an accounting of defendant's

profits is sought.

The Seventh Amendment analysis requires a determination

of "whether the statutory cause of action is more analogous to

8
Of course, even if the accounting is viewed as an
equitable claim for the judge, the judge is bound by the jury's
determination of issues, such as the jury's finding of willfulness,
which affect the disposition of the accompanying equitable claim.
Attrezzi, 436 F.3d at 43 n.5.

-25-
cases tried in courts of law than to suits tried in courts of

equity or admiralty," which in turn requires examination of "both

the nature of the statutory action and the remedy sought."

Feltner, 523 U.S. at 348; see also Markman v. Westview Instruments

Inc., 517 U.S. 370, 376 (1996); Granfinanciera, S.A. v. Nordberg,

492 U.S. 33, 41-42 (1989).

VSC's opening brief provides no argument at all on this

required examination but does cite to commentary in a respected

treatise. See 6 McCarthy, supra, § 32:124, at 32-261 ("[A] claim

for an accounting of defendant's profits is usually treated for

jury trial purposes as the equivalent of a claim for legal

damages."). Its reply brief offers little more.

No federal court of appeals decision which extensively

discusses the issue has been called to our attention by the

parties. One law review article on the topic concludes that the

issue of an accounting of defendant's profits in a trademark action

is for the court, based on its review of the history of the remedy.

M. Thurmon, Ending the Seventh Amendment Confusion: A Critical

Analysis of the Right to a Jury Trial in Trademark Cases, 11 Tex.

Intell. Prop. L.J. 1, 6 (2002).

The power of a trial judge to determine that the evidence

is insufficient to support an award of a disgorgement of the

infringers profits is unaffected by the Dairy Queen rule. To the

extent VSC is arguing that the district court is precluded from

-26-
making this assessment of the evidence either at summary judgment

or after trial, we reject the argument. The court is, at the

least, the initial gatekeeper as to whether the evidence suffices.

See Quick Techs. Inc. v. Sage Group PLC, 313 F.3d 338, 349 (5th

Cir. 2002). The Supreme Court established at least this much in

Champion Spark Plug Co. v. Sanders, 331 U.S. 125 (1947).9 In

Champion Spark Plug, the Supreme Court held that courts must take

equitable principles into account in determining whether to award

an accounting of profits. 331 U.S. at 131. There, the court

upheld the decision of both the trial and appellate courts to deny

an accounting and held the remedy is not automatic as a result of

an infringement finding. Id. at 131-32.

Here, the court ruled that the issue of an accounting is

for the court, not a jury.10 The trial judge also ruled that the

9
Whether the precise holding of Champion Spark Plug
survives the various amendments to the Lanham Act in 1999 is not an
issue we need to address. See B. Banner, Trademark Infringement
Remedies 7-3 (2006). We note McCarthy's view that the purpose of
the 1999 Amendment of Lanham Act § 35(a) was to be clear that in
dilution cases, and only dilution cases, Congress meant to limit
this recovery to instances of willful violation. 5 McCarthy,
supra, § 30:62, at 30-145.
10
Whether there is a jury trial right on the issue of an
accounting of the infringer's profit could affect the standard of
appellate review. If the issue were committed to the discretion of
the court, either because there is no jury trial right or because
the court under the statute may adjust a jury award in light of
equitable considerations, we would review the court's ultimate
finding for abuse of discretion. See Venture Tape, 540 F.3d at 62;
see also Hoult v. Hoult, 373 F.3d 47, 53 (1st Cir. 2004)
(describing abuse of discretion standard). If, however, the issue
of an accounting of damages was ordinarily for the jury, at least

-27-
evidence to support the remedy of an accounting was insufficient to

reach the jury, stating that if the jury made such an award, the

court would be forced "to throw it out." If the evidence was

insufficient to justify an accounting (as we hold), then the

question of whether there is a Seventh Amendment jury trial right

to an accounting becomes academic and can be avoided.

