Lontex Corporation v. NIKE, INC. Lontex Corp

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
Nos. 22-1417 & 22-1484
___________
LONTEX CORPORATION
v.
NIKE, INC.
Lontex Corp.,
Appellant in No. 22-1484
Nike, Inc.,
Appellant in No. 22-1417
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-18-cv-05623)
Honorable Michael M. Baylson
____________
Argued on January 17, 2024
Before: HARDIMAN, MATEY, and PHIPPS, Circuit Judges.
(Filed: July 10, 2024)

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Ilana H. Eisenstein
Ben C. Fabens-Lassen
DLA Piper LLP
1650 Market Street
One Liberty Place, Suite 5000
Philadelphia, PA 19103
Michael D. Hynes
Marc E. Miller
DLA Piper LLP
1251 Avenue of the Americas
New York, NY 10020
Stanley J. Panikowski [Argued]
DLA Piper LLP
4365 Executive Drive
Suite 1100
San Diego, California 92121
Gina L. Durham
DLA Piper LLP
555 Mission Street, Suite 2400
San Francisco, California 94105
Counsel for Appellant
Craig C. Crockett
Troutman Pepper Hamilton Sanders LLP
3 Embarcadero Center, Suite 800
San Francisco, CA 94111
Michael A. Schwartz
Troutman Pepper Hamilton Sanders LLP

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3000 Two Logan Square
Eighteenth & Arch Streets
Philadelphia, PA 19103
Misha Tseytlin [Argued]
Troutman Pepper Hamilton Sanders LLP
227 W. Monroe St., Suite 3900
Chicago, Illinois 60606
Ben L. Wagner
Troutman Pepper Hamilton Sanders LLP
11682 El Camino Real, Suite 400
San Diego, CA 92130
Counsel for Appellee
___________
OPINION OF THE COURT
____________
HARDIMAN, Circuit Judge.
This dispute involves a registered trademark for “Cool
Compression.” The holder of the mark, Lontex Corporation, is
a small Pennsylvania business that manufactures and sells
compression apparel to professional athletes and the sporting
public. Lontex sued Nike, Inc. for trademark infringement.
After a trial on the merits, the jury awarded Lontex
$142,000 in compensatory damages and $365,000 in punitive
damages. Both parties appeal multiple issues involving the

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jury’s findings and the District Court’s pre-trial and post-trial
orders. We will affirm the District Court on all issues except
for its orders awarding attorney’s fees to Lontex, which we will
vacate and remand for further proceedings consistent with this
opinion.
I
A
In 2008, the United States Patent and Trademark Office
approved Lontex’s application and registered the “Cool
Compression” trademark. The mark consisted of “standard
characters without claim to any particular font, style, size or
color” when used in connection with athletic compression
clothing. App. 2597 (capitalization removed). Lontex initially
used the phrase “Cool Compression” at in-person product
presentations. But after obtaining the trademark, the company
started displaying the phrase on its website and printing it on
some of its product labels. It sold Cool Compression apparel
under the “Sweat it Out” brand to many professional sports
teams and the public alike.
In 2015, Nike rebranded a line of its base-layer athletic
clothing as “Nike Pro.” The rebranding included a category of
“Cool” products designed to absorb sweat and reduce body
temperature. Nike Pro clothing also came in various fits such
as “compression” and “fitted.” App. 1151–52, 2366. That same
year, Nike started using the words “Cool” and “Compression”
together in the names of Nike Pro products that were sold online
and in Nike catalogs. “Cool Compression” also appeared in
product names on Nike’s tech sheets (internal documents used
to explain Nike products to Nike employees and some third-

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party retail partners). The phrase “Cool Compression” did not
appear on Nike’s physical products or product tags.
B
After discovering Nike’s use of “Cool Compression,”
Lontex sent Nike a cease-and-desist letter in April 2016,
demanding that it stop using the phrase on nike.com and with
its distributors. Based on communications with Nike, Lontex’s
owner believed that Nike might stop using the phrase on
nike.com, but the parties did not discuss whether Nike would
ask its third-party retailers to remove the phrase from their
online listings as well. While third-party retailers often write
their own product descriptions for their websites, Nike
typically names the products, as retailers are “not expected to
come up with their own product name[s].” App. 1211.
After receiving the cease-and-desist letter, Nike’s
lawyers directed the company to stop using the phrase “Cool
Compression” in product names “as soon as possible.” App.
2346. Nike’s lawyers also assumed that the issue would be
resolved in the course of the company’s efforts to streamline
its naming conventions because Nike planned to start using
“tight” instead of “compression.” App. 2346, 2402–03.
In the subsequent months, Nike removed the phrase
“Cool Compression” from product names on its website and
took steps to remove it from its catalogs, though the phrase still
appeared in Nike catalogs over a year later. There is no
evidence that Nike removed “Cool Compression” from its tech
sheets.
About two years after the cease-and-desist letter issued,
Nike reached out to all third-party retailers authorized to sell

