# Appendix — International Star Class Yacht Racing Ass'n v. Tommy Hilfiger U. S. A., Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1137%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 2000 - **Citation:** 531 U.S. 873 ## Text TABLE OF CONTENTS Summary Order of the United States Court of Appeals for the Second Circuit, dated SES Fly a hts dee ine kes Order of the United States Court of Appeals for the Second Circuit, dated April 3, 2000..... Opinion of the United States Court of Appeals for the Second Circuit, dated May 29, 1998 RR I oa has ed oak’ essa cca ccc. Opinion of the United States Court of Appeals for the Second Circuit, dated April 4, 1996 Re ork ahs obs nk cena e coc) sak aoe Opinion and Order of the United States District Court for the Southern District of New York, I TE hc Opinion and Order of the United States District Court for the Southern District of New York, I tt oe a Opinion and Order of the United States District Court for the Southern District of New York, dated February 28, 1997 (959 F. Supp. 623) .... Opinion and Order of the United States District Court for the Southern District of New York, WE HI Bc FOE Kohn scat cnc de cad anced cccank PAGE la Sa 7a 2la 32a 4la 53a il PAGE Opinion and Order of the United States District Court for the Southern District of New York, dated November 30, 1994 (33 U.S.P.Q.2d 1610). 97a Statutory Provisions RG AGE, BOO, ao tees © REED vc ccccccnsens 122a Lanham Act, § 32, 15 U.S.C. § 1114..........3. 122a Lanham Act, § 35(a), 15 U.S.C. § 1117(a) ...... 125a Lanham Act, § 43(a), 15 U.S.C. § 1125(a) ...... 126a la UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT No. 99-7329 Filed January 12, 2000 At a stated term of the United States Court of Appeals for the Second Circuit, held at the United States Court- house, Foley Square, in the City of New York, on the 12th day of January, two thousand. PRESENT: HONORABLE RALPH K. WINTER, Chief Judge, HONORABLE JON O. NEWMAN, HONORABLE JOHN M. WALKER, JR., Circuit Judges. INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff-Appellant, —_—V.— . TOMMY HILFIGER U.S.A., INC., Defendant-Appellee. i 2a APPEARING FOR APPELLANT: J. Joseph Bainton, Bain- ton McCarthy & Siegel, New York, N.Y. APPEARING FOR APPELLEE: Louis S. Ederer, Gursky & Ederer, New York, N.Y. SUMMARY ORDER Appeal from the United States District Court for the Southern District of New York (Robert P. Patterson, Jr., Judge). ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the judgment of the Dis- trict Court is AFFIRMED. On two prior appeals in this trademark infringement litigation, we remanded for reconsideration of whether Defendant-Appellee’s use of the Plaintiff-Appellant’s ~““Star Class” mark was in bad faith, thereby entitling the Plaintiff-Appellant to an accounting of profits. See Inter- national Star Class Yacht Racing Ass'n v. Tommy Hilfiger U.S.A., Inc., 146 F.3d 66, 73 (2d Cir. 1998) (“ISCYRA II”); International Star Class Yacht Racing Ass'n v. Tommy Hilfiger U.S.A., Inc., 80 F.3d 749, 754-55 (2d Cir. 1996) (“ISCYRA I”). Upon the most recent remand, the District Court found, without the use of judicial notice that we had ruled erroneous, see ISCYRA II, 146 F.3d at 70-71, that bad faith had not been established. 1. The Plaintiff-Appellant asks this Court to reconsider its precedents requiring a showing of bad faith in order to recover monetary damages. However, we have twice remanded this case specifically to determine the existence of bad faith. See ISCYRA II, 146 F.3d at 71, 73; ISCYRA I, 3a 80 F.3d at 753. To change the legal standard at this point in the litigation would violate the law of the case. See North River Insurance Co. v. Philadelphia Reinsurance Corp., 63 F.3d 160, 164-165 (2d Cir. 1995). Moreover, precedents of this Court must be followed by a panel in the absence of in banc rehearing. 2. A finding of bad faith in a trademark infringement case is subject to review only for clear error. See ISCYRA I, 80 F.3d at 753. The District Court found that unrebutted evidence showed that “the sales of (Hilfiger’s] garments were driven by the prominent use of defendant’s name, initials and crests, which identified the garments as [Hilfiger’s] products, and not the words ‘Star Class.’ ” International Star Class Yacht Racing Ass’n v. Tommy Hilfiger U.S.A., Inc., No. 94 Civ. 2663 (RPP), 1999 WL 108739, at *1 (S.D.N.Y. Mar. 3, 1999). From this fact the Court inferred that “there would be little, if any, motivation for bad faith appropriation” of ISCYRA’s ma: k by Hilfiger in order to confuse or deceive consumers o° to profit from the Association’s reputation. Jd. Moreover, the trademark search conducted by Hilfiger’s attorneys, which was restricted to clothing classifications, found no mark for “Star Class.” Thus, the Court found, there was “no show- ing that Hilfiger had knowledge of the existence of [ISCYRA] or of the mark’s association with any entity at all, let alone any commercial use of the designation Star Class.” Id. The District Court also found that, based on the holdings of contemporary trademark cases, Hilfiger did not have an obligation to conduct a more extensive trademark search in 1994. The Court found that Hilfiger’s use of the Star Class mark as a decoration rather than as a trademark was con- sistent with the advice of Hilfiger’s attorney that “use and registration” would require a full trademark search. Id. at *2. Moreover, the Court found that the advice of Hilfiger’s re 4a attorney that “Star Class” would be a weak trademark because of the common use of the terms “Star” and “Class” encouraged Hilfiger to believe that the use of the term was permissible. See id. Finally, the Court found that Hilfiger’s continued sale of infringing garments after it denied Hilfiger’s motion for summary judgment did not indicate bad faith. See id. at *3. From all of these subsidiary findings, the District Court made its ultimate finding that Hilfiger had not acted in bad faith. Although there is some evidence that points toward the existence of bad faith, we cannot say, after review of the record, that we are “ ‘left with [the] definite and firm conviction that a mistake has been committed.’ ” McNeil-P.C.C., Inc. v. Bristol-Myers Squibb Co., 938 F.2d 1544, 1550 (2d Cir. 1991) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985)). Accordingly, we affirm. FOR THE COURT, KAREN GREVE MILTON, Acting Clerk _ By: /s/ LUCILLE CARR Lucille M. Carr, Operations Manager 5a UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Docket No. 99-7329 Filed April 3, 2000 Received April 6, 2000 At a stated Term of the United States Court of Appeals for the Second Circuit, held at the United States Court- house, Foley Square, in the City of New York, on the 3rd day of April, two thousand. PRESENT: HON. RALPH K. WINTER, Chief Judge, HON. JON O. NEWMAN, HON. JOHN M. WALKER, JR.., ' Circuit Judges. INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff-Appellant, —V.— TOMMY HILFIGER, Defendant-Appellee. | | 6a A petition for panel rehearing and a petition for rehear- ing en banc having been filed herein by the appellant Inter- national Star Class Yacht Racing Association. Upon consideration by the panel that decided the appeal, it is Ordered that said petition for rehearing is DENIED. ; It is further noted that the petition for rehearing en banc has been transmitted to the judges for the court in regular active service and to any other judge that heard the appeal and that no such judge has requested that a vote be taken thereon. FOR THE COURT KAREN GREVE MILTON, Acting Clerk By: /s/ BETH J. MEADOR Beth J. Meador, Administrative Attorney Ta UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 1997 (Argued: March 5, 1998 Decided: May 29, 1998) Docket Nos. 97-7761, -7799 INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff-Appellant- Cross-Appellee, —vVi— TOMMY HILFIGER U:S.A., INC., Defendant-Appellee- Cross-Appellant. Before: OAKES, NEWMAN and CABRANES, Circuit Judges. 8a The International Star Class Yacht Racing Associa- tion (“ISCYRA”) appeals from the decision of the United States District Court for the Southern Disttict of New York, Robert P. Patterson, Jr., Judge, denying ISCYRA monetary relief and attorney fees for the infringing use of ISCYRA’s mark “Star Class” by Tommy Hilfiger U.S.A., Inc. (“Hilfiger”). The district court held that ISCYRA had failed to demonstrate that Hilfiger used the mark in bad faith. Hilfiger cross-appeals the district court’s calculation of damages without considering evidence of Hilfiger’s costs and other deductions and its decision to strike the testimony of Hilfiger’s lead trial counsel. Vacated on appeal, vacated in part and affirmed in part on cross-appeal, and remanded. J. JOSEPH BAINTON, New York, NY (Thomas D. Drescher, John G. McCarthy, Ross & Hardies, of counsel), for Plaintiff-Appel- lant-Cross-Appellee. Lou!s S. EDERER, New York, NY (Joseph H. Lessem, Cowan, Liebowitz & Latman, P.C.; Steven Gursky, Robert Devlin, Gursky & Associates, of counsel), for Defendant-Appellee-Cross-Appellant. OAKES, Senior Circuit Judge: The International Star Class Yacht Racing Associa- tion (“ISCYRA”) appeals from the decision of the United States District Court for the Southern District of New York, Robert P. Patterson, Jr., Judge, denying ISCYRA monetary 9a relief and attorney fees for the infringing use of ISCYRA’s mark “Star Class” by Tommy Hilfiger U.S.A., Inc. (“Hilfiger”). The district court held that ISCYRA had failed to demonstrate that Hilfiger used the mark in bad faith. Hilfiger cross-appeals the district court’s calculation of damages without considering evidence of Hilfiger’s costs or the percentage of profits from sales attributable to Hilfiger’s mark rather than ISCYRA’s, and its decision to strike the testimony of Hilfiger’s lead trial counsel. We vacate and remand the court’s findings as to Hilfiger’s bad faith because the district court improperly relied on factual findings from an earlier, unrelated antitrust case. We also vacate the district court’s determination as to Hilfiger’s costs and deductions, but affirm the decision to exclude the testimony of Hilfiger’s counsel. I. BACKGROUND ISCYRA is a non-profit corporation created to govern and promote the sport racing of a class of sail boats known as “Star Class” yachts. ISCYRA owns the rights to the design of Star Class boats, and monitors the construction, certification, and registration of vessels in this class. One hallmark of a Star Class vessel is that it must display a solid five-point star on its main sail. ISCYRA also uses the star along with the words “Star Class” on hats, clothing, pins, and decals sold to the public. ISCYRA permits yacht clubs hosting regattas to use the star insignia and the term “Star Class” on promotional materials, and collects roy- alties for the use of these marks on clothing and other mar- ketable materials. ISCYRA has never registered “Star Class” for federal trademark protection. . In March 1994, ISCYRA learned that Tommy Hilfiger, a leading designer and marketer of men’s clothing, was man- ufacturing and selling garments bearing the words “Star Class” with the star insignia. Promotional materials issued 10a with the collection described the clothing as “classic nau- tical sportswear” with “authentic details taken from the sport of competitive sailing” and “elements and patterns taken directly from actual racing sails.' Hilfiger’s name and logo also appeared on most of the garments. While designing the clothes, Hilfiger had requested from its attorneys a trademark screening search for the words “Star Class.” Hilfiger did not specify its intended use of the words, nor did it reveal that it had taken the term from “the sport of competitive sailing.” The search was thus lim- ited to registered federal trademarks, with a particular emphasis on trademarks in class 25, a clothing classifica- tion. One of Hilfiger’s attorneys, Neil A. Burstein, reported to Hilfiger that he had found no competing marks in his search, and stated, “At this point, we would not necessar- ily rule out your use and registration of this mark, subject to our usual disclaimers regarding the need to first obtain and review a full trademark search.” (emphasis in origi- nal). Hilfiger did not conduct a full search of all prior com- mercial uses of the term until after it was sued by ISCYRA, at which point it learned that “Star Class” was a mark in the yachting context. On April 13, 1994, ISCYRA sued Hilfiger for false des- ignation of origin under the Lanham Act, 15 U.S.C. § 1125(a) (1994), common law trademark infringement, and injury to its business reputation and trademark dilu- tion under New York state law. On April 25, 1995, the district court granted ISCYRA a permanent injunction to bar Hilfiger’s use of the mark “Star Class,” but declined to award monetary relief or attorney fees because it deter- | Hilfiger’s designer admitted at trial to examining books and other materials on sailboat racing which referred to Star Class racing and Star Class boats while designing the collection. See ISCYRA v. Tommy Hilfiger U.S.A., Inc., No. 94 Civ. 2663, 1995 WL 241875, at *3 (S.D.N.Y. April 26, 1995). * tn One, lla mined that ISCYRA had not sustained any actual damages and that Hilfiger had not used the mark in bad faith. ISCYRA appealed to this Court, which affirmed in part and vacated in part. See ISCYRA v. Tommy Hilfiger, U.S.A., Inc., 80 F.3d 749 (2d Cir. 1996). We ruled that the district court had made erroneous and incomplete findings of fact and remanded for further consideration of whether Hilfiger had willfully infringed ISCYRA’s mark. In particular, we held that the district court should have considered as evi- dence relevant to determining bad faith Hilfiger’s failure to follow its attorneys’ advice to conduct a full search and Hilfiger’s continued marketing of the “Star Class” clothing after ISCYRA had filed suit. Jd. at 754. On remand, the district court again determined that insufficient evidence existed to show that Hilfiger had used ISCYRA’s mark in bad faith. The district court initially allowed Hilfiger to reopen the record to present additional testimony by Hilfiger’s lead counsel, Steven Gursky, relat- ing to the legal advice received by Hilfiger prior to using ISCYRA’s mark. However, in its opinion issued on March 4, 1997, the district court rejected this new testimony in toto, reasoning that Hilfiger was on notice in the first trial that bad faith was at issue, and should have introduced all relevant evidence then. The court then considered the two elements deemed important by this Court—the failure to conduct a full search in contravention of the disclaimer contained in Burstein’s letter, and the continued sale of garments after the commencement of the suit. As to the failure to conduct a full search, the district court evaluated the disclaimer letter in light