Our review of the sufficiency question is de novo.

Attrezzi, 436 F.3d at 37. This circuit, like others, has

recognized three rationales for awarding to the 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." Tamko,

282 F.3d at 36. The sufficiency of the evidence must be evaluated

against each of the rationales for an award of the defendant's

profits. On this record, we agree with the trial judge's

assessment, under any of the standards of review, that none of

those rationales would be served by an accounting.

The first rationale for an accounting is as a proxy for

legal damages, that is, a rough measure of harm to the plaintiff.11

in the first instance, then appellate review would be for whether
the evidence was sufficient to put the issue to the jury.
11
In our view, this proxy rationale may well present the
strongest argument under the Seventh Amendment; we do not decide
the point. This does not mean that a plaintiff's characterization
of why it is seeking an accounting would control, even under our

-28-
Dairy Queen itself held that "[t]he necessary prerequisite to the

right to maintain a suit for an equitable accounting . . . [is] the

absence of an adequate remedy at law." 369 U.S. at 478. The proxy

rationale has no place in this case on the evidence.

The harm to plaintiff was in fact measured and damages

were awarded. The jury answered a special question, "[p]lease

state, in words and figures, the dollar amount of damages which you

have determined defendant Unisys Corporation should pay to

plaintiff Visible Systems Corporation in order to restore it to the

position it would have been in had the infringement not occurred"

(emphasis added), and awarded $250,000 to VSC, as recompense for

the harm VSC suffered.

Furthermore, the district court concluded12 that the

evidence did not show there were profits which accrued to Unisys as

hypothetical. See Thurmon, supra, at 90-91, 101 (noting that
focusing on the proxy rationale may invite manipulation of the jury
trial guarantee through artful pleading); id. at 107 (noting that
courts of equity historically awarded an accounting of defendant's
profits as a substitute for a damages claim at law); see also Juicy
Couture, Inc. v. L'Oreal USA, Inc., No. 04 Civ. 7203, 2006 WL
559675, at *1-2 (S.D.N.Y. Mar. 7, 2006) (refuting a plaintiff's
strategic attempt to assert a proxy rationale).
12
The court denied summary judgment on this issue but
reconsidered the issue at trial after VSC brought new facts to its
attention and then decided in the chambers charge conference that
the evidence was insufficient to support an accounting. We do not
have the benefit of a full statement of the district court's
reasoning. We reject VSC's criticism of the district court for not
conjuring up some memory of what was said when there was no
documentation. VSC easily could have asked for a reporter to be
present at the charge conference.

-29-
a result of its infringement. Our prior discussion of the

evidence13 supports the district court's conclusion. Indeed, at

trial VSC "[did] not contend that potential customers of Unisys are

likely to make purchasing decisions about its goods and services

under the mistaken belief they are associated with Visible

Systems."

Rather, plaintiff's theory of harm was one of reverse

confusion, and reverse confusion does not lend itself to any

automatic assumption that there is an equivalence between

defendant's profits and plaintiff's diverted sales. See Johnny

Blastoff, Inc. v. L.A. Rams Football Co., 188 F.3d 427, 436-37 (7th

Cir. 1999) (noting that in reverse confusion cases, the infringer

does not seek to profit from the senior user's goodwill but

nevertheless causes indirect harm to the senior user); Big O Tire

Dealers, Inc. v. Goodyear Tire & Rubber Co., 561 F.2d 1365, 1374

(10th Cir. 1977); Restatement (Third) of Unfair Competition § 37

13
To recap, VSC primarily sold software, which constituted
approximately 80 to 90% of its revenues, and its consulting sales
in fact increased during the period of Unisys' infringement. By
contrast to VSC's sale of software, Unisys never sold its own
software. Unisys sold consulting services; when, in those
instances of providing consultant services, the client also wanted
software, Unisys consultants were "tool agnostic" and provided
third-party products. While VSC and Unisys targeted similar
customers, VSC's consulting clients primarily sought support in
using VSC's software products; Unisys' consulting clients primarily
sought business advice without regard to which software was used.
VSC's consulting engagements were largely limited to training and
mentoring VSC's clients in using VSC's products. Further, VSC
eliminated the position of Vice President of Client Services and
employed no full-time consultants at the time of the infringement.