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Nike products online and asked them to stop using
“Compression” in product names. In doing so, Nike made no
mention of Lontex’s cease-and-desist letter and simply
presented the change as an update to Nike’s product naming
convention. At the time, multiple retailers were still marketing
products with “Cool Compression” in their names.
As relevant here, Lontex sued Nike for: (1) trademark
infringement based on its use of “Cool Compression”;
(2) contributory trademark infringement based on Nike’s
continued supply of “Cool Compression” products to third-
party retailers; and (3) counterfeiting. See Lontex Corp. v.
Nike, Inc., 384 F. Supp. 3d 546, 551–52 (E.D. Pa. 2019). The
District Court dismissed Lontex’s counterfeiting allegation
under Rule 12(b)(6) of the Federal Rules of Civil Procedure,
holding that Nike’s use of “Cool Compression” was not
“substantially indistinguishable” from Lontex’s use of the
phrase. Id. at 558 (citation omitted).
C
At trial, multiple Nike employees testified that they had
never heard of Lontex—much less its trademark—before the
company received the cease-and-desist letter. Although it was
Nike’s policy to submit its product names through a trademark
search tool, the company did not conduct a trademark search
on “Cool Compression” because employees viewed the phrase
as merely a descriptive term for the product style and fit. Nike’s
Product Line Manager for the Nike Pro line, whose
responsibilities included ensuring “compl[iance] with . . .
direction from Legal,” App. 2323, explained that Nike’s
lawyers had instructed his team to “separate” the words “Cool”
and “Compression” from each other, App. 2322–23. And he
viewed compliance with this directive as mandatory.

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Lontex customers testified that they associated the
phrase “Cool Compression” with Lontex. But some had also
seen the phrase used with Nike products. Two customers saw
a sign for Nike “Cool Compression” products in a Dick’s
Sporting Goods store, and two others saw the phrase in Nike
catalogs. These four customers wondered whether there was an
association between Lontex and Nike, but there is no evidence
they ever asked about, or actually bought, a Nike product under
the mistaken belief it was a Lontex product.
The jury returned a verdict for Lontex, finding Nike
liable for willful infringement and for contributory
infringement based on Nike’s sales to third-party retailers. As
for damages, the parties’ testimony varied dramatically.
Lontex’s expert estimated that the company lost $40 million,
while Nike’s expert testified that Lontex lost at most $800,000.
The jury awarded Lontex $142,000 in compensatory damages
for lost royalties and $365,000 in punitive damages, but it
declined to award Lontex disgorgement of Nike’s profits.
D
Extensive post-trial motions practice followed the
verdict. Nike renewed motions it made at trial for judgment as
a matter of law on fair use, trademark infringement,
contributory trademark infringement, willfulness, and punitive
damages. Lontex moved, among other things, for
disgorgement of profits and trebling of damages awarded by
the jury. The District Court granted Lontex’s request for treble
damages and increased the compensatory award to $426,000
but denied the parties’ other motions. Separately, the District
Court awarded Lontex attorney’s fees of almost $5 million
after finding the case was “exceptional” under the Lanham Act.

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Nike appeals the District Court’s orders denying its
post-trial motions, trebling the damages, and awarding Lontex
attorney’s fees. Lontex cross-appeals the order denying its
post-trial motion for profit disgorgement and the pre-trial order
dismissing its counterfeiting allegation.
II1
We exercise plenary review over the District Court’s
order denying Nike’s requests for judgment as a matter of law
and its order dismissing Lontex’s counterfeiting allegation
under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Jaasma v. Shell Oil Co., 412 F.3d 501, 503 (3d Cir. 2005);
Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 154 n.1
(3d Cir. 2014). For judgment as a matter of law, “[t]he question
is not whether there is literally no evidence supporting”
Lontex, Jaasma, 412 F.3d at 503 (cleaned up), but whether “a
reasonable jury would . . . have a legally sufficient evidentiary
basis to find” for Lontex, Fed. R. Civ. P. 50(a). We view the
evidence in the light most favorable to the verdict winner
(Lontex) and give it the benefit of every reasonable inference.
McDaniels v. Flick, 59 F.3d 446, 453 (3d Cir. 1995). We thus
do not “weigh the evidence, determine the credibility of
witnesses, or substitute [our] version of the facts for the jury’s
version.” Id. (cleaned up).
We review for abuse of discretion the District Court’s
orders: trebling damages, Kars 4 Kids Inc. v. America Can!, 8
F.4th 209, 223 n.20 (3d Cir. 2021); declining to grant profit
disgorgement, see id. n.15; and awarding attorney’s fees, see
SecuraComm Consulting Inc. v. Securacom Inc., 166 F.3d 182,
1 The District Court had jurisdiction under 28 U.S.C. §§ 1331
and 1338(a). We have jurisdiction under 28 U.S.C. § 1291.