of the court’s understanding of prevailing industry practice in trademark searches. To establish industry custom, the district court took judicial notice, of facts and testimony from Corsearch v. Thomson & Thomson, 792 F. Supp. 305 (S.D.N.Y. 1992), an antitrust case that the district judge had tried in 1991 concerning trademark search firms. The court found that standard 12a industry practice was to conduct only “knock-out” or “rule- out” searches of names and symbols in the database of fed- erally registered trademarks before using a contemplated mark, and that comprehensive or more sophisticated searches were reserved, when ordered at all, for-marks that were seriously being considered for trademark registration. ISCYRA v. Tommy Hilfiger, U.S.A., Inc., 959 F. Supp. 623, 625-26 (S.D.N.Y. 1997) (citing Corsearch, 792 F. Supp. at 311). The court therefore interpreted Burstein’s disclaimer as boilerplate cautionary language, referring to the need to conduct a full search only if Hilfiger intended to register the term “Star Class” and use it as a stand-alone trademark. As Hilfiger claimed to use the term “Star Class” only as decoration and not as a stand-alone trademark, the court concluded that “there was no reason for Hilfiger to order its law firm to undertake a full search,” and that its failure to do so was not inconsistent with its attorneys’ advice. ISCYRA, 959 F. Supp. at 627-28. Finally, the court found that Hilfiger’s continued sale of garments bearing the “Star Class” mark was consistent with the opinion of Hilfiger’s attorneys that ISCYRA’s non- registered mark was entitled to “rather weak” protection, and thus was also not evidence of bad faith. Jd. at 628-29. Anticipating the possibility that this Court might not agree on appeal, the district court determined, as evidence of | damages, that Hilfiger shipped $818,419.85 worth of | infringing goods after receiving ISCYRA’s cease-and- desist letter. The court made no deduction for Hilfiger’s costs because “[djefendant offered no evidence of its costs attributable to these sales.” Jd. at 629. The court denied both ISCYRA’s and Hilfiger’s motions for reconsideration on June 5, 1997. This appeal followed. / , 13a II. DISCUSSION On appeal, ISCYRA contends that the district court relied on erroneous conclusions of law and fact in making its determinations. Among other claims, ISCYRA argues (1) that it was improper for the court judicially to notice facts from Corsearch that were outside the record of this case, and (2) that the court erred in not considering all of Hilfiger’s profits as evidence of damages, rather than just profits from sales made after receipt of ISCYRA’s cease- and-desist letter. Hilfiger cross-appeals the decision to dis- regard the testimony of its counsel, Steven Gursky, and the court’s failure to consider evidence of Hilfiger’s costs con- tained in one of ISCYRA’s exhibits, and evidence of sales due to the appeal of Hilfiger’s mark in calculating dam- ages. A. Judicial Notice The Federal Rules of Evidence provide that courts may only take judicial notice of facts outside the trial record that are “not subject to reasonable dispute.” Fed. R. Evid. 201(b). Such facts must either be “(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be ques- tioned.” Id.; see also Alvary v. United States, 302 F.2d 790, 794 (2d Cir. 1962). Because the effect of judicial notice is to deprive a party of the opportunity to use rebuttal evi- dence, cross-examination, and argument to attack contrary evidence, caution must be used in determining that a fact is beyond controversy under Rule 201(b). See Fed. R. Evid. 201(b) advisory committee notes; cf. Brown v. Piper, 91 U.S. 37, 43 (1875) (“Care must be taken that the requisite notoriety exists. Every reasonable doubt upon the subject should be resolved promptly in the negative.”). l4a In this case, the district court relied on statements of fact contained in its 1992 Corsearch opinion to establish pre- vailing trademark search practices in 1993.* This was error. As we stated in Liberty Mutual Ins. Co. v. Rotches Pork Packers, Inc., 969 F.2d 1384 (2d Cir. 1992), “A court may take judicial notice of a document filed in another court ‘not for the truth of the matters asserted in the other liti- gation, but rather to establish the fact of such litigation and related filings.’ ” Jd. at 1388 (holding that facts contained in a bankruptcy court order were an improper subject for judicial notice) (quoting Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991)). Facts adjudicated in a prior case do not meet either test of indisputability contained in Rule 201(b): they are not usually common knowledge, nor are they derived from an unimpeachable source. See, e.g., United States v. Jones, 29 F.3d 1549, 1553 (11th Cir. 1994) (holding that findings concerning the defendant’s work habits made by another district court in a separate litigation were not sufficiently indisputable to be judicially noticed); Holloway v. Lockhart, 813 F.2d 874, 879 (8th Cir. 1987) 2 The court considered such evidence relevant to interpreting the disclaimer contained in Burstein’s letter and in evaluating Hil- figer’s response to the letter. While we agree that industry custom is relevant to determining whether Hilfiger engaged in ‘willful blind- ness’ by refusing to conduct a more comprehensive search, such evi- dence would not necessarily be dispositive of the question. For instance, even if ‘knockout’ searches are sufficient in the usual case, here Hilfiger was aware that it was lifting “authentic details from the sport of competitive sailing.” As we said in ISCYRA I, “Given Hil- figer’s awareness that it was copying. . . ‘from the sport of com- petitive sailing,’ it should have shown greater concern for the possibility that it was infringing on another’s mark.” 80 F.3d at 753. We believe that Hilfiger’s failure to conduct a full search therefore must be evaluated not only in light of industry custom, but also in light of its knowledge that ‘Star Class’ might be a mark in the yacht- ing context, together with any other factors that might prove or negate - bad faith. 1Sa (declining to allow judicial notice of finding in a related litigation that use of tear gas against a group of inmates was reasonable and necessary because that fact could only be ascertained by independent examination and evaluation of witnesses); Ujvari v. United States, 212 F. Supp. 223, 228 (S.D.N.Y. 1963) (refusing to take judicial notice of exchange rates found in previous Tax Court cases because court must independently determine questions of fact in case before it).’ The suggestion has also been made that allowing courts to rely on factual findings from previous cases could render the doctrine of collateral estoppel super- fluous, see 21 Charles Alan Wright & Kenneth W. Graham, Federal Practice and Procedure: Evidence § 5106 at 245 (Supp. 1998); Jones, 29 F.3d at 1553, though this may overstate the case. Moreover, prevailing trademark search practices may well have changed or developed in the intervening years between the Corsearch trial and the events at issue in this case. ISCYRA cites to at least one article on the subject, published in 1994, stating that the “usual” practice for trademark counsel is to conduct a full search once a mark Passes its initial screening. See Glenn A. Gundersen, Trademark Searching: A Practical and Strategic Guide to the Clearance of New Marks in the United States 17 (1994). Since the industry practice is subject to dispute, ISCYRA is entitled to “have its ‘day in court,’ and, through time-honored methods, test the accuracy of [Hil- figer’s] submissions and introduce evidence of its own.” Oneida Indian Nation of New York v. State of New York, 3 The cases cited by the district court in its opinion denying the parties’ motions for reconsideration do not apply. In those cases, the appellant had either waived its right to object to the use of judi- cial notice, see United States v. Vasquez-Guerrero, 554 F.2d 917, 919 n.1 (9th Cir. 1977), or the decision pre-dated the enactment of Rule 201(b), see, e.g., In re Diversey Hotel Corp., 165 F.2d 655, 657 (7th Cir. 1948), - 16a 691 F.2d 1070, 1086 (2d Cir. 1982) (favoring this course to judicial notice where secondary sources are disputed).* Hilfiger claims that a remand is unnecessary since the district court relied on Burstein’s trial testimony and prior case law, as well as facts contained in the Corsearch opin- ion, to ascertain that defendant’s minimal trademark search efforts did not constitute willful infringement. While the district court did consider these other materials, it used these sources primarily to bolster the conclusions found in the Corsearch opinion. See ISCYRA, 959 F. Supp. at 626, 627-28. For instance, the court evaluated Burstein’s testi- mony in light of its agreement with the trade practices revealed in Corsearch. Id. at 628. Because the district court did not independently evaluate the significance of this other evidence, we cannot say that the court would have reached the same conclusions without relying on the Corsearch findings. We therefore vacate the lower court opinion without reaching the bulk of ISCYRA’s other claims, and remand for further proceedings. * Our analysis is not changed by ISCYRA’s failure to object to the district court's consideration of findings from Corsearch at the second trial because the district court never explicitly informed the parties that it planned to rely on the Corsearch opinion. Indeed, in its only comments on the subject, the court appeared to acknowl- edge that such reliance would be improper. See, e.g., Tr. at 572 (“Let me tell you something that troubled me when I reviewed the Court of Appeals’ opinion. I think, maybe unbeknownst to myself, I unwittingly took into account testimony I heard in the Thomson & Thomson case as to how people go about ordering trademark searches as a regular course of business, and when they use the scan and when they go for a full search. And I don’t know how to divorce what I learned there from the record here. . . . I leave it with you as maybe you have thoughts about it.”). ISCYRA therefore could not reasonably be expected to raise the issue until after the district court issued its opinion. ‘ B. Profits The one remaining issue in ISCYRA’s appeal that we address is whether the district court erred by not consid- ering, as evidence of damages, all of Hilfiger’s profits from sales of “Star Class” clothing, rather than just profits from sales made after the receipt of the cease-and-desist letter. A district court faced with a Lanham Act violation pos- sesses “some degree of discretion in shaping [the] relief” according to the principles of equity and the individual cir- cumstances of each case. George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992) (citing 15 U.S.C. § 1117(a) (1994)). Nevertheless, that discretion must oper- ate within the parameters for allowing an accounting of profits in this circuit. Jd. We have held that an accounting for profits is available, even if a plaintiff cannot show actual injury or consumer confusion, “ ‘if the accounting is necessary to deter a will- ful infringer from doing so again.’ ” Jd. (quoting Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767, 772 (2d Cir. 1984)). As with the decision to award profits at all, the decision whether to award a full or partial accounting must be based on what is necessary to deter future misconduct. In W.E. Bassett Co. v. Revlon, Inc., 435 F.2d 656, 664 (2d Cir. 1970), a case concerning particularly egregious infringement of a competitor’s mark, we stated that “the only way the courts can fashion a strong enough deterrent is to see to it that a company found guilty of willful infringement shall lose all its profits from its use of the infringing mark.” (emphasis in original). While this lan- guage could be read to suggest that a defendant must dis- gorge all of its profits any time willful infringement is proved, more recent cases establish that a district court has discretion to fashion an alternative remedy, or to award only a partial accounting, if the aims of equity would be better served. See George Basch, 968 F.2d at 1540 (stating ee ee 18a that a finding of willful infringement is necessary but not sufficient to award an accounting for profits); Allen v. Men's World Outlet, 679 F. Supp. 360, 371 (S.D.N.Y. 1988) (declining to award an accounting for profits for willful use of the plaintiff's likeness in an advertisement because a permanent injunction would adequately serve the goal of deterrence). As the record here is unclear as to the egre- giousness of Hilfiger’s conduct, we express no opinion at this stage as to the appropriate award of profits that might be necessary to deter future wrongdoing. We leave this question for the district court to consider, if necessary, on remand. On its cross-appeal, Hilfiger claims that the district court improperly calculated the profits due to ISCYRA by dis- regarding evidence of Hilfiger’s costs and other deductions offered at trial. We are inclined to agree. As to costs, Hil- figer points to cost figures contained in one of ISCYRA’s exhibits. Although this evidence was introduced by ISCYRA to demonstrate Hilfiger’s sales, ISCYRA did not specify any limitations as to its contents or usage. More- over, the cost figures in Exhibit 90 were mentioned at one point during the trial when the sales figures were corrected. Although defendant’s counsel neglected to alert the District Judge to its claim that Exhibit 90 provided a basis for deriving a profit margin, the existence of the cost data in the record undermines the court’s finding that no evidence of costs existed. On remand, the district court should con- sider such evidence, if necessary, according it whatever weight is appropriate. Hilfiger further claims that the district court should have subtracted the percentage of profits attributable to Hilfiger’s mark rather than ISCYRA’s in assessing any award to ISCYRA. In Mishawaka Rubber & Woolen Mfg. Co._v. §.S. Kresge Co., 316 U.S. 203, 206 (1942), the Supreme Court held that a plaintiff “is not entitled to prof- its demonstrably not attributable to the unlawful use of his 19a mark,” but that the burden of proving any deduction for sales not based on the infringing mark falls upon the infringer. Jd. at 206-07; see also 15 U.S.C. § 1117 (1994); ° George Basch, 968 F.2d at 1540 (listing the degree of cer- tainty that the defendant benefitted from its unlawful con- duct as one factor to consider in determining whether to order an accounting for profits in cases of willful infringe- ment). Hilfiger presented evidence at trial through the testimony of Allan Zwerner, a buyer for a large chain of department stores, that some portion of the sales of its nautical sportswear line was attributable to the appeal of Hilfiger’s well-known mark and reputation. The district court may consider this evidence on remand in assessing whether Hilfiger has met its burden of proof. However, where infringement is especially malicious or egregious, allowing a defendant, especially a dominant - competitor who has made use of the mark of a weaker entity, to deduct profits due to its own market dominance in some circumstances inadequately serves the goal of deterrence. See Truck Equipment Service Co. v, F ruehauf Corp., 536 F.2d-1210, 1222-23 (8th Cir. 1976) (declining to allow an eighty percent deduction for profits attributable to strong consumer association with the mark of a well- known infringer that had copied the distinctive design of a competitor); cf. W.E. Bassett, 435 F.2d at 664 (ordering a full accounting of all profits where Revlon deliberately made use of the mark of a smaller competitor because such a remedy was “the only way the courts can fashion a strong enough deterrent”). As with ISCYRA’s argument on dam- ages, we cannot determine whether this case presents such a situation without further fact-finding by the district court as to the degree of bad faith, if any, displayed by Hilfiger. We therefore leave the issue for the district court to address on remand. 