-30-
cmt. b (1995) ("The correspondence is clearly imperfect, however,

since in most cases there is no reason to expect that every sale

made by the defendant has been diverted from the plaintiff, or that

the profit margins of the parties are necessarily the same.").

This case is not a suitable candidate for the proxy rationale for

an accounting.

VSC relies primarily on the second rationale for an

accounting -- avoidance of unjust enrichment of the infringing

defendant. We assume that it is possible both for one party to

have suffered lost profits from its own declining sales and for the

infringer to have been unjustly enriched by its infringement.

Still, as we have said, the evidence is that Unisys made no unjust

profits and so was not unjustly enriched.

The third rationale, that an accounting can be justified

if necessary to protect the plaintiff by deterring a willful

infringer from further infringement, also has no place here based

on the evidence. That rationale requires, at a minimum, that the

defendant has acted willfully, as the jury did find here. See

Tamko, 282 F.3d at 36 n.11. Still, willfulness alone is not enough

to justify a remedy of an accounting of defendant's profits where

there is a damages award to the plaintiff, no showing of unjust

enrichment, no bad faith, and an injunction has been entered.

The fact that injunctive relief has been entered does not

alone preclude an accounting, Tamko, 282 F.3d at 35, but it is

-31-
highly pertinent to the adequacy and completeness of the remedy.

The injunction here provides adequate deterrence. It prevents

Unisys from using the VISIBLE, 3D VISIBLE ENTERPRISE, or 3D-VE

marks in the enterprise modeling and architecture fields. The

injunction also provides for a dispute resolution procedure in the

event VSC believes Unisys has violated its terms. The presence of

the injunctive relief also promotes the goal of increasing

confidence in the market economy. Cf. Conway-Jones, supra, at 882.

D. Denial of Attorneys' Fees

The Lanham Act provides for attorneys' fees only "in

exceptional cases." 15 U.S.C. § 1117(a). VSC challenges the

court's order declining to award fees, arguing that the factors

identified in Tamko for deciding whether to award fees weigh in its

favor. Congress left it to the court, not the jury, to consider

whether an award of attorneys' fees is equitable. Tamko, 282 F.3d

at 31 n.5.

We review the legal question of the meaning of

"exceptional cases" de novo and the district court's denial of an

award of attorneys' fees for abuse of discretion. To the extent

that the district court's award rests on factual determinations,

however, we review those for clear error. Id. at 30.

There is no "per se equivalence between 'exceptional

case' and a jury finding of willfulness." Id. at 31 n.5. Among

-32-
the factors we have identified in guiding a court's decision on an

award of fees are whether:

[T]he area of law is unclear and defendants
might reasonably think they did not infringe;
there is a close legal question as to whether
there is any trademark violation; defendant
had no intent to deceive or confuse the
public; the defendant made a concerted effort
to create a non-infringing mark; the plaintiff
suffered no actual damage.

Id. at 32-33 (citations omitted). The district court reviewed

these factors and committed no error of law.

The court did not abuse its discretion in concluding that

"little, if anything, about this case could be appropriately deemed

exceptional or extraordinary." It reasoned that Unisys had a good

faith belief that it was not in competition with VSC, that the

evidence that VSC suffered actual damage was indirect, and that

Unisys' behavior did not rise to the level of deliberate and

willful conduct as was the case in Tamko. Indeed, at the summary

judgment stage, the district court characterized the plaintiff's

case as "thin," a relevant consideration. See Raxton Corp. v.

Anania Assocs., Inc., 668 F.2d 622, 625 (1st Cir. 1982).

IV.

We affirm the judgment of the district court. Each side

shall bear its own costs.

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