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190 n.6 (3d Cir. 1999), abrogation on other grounds
recognized by Banjo Buddies, Inc. v. Renosky, 399 F.3d 168,
171 (3d Cir. 2005).
III
A
Nike appeals the jury’s finding that its infringement was
“willful,” arguing that the jury was improperly allowed to infer
willfulness solely from Nike’s continued use of Lontex’s
trademark after it received the cease-and-desist letter. Nike is
incorrect.2
Though “defendants have every right to decline pre-
litigation requests without adverse consequences, . . . they must
do so in good faith—that is, believing that they have a
colorable claim of right to engage in the challenged behavior.”
Green v. Fornario, 486 F.3d 100, 104 (3d Cir. 2007). So
continued use of a trademark contrary to a cease-and-desist
2 Nike also argues it was inaccurate to instruct jurors that
willfulness “encompasses . . . reckless infringement.” Nike Br.
48 (quoting App. 1574–75). Several courts of appeals have
recognized willfulness as extending to reckless infringement.
See Fishman Transducers, Inc. v. Paul, 684 F.3d 187, 191 (1st
Cir. 2012); 4 Pillar Dynasty LLC v. N.Y. & Co., Inc., 933 F.3d
202, 209–10 (2d Cir. 2019); Zazú Designs v. L’Oréal, S.A., 979
F.2d 499, 507 (7th Cir. 1992). We need not reach this question
because Nike challenges the willfulness finding only as a
matter of law without appealing the jury instructions
themselves or requesting a new trial on that basis. For the same
reason, we do not reach Nike’s challenge to a reverse confusion
instruction.

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letter can establish willfulness if done in bad faith. See id. at
104–05. A defendant’s subjective belief is often discerned
through circumstantial, rather than direct, evidence. See id. at
104. “When there is no evidence of bad faith in the adoption of
the mark, all post-notification conduct must be analyzed to
determine if the defendant’s continuing actions were
unreasonable and amounted to bad faith.” Moore Bus. Forms,
Inc. v. Ryu, 960 F.2d 486, 492 (5th Cir. 1992).
Even assuming that Nike had no improper motive in
adopting the phrase “Cool Compression” without conducting a
trademark search, a jury could still find willfulness from
Nike’s continued use after it learned of Lontex’s trademark.
After reviewing the cease-and-desist letter, Nike’s legal
department instructed the company to stop using “Cool
Compression” “as soon as possible.” App. 2346. That advice
might have been precautionary guidance designed to avoid
litigation notwithstanding Nike’s belief that it had a colorable
legal basis to use the phrase. Or perhaps Nike needed to stop
“as soon as possible” because the company knew it was
infringing Lontex’s trademark rights. The evidence does not
compel one inference over the other, so a reasonable jury could
have found that Nike did not subjectively believe it had a right
to use “Cool Compression” in view of its counsel’s legal
advice.
Despite that advice, Nike kept using the mark for at least
a year in its catalogs. And there is no evidence that Nike
removed the phrase from the tech sheets viewed by sales
associates and some retailers. Nor is there any evidence that
the company alerted third-party retailers of the trademark issue
as Nike continued to sell them “Cool Compression” products
for two years. Taken together, this circumstantial evidence
supports a jury inference that Nike, despite knowing of