20a ‘ C. Exclusion of Gursky’s Testimony Finally, Hilfiger claims that it has been unfairly preju- diced by the district court’s exclusion of testimony by its lead counsel. The decision whether to hear additional evi- dence on remand is within the sound discretion of the trial court judge. Springs Mills, Inc. v. Ultracashmere House Ltd., 724 F.2d 352, 355 (2d Cir. 1983). Our review of this case convinces us that no abuse of discretion occurred here. On remand, Hilfiger sought to introduce Gursky’s testi- mony to rebut any inference that Hilfiger had acted in bad faith by ignoring its counsel’s advice. This testimony was rejected because Hilfiger’s intent in using the Star Class mark was at issue in the first trial, and Hilfiger had ample opportunity at trial to develop a record and to present any evidence relevant to assessing whether its use of the mark was in good faith. Under these circumstances, the district court could reasonably conclude that the inability to sup- plement this record on remand would not result in undue prejudice to Hilfiger. III. CONCLUSION For the reasons set forth above, we vacate the opinion of the district court, and remand for further proceedings con- sistent with this opinion. % 2la UNITED STATES COURT OF APPEALS FOR THE SECOND Circurr No. 689—August Term, 1995 (Argued December 6, 1995 Decided April 4, 1996) Docket No. 95-7547 INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff-Appellant, —_—V— TOMMY HILFIGER, U.S.A., INC., Defendant-Appellee. Before: NEWMAN, Chief Judge, OAKES and CABRANES, Circuit Judges. Appeal from a portion of the judgment of the United States District Court for the Southern District of New York (Robert P. Patterson, Jr., Judge), denying appellant an 22a accounting of defendant's profits, attorney fees, and an injunction against use of its five-pointed star mark under the Lanham Act. Affirmed in part, vacated in part, and remanded. J. JOSEPH BAINTON, New York , NY (Thomas D. Drescher, John G. McCarthy, Ross & Hardies, of counsel), for Plaintiff-Appel- lant. STEVEN BENNETT BLAU, New York, NY (Steven R. Gursky, Gursky & Blau, of counsel), for Defendant-Appellee. OAKES, Senior Circuit Judge: This appeal involved the availability of monetary relief and attorney fees in a trademark infringement action brought under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1994). The International Star Class Yacht Rac- ing Association (“ISCYRA”) appeals from a portion of the judgment of the United States District Court for the South- ern District of New York (Robert P. Patterson, Jr., Judge), entered on May 19, 1995. The district court, after a bench trial, granted ISCYRA’s application for a permanent injunction against use of its “STAR CLASS” mark by the appellee Tommy Hilfiger U.S.A., Inc. (“Hilfiger”) but denied injunctive relief as to ISCYRA’s insignia, a solid five-pointed star. The district court also denied ISCYRA an accounting of Hilfiger’s profits, actual damages, and attor- ney fees. 23a ISCYRA contends that the district court’s denial of an accounting and fees was based on its erroneous finding that Hilfiger showed no bad faith in the use of ISCYRA’s unregistered mark. ISCYRA also argues that there was suf- ficient consumer confusion generated by Hilfiger’s prod- ucts to justify the award of actual damages. Finally, ISCYRA contests the district court’s conclusion that it is entitled to no trademark protection for its five-pointed Star insignia. Because we find that the district court made erroneous and incomplete factual findings on the issue of Hilfiger’s bad faith, we vacate its denial of an accounting of profits and attorney fees and remand for reconsidera- tion of the bad faith issue. On the other two points, we affirm. BACKGROUND ISCYRA is a non-profit corporation founded in 1922 for the purpose of governing and promoting the sport of Star Class yacht racing. Star Class sailboats are sophisticated one-design racing craft sailed in high-profile regattas and championship series around the world, including the Sum- mer Olympics. ISCYRA owns the rights to the design of Star Class boats and closely monitors the construction, cer- tification, and registration of each boat in the class. One requirement of a genuine Star Class boat is that its main sail bear the solid red five-pointed star which serves as ISCYRA’s insignia or a star of green, blue, silver or gold awarded at ISCYRA championship races. The red star is also used, along with the words “STAR CLASS”, on the yachting hats, clothing, flags, decals and pins sold by ISCYRA. ISCYRA permits yacht clubs hosting regattas to use the insignia and “STAR CLASS” on promotional items, and has collected royalties for their use in jewelry and posters. 24a Hilfiger is a successful designer and marketer of men’s clothing with sales of over $227 million in 1993. Its 1994 Spring Collection included garments bearing the words “STAR CLASS” with a solid red five-pointed star. These garments were marketed as “classic nautical sportswear” with “authentic details taken from the sport of competitive sailing” and “elements and pattern taken directly from actual racing sails.” Hilfiger’s name and flag trademarks also appeared prominently on all the garments, which were marketed in the United States and abroad. While designing the 1994 Spring Collection, Hilfiger requested a trademark screening search for the words “STAR CLASS” from its attorneys. Hilfiger did not spec- ify that it planned to use the words on ‘nautical’ clothing with details from “competitive sailing,” and the search was limited to federal trademarks in class 25, a clothing clas- ~ sification. The screening search did not reveal any identi- cal registered or applied-for federal trademarks, but Hilfiger’s attorneys advised it to conduct a “full trademark search” before using the words “STAR CLASS.” Hilfiger did not conduct such a search until after it was sued by ISCYRA, at which point it learned that “STAR CLASS” was indeed a mark in the yachting context. In April 1994, ISCYRA initiated this action against Hilfiger for false designation of origin under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1994), common law trademark infringement and unfair competition, and injury to business reputation and trademark dilution under New York state law. Despite notice of ISCYRA’s suit and the results of the full trademark search, Hilfiger did not recall its allegedly infringing merchandise from retailers and had sold over $3 million worth of garments bearing the “STAR CLASS” mark by the time the case came to trial in January 1995. No one from Hilfiger took the witness stand during the two-day bench trial. 25a The district court granted ISCYRA’s application for a permanent injunction under the Lanham Act against use of its “STAR CLASS” mark by Hilfiger, but denied injunctive relief as to ISCYRA’s insignia, a solid five-pointed star. The district court also denied ISCYRA’s request for accounting of profits, actual damages, and attorney fees, and dismissed ISCYRA’s state law and unfair competition claims. On appeal, ISCYRA argues that the district court erred in denying an accounting and attorney fees based on its conclusion that Hilfiger did not act in bad faith in using the “STAR CLASS” mark. ISCYRA maintains that (1) Hilfiger’s failure to conduct a comprehensive trademark search; (2) Hilfiger’s failure to recall garments bearing “STAR CLASS” from its inventory and its continued sales of these garments after ISCYRA’s lawsuit put it on notice of ISCYRA’s common kaw trademark; and (3) the evidence of Hilfiger’s intentional copying of ISCYRA’s mark were sufficient to establish bad faith and warrant both an accounting of Hilfiger’s profits and the award of attorney fees. ISCYRA further argues that the district court Clearly erred both in denying actual damages because no actual confusion was caused by Hilfiger’s merchandise and in finding that ISCYRA had no protectible trademark rights in its five-pointed star insignia. We agree with ISCYRA that the district court’s bad faith finding is based on incom- plete findings of fact and erroneous conclusions. We there- fore vacate the denial of an accounting of profits and attorney fees, which rested on the finding of an absence of bad faith, and remand the case to the district court for reconsideration of Hilfiger’s bad faith. We affirm the remainder of the district court’s decision. 26a DISCUSSION | I. The Standards for Monetary Relief and Attorney Fees Section 35(a) of the Lanham Act governs claims for monetary relief and attorney fees made by. plaintiffs who have successfully established a trademark violation. It pro- vides: the plaintiff shall be entitled, . . . subject to the prin- ciples of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. . . . The court in exceptional cases may award reasonable attorney fees to the pre- vailing party. 15 U.S.C. § 1117(a) (1994). Applying Section 35(a), the district court found that ISCYRA could not recover an accounting of Hilfiger’s profits, actual damages, or attor- ney fees. We review the district court’s decision for abuse of discretion. George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir.), cert. denied, 506 U.S. 991 (1992); Goodheart Clothing Co., Inc. v. Laura Goodman Enterprises, Inc., 962 F.2d 268, 272 (2d Cir. 1992). Proof of actual confusion is ordinarily required for recovery of damages for pecuniary loss sustained by the plaintiff. Restatement (Third) of Unfair Competition § 36 emt. 1 (1995). Such damages may include compensation for (1) lost sales or revenue; (2) sales at lower prices; (3) harm to market reputation; or (4) expenditures to prevent, correct, or mitigate consumer confusion. Jd. at § 36(2). Because ISCYRA offered no evidence of actual confusion caused by Hilfiger’s infringing use of the “STAR CLASS” mark and indeed presented no evidence of pecuniary loss, remedy for these actual damages is not available. The unavailability of actual damages as a remedy, how- ever, does not preclude ISCYRA from recovering an accounting of Hilfiger’s profits or attorney fees. In order to hi niaaniinsaiiniiiiiaesleaiiiaalieeiieeaiiiiiadal as 27a recover an accounting of an infringer’s profits, a plaintiff must prove that the infringer acted in bad faith. Restate- ment (Third), supra, § 37 cmt. E; George Basch Co., 968 F.2d at 1540; see also Resource Developers Inc. v. Statute of Liberty-Ellis Island Foundation, Inc., 926 F.2d 134, 139- 40 (2d Cir. 1991); WE. Bassett Co. vy. Revion, Inc., 435 F.2d 656, 664 (2d Cir. 1970). Similarly, an award of attor- ney fees may be justified when bad faith infringement has been shown. Goodheart Clothing, 962 F.2d at 272; Quaker State Oil Refining Corp. v. Kooltone, Inc., 649 F.2d 94, 95 (2d Cir. 1981) (per curiam). In order to determine whether the district court abused its discretion denying an account- ing of Hilfiger’s profits and an award of attorney fees, we therefore must turn to its finding that Hilfiger did not act in bad faith when it infringed on ISCYRA’s mark. II. The District Court’s Bad Faith Finding The district court’s conclusion that Hilfiger did not act in bad faith or willfully infringe in its use of the “STAR CLASS” mark was based on several factual findings which we review for clear error. Bambu Sales, Inc., v. Ozak Trad- ing Inc., 58 F.3d 849, 854 (2d Cir. 1995); Nikon, Inc. v. Ikon Corp.,-987 F.2d 91, 94 (2d Cir. 1993). For the fol- lowing reasons, we hold these findings to be clearly erro- neous and incomplete, necessitating a remand to the district court for further consideration of the issue. Initially, we note a factual error in the district court’s opinion which goes directly to the question of the will- fulness of Hilfiger’s infringement. The district court stated that the trademark search conducted by Hilfiger prior to its use of ISCYRA’s “STAR CLASS” mark was of federal and State marks. In fact, the search was limited solely to reg- istered or applied-for federal trademarks; despite its attor- neys’ advice that a wider search be conducted, Hilfiger did not do one until after ISCYRA filed its suit. 28a The district court relied on Hilfiger’s limited first search as proof that Hilfiger did not “engage in a deceptive com- mercial practice” or otherwise act in bad faith in using ISCYRA’s mark. We are not convinced, however, that such a limited search should exonerate Hilfiger, particularly when Hilfiger ignored the specific advice of its attorneys to search more thoroughly. The district court also found that although Hilfiger inten- tionally copied ISCYRA’s “STAR CLASS” mark, it did not intend to copy a trademark owned by another. The court recognized that Hilfiger’s failure to offer a “credible inno- cent explanation” for its use of ISCYRA’s mark could support an inference of bad faith under Centaur Commu- nications, Ltd. v. A/S/M Communications, 830 F.2d 1217, 1228 (2d Cir. 1987). The court nevertheless concluded that Hilfiger had not willfully infringed on ISCYRA’s mark, cit- ing as evidence the limited trademark search discussed above. In light of Hilfiger’s minimal efforts to ascertain whether “STAR CLASS” was, in fact, a trademark, we agree with ISCYRA that the district court clearly erred in finding Hil- figer guilty only of simple copying and not of intent to copy a mark. Given Hilfiger’s awareness that it was copy- ing “authentic details . . .