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Lontex’s trademark and being advised by its own lawyers to
stop using the mark, intentionally continued using Lontex’s
trademark. Because a reasonable jury could find that Nike’s
continued use of Lontex’s trademark shows willful
infringement, the District Court did not err, and Nike is not
entitled to judgment as a matter of law.
B
Nike next argues that its incorporation of “Cool
Compression” in product names was fair use, meaning that
Nike used the words “fairly and in good faith only to describe”
its products without presenting the phrase as a trademark. 15
U.S.C. § 1115(b)(4). This argument fails for the same reasons
that a jury could find Nike’s continued use of the phrase against
the advice of its own lawyers was willful and not in good faith.
Because a reasonable jury could reject Nike’s fair use defense,
the District Court did not err, and Nike is not entitled to
judgment as a matter of law. See Inst. for Sci. Info., Inc. v.
Gordon & Breach, Sci. Publishers, Inc., 931 F.2d 1002, 1008
(3d Cir. 1991).
C
Nike also claims entitlement to judgment as a matter of
law on the likelihood of consumer confusion. We assess that
issue by balancing the ten Lapp factors, none of which is
dispositive. Checkpoint Sys., Inc. v. Check Point Software
Techs., Inc., 269 F.3d 270, 280 (3d Cir. 2001); see also
Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir. 1983).

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1. Factor One: Degree of Similarity Between Marks
Assessing the degree of similarity requires us to
determine whether two marks “create the same overall
impression when viewed separately.” Checkpoint, 269 F.3d at
281 (cleaned up). We consider whether the “average consumer,
on encountering one mark in isolated circumstances of [the]
marketplace and having only a general recollection of the
other, would likely confuse or associate the two.” Id. (cleaned
up). Lontex used “Cool Compression” as a standalone mark,
while Nike used it only as part of longer product names
containing additional Nike branding. Even so, both companies
used the same alliterative phrase, which would likely create a
similar “overall impression” for a consumer with “only a
general recollection” of the marks. Id. (cleaned up). So we
conclude that a jury could find that this similarity increased the
likelihood of confusion.
2. Factor Two: Strength of the Owner’s Mark
“The strength of a mark is determined by (1) the
distinctiveness or conceptual strength of the mark and (2) its
commercial strength or marketplace recognition.” Id. at 282.
“Cool Compression” is conceptually weak because both
words are at least partially descriptive of the products, see
id., and Lontex has no trademark rights over the word
“compression.” But Lontex presented evidence that its
customers associated “Cool Compression” with Lontex
products, so a jury could find that this constituted
marketplace recognition and increased the likelihood of
confusion.

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3. Factor Three: Price and Purchaser Care and
Attention
“When consumers exercise heightened care in
evaluating the relevant products before making purchas[es]” it
tends to reduce the likelihood of confusion. Id. at 284. The
more expensive and “more important the use of a product,” the
more care consumers exercise. Versa Prods. Co. v. Bifold Co.
(Mfg.), 50 F.3d 189, 204 (3d Cir. 1995). Similarly, professional
purchasers tend to exercise more care than ordinary consumers.
See Checkpoint, 269 F.3d at 285. Although Nike and Lontex
sold products to professional sports teams, which likely
exercised heightened care, they also sold athletic apparel to
ordinary customers. And because ordinary customers tend to
exercise limited care and attention, a jury could find that this
factor increased the likelihood of confusion.
4. Factors Four and Six: Length of Nike’s Use Without
Evidence of Actual Confusion; and Evidence of
Actual Confusion
Actual consumer confusion is strong evidence of a
likelihood of confusion. Fisons Horticulture, Inc. v. Vigoro
Indus., Inc., 30 F.3d 466, 476 (3d Cir. 1994). Confusion is not
limited solely to mistaken purchasing decisions, see
Checkpoint, 269 F.3d at 294–95, but “[w]here confusion has
little or no meaningful effect in the marketplace [itself], it is of
little or no consequence in our analysis,” id. at 297. In
Checkpoint, for instance, we noted that “anecdotal evidence of
mistaken consumer inquiries” constituted only “de minimis”
evidence of confusion. Id. at 298–99. This case exemplifies
that point. A few Lontex customers expressed uncertainty over
a possible association between Nike and Lontex, but that
uncertainty had no appreciable effect on their interactions with