-from the sport of competitive sailing,” it should have shown greater concern for the pos- sibility that it was infringing on another’s mark. Hilfiger’s choice not to perform a full search under these circum- stances reminds us of two of the famous trio of monkeys who, by covering their eyes and ears, neither saw nor heard any evil. Such willful ignorance should not provide a means by which Hilfiger car evade its obligations under trademark law. In addition to the district court’s two clearly erroneous findings, we believe that its analysis of Hilfiger’s bad faith was incomplete. First, the district court did not address the fact that Hilfiger failed to conduct a full trademark search 29a on “STAR CLASS” before using the mark in direct con- travention of the advice of its attorneys. Other courts have found that an infringer who “acts in reasonable reliance on the advice of counsel” generaily cannot be said to have acted in bad faith. See, €.g., Sands, Taylor & Wood Co. v, Quaker Oats Co,. 978 F.2d 947, 962 (7th Cir. 1992), cert. denied, 507 U.S. 1042 (1993); Cuisinarts, Inc. vy. Robot- Coupe Int’l Corp., 580 F. Supp. 634, 637-39 (S.D.N.Y. 1984). Conversely, the failure to follow the advice of coun- sel given before the infringement must factor into an assessment of an infringer’s bad faith. Second, the district court gave no consideration to Hil- figer’s conduct after ISCYRA brought suit for trademark infringement. The suit gave Hilfiger notice of its potential trademark violation, and the full trademark search that it conducted soon thereafter confirmed the existence of ISCYRA’s mark. Hilfiger nonetheless continued to sell its merchandise with the infringing mark, racking up over $3 million in sales, without regard for the rights of ISCYRA. As counsel for Hilfiger admitted during oral argument, Hilfiger was betting on the fact that ISCYRA would not Prevail in its suit. Hilfiger lost that bet, and should not escape the consequences of its conduct. See Stuart vy. Collins, 489 F. Supp. 827, 832 (S.D.N.Y. 1980) (find- ing willful infringement when defendant continued to use plaintiff’s mark after plaintiff’s attorney demanded that it cease, thereby giving “short shrift to plaintiff’s claim out of arrogance and confidence that he would not mount any significant legal attack”); see also Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132, 1135 (9th Cir. 1986) (courts should remove economic incentive to engage in infringing activity); W.E. Bassett Co., 435 F.2d at 664 (an accounting of profits serves to deter will- ful infringers). As recognized by the Restatement, an accounting of profits should be limited to cases of fraudulent infringe- 30a ment, i.e. “to acts intended to create confusion or deceive prospective purchasers,” Restatement (Third), supra, § 37 cmt. e., and not be awarded in cases where a defendant “deliberately but in good faith used a mark.” Jd. We note that, under this standard, Hilfiger cannot lay claim to a “good faith” belief that it was not infringing on ISCYRA’s mark because it neither fully explored others’ rights to “STAR CLASS” nor ceased its infringing behavior when it was sued. See Nalpac, Ltd. v. Corning Glass Works, 784 F.2d 752, 755-56 (6th Cir. 1986) (exploitation of another’s mark after knowledge of its existence suggests bad faith). We conclude that the district court, in determining whether Hilfiger acted in bad faith, relied on two clearly erroneous factual findings and did not consider all the evi- dence pertaining to the willfulness of Hilfiger’s infringe- ment. We therefore remand the issue of Hilfiger’s bad faith for reconsideration in light of our analysis above. As a result, we cannot review the district court’s denial of an accounting of profits and attorney fees, but instead must vacate the denial and remand. III. Protectibility of ISCYRA’s Five-Pointed Star Mark ISCYRA contends that the district court “appears” to hold that ISCYRA enjoys no trademark protection at all in its five-pointed star insignia, and that the court clearly erred to the extent that its opinion so holds. ISCYRA main- tains that it has limited trademark protection of the insignia when it is used in relation to yachts or professional sailing. We agree with the district court that Hilfiger cannot be enjoined from the use of a five-pointed star symbol on its garments and affirm the district court’s denial of injunctive relief to ISCYRA as to this mark. We do not read the court’s opinion to reach beyond Hilfiger’s use of the insignia on clothing in a manner presented by the facts of this case. The issue of the insignia’s protectibility in a case 3la involving yachting or professional sailing, therefore, was not decided by the district court and is not addressed by our affirmance. CONCLUSION For the foregoing reasons, we vacate the denial of an accounting of profits and attorney fees, and remand the question whether Hilfiger acted in bad faith by using ISCYRA’s “STAR CLASS” mark to the district court for “reconsideration. In all other respects, we affirm. 32a UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 94 Civ. 2663 (RPP) INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff, —against— TOMMY HILFIGER U.S.A., INC., Defendant. OPINION AND ORDER ROBERT P. PATTERSON, JR., U.S.D.J. Upon second remand from the Second Circuit, and act- ing as a finder of fact, this Court finds that plaintiff has not shown that defendant acted in bad faith when it determined to use the plaintiff’s unregistered mark “Star Class” as a decoration on certain of its garments.' The Court reaches this finding of fact excluding from its consideration the 1 Contrary to the Court of Appeals’ finding that “Hilfiger’s- name and logo also appeared on most of the garments,” /nternational Star Class Yacht Racing Ass'n v. Tommy Hilfiger U.S.A. Inc., 146 F.3d 66, 68 (2d Cir. 1998), all of the garments had defendant’s label. One garment, a sweater bearing in large print “Star Class,” did not have in 3-4 inch high letters “Tommy Hilfiger” or “Tommy” on its outside, but did have defendant’s label on the inside of the collar, as well as hang tags denoting its origin. The other garments used large letters to highlight the Hilfiger name, as well as labels and hang tags. 33a evidence of ordinary practice in trademark search matters derived from Corsearch, Inc. y. Thomson & Thomson, 792 F. Supp. 305 (S.D.N.Y. 1992). According to the unrebutted evidence at trial, the sales of defendant’s garments were driven by the prominent use of defendant’s name, initials and crests, which identified the garments as defendant’s products, and not the words “Star Class.” In view of the manner of display and labeling, and the prominent use of the Hilfiger marks, there would be little, if any, motivation for bad faith appropriation of plaintiff’s mark by defendant. The evidence does not demonstrate that Hilfiger willfully intended to Cause con- fusion or deception or to profit from plaintiff’s reputation. Cf. Lang v. Retirement Living Publ’g Co., 949 F.2d 576, 583 (2d Cir. 1991) (determination of infringer’s bad faith “looks to whether the defendant adopted its mark with the intention of Capitalizing on plaintiff’s reputation and good- will and any confusion between his and the senior user’s product”). Tommy Hilfiger U.S.A., Inc. (“Hilfiger”) may have had knowledge that it was drawing “authentic details from the sport of competitive sailing,” see 146 F.3d at 70 n.2, but it had orderéd a trademark search of the mark by its attorneys which did “not reveal any identical federal trademark registrations or applications in class 25 [a cloth- ing classification] which would bar your proposed use of this mark.” (Pl. Ex. 74, quoted in International Star Class Yacht Racing Ass’n vy, Tommy Hilfiger U.S.A., Inc., 959 F. Supp. 623, 626 (S.D.N.Y. 1997), aff’d in part, vacated in part, 146 F.3d 66 (2d Cir. 1998).?) There is no showing that Hilfiger had knowledge of the existence of the International Star Class Yacht Racing Association (the “ISCYRA”) or of the mark’s association with any entity at all, let alone any commercial use of the designation Star ? This caption will hereinafter be referred to as ISCYRA vy. Hilfiger. ec | 34a Class.’ Even knowledge of another’s mark does not auto- matically give rise to an inference of bad faith. See W.W.W. Pharm. Co. v. Gillette Co., 984 F.2d 567, 575 (2d Cir. 1993); Lang, 949 F.2d at 583-84; Sweats Fashions, Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1565 (Fed. Cir. 1987); Karmikel Corp. v. May Dep’t Stores Co., 658 F. Supp. 1361, 1375-76 (S.D.N.Y. 1987); Edison Bros. Stores, Inc. v. Cosmair, Inc., 651 F. Supp. 1547, 1560 (S.D.N.Y. 1987). As in George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1540-41 (2d Cir.), cert. denied, 506 U.S. 991 (1992), in which the defendant's intention to imitate the plaintiff’s trade dress was found insufficient, in itself, to support of bad faith, Hilfiger’s knowledge that it was copying details from the sport of sailing does not show that it engaged in willful deception. Furthermore, it is not dispositive that Hilfiger failed to conduct a more extensive search than a Federal Registra- tion and Application screening within class 25. The Court finds that Hilfiger did not have an obligation, at the rele- vant time in 1994, to do a more extensive search in view of the holdings in Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947 (7th Cir. 1992), cert. denied, 507 U.S. 1042 (1993). Zazu Designs v. L’Oreal S.A., 979 F.2d 499 (7th Cir. 1992), and Hasbro, Inc. v. Lanard Toys, Ltd., 858 F.2d 70 (2d Cir. 1988); see also Sunenblick v. Harrell, 895 3 _ Hilfiger’s designer admitted at trial to examining books and other materials on sailboat racing which referred to Star Class racing and Star Class boats. See 146 F.3d at 68 n.1. This evidence may give rise to an inference that Hilfiger copied the Star Class mark, but it does not prove that the marks were known by Hilfiger or its agents to be trademarks of the ISCYRA or any other entity. See ISCYRA, 959 F. Supp. at 626; ISCYRA v. Hilfger, No. 94 Civ. 2663, 1995 WL 241875, at *3, *11-*12 (S.D.N.Y. April 26, 1995), aff’d in part, vacated in part, 80 F.3d 749 (2d Cir. 1996). The Star Class mark is a descriptive mark, see id. at *7, and there is insufficient evidence to show that when Hilfiger imitated the mark it intended to copy a trade- mark. See id. at *12. 35a F. Supp. 616, 633 (S.D.N.Y. 1995) (failure to conduct a trademark search does not, in itself, support finding of bad faith), aff'd, 101 F.3d 684 (2d Cir.), cert. denied, 117 S. Ct. 386 (1996); Oxford Indus. Inc. y. JBJ Fabric Inc, 6 U.S.P.Q.2d 1756, 1762 (S.D.N.Y. 1988) (same). This Court finds that defendant's intent to use the Star Class mark as a decoration, not as a trademark, was consistent with the advise of Mr. Burstein, its attorney, who stated, “At this point, we would not necessarily rule out your use and reg-' istration of this mark subject to our usual disclaimers regarding the need to first obtain and review a full trade- mark search.” (PI. Ex. 74, quoted in ISCYRA v. Hilfger, No. 94 Civ. 2663 (RPP), 1997 WL 297031, at *2 n.1 (S.D.NY. June 4, 1997), aff’d in part, vacated in part, 146 F.3d 66 (2d Cir. 1998).) “Use and registration” are the requirements for obtaining a federal registration for a stand alone mark, see id., and use of the Star Class mark as a decoration with- out a full search—as opposed to “use and registration” — was not in disregard of the advice of defendant’s attorneys.‘ Defendant's attorneys indicated only that if defendant was seeking to protect this mark as its own, it should have a full trademark search. (Trial Tr. at 336-37.) Defendant had no intention of using the mark in this fashion. In any case, Ms. Luparello, a non-lawyer who was an assistant to Hilfiger’s CEO, and who had responsibilities for interfac- ing with Hilfiger’s attorneys, was told that a search had been conducted and there was no bar to defendant’s use of the mark. Mr. Burstein’s later language was not shown to have had the significant effect on Ms. Luparello that plain- tiff has argued for. (Luparello Dep. at 354-356.) Furthermore, Mr. Burstein’s letter had advised defen- dant: “STAR CLASS would be a rather weak trademark. This is because the words “STAR” and “CLASS” are non- 4 It should be noted that the full Thomson & Thomson search only described ISYCRA’s use of the term as designating “yacht club membership.” (PI. Ex. 79.) 36a distinctive terms used extensively in other fields by third parties.” (Trial Tr. at 310; Pl. Ex. 74, quoted in ISCYRA, 1997 WL 297031, at *5.) This conclusion was not unrea- sonable. Indeed, as the Court noted in its decision after trial, it was a “close question” whether or not plaintiff had any trademark rights. JSCYRA, 959 F. Supp. at 620. While defendant’s efforts to ascertain whether Star Class was, in fact, a trademark must be evaluated in conjunction with its awareness that it was copying details from the sport of sail- ing, see ISCYRA v. Hilfiger, 80 F.2d 749, 753 (2d Cir. 1996); ISCYRA, 146 F.3d at 70 n.2., they also must be con- | sidered in light of Mr. Burstein’s advice that any entity’s | claim to the Star Class mark would be weak. Even had defendant conducted a full trademark search and acquired actual knowledge of prior use of the Star Class mark by plaintiff, a finding of bad faith would not be required if | defendant had relied on the advice of counsel in choosing | the mark and not intended to promote confusion or appro- priate plaintiff’s good will. See W.W.W., 984 F.2d at 575. Bs Further casting doubt on the proposition that defendant | acted in bad faith is the minimal value the Star Class mark added to defendant’s sales, and the improbability that defendant would choose the mark in the hope of deceiving consumers or capitalizing on plaintiff’s reputation. See : Lang, 949 F.2d at 584. In sum, even considering defen- dant’s knowledge that it was copying details from sailing, the facts suggest that it is unlikely defendant acted in bad faith. é Nor does the continued sale of goods bearing plaintiff’s marks after this Court denied Hilfiger’s motion for sum- mary judgment indicate bad faith. In its denial of the motion for summary judgment, the Court merely held that whether plaintiff had trademark rights in “Star Class” was an issue of fact. ISCYRA v. Hilfiger, 33 U.S.P.Q.2d 1610, 1615 (S.D.N.Y. 1994). It did not reject defendant’s argu- ment that plaintiff had no trademark rights in Star Class. | ‘ ‘i 7 37a Indeed, as aforementioned, the Court found it a “close question” whether or not plaintiff had any trademark rights at all. Although this Court found the plaintiff’s unregis- tered mark should merit protection in its opinion and order of April 26, 1995, ISCYRA v. Hilfiger, No. 94 Civ. 2663, 1995 WL 241875 (S.D.N.Y. April 26, 1995), this Court does not find that defendant’s conduct in light of Mr. Burstein’s advice was so unjustified as to support a finding of bad faith. In many cases, courts have disagreed with counsel’s opinion in trademark infringement matters, but not found defendants to have acted in bad faith. See Estee Lauder, Inc. v. The Gap, Inc., 932 F. Supp. 595, 615 (S.D.N.Y. 1996), rev’d on other grounds, 108 F.3d 1503 (2d Cir. 1997); Cuisinarts, Inc. v. Robot-Coupe Int’! Corp., 580 F. Supp. 634, 637 (S.D.N.Y. 1984); Information Clear- ing House, Inc. v. Find Magazine, 492 F. Supp. 147, 161- 62 (S.D.N.Y. 1980) (Weinfeld, J.); A&H Sportswear Co. v. Victoria’s Secret Stores, Inc., 926 F. Supp. 1233, 1268 (E.D. Pa. 1996), aff’d, 49 U.S.P.Q.2d 1493 (3d Cir. 1999). In view of the fact that (1) Hilfiger was only using the Star Class mark as an embellishment on its Nantucket line of clothing, which was exceedingly well trademarked with the Hilfger name designating the source of the goods, (2) there is no showing that Hilfiger intended to copy a trade- mark, (3) Hilfiger’s conduct was consistent with the advice of its attorneys concerning when a-full search would be required, and (4) Hilfiger was reasonably advised by its attorneys that the Star Class mark was weak, the Court finds that the evidence is insufficient to support a finding of bad faith. The Second Circuit’s opinion remanding the case also requested this Court to make determinations as to (1) whether defendant should account to plaintiff for all of its profits from sales of clothing using plaintiff’s mark, or merely for profits from sales made after receipt of plain- tiff’s cease and desist letter: (2) the propriety of deducting 38a defendant's costs of sales; and (3) whether some portion of the sales of nautical sportswear was attributable to the appeal of Hilfiger’s well known mark and reputation. Accordingly, since the Second Circuit may not agree with this Court’s finding of insufficient evidence of bad. faith or wilful misconduct and may make findings of its own, the following findings are made: 1. Defendant’s profits from sales of clothing bearing plaintiff’s mark made prior to receipt of plaintiff’s cease and desist letter need not be disgorged in order to deter future misconduct, particularly because there is no show- ing that defendant knew that plaintiff existed or that any- one owned the Star Class mark, or that defendant intended to copy a trademark. 