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the companies. And without actual confusion, the length of
Nike’s use does not weigh in Lontex’s favor either. So a jury
could not reasonably find that these two factors increased the
likelihood of confusion.
5. Factor Five: Nike’s Intent in Adopting the Mark
Confusion is more likely where “the defendant chose
the mark to intentionally confuse consumers,” as
“demonstrated via purposeful manipulation of [the
defendant’s] mark to resemble the [plaintiff’s].” Sabinsa Corp.
v. Creative Compounds, LLC, 609 F.3d 175, 187 (3d Cir. 2010)
(cleaned up). “The adequacy and care with which a defendant
investigates and evaluates its proposed mark, and its
knowledge of similar marks” are also “highly relevant.” Kos
Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 721 (3d Cir. 2004)
(citations omitted). When assessing the defendant’s behavior,
we look for evidence of deliberate intent, not mere
carelessness. See A & H Sportswear, Inc. v. Victoria’s Secret
Stores, Inc., 237 F.3d 198, 232–33 (3d Cir. 2000).
The District Court concluded that “a reasonable jury
might find that Nike acted with reckless indifference” by
failing to conduct a trademark search and continuing to use the
phrase after learning of Lontex’s trademark. Lontex Corp. v.
Nike, Inc., 2022 WL 622321, at *9 (E.D. Pa. Mar. 3, 2022). We
see it differently. On this record, it is hard to see how a jury
could find deliberate intent.
Failure to conduct a trademark search can demonstrate
intent in some situations, such as where the defendant has
preexisting knowledge of the plaintiff’s mark or disregards
counsel’s advice to conduct a trademark search. See
SecuraComm, 166 F.3d at 188–89 (citations omitted). But

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failure to conduct a trademark search out of mere “carelessness
is not the same as deliberate indifference with respect to
another’s rights in a mark or a calculated attempt to benefit
from another's goodwill.” Id. at 189.
We find it significant that Lontex did not challenge the
testimony from Nike employees that they were unaware of
Lontex and its trademark prior to this dispute. And though Nike
had a general policy requiring trademark searches, the record
contains no evidence that Nike’s lawyers advised it to run a
trademark search on “Cool Compression” prior to using the
phrase. So while Nike may have been careless in failing to
conduct a trademark search, its carelessness does not reveal a
deliberate intent to capitalize on Lontex’s trademark. See id. at
189.
Finally, to state the obvious, if Nike was unaware of
Lontex, it could not have adopted “Cool Compression” with
the deliberate intent to imitate Lontex and confuse consumers.
And Nike’s continued use after adopting the phrase and
learning of Lontex’s trademark does not shed light on the
company’s initial intent. A jury would thus have insufficient
evidence to find that Nike adopted the mark with the intention
of confusing consumers.
6. Factors Seven, Eight, and Ten: Similarity of
Marketing Channels; Target Markets; and Actual
Sales Markets
“[S]imilarity in advertising and marketing campaigns”
directed at “the same consumers” increases the likelihood of
confusion. Checkpoint, 269 F.3d at 288–89 (citation omitted).
But “[g]oods may fall under the same general product category
[yet] operate in distinct niches.” Id. at 288. Nike seeks to

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differentiate its sales market and advertising by pointing to
Lontex’s focus on sports medicine. But as the District Court
found, both companies advertised their products as improving
athletic performance, so their marketing strategies overlapped
in at least some areas. And the companies marketed and sold
to the same professional sports teams, creating overlap in their
target and actual sales markets. Though both also marketed and
sold their products to ordinary consumers, they did so through
separate channels. Unlike Nike, Lontex advertised to
consumers primarily through its owner’s presentations at in-
person events. And unlike Lontex, Nike sold products to
regular consumers through brick-and-mortar stores and
independent retailers. So while the parties’ sales and marketing
to ordinary consumers bore little similarity, a jury could find
that the overlap in marketing and sales to professional sports
teams increased the likelihood of confusion.
7. Factor Nine: Relationship of the Goods in the
Minds of Consumers
Confusion is more likely when “goods are similar
enough that a customer would assume they were offered by
the same source” or shared a “common source affiliation or
sponsorship.” Id. at 286. The products here are similar because
both companies made and sold compression apparel. This is
considerably more similar than other products we have
regarded as such. See, e.g., Fisons, 30 F.3d at 481 (listing cases
in which courts found similarities between products including
“pipe tobacco and bar accessories with scotch whisky” and
“women’s scarves and apparel with women’s cosmetics and
fragrances”). Because both companies sold athletic
compression apparel, a jury could find the relationship of the
goods in the minds of consumers increased the likelihood of
confusion.

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* * *
Our review of the Lapp factors leads us to conclude that
they do not strongly support either party. But reviewing the
evidence in the light most favorable to the verdict winner—
here, Lontex—we hold that a reasonable jury could find that
seven out of the ten factors increased the likelihood of
confusion. This suffices to establish a likelihood of confusion,
so Nike is not entitled to judgment as a matter of law. 3
D
A company can be liable for trademark infringement by
an independent retailer if the company “continues to supply its
product to one whom it knows or has reason to know is
engaging in trademark infringement.” Inwood Labs, Inc. v. Ives
Labs, Inc., 456 U.S. 844, 854 (1982); see also AT&T Co. v.
Winback & Conserve Program, Inc., 42 F.3d 1421, 1432 (3d
Cir. 1994). While its third-party retailers often crafted their
3 Lontex and Nike also discuss reverse confusion, which is
another way to establish a likelihood of confusion. See
Freedom Card, Inc. v. JPMorgan Chase & Co., 432 F.3d 463,
470 (3d Cir. 2005). “Reverse confusion is the misimpression
that the junior user is the source of the senior user’s goods.”
Banff, Ltd. v. Federated Dep’t. Stores, Inc., 841 F.2d 486, 490
(2d Cir. 1988). Reverse confusion implicates the Lapp factors,
but requires modified consideration of factors two, five, and
six. See Freedom Card, 432 F.3d at 472. Lontex had to show
either direct confusion or reverse confusion to prevail. Because
the jury had enough evidence to find for Lontex based on direct
confusion, Nike was not entitled to judgment as a matter of law
and we need not reach reverse confusion.

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own product descriptions, Nike knew that they typically copied
Nike’s product names when selling its apparel. Yet Nike kept
selling to these retailers for two years after Lontex put Nike on
notice of a possible trademark violation and Nike’s own
lawyers advised the company to stop using “Cool
Compression.” And Nike did not inform its retailers about
Lontex’s cease-and-desist letter or the potential legal
ramifications of using the phrase. This evidence is sufficient
for a jury to find Nike liable for contributory infringement, so
the District Court did not err in so holding.
E
Nike challenges the availability of punitive damages
under Pennsylvania law. Pennsylvania follows the Restatement
(Second) of Torts, allowing punitive damages only “for
conduct that is outrageous, because of the defendant’s evil
motive or his reckless indifference to the rights of others.” Feld
v. Merriam, 485 A.2d 742, 747 (Pa. 1984) (cleaned up). Both
“willful” and “reckless” conduct qualify as outrageous. Id. at
747–48. As the District Court correctly concluded, the
evidence that supports a jury finding of willfulness under the
Lanham Act also supports a jury finding that Nike acted with
reckless indifference under Pennsylvania law. Specifically,
Nike kept using “Cool Compression” after its own lawyers
reviewed Lontex’s cease-and-desist letter and instructed Nike
to stop using Lontex’s trademark. Thus, Nike is not entitled to
judgment as a matter of law and the District Court did not err.
F
The Lanham Act allows a court to enter an award of up
to three times “the amount found as actual damages” if such
enhancement is warranted “according to the circumstances of

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the case.” 15 U.S.C. § 1117(a). Willfulness plays a “central”
role in enhancing damages, Kars 4 Kids, 8 F.4th at 224 n.22,
but enhancements must be awarded for compensatory, not
punitive, reasons, see id. at 225.
Nike argues the District Court relied solely on
impermissible punitive justifications to treble the jury’s
compensatory damages award from $142,000 to $426,000. The
record shows otherwise. The District Court explained it was
trebling damages “principally because of the [jury’s] finding
of willfulness.” Lontex, 2022 WL 622321, at *5. The Court
also considered its separate decision to reject Lontex’s request
for profit disgorgement, which would have significantly
increased Lontex’s compensation because Nike’s estimated
profits “greatly exceed[ed] the compensatory damages.” Id.
Instead, the District Court exercised its discretion to “provide
adequate compensation” to Lontex through a damages
enhancement. Id.
It is true, as Nike argues, that the District Court
discussed the “David and Goliath” nature of the case, the fact
that “Nike substantially profited from the sale of trademark
infringing products,” and the importance of “‘making
infringement unprofitable.’” Id. (quoting Banjo Buddies, 399
F.3d at 178). But even assuming these considerations were
impermissible, the District Court’s principal reasons were
proper and independently sufficient to support the damages
enhancement. See Gen. Motors Corp. v. New A.C. Chevrolet,
Inc., 263 F.3d 296, 329 (3d Cir. 2001). So we hold the District
Court did not abuse its discretion in trebling damages.