2. According to Exhibit 9, defendant’s sales following commencement of this action are $818,419.85, and the cost of such sales is $368,288.93, or 45% of sales. Thus, Hilfiger’s profits on those sales amounts to $450,130.92. 3. The evidence shows that the defendant’s profits flowed overwhelmingly from the presence on the clothing of “TOMMY HILFIGER” in big letters, the initials “T.H,” and the Hilfiger flag design mark. (Trial Tr. at 255-259.) Zwerner, a buyer for Burdinee’s, a leading chain of depart- ment stores, testified, “The bigger, the more prominent the Tommy Hilfiger designation, crest or name on the garment the better it sells.” (Jd. at 259.) Zwerner testified that, in contract, the words “Star Class” on garments “didn’t mean anything except ‘He’s high class.’ ” (Id.) To the extent it is pertinent, defendant’s witness Leeds testified that license fees for use of a trademark license range from 2-1/2 to 6% of gross sales. (Trial Tr. at 286.) In this Court’s judgment, the entry of an injunction against use of plaintiff’s trademark was sufficient to deter any further infringement of plaintiff's unregistered mark. 39a As shown by the Zwerner testimony, the use of the Star Class mark conferred little benefit on Hilfiger. Though this Court does not award damages, if it is necessary to make such an award, the Court finds that in light of the small benefit Hilfiger derived from use of the Star Class mark, those damages would be 2-1/2% of $818,419.85, the gross sales of the infringing product after the suit commenced, or $20,460.50. Conclusion The Court finds that plaintiff has not carried its burden of proving by a preponderance of the evidence that defen- dant acted in bad faith by selling infringing garments before or after the cease and desist order, but that if dam- ages are to be assessed based on bad faith. plaintiff should receive $20,460.50 from defendant. IT is SO ORDERED. Dated: New York, New York March 2, 1999 /s/ Robert P. Patterson, Jr. U.S.D.J. Copies of this Opinion and Order sent to: Counsel for Plaintiff BAINTON MCCARTHY & SIEGEL, LLC 130 East 35th Street New York, NY 10016 By: J. Joseph Bainton, Esq. John G. McCarthy, Esq. Tel: 212-725-7780 Fax: 212-725-6920 Counsel for Defendant: GURSKY & EDERER, P.C. 21 East 40th Street, 15th Floor New York, NY 10016 By: Louis S. Ederer, Esq. Steven R. Gursky, Esq. Tel: 212-213-1234 Fax: 212-213-1245 COWAN, LIEBOWITZ & LATMAN, P.C. 1133 Avenue of the Americas New York, NY 10036-6799 By: Louis S. Ederer, Esq. Joseph H. Lessem, Esq. Tel: 212-790-9200 Fax: 212-575-0671 4la UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 94 Civ. 2663 (RPP) INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff, —against— TOMMY HILFIGER U.S.A., INC., Defendant. APPEARANCES Counsel for Plaintiff: Ross & HARDIES Park Avenue Tower 65 East 55th Street New York, New York 1022-3219 By: J. Joseph Bainton John G. McCarthy Chike I. Chukwulozie Tel: (212) 421-5555 Fax: (212) 421-5682 42a Counsel for Defendant: COWAN, LIEBOWITZ & LATMAN, P.C. 1133 Avenue of the Americas New York, New York 100386-6799 By: Louis S. Ederer Joseph H. Lessem Tel: (212) 790-9200 Fax: (212) 790-9300 OPINION AND ORDER ROBERT P. PATTERSON, JR., U.S.D.J. Plaintiff International Star Class Yacht Racing Associ- ation (“ISCRYA”) moves for reconsideration of this Court’s finding in its Opinion and Order entered March 4, 1997 (“March 4, 1997 Opinion”) that defendant Tommy Hilfiger U.S.A., Inc. (“Hilfiger”) did not copy ISCRYA’s trademark in bad faith. Defendant Hilfiger moves to alter and/or amend those parts of the Court’s March 4, 1997 Opinion that (a) failed to deduct from the determination of Hilfiger’s profits the costs identified in Plaintiff’s Exhibit 90 and (b) sustained the objection of plaintiff’s counsel to the testimony of Steven Gursky (“Gursky”) at the October 24, 1996 hearing. For the reasons set forth below, both parties’ motions are denied: I. Plaintiff ’s Motion Plaintiff argues that this Court’s finding in its March 4, 1997 Opinion that Hilfiger did not copy ISCYRA’s trade- mark in bad faith was based on facts that the Court cannot correctly consider because the Court improperly took judi- cial notice of facts arising out of its personal knowledge of 43a industry practice as revealed in a case tried before it in 1991, Corsearch v. Thomson & Thomson, 792 F.Supp. 305 (S.D.N.Y. 1992). It is true that generally dicta from past decisions cannot dispose of factual issues in later cases. See Wooden v., Mis- souri Pacific R. Co., 862 F.2d 560, 563 (Sth Cir. 1989) (rejecting appellant’s argument that district judge should have taken judicial notice, based on dicta in 1949 Supreme Court opinion, that it was common knowledge in 1950s that working in cloud of silicon dust without respiratory gear could cause severe Ming diseases); see also Gasnik v. State Farm Insurance Co., 825 F.Supp. 245, 247 (E.D. Cal. 1992) (rejecting defendant's request that court take judicial notice of its own prior order because prior order is “not an adjudicative fact of which judicial notice can be taken”). A court may, however, “properly notice a doctrine or rule of law from such prior case and apply that principle under the theory of stare decisis.” M/V American Queen vy. San Diego Marine Construction Corp., 708 F.2d 1483, 1491 (9th Cir. 1983) (upholding district judge’s use of findings on reasonableness of certain contract limitations provisions from unpublished orders from same district as partial sup- port for finding of reasonableness of similar limitation pro- vision); cf. United States vy. Vasquez-Guerrero, 554 F.2d 917, 919 n. 1 (9th Cir.) cert. denied 434 U.S. 865 (1977) (district judge had “held comprehensive factual hearings regarding [border control] checkpoints” while trying United States v. Baca, 368 F.Supp. 398 (S.D. Cal. 1973); same judge applied those findings at suppression hearing in later unrelated case to determine permissibleness of a border stop; appellate panel adopted findings with regard to suppression hearing because district judge had “explic- itly stated at the suppression hearing that he was relying upon Baca in holding” that a certain point on the border was a permanent checkpoint, and defense counsel “did not object, except to argue that under subsequent cases, the i doa legal conclusion was incorrect”); In re Diversey Hotel Corp., 165 F.2d 655, 657 (7th Cir.) cert. denied; Kosdon v. Diversey Hotel Corp., 333 U.S. 861 (1948) (in determining whether corporate reorganization filing was in good faith, trial court may take notice of facts brought to its attention in other reorganization proceedings). In this case, the Court found that Hilfiger did not act in bad faith because it did not ignore the advice of counsel. This finding was based in part on viewing the advice given by Hilfiger’s counsel in light of the common industry prac- tice of not always conducting a full trademark search before use of a trademark. This understanding of common industry practice was not based, however, on the Court's own personal knowledge of industry practice. It was based on both Hilfiger attorney Neil Burstein’s (“Burstein”) tes- timony that his firm’s disclaimer only recommended that Hilfiger perform a full trademark search if “Star Class” was to be used as a “stand-alone mark” (in which case the trademark would be “used and registered”),' and on indus- try practice regarding the nature of trademark searches ! In its post-hearing brief to this Court plaintiff mischarac- terized this advice, stating that “Mr. Burstein told Hilfiger without qualification not to rely on his ‘screening search’, which was limited solely to registered and applied-for federal trademarks” (See Plain- tiff’s Revised Second Post-Trial Brief at 20 (citing Pl. Exs. 72,73 & 74; Trial Tr. at 325) ). There is no evidence that Burstein so advised Hilfiger. Rather, Burstein's advice to Hilfiger in the August 6, 1993 letter was the following: “At this point, we would not necessarily rule out your use and registration of this mark subject to our usual dis- claimers regarding the need to first obtain and review a full trade- mark search.” (P1. Ex. 74) (emphasis in text). The Court notes that plaintiff's counsel's Proposed Findings of Fact purport to quote this letter but omit the important words “and registration” after the word “sue”. (See Plaintiff's Proposed Findings of Fact, September 9, 1996 at 428.) Since use and registration are both required to register a trademark, Burstein's use of this language is consistent with his testimony that a full search should be conducted for a stand-alone mark. 45a conducted before adopting a trademark, as evidenced by findings in Corsearch, 792 F.Supp. at 307, as well as on other published judicial opinions which showed that no court had required that companies perform a full trademark Search before use and only two courts had previously required a registered mark search before use. See Inter- mational Star Class Yacht Racing Association vy. Tommy Hilfiger, 1997 WL 91082 at *3 (S.D.N.Y. March 4, 1997) (citing Sands, Taylor & Wood. Co. v, Quaker Oats. Co., 978 F.2d 947 (7th Cir. 1992) cert. denied, 507 U.S. 1042 (1993) aff’g in part 1990 WL 251914 at *16 (N. D. II. Dec.20, 1990) (finding bad faith where defendant failed to conduct registered trademark search until days before air- ing of commercial and had knowledge trademark was in use); see also Zazi Designs v. L’Oreal, 979 F.2d 499, 504 (ith Cir. 1992) (“Firms need only search the register before embarking on development.”); and Hasbro. Inc. v. Lanard Toys, Ltd., 858 F.2d 70 (2nd Cir. 1988)(upholding lower court finding that search limited to only registered marks was not bad faith).) Moreover, the Court raised the findings of Corsearch at the hearing (Transcript of Hearing, “Hearing Tr.” at 572) and invited counsel to comment on those conclusions (id.). Defendant in its brief on remand discussed Corsearch in support of its argument that its actions were in good faith (Defendant’s Post-Trial Memorandum of Law, “Def. Post- Tual Mem.” at 6). Plaintiff’s argument on this motion that it had inadequate notice that the issue of what was accepted industry practice was relevant to the Court’s consideration of whether Hilfiger acted in bad faith is unavailing. Plain- tiff did not object when the Court discussed Corsearch at the hearing, and it presented no case law which either dis- puted the findings of Corsearch and the other cases cited by the Court or which set forth any alternative under- standing of acceptable industry practice. Cf. United States v. Vasquez-Guerrero, 554 F.2d at 919 n. 1. 46a Accordingly, plaintiff’s motion for reconsideration is denied. II. Defendant’s Motion Defendant moves for reargument and to alter and/or amend the Court’s March 4, 1997 Opinion on the grounds that (1) the Court overlooked evidence in the record of Hilfiger’s - costs and the apportionment of Hilfiger’s profits; and (2) the testimony of Gursky should have been admitted into evidence. The standard for a motion for reconsideration or reargument is strict, and it “is not a mechanism to allow parties to relitigate contentions and arguments already briefed, considered and decided.” Yankelevitz v. Cornell University, 1997 WL 115651 at *2 (S.D.N.Y.1997). The Court did not overlook evidence in the record of Hilfiger’s costs as defendant did not introduce any such evidence into the record. Plaintiff’s Exhibit 90 was offered for the purpose of showing Hilfiger’s sales and profits and not its costs. No evidence of those costs was submitted by defendant at the hearing, and no reference to those costs was made by defendant in its post- hearing memorandum. As the Court pointed out in its March 4, 1997 Opinion, Gursky’s testimony at the post-trial hearing is not admitted because it went to the issue of bad faith which defendant had had ample notice would be an issue prior to trial. Thus, defendant could have presented evidence on this issue at trial; by not doing so, it lost its chance. See International Star Class Yacht Racing Association v. Tommy Hilfiger, 1997 WL 91082 at *1. Defendant has presented no evidence or controlling deci- sions that this Court overlooked in its March 4, 1997 Opin- ion so defendant’s motion for reargument is denied. . 47a Ill. The Parties’ Proposed F indings of Fact In its March 4, 1997 Opinion, the Court inadvertently did not review the parties’ Proposed Findings of Fact on the Issue of Bad Faith which were based solely on the trial record and received September 9 and 10, 1996, some weeks prior to the October 24, 1996 Hearing. The parties are enti- tled to rulings on these Proposed findings. Accordingly, the following Findings of Fact are accepted: 1. In its Nantucket line of clothing, Hilfiger used the phrase “Star Class” as part of a composite logo, imme-- diately in conjunction with both the registered Hilfiger name trademark (i.e., TOMMY HILFIGER) and a vari- ant of the registered Hilfiger red, white and blue flag design trademark. Both the Hilfiger name mark and the Hilfiger design mark were larger and more prominent than the phrase “Star Class” (Def. Exh. T-40). 