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G
Nike also appeals the District Court’s award of
attorney’s fees to Lontex. Fees should be awarded in the
trademark infringement context only if the case is
“exceptional,” Fair Wind Sailing, Inc. v. Dempster, 764 F.3d
303, 314–15 (3d Cir. 2014), meaning it “stands out from others
with respect to the substantive strength of a party’s litigating
position (considering both the governing law and the facts of
the case) or the unreasonable manner in which the case was
litigated,” Octane Fitness, LLC v. ICON Health & Fitness,
Inc., 572 U.S. 545, 554 (2014). “There is no precise rule or
formula for making these determinations,” and courts should
“consider[] the totality of the circumstances.” Id. (cleaned up).
The District Court stated three reasons for finding this
case exceptional, each of which is rooted in broad policy
considerations rather than facts specific to this case.
First, the Court reasoned that enforcement of trademark
laws is important. Lontex Corp. v. Nike, Inc., 2022 WL 815800,
at *1 (E.D. Pa. Mar. 17, 2022). We agree, but that truism does
nothing to distinguish this case from any other trademark case.
Second, the District Court noted that Lontex is a small
company that took on “a major United States corporation with
much larger resources” in a “daunting” “David and Goliath”
matchup. Id. The size of companies may inform whether one
party engaged in unfair litigation tactics, such as when a larger
party seeks to “bury” a smaller opponent financially or “prevail
by crushing” it. Securacomm Consulting, Inc. v. Securacom
Inc., 224 F.3d 273, 282 (3d Cir. 2000) (internal quotations
marks omitted). But the District Court found that Nike did not
“engage[] in any unfair, improper litigating strategy or . . .

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litigate[] this case in a[n] ‘unreasonable manner.’” Lontex,
2022 WL 815800, at *2. On these facts, the parties’ respective
sizes and resources, without more, are not relevant
considerations for exceptionality.
Finally, the Court found that trademark cases are
expensive to litigate and that, “as a matter of policy,” “[i]t is
not realistic to expect a small [company] like Lontex to be able
to pay the legal bills to a major law firm[] for this type of case.”
Id. Here again, such costs are typical of trademark
infringement cases. Moreover, Lontex’s privilege logs suggest
the company may have received outside litigation funding. If
the District Court concludes on remand that Lontex’s ability to
pay its legal fees is relevant, the Court’s reasoning must be
based on the facts of this case rather than broad policy
considerations.
The District Court also found that “Lontex showed
‘substantive strength’” in its case but did not provide any
explanation for this conclusion. Id. Lontex’s victory on the
merits of a hard-fought case does not, by itself, render its
position “exceptional”—especially since the jury largely
rejected Lontex’s damages claims. If the District Court finds
on remand that Lontex showed substantive strength, the Court
should explain how it reached this conclusion under “both the
governing law and the facts of the case.” Octane Fitness, 572
U.S. at 554.
While discussing the “David and Goliath” aspect of the
case, the District Court noted that willfulness was “an
important factor” in its exceptionality determination. Lontex,
2022 WL 815800, at *1. But willfulness was not one of the
three reasons the Court gave for its decision, and one passing
reference to it is insufficient for us to conclude that “it is highly

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probable” the Court would have found exceptionality absent
improper considerations. New A.C. Chevrolet, 263 F.3d at 329.
Consequently, the District Court’s brief mention of substantive
strength and willfulness does not render the previous
considerations harmless error. See id.
On remand, the District Court should apply Octane
Fitness and Fair Wind Sailing. The District Court has broad
discretion and may look to the totality of the circumstances
when assessing exceptionality, but the Court should not rely on
general policy considerations that apply in typical trademark
infringement cases. And while the behavior of the parties
during litigation may be relevant, the Court should avoid
extralegal assessment of the parties’ sizes and financial
resources as standalone indicators of exceptionality.
* * *
To sum up: Nike is not entitled to judgment as a matter
of law on any of the jury’s findings and the District Court did
not abuse its discretion by trebling damages. For the reasons
stated, however, we will vacate the orders awarding Lontex
attorney’s fees and remand for the District Court to reassess
whether the case is exceptional.
IV
We turn last to the cross-appeal. Lontex challenges the
District Court’s order dismissing its counterfeiting allegation
prior to trial and the Court’s order refusing to award
disgorgement of Nike’s profits.

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A
The District Court properly dismissed Lontex’s
counterfeiting allegation4 under Rule 12(b)(6) of the Federal
Rules of Civil Procedure. For a complaint to state a claim upon
which relief may be granted, a plaintiff must “plead[] factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Under the Lanham Act, a “counterfeit” is “a spurious
mark which is identical with, or substantially indistinguishable
from, a registered mark.” 15 U.S.C. § 1127 (emphasis added).
This is a higher standard than other forms of trademark
infringement, such as a “colorable imitation” which “includes
any mark which so resembles a registered mark as to be likely
to cause confusion or mistake or to deceive.” Id. So
counterfeiting requires greater similarity between marks than
other types of trademark infringement.
As the Eighth Circuit explained, “[a] counterfeit is . . .
far more similar to the registered mark than a mark that barely
infringes it, and so an infringing mark is not necessarily also a
counterfeit.” Sturgis Motorcycle Rally, Inc. v. Rushmore Photo
& Gifts, Inc., 908 F.3d 313, 340 (8th Cir. 2018); see also 3 J.
Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition § 25:15.50 (5th ed.) (“The test of ‘identical with,
or substantially indistinguishable from’ requires a much closer
degree of similarity than is required for traditional
infringement of a registered trademark.”) (collecting district
4 Lontex argued before the District Court that counterfeiting
was a basis for additional statutory damages rather than a
standalone claim. See Lontex, 384 F. Supp. 3d at 552.