2. The Hilfiger trademark is one of the two leading apparel trademarks in the United States (Leeds, Tran- script of Trial, “Trial Tr.” at 287). 3. Kathleen G. Luparello (“Luparello”), an assistant to the Chief Executive Officer of Hilfiger and Hilfiger’s director of corporate services, was not a member of its design department (Luparello Dep., Trial Tr. at 350). 4. Luparello’s responsibilities include interfacing with Hilfiger’s attorneys on use and protection of Hilfiger’s trademarks (id.). 5. Luparello transmitted to Hilfiger’s attorneys Hilfiger’s request that a trademark search be done on “Star Class” (id., at 352). 6. In 1993, Neil Burstein was of counsel to the law firm of Gursky & Blau, attorneys for defendant (Burstein, Trial Tr. at 307). 48a 7. In or about August 1993, Burstein received Hilfiger’s request to perform a trademark search on the words “Star Class” (id.). 8. Burstein did not know how Hilfiger intended to use the term “Star Class” (id. at 322). 9. Burstein was not informed by anyone at Hilfiger prior to the commencement of the litigation that Hilfiger intended to market clothing with “Star Class” as con- taining “authentic details taken from the sport of com- petitive sailing” (id. at 329). 10. Burstein chose to have a Westlaw trademark screening search performed for federal trademark reg- istrations and pending applications (id. at 307, 309, 335; Pl. Exh. 72, 73). 11. Burstein did two such Westlaw trademark screen- ing searches, one limited to goods in Class 25, cloth- ing. and another for goods and services in all classes (Burstein, Trial Tr. at 324-26; Exh. 72, 73). 12. Burstein concluded from the aforementioned trademark screening searches that (a) there were no registrations or pending applications covering the phrase “Star Class,” (b) there were many third-party usages of marks containing the words “Star” or “Class”, and (c) any mark that used the words “Star” or “Class” would be a very weak mark (Burstein, Trial Tr. at 310). 14. The norma! procedures followed by Burstein did not mandate that a trademark screening search be fol- lowed up with a full trademark search. A full trade- mark search would mot be done if the term did not have trademark significance or would not be used as a stand-alone trademark (id., at 336-37). 49a 15. Burstein believed that he followed normal pro- cedures with respect to Hilfiger’s Nantucket line of clothing including the term “Star Class” (id. at 338). 16. After Hilfiger received a cease and desist letter from counsel for the plaintiff (“ISCYRA”), Burstein caused a full trademark search to be performed by Thomson & Thomson for “Star Class” for clothing and nautical sporting goods (id. at 310-312). 17. The Thomson & Thomson trademark search cov- ered federal registrations, federal applications, state registrations, common law trademarks and trade names (id. at 311; P1. Exh. 79), 18. The Thomson & Thomson search report was more than 140 pages in length (P1. Exh. 79). 19. The Thomson & Thomson search report revealed extensive usages of the words “Star” and “Class”, including instances where “Star Class” was used by third parties as a trademark (Burstein, Trial Tr. at 313- 15; Pl. Exh. 79). 20. No reference to ISCYRA’s use of the phrase “Star Class” appeared in the federal registration portion of the Thomson & Thomson search report (P1. Exh. 79). 21. No reference to ISCYRA’s use of the phrase “Star Class” appeared in the federal application portion of the Thomson & Thomson search report (id.). 22. No reference to ISCYRA’s use of the phrase “Star Class” appeared in the state registration portion of the Thomson & Thomson search report (id.). 23. The only reference in the Thomson & Thomson search report to ISCYRA’s use of the phrase “Star Class” was a listing under “company name” for “yacht club membership” (Burstein, Trial Tr. at 345: Pl. Exh. 79). 50a 24. ISCYRA is not and does not intend to be a com- mercial manufacturer or seller of clothing or apparel (Stip. Facts 9 (1V)(0)). 25. Total sales by ISCYRA of merchandise bearing the phrase “Star Class” was $10,388 in 1992 (Stip. Facts 4 (I1V)(L)). 26. Total sales by ISCYRA of merchandise bearing the phrase “Star Class” was $11,783 in 1993. (Id.) 27. Burstein also caused a trademark search to be done on a design consisting of a five-pointed star (Burstein, Trial Tr. at 318). 28. Burstein testified that he believed that search revealed thousands of marks that had stars in them (id.). 29. If, at the time he performed the Westlaw trade- mark screening search, Burstein had known about ISCYRA’s use of the term “Star Class” and a five- pointed star what he knew at the time of the trial, his legal conclusion would have been that ISCYRA’s use of the words “Star Class” and/or a five-pointed star had no trademark significance (id., at 339-40). 30. Assuming that prior to receiving ISCYRA’s cease and desist letter, Burstein had known of (a) ISCYRA’s existence and its use of “Star Class” as it appears in the Thomson & Thomson search report, (b) Hilfiger’s intention to use “Star Class” on garments in the Nan- tucket line and Hilfiger’s intention to advertise the Nantucket line as containing “authentic details taken from the sport of competitive sailing,” and (c) had had an exampie of the use of that phrase, Burstein would not necessarily have precluded Hilfiger from using “star class” in connection with the Hilfiger mark (id. at 343-45). Sla 31. Luparello read the letter from Burstein marked as Plaintiff’s Exhibit 74 (id. at 354). 32. Burstein’s letter stated the following: The screening search for the mark STAR CLASS did not reveal any identical federal trade- mark registrations or applications in class 25 which would bar your Proposed use of this mark. At this point, we would not necessarily rule out your use and registration of this mark subject to . Also to be considered is that STAR CLASS would be a rather weak trademark. This is because the words “STAR” and “CLASS” are non-distinctive terms used extensively in other fields by third parties (P1. Exh. 74) (emphasis in text). 33. Luparello understood the phrase “our usual dis- claimers” in Burstein’s letter to mean “attorney para- noia,” i.e., “overcautiousness” (Luparello Dep., Trial Tr. at 354), 34. Luparello did not know the differences between a “trademark screening search” and a “full trademark search” (id., at 355-56). 35. Luparello could not recall Burstein or his firm ever sending her a trademark search report that was in a format similar to the ful] Thomson & Thomson trademark search report for “Star Class” in response to a request by her for a trademark search (id. at 357). 36. Luparello could not recall ever having asked any law firm or lawyer to do “a more in-depth search than a usual trademark search” (id. at 358). 52a 37. ISCYRA commenced the present action by a com- plaint served on defendant on April 14, 1994 (Civil Docket Sheet No. 5). 38. $2,334,892.20 worth of sales of clothes in Hilfiger’s Nantucket line using the phrase “Star Class” were made before May 1994, approximately two weeks after ISCYRA commenced its lawsuit against Hilfiger (Exh. to Plaintiffs’ Post-Trial Brief). 39. Only $818,492.85 worth of sales of clothes in Hilfiger’s Nantucket line using the phrase “Star Class” were made after May 1994 (Exh. to Plaintiffs’ Post- Trial Brief). 40. ISCYRA never requested that Hilfiger recall clothing using the term “Star Class” or sought judicial relief to that effect (Complaint; Order to Show Cause entered April 14, 1994). Conclusion For the reasons stated above, both parties’ motions are denied, and this case is hereby closed. IT 1s SO ORDERED. Dated: New York, New York June 3, 1997 /s/) ROBERT P. PATTERSON, JR. Robert P. Patterson, Jr. U.S.D.J. 53a UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 94 Civ. 2663 (RPP) INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff, —against— TOMMY HILFIGER U.S.A., INC., Defendant. APPEARANCES Counsel for Plaintiff: Ross & HARDIES Park Avenue Tower 65 East 55th Street New York, New York 1022-3219 By: J. Joseph Bainton , John G. McCarthy Chike I. Chukwulozie Tel: (212) 421-5555 Fax: (212) 421-5682 54a Counsel for Defendant: COWAN, LIEBOWITZ & LATMAN, P.C. ~ 1133 Avenue of the Americas New York, New-York 100386-6799 By: Louis S. Ederer Joseph H. Lessem Tel: (212) 790-9200 Fax: (212) 790-9300 OPINION AND ORDER ROBERT P. PATTERSON, JR., U.S.D.J. On April 4, 1996 the Second Circuit affirmed in part, vacated in part, and remanded the judgment this Court entered on May 19, 1995. The Second Circuit found that the District Court’s conclusion that there was no evidence of bad faith or wilful infringement in defendant Tommy Hilfiger, U.S.A., Inc.’s (“Hilfiger”) use of the “Star Class” marks was based on two erroneous factual findings: (1) that the trademark search that defendant undertook was of both federal and state marks, when in fact it was of federal marks only, see International Star Class Yacht Racing Association v. Hilfiger, 80 F.3d 749, 752 (2d Cir. 1996); and, (2) that although Hilfiger intentionally copied plain- tiff International Star Class Yacht Racing Association’s (“ISCYRA”) “Star Class” mark, it did not intend to copy a trademark owned by another. Jd. at 753. The Second Cir- cuit found this to be clearly erroneous given Hilfiger’s minimal efforts to ascertain whether “Star Class” was a trademark. Id. The Second Circuit also found that the District Court’s analysis of Hilfiger’s bad faith was incomplete, as the Dis- trict Court did not address Hilfiger’s failure to conduct a 55a full trademark search on Star Class “in direct contravention of the advice of its attorneys,” id. at 754, and did not take into consideration Hilfiger’s continued sale of allegedly infringing merchandise after initiation of this suit. Jd. On remand, the defendant moved to present additional evidence on the issue of its alleged bad faith and the amount of damages to be imposed, based on the Second Circuit’s statement that after plaintiff instituted this action Hilfiger continued to utilize plaintiff’s mark on its apparel, “racking up over $3 millon in sales”. Id. The District Court granted defendant’s motion and allowed the presentation of additional evidence on October 24, 1996. The evidence consisted of the testimony of Steven R. Gursky (“Gursky”), counsel to defendant, whose testimony was designed to rebut the Second Circuit’s statement that defendant ignored the advice of his firm in its use of the “Star Class” mark. Also, a witness from Hilfiger’s con- trollers’ office presented records showing defendant shipped only $818,492.85 worth of goods bearing the words “Star Class” after the commencement of the action (Transcript of October 24, 1996 Hearing, “Hearing Tr.” at 557-60), not the “over $3 million in sales” stated by the Circuit Court. The Court rejects in toto the testimony of Gursky at the October 24, 1996 hearing. Defense counsel had‘adequate notice at trial of the plaintiff’s claim of bad faith and made a record at trial as to the advice defendant received from its counsel on the use of “Star Class”. Contrary to defendant’s contention in its Post-Trial Memorandum of Law on Remand (“Post-Trial Mem.” at 2-3 n. 1) requesting the evi- dentiary hearing, prior to trial the plaintiff did raise the issue of the defendant’s bad faith, albeit in a less direct fashion than suggested by the Second Circuit. The plain- tiff’s complaint filed on April 13, 1994 charged a violation of the Lanham Act, which should have alerted defense counsel to the probability of a claim of bad faith, a factor considered under Lanham Act analysis. See Paddington 56a Corp. v. Attiki Importers & Distributors, Inc., 996 F.2d 577, 584 (2d Cir. 1993). Also, in its Memorandum in Sup- port of Its Motion For a Preliminary Injunction (“Mem. in Supp. of Prelim. Inj.”) filed with the complaint, in sections entitled “Defendant’s Bad Faith” (Mem. in Supp. of Prelim. Inj. at 16) and “Predatory Intent” (/d. at 21), as well as in its Memorandum Opposing Summary Judgment, plaintiff disputed defendant’s claim of no evidence of intentional copying. Similarly plaintiff leveled charges in the Pre-Trial Order of “wilful and deliberate” copying and “deception”, and in its Proposed Findings of Fact and Conclusions of Law, plaintiff charged Hilfiger acted with predatory intent. All of these statements should have put defendant’s coun- sel on notice that at trial plaintiff would be charging bad faith. The fact that defendant’s counsel did not realize at trial that plaintiff was offering evidence which could show bad faith is irrelevant. Defendant’s counsel had an opportunity to counter such claims with proof from the defendant’s executives as to their state of mind in utilizing the mark “Star Class” and chose not to do so, but to rely instead on counter-designations in the deposition testi- mony of defendant’s director of design Michael Sondag (“Sondag”)! to the effect that he did not know that the Star Class existed as a class of racing yachts. (Transcript of Trial of January 9, 10, 1995, “Trial Tr.” at 233-34.) The defense also called Neil Burstein (“Burstein”), of counsel on intellectual property matters to the law firm represent- ing defendant and an adviser to defendant in this matter, to show that the defendant had proceeded to use “Star Class” only after its attorneys had conducted two trademark screening searches. The fact that defendant employed counsel with insufficient trial experience is no excuse for its failure to call additional witnesses. l 227.) Sondag reported directly to Tommy Hilfiger. (Trial Tr. at Ere ener 57a Accordingly, the evidence presented at the trial is the sole basis on which plaintiff’s bad faith claim should be evaluated, and only the evidence at trial (not the evidence at the October 24, 1996 hearing) will be reconsidered in light of the Second Circuit’s Opinion. Discussion In its Findings of Fact and Conclusions of Law, this Court did commit a clear mistake in finding that a trade- mark search of federal and state registrations had been con- ducted by the defendant, as Opposed to just a federal trademark search.” The Court’s recollection of the nature of the “knock-out” trademark search conducted for the defen- dant was clearly incorrect, but this error is not one of any moment, as a state trademark search would not have revealed any trademark of plaintiff’s (Plaintiff’s Exhibit, “Pl. Ex.” 79),? and so this error by the Court does not bear on the issue of defendant’s bad faith. The Second Circuit’s suggestion that, in light of Hilfiger’s minimal efforts to ascertain whether “Star Class” was in fact a trademark, this Court erred in finding Hilfiger guilty only of simple copying and not intent to copy a mark, does not take into account the change in industry practice in trademark searches that took place in the late 1980s and early 1990s of which the District Court was aware. 