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court cases). Other circuit courts have arrived at similar
conclusions when interpreting the Lanham Act in criminal
rather than civil contexts. See Sakar Int’l, Inc. v. United States,
516 F.3d 1340, 1346 n.5 (Fed. Cir. 2008) (“Merchandise
bearing a ‘counterfeit mark’ is . . . a subset of merchandise that
merely ‘copies or simulates’ a registered mark.”); Montres
Rolex, S.A. v. Snyder, 718 F.2d 524, 528 (2d Cir. 1983)
(distinguishing between “mere[] infringements” and marks
that “not only infringe but in addition are such close copies that
they amount to counterfeits”).
We measure the similarity of two marks by comparing
the “overall impression” ordinary consumers would have upon
encountering the marks. See Fisons, 30 F.3d at 477. A
trademark, after all, derives its “commercial impression” from
its appearance “as a whole, not from its elements separated and
considered in detail.” Est. of P.D. Beckwith, Inc., v. Comm’r of
Pats., 252 U.S. 538, 545–46 (1920). Put simply, if consumers
see “the entirety of the marks,” “it is the entirety of the marks
that must be compared.” Opryland USA Inc. v. Great Am.
Music Show, Inc., 970 F.2d 847, 851 (Fed. Cir. 1992).
In this case, an ordinary consumer viewing the entirety
of the “Cool Compression” marks used by Nike and Lontex
would not find the marks “identical” or “substantially
indistinguishable.” 15 U.S.C. § 1127. Nike used “Cool
Compression” as a part of longer product names, and each of
those product names also contained a Nike brand identifier
such as “Nike Pro” or “Air Jordan” immediately before the
trademarked phrase. So consumers saw Nike’s use of “Cool
Compression” in the context of Nike’s iconic brands. In
contrast, Lontex did not include Nike branding alongside its
trademark. This difference distinguishes the marks even more
for counterfeiting purposes.

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We hold that the marks were similar enough to
constitute general trademark infringement but not
“substantially indistinguishable.” So Lontex’s counterfeiting
allegation was not plausible and the District Court correctly
dismissed it.
B
Lontex next argues that the District Court failed to
assess whether Lontex is entitled to disgorgement of Nike’s
profits and instead simply acquiesced to an advisory jury
verdict. This claim is unpersuasive because the District Court
independently analyzed disgorgement and, in its discretion,
decided against awarding that remedy. See Lontex, 2022 WL
622321, at *3–5.
Profit disgorgement “does not follow as a matter of
course upon the mere showing of an infringement.” A & H
Sportswear, 166 F.3d 197, 209 (3d Cir. 1999) (citation
omitted). Decisions on equitable remedies “must be made on a
case-by-case basis.” Holland v. Florida, 560 U.S. 631, 649–50
(2010) (cleaned up). Courts decide the propriety of
disgorgement by considering six non-exclusive factors. See
Banjo Buddies, 399 F.3d at 175. The District Court did just that
and we perceive no abuse of discretion in its analysis.
The Court found that three Banjo Buddies factors
supported disgorgement and three did not. Balancing these
factors, it concluded that “on the whole, the Banjo Buddies
factors favor non-disgorgement,” and that Lontex’s request
was “not supported by enough evidence or any precedent.”
Lontex, 2022 WL 622321, at *4.

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Lontex disagrees with the District Court’s assessment
and weighing of the factors. But absent a showing that the
District Court legally erred in its analysis, “[a] discretionary
award is just that—discretionary.” Badger Meter, Inc. v.
Grinnell Corp., 13 F.3d 1145, 1158 (7th Cir. 1994). Lontex
identifies no legal errors and thus has not shown the District
Court abused its discretion by declining to award profit
disgorgement.
* * *
The parties to this trademark infringement dispute
received a fair trial and the District Court ably decided the
many legal issues presented to it. We will affirm all the orders
of the District Court except its orders awarding attorney’s fees.
We will vacate those orders and remand for further
proceedings consistent with this opinion.

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