2 Two trademark search companies, Thomson & Thomson, through Dialog Information Services, Inc., and Trademark Research Corporation, did offer both federal and state trademark screening searches for all fifty states at the time. See Corsearch v. Thomson & Thomson, 792 F.Supp. 305, 307 (S.D.N.Y. 1992) (discussed infra). 3 A full search performed after the initiation of this lawsuit by Thomson & Thomson revealed only common law trademark use by plaintiff. (Transcript of January 9, 10, 1995 Trial, “Trial Tr.” at 317; Pl. Ex. 79.) 58a - Corsearch v. Thomson & Thomson, 792 F.Supp. 305 (S.D.N.Y. 1992), an antitrust case, was tried before this Judge over a period of about four weeks in late 1991. in that case it was uncontested that after the fall of 1989 industry practice in trademark searches underwent a sig- nificant metamorphosis following the general release by the federal patent and trademark office of its computerized data base of all federally registered marks and pending applications. See Corsearch v. Thomson & Thomson, 792 F.Supp. at 308, 323- 25. Thereafter, several firms, includ- ing Corsearch, Mead Data Central and Dun & Bradstreet, entered the trademark screening search field in competition with Thomson & Thomson which had held “monopoly power in the ‘comprehensive trademark search market’ ” and had had an exclusive right, as had Trademark Research Corporation, to license the computerized version of the federal trademark search which they helped develop. Jd. at 308. Testimony in Corsearch revealed that a number of “trademark search firms” now offer only screening searches of the federal data base, id. at 323, and that such firms are widely used by in-house and trademark counsel to conduct “knock-out” or “rule out” searches of names and symbols, and comprehensive or “more sophisticated searches are reserved for marks which have passed knock out tests and are being seriously considered for trademark registration.” Jd. at 311 (quoting Affirmation of Dr. Mar- ion Stewart 9q 21-22). Indeed, industry statistics demonstrated that a multitude of federal trademark applications are regularly filed with- out a full search being conducted.‘ Jd. at 307. It was thus 4 As the Corsearch opinion stated: (T]housands of federal trademark applications are filed each year without ordering a full search from any trademark infor- mation service. . . Corsearch and [Thomson & Thomson] combined performed only approximately 60,000 compre- hensive searches in 1990, a substantial number of which did Hhiiennminnsiii ila aioe ase 59a common practice for businesses to use trademarks and apply for federal registration without conducting a full trademark search and to rely instead on computerized screening searches, or “knock-out” searches, comprised only of federal trademarks and pending applications, before such use and registration. Id. at 307. Indeed, the Court has been unable to find any case prior to the Second Circuit decision which has held that a party in Hilfiger’s position had a duty to conduct a full search of prior uses of a trademark before use, and has only found two explicitly requiring the search for existing registered marks. See Sands, Taylor & Wood. Co. v. Quaker Oats, Co.., 978 F.2d 947 (7th Cir. 1992) cert. denied, 507 U.S. 1042 (1993) (aff’g 1990 WL 251914 at * 20 (N. D. Ill. Dec.20, 1990)); see also Zazu Designs v. L’Oreal, 979 F.2d 499, 504 (7th Cir. 1992) (“Firms need only search the register before embarking on development.”); Hasbro, Inc. vy. Lanard Toys, Ltd., 858 F.2d 70 (2nd Cir. 1988) (upholding lower court finding that search limited to only registered marks was not bad faith). Court Opinions such as these, although principally dicta, evidently were relied upon in business and by trademark counsel, especially by those anxious not to maximize their costs with full searches and anxious not to delay production while a comprehensive search was conducted. In light of the common practice in the industry as revealed in Corsearch and Supported by the case law, defendant's efforts to ascertain whether “Star Class” was a mark of another do not appear to be inadequate. Moreover, defendant's conduct does not appear in any other way to evince an intent to copy the mark of another. There is no question Hilfiger advertised the Nantucket Line as “com- not result in trademark applications. 127,000 trademark applications were filed with the [United States Patent and Trademark Office} in 1990. Corsearch, 792 F.Supp. at 307. 60a bining classic nautical sportswear with a variety of authen- tic details taken from the sport of competitive sailing.” (Trial Tr. at 34, 229.) There was no evidence, however, that Hilfiger had reason to believe that the designation “Star Class” was anything other than a certain type of sailboat used in racing. Hilfiger’s designer admitted examining Stars and Stripes: The Official Record, a coffee table book published by Dennis Connor Sports, a recognized author- ity on sailboat racing (Pl. Ex. 88; Trial Tr. at 230), which referred to Star Class racing and Star Class boats but gave no indication of the affiliation of that phrase with ISCYRA, and treated the phrase generically on many of its pages. See International Star Class Yacht Racing Associ- ation v. Tommy Hilfiger U.S.A., Inc., 1995 WL 241875 at * 7 (S.D.N.Y. April 26, 1995). Designer Sondag stated that he had not determined that Star Class as a class of sailing yachts existed.° (Trial Tr. at 233-34.) There was no show- ing that the defendant knew ISCYRA existed. Even Burstein, who was a member of a yacht club, testified he had no such knowledge (Jd. at 330, 339), and plaintiff offered no evidence anyone else at Hilfiger had such knowledge. _ Counsel for plaintiff’s reliance on the testimony of designer Sondag (a layperson) to the effect that he copied another logo, to show predatory intent to copy the mark of another, is almost laughable. (/d. at 239 (quoting Sondag > In view of Sondag’s testimony, the Court does not find-that defendant’s failure to call Tommy Hilfiger, Sondag’s immediate supervisor, warrants drawing an adverse inference that Mr. Hilfiger’s testimony would have been unfavorable to defendant. There was no showing that Mr. Hilfiger’s testimony would not “merely have repeated other testimony and evidence already before” the Court through Sondag’s deposition, and so an adverse inference would be inappropriate. See 3 Leonard B. Sand et al., Modern Federal Jury Instructions 975.01 (Instruction 75-3) (1996). Counsel advised that all of defendant’s executives were unavailable as it was “market week” in the industry. (Trial Tr. at 223.) 6la Deposition).) The North Sails logo discussed in the designer’s testimony consists of a round circle with a slash mark separating the letters “N” and “S”. (Id. at 35.) Use of a round circle with a slash mark Separating letters or distinctive symbols is a very common trademark design. Hilfiger used the round circle with a double slash mark to enclose and separate the letters “T” and “H” (Jd. at 35- 37), and the double slash mark incorporated the word “HILFIGER” .* (See Def. Ex. 40 (attached as Ex. A).) The - letters “N” and “S” do not resemble “T” and “H”, and the mark may not be considered a “copy” as a matter of law, despite the witness’s use of the vernacular: There is no evidence that this action of Hilfiger’s evinced an intent to copy the mark of another. As the Second Circuit stated, the fact that Hilfiger went ahead with the use of the phrase “Star Class” after receiv- ing defendant’s counsel’s letter of August 6, 1993 to Hilfiger trademark liaison Kathleen Luparello (“Luparello”) must be considered in evaluating Hilfiger’s bad faith. (Letter of Gursky & Blau to Luparello of August 6, 1993, Pl. Ex. 74.) Prior to sending the letter, defendant’s counsel had per- formed a trademark screening search by computer of federal trademark registrations and pending applications for the trade names “Star Class” and “Haberdasher”. (P]. Ex. 72.)' It advised its client in the letter of August 6, 1993 against the use of the trade name “Haberdasher” because of prior use. (PI. Ex. 74.) With respect to “Star Class” it advised: 6 The numbers “0” and “42” were added within the circle, the latter designating Mr. Hilfiger’s age. (Trial Tr. at 240 (quoting Sondag Deposition).) In fact, two screening searches were performed on Westlaw on August 3, 1993. Plaintiff’s Exhibit 72 covered all federal regis- tered and pending applications for “Star” and “Class” (Trial Tr. at 307-8), and Plaintiff’s Exhibit 73 covered “Star Class” for Interna- tional Class 25 (clothing) and U.S. Class 39 (clothing). (Trial Tr. at 324-36.) 62a The screening search for the mark STAR CLASS did not reveal any identical federal trademark regis- trations or applications in class 25 which would bar your proposed use of this mark. At this point, we would not necessarily rule out your use and registra- tion of this mark subject to our usual disclaimers regarding the need to first obtain and review a full trademark search. Also to be considered is the fact that STAR CLASS would be a rather weak trademark. This is because the words “STAR” and “CLASS” are non-distinctive terms used extensively in other fields by third parties. Please do not hesitate to call me directly if you have any questions about the screening search. If you want to proceed with a full search for STAR CLASS, please advise. (Pl. Ex. 74) (emphasis in text). Defendant’s reaction to this letter must be considered in light of the growing use of knock-out searches and the greatly reduced use of full searches by businesses and law firms after 1989. See, e.g., Corsearch v. Thomson & Thomson, 732 F.Supp. at 307, 321 (Thomson & Thomson’s revenues from full searches dropped from ninety-five per- cent to sixty percent of total revenues between 1983 and 1991). In light of this custom and practice in the trademark search field, the underlined section in the letter need not be interpreted as advice to conduct a comprehensive trade- mark search before any use of “Star Class” but more as a “cover your backside” lawyer’s disclaimer of responsi- bility, intended to protect the lawyer in the event of adverse consequences from the adoption of the mark, rather than to advise the client to conduct a full search before using and registering*® “Star Class” as a trademark. Indeed, 8 In order for rights to be perfected in a registered trademark, both use and registration must be shown. See Anne C. Hiaring, “Prin- Lciseimemnnnecnmnhiiimiaaiiiiiis aes ace ti ns 63a Luparello, in the pre-trial deposition read into the record by plaintiff’s attorney, testified she regarded the disclaimer language as “attorney paranoia”. (Trial Tr. at 354 (quoting Luparello Deposition).) At trial, Burstein, the author of the letter, explained the disclaimer as follows during cross- €Xamination: Q: . . . Would you please tell me . . . what the “usual disclaimers” regarding a need to first obtain and review a full trademark search were? A: Well, generally before a mark is used and regis- tered as a stand alone mark, we recommend that a full trademark search be conducted. It’s pretty much the gist of the disclaimers. (Trial Tr. at 327.) Here, Star Class was not used as a “stand alone mark” by Hilfiger to identify the source of goods or to identify a line of goods, nor was it intended to be “used and regis- tered”. The T/H circle symbol, which contains the name “HILFIGER” in good-sized type, was used for decoration, evidently to give the goods “panache”. Another decorative symbol used in a similar manner was a decorated crest bearing the word “NANTUCKET”, under which were two small flags, one of which contained “T * H”. The deco- ration which gave rise to this Suit was a yacht club-type pennant bearing the initials “TH” and the number 42 (Hilfiger’s age), capped by the words “TOMMY HIL- FIGER” in large letters and underlined by the words “STAR * CLASS” in slightly smaller letters. On the left side of the pennant was the notation “EST.”, and on the right, “MCMLXXXV”. The most logical interpretation of this decoration was that the product was from Hilfiger’s ciples of Trademark Law” in Understanding Basic Trademark Law 1996, at 9, 16-17 (PLI Pat., Copyrights, Trademarks, and Literary Prop. Course Handbook Series No. G-451, 1996). 64a best class of products. The name “Star Class” was not reg- istered or attempted to be registered by Hilfiger, and the words were not for use to designate a class of goods. The line of goods was called the “Nantucket Line”, and Hilfiger prominently displayed its stand-alone mark, the name “Tommy Hilfiger”, in large letters on the outside surface of its goods in addition to labeling them inside the collar. If the mark was not intended to be “used and registered as a stand alone mark”, then, according to Burstein’s testimony, there was no reason for Hilfiger to order its law firm to undertake a full search. Burstein’s trial testimony supports the conclusion that his letter was not intended to advise Hilfiger to have a full search done before using “Star Class” unless it was to be used as a “stand alone mark”. While Burstein’s testimony as to the meaning of his firm's disclaimer represents more conservative advice than industry practice in late 1991 and, inferentially, in 1993, since full searches were no longer ordered as a matter of course even when a mark was intended to be used and registered, that advice is not incon- sistent with industry practice when the mark was not intended to be used and registered and only used for dec- oration. Thus, since Hilfiger was only using “Star Class” as a decoration and not as a trademark, its subsequent use of “Star Class” without ordering a full search is not incon- sistent with its attorney’s advice and was consistent with a common industry practice. With respect to the issue of whether defendant’s bad faith is evidenced by its continued sale of the clothes that bore the words “Star Class” after the filing of this lawsuit, the continued sale is consistent with the defendant’s attor- neys’ opinion in the letter of August 6, 1993 (Pl. Ex. 74) that plaintiff’s non-registered mark was “rather weak”. Indeed, the Thomson & Thomson search had revealed that federal registered marks for “Star Class” existed for use on paper goods and printed matter, as well as for interiors, and 65a that an application for “Star Classics” was then pending covering toys and sporting goods (Trial Tr. at 314), and “Star Class” was registered for advertising and business services in Pennsylvania. (Pl. Ex. 79.) As Burstein testi- fied, the comprehensive trademark search had revealed widespread use of “Star” and “Class” by others and evi- denced no use of “Star Class” by plaintiff with respect to apparel but only with respect to yacht club membership. (Jd, at 317.) Plaintiff did not undertake a consumer survey to show that ISCYRA or its mark were widely known to persons interested in purchasing sportswear with a nautical ambiance. See Hilfiger I 1995 WL 241875 at * 8. No evi- dence showed that the defendant acted with the aim of securing customers who were customers or members of plaintiff’s organization,® or that the conduct of defendant was an attempt to engage in deceptive commercial prac- tices. See id. at *11. As the Court’s Conclusions of Law reveal, the issue of whether the term “Star Class” was generic or was descriptive and had acquired secondary meaning was a close question. See id. at *4-*9. The Court does not find bad faith based on defendant’s continued dis- tribution of already manufactured goods following the receipt of plaintiff’s notice of trademark claim letter and the initiation of this action. There is no evidence or sug- gestion that defendant’s attorneys suggested that such dis- tribution and sale be discontinued. Accordingly, the Court finds the plaintiff did not prove defendant’s bad faith in its use of “Star Class” on its gar- ments offered for sale prior to this Court’s decision, and denies plaintiff’s request for an accounting of Hilfiger’s 9 Defense witness Allan Zwerner, Senior Vice President of Burdine’s, a Miami department store chain, testified that although Burdine’s purchased $24.5 million worth of defendant’s products in 1994 for 40 retail stores, it never received any inquiries as to Possi- ble sponsorship or affiliation with plaintiff. (Trial Tr. at 254-66); see Hilfiger, 1995 WL 241875 at * 12. 66a profits. Plaintiff’s request for an award of attorneys’ fees is denied as well.'° Since the Circuit may not agree with this Court’s finding that plaintiff offered insufficient evidence of defendant's bad faith, the Court will make findings on the evidence of damages. As shown by Defendant’s Exhibit 45 (Hearing Tr. at 438-45), the defendant shipped only $818,419.85 worth of goods bearing the phrase “Star Class” after March 31, 1994, two weeks after plaintiff’s cease and desist letter dated March 16, 1994 (Plaintiff’s Revised Fost-Trial Brief at 23) and two weeks before the filing of this lawsuit. Defendant offered no evidence of its costs attributable to these sales. Accordingly, no deduction will be made for such costs. See 15 U.S.C. § 1117; see also Louis Vuitton S.A. v. Spencer Handbags Corp., 765 F.2d 966, 973 (2d Cir. 1985). Conclusion For the reasons stated above, plaintiff has not shown by a preponderance of the evidence that defendant acted in bad faith in using plaintiff’s trademark. Accordingly, plain- tiff’s request for an accounting of defendant’s profits or an order that defendant pay attorneys’ fees is denied. In any event, plaintiff has not shown damages of more than $818,419.85. No evidence has been offered as to the attorneys’ fees incurred by plaintiff in this action, so no determination of fees can be made at this time. IT 1s SO ORDERED. 10 No evidence has been offered as to the attorneys’ fees plain- tiff incurred in this action. es 67a Dated: New York, New York February 28, 1997 /s/ Robert P. Patterson, Jr. U.S.D.J. 69a UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 94 Civ. 2663 (RPP) INTERNATIONAL STAR CLASS YACHT RACING ASSOCIATION, Plaintiff, —_—V— TOMMY HILFIGER U.S.A., INC., Defendant. APPEARANCES Counsel for Plaintiff: Ross & HARDIES 65 East 55th Street New York, NY 10022-3219 By: J. Joseph Bainton Phone: 212-421-5555 Fax: 212-421-5682 70a Counsel for Defendant: GURSKY & BLAU 21 East 40th Street New York, NY 10016 By: Steven B. Blau Phone: 212-213-1234 Fax: 212-213-1245 OPINION AND ORDER ROBERT P. PATTERSON, JR., U.S.D.J. Plaintiff International Star Class Yacht Racing Associ- ation (the “Association”) brings this action for damages and injunctive relief against Defendant Tommy Hilfiger U.S.A., Inc. ¢“Hilfiger”) pursuant to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125, Section 368-d (Injury to Business Reputation and Dilution) of the New York General Business Law, and common law trademark infringement and unfair competition.' Jurisdiction of the Court is invoked under the Lanham Act and 28 U.S.C. §§ 1332 and 1338(b) in that this action arises under an Act of Congress relating to trademarks, and Plaintiff is assert- ing state law claims in conjunction with said trademark infringement claims. Venue is pled in this district pursuant to 28 U.S.C. § 1391(b) and (c). The Complaint charges common law trademark infringe- ment and unfair competition, false designation of origin under Section 43(a) of the Lanham Act, and injury to busi- ness reputation and dilution of trademark under Section Plaintiff's motion to amend the Complaint to substitute Tommy Hilfiger U.S.A. for Tommy Hilfiger, Inc. was granted on the eve of trial. Tla 368-d of the New York General Business Law, arising out of the Defendant’s causing the words “Star Class” and the emblem “%*” to be placed on its garments which Plaintiff asserts infringes on its emblem and non-registered trade- mark “Star Class.” Trial was held on January 9 and 10, 1995. . This Opinion and Order constitutes the Findings of Fact and Conclusions of Law of the Court. Background Plaintiff is a not-for-profit corporation duly organized and existing in Illinois in 1922 and with its principal place of business in that state. Stip. Facts at 4 (II)(A). Defendant is a corporation duly incorporated and existing in the state of New Jersey. Id. at q (II)(B). . Prior to the formation of the Association, a man named George Corry, together with other yachting enthusiasts, designed a small yacht for racing in 1910 to improve on another class of small yachts called the “Bug,” and named the new boat the “Star.” PI. Bx. 1 (C. Stanley Ogilvy, A History of the Star Class [Association 1991} ) at 8. The first “Star” was built in Port Washington, New York, and the following year the first 22 Star yachts ordered to be built according to the new design were delivered to buy- ers. Id. The single design was important to racing enthu- Siasts since it sought to eliminate the equipment variable in racing and to increase the importance of a two-person crew’s prowess in Sailing races confined to boats of that class. Since 1911 over 7700 Star boats have been built and almost 2000 are still in use throughout the world. The Association, whose stated object is “to promote, develop and govern Star Class racing throughout the world, under uniform rules,” Stip. Facts at 1(IV)(B), has prospered accordingly. It is divided into twenty districts, each com- 72a prising a group of fleets in a given locality, and consisting of nine districts in North America, six in Europe, three in South America, and one each in Australia and Africa. These districts include 170 fleets with over 2000 members. In the United States there are almost 600 members. Tr. at 49 (Burgess); 203 (MacCausland).? The Association does not manufacture, build or sell Star yachts, Stip. Facts at 49. (1V)(G-H), but maintains a regis- ter of existing “Star Class” boats. In order to be registered, a builder must purchase from the Association an official set of plans and specifications and an identification number for the boat. Tr. at 86-105 (MacCausland). The builder’s meth- ods must be approved before construction begins. After construction the boat is measured and weighed by Asso- ciation representatives, and the Association issues a mea- surement and weight certificate and a vessel number if its specifications are met. The boat’s sails must also comply with strict measurement and construction requirements, and must display the vessel’s number and the “Star Class” num- ber and Emblem, a solid red five-point star (unless the owner’s racing record warrants the display of a solid green, blue, silver or gold five- point star). “A yacht is eligible and considered to be in the Star Class only if it has been properly registered, conforms to measurement rules and is owned by a qualified active or life member recorded at the time as in good standing with the Association.” Stip. Facts at 1 (IV)(E) (Rules of the Association at 42.1). The Asso- ciation supports itself by charges to boat manufacturers for the use of design plans, royalty fees for certifications, and by the dues of its members. In addition to Star Class races conducted by each fleet, the Association holds annual championships and other regattas around the world. Before any championship race 2 References to transcript pages of the trial held on January 9 and 10, 1995 will appear in this Opinion and Order as “Tr. at __.” 73a the weight and measurements of each Star Class entry are checked. With the exception of 1976, Star Class yachts have raced in each Summer Olympic game since 1932. These races receive considerable media coverage. See Plaintiff’s First Request to Take Judicial Notice, Volumes One and Two, Filed July 1, 1994. The Association publication “Log of the Star Class,” first published in 1922, contains records of all Star Class regattas, the Star Class constitution and by-laws, a set of Star Class racing rules and a register of the existing Star Class yachts. See Pl. Ex. 2 (“1993 Log of the Star Class”). The “Log of the Star Class” Specifies the manner in which Association and fleet officers are to wear the appropriate solid five-point star on their caps and sleeves. See Opinion and Order dated November 30, 1994 at 3-4. The Associa- tion sells “Star Class” flags and decals to its members and advertises and sells through the annual publication of “Log of the Star Class,” and the Association’s monthly newslet- ter “Starlights,” neckties, blazer patches and lapel pins featuring its emblem, the solid five-point red star, and the Association’s initials I.S.C.Y.R.A. or a sail motif (“class merchandise”). Gross sales of class merchandise in 1992 was $10,388 at a cost of $5,076, and in 1993 sales were $11,783 at a cost of $6,271. Stip. Facts at 4 (IV)(L); Def. Ex. F at $C000114. i The Association also permits host yacht clubs holding regattas under the sanction of the Association to defray their costs by selling t-shirts, sweatshirts, Caps, jackets and other related items which bear the marks in issue or vari- ations thereof (“collateral items”) as part of the promotion of the racing events. Stip. Facts at qq (IV)(M-N). The Asso- ciation does not intend to become a commercial manufac- turer or seller of clothes or apparel items. Stip. Facts at q(IV)(O). : Hilfiger is an extremely successful designer and dis- tributor of high quality men’s clothing. Hilfiger’s sales 74a exceeded 227 million dollars in the year ending March 31, 1994. Pl. Ex. 87 at 17. Hilfiger is among the two or three most successful promoters of lines of men’s sports clothing today, ranking with Ralph Lauren. Tr. at 287 (Leeds). The Defendant’s garments bear labels prominently displaying the name “Tommy Hilfiger.” The colors of Defendant’s clothing are predominantly red, white and blue. The words “Star Class” were used in the first and only instance by Defendant in the Tommy Hilfiger (®) 1994 Spring Collection, particularly on garments in its Nantucket Line. Hilfiger marketed the Nantucket Line as “classic nautical sportswear” containing “authentic details taken from the sport of competitive sailing” and “elements and patterns taken directly from actual racing sails.” PI. Ex. 70. Plaintiff’s Exhibit 88, a book about sailboat racing admittedly used by Defendant in research for its Nantucket line, contains pictures of yachts with sails bearing the reg- istered trademark of North Sails, an approved sailmaker for Star Class yachts. See Tr. at 230 (Sondag Dep.). The North Sails trademark depicted is an “N” and an “S” contained in a circle. A mark similar to that of North Sails was placed on some of the Nantucket Line clothing, but bearing the letters “T” and “H” instead of “N” and “S,” and not as a label of origin but in the form of a decoration on the sides of garments. The garments also were decorated with a diminutive “burgee” (a burgee is a yachting flag usually denoting a yacht club) bearing the initia)s “T.H.,” and the words “Star * Class.” See Def. Exs. 26, 28, 31, 32, 33. The words “Tommy Hilfiger (®)” were prominently placed on all garments. The Defendant did not call any witnesses to the stand to deny that its use of the emblem, a five-point red star, was derived from observations of Plaintiff’s mark, or that the term “Star Class” was not similarly utilized. Accordingly, the Court may draw the inference that Defendant inten- hi eeeerrneeereeineiiiaiiiiiieeiiiiiiiiiiial 75a tionally copied the unregistered marks in question. See Lauratex Textile Corp. v. Allton Knitting Mills Inc., 517 F.Supp. 900, 904 (S.D.N.Y. 1981) (negative inference drawn that infringement of copyrighted design was willful because defendant’s president failed to testify). There is no showing, however, that the marks were known by the Defendant or its agents as trademarks of the Association. The Defendant did present evidence that it had ordered a trademark search of “Star Class” by its outside attorneys; that the search conducted was for federal and state trade- marks; that the search did not reveal Plaintiff’s use of the mark; and that Defendant was advised by its attorneys in August 1993, prior to using the mark, that the search did not reveal that “Star Class” was a trademark and thus “pro- posed use of this mark... . [is] not necessarily rule[d] out... .” Pl. Ex. 74 (letter regarding “Trademark Screen- ing Searches” from Neil Burstein to Kathleen Luparello at Tommy Hilfiger U.S.A., Inc.). This is some evi- dence contradicting Plaintiff’s claim that the Defendant intended to use a trademark belonging to another, namely Plaintiff. Discussion A. LANHAM ACT CLAIM Section 43(a) of the Lanham Act proscribes “false designation of Origin” in relation to goods or services. 15 U.S.C. § 1125(a)3 A plaintiff must first demonstrate that > Section 43(a)(1) of the Lanham Act prohibits any person from using in connection with amy goods . . . or any container for goods, . . . any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false 76a its mark deserves protection under the Lanham Act in order to allege infringement. Bristol-Myers Squibb Co. v. McNeil-P.P.C., Inc., 973 F.2d 1033, 1039 (2d Cir. 1992). “[T]he general principles qualifying a mark for registration under § 2 of the Lanham Act are for the most part appli- cable in determining whether an unregistered mark is entitled to protection under § 43(a).” Two Pesos, Inc. v. Taco Cabana, Inc., [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1137%3A2. Public record